(New York)

Small cap stocks are off to a good start this year, up over 3% this month. Furthermore, a strong start tends to signal good gains for the whole year. There is a lot of reason to be positive—the economy is good, regulations are being rolled back, and the bull market for small caps is much younger (less than two years since a big correction). However, risks abound, according to Barron’s, especially in the long-term. Valuations are still high by historical standards, and are actually higher than they first appear. Smaller companies are also more in-debt and more exposed to interest rate rises than many realize.

FINSUM: We think small caps will keep rising so long as the broader market does. Also, the fact that they had a 25% correction which ended in February 2016 gives them a bit more breathing room than their large cap peers.

(Washington)

Special counsel Robert Mueller’s investigation is reportedly pushing forward its investigation and is close to wrapping up the obstruction of justice aspect of its inquiry. Mueller is interviewing people closer to the president’s inner circle, but it is unclear if he will bring any charges. Trump has responded to the most recent interviews by offering to go under oath in an interview with Mueller, which is now scheduled to happen in the next few weeks.

FINSUM: It looks like Trump is going to set the record straight, under oath, with Mueller. Stay tuned.

(Washington)

There is no doubt about it, the midterm elections of this year are going to be an enormous challenge for the Republican party. As the election in Alabama last month showed, the tide has swung politically, and many Republicans looking at reelection are facing tough campaigns or have resigned rather than run and lose. Examples of the challenge abound, such as Republican congressman Frelinghuysen from New Jersey, who is facing his first real test in 23 years. History also doesn’t suggest a favorable result, as the midterm election often acts as a referendum on the White House. Democrats got beaten in the midterms after both Clinton and Obama’s elections.

FINSUM: With Trump’s approval rating quite low, it does seem like a lot of the public might retaliate against the party by voting against their GOP congressional candidates.

(New York)

Okay so here is the trick: the Dollar should be getting stronger, but it isn’t. In fact, it is getting weaker quickly, and is at its lowest point in three years. The economy is getting stronger and rates look likely to rise, but the Dollar is weakening. What does this mean for stocks and the economy? The answer is that, in general, a weaker Dollar is good for earnings, as American companies, especially the largest ones, tend to get a lot of revenue from overseas. However, some think the Dollar is falling because of higher inflation expectations, which could mean that it is a sign of weaker financial markets to come.

FINSUM: One would think that slow to moderate inflation with a high likelihood of rising rates and a strengthening economy would be ideal for Dollar appreciation. But the opposite is happening.

(Washington)

There has been a lot of talk lately about a coming US and global trade war. A lot of the focus has been on China, but also NAFTA. Well Bloomberg says the idea of a looming trade war is wrong, because it is already here. Over the last few months the US has already added some stiff barriers to trading with Canada. The moves show that the US is not afraid to throw up tariffs even in trading relationships that are pretty balanced.

FINSUM: Trump and the US government are now taking a very firm line on trade by increasing tariffs and launching investigations into potential violations. We like the idea of the making US trade more fair after years of undermining ourselves, but do have some concerns it could backfire in the long run.