(Washington)

Investors, be worried about the Fed, and not for the reasons you think. While all the market’s focus has been on how quickly the Fed will raise rates, what could really cause problems is the Fed’s unwinding of its balance sheet. According to the Indian central bank, this unwinding is sucking Dollars out of the system and causing a Dollar liquidity squeeze. According to Urjit Patel, the governor of India’s central bank, this Dollar-squeeze means “a crisis in the rest of the dollar bond markets is inevitable”, with a growing “possibility . . . a ‘sudden stop’ for the global economic recovery”.

FINSUM: It sounds like emerging markets are going to have increasing trouble issuing Dollar bonds, which could definitely throw a wrench into the recovery. Maybe this is how the Fed sparks a global recession and not just an American one.

(Washington)

Advisors all over the country are wondering when the SEC rule might be implemented. The DOL’s fiduciary rule took ages to be a reality (and never quite made it), but the SEC rule seems like it will be faster. But how fast? Realistically, probably one year from now, according to one industry expert. BNY Mellon Pershing urges advisors to stay engaged and not catch “fiduciary rule fatigue”. “We still have an opportunity to shape the fiduciary landscape … It's really important that we don't grow weary of the standard of care issue, because we have an opportunity to take the lead”.

FINSUM: A year sounds reasonable. The rule is only in its first iteration now, and we suspect there will be significant changes.

(New York)

The US real estate market looks set to change in a big way. Brokers and developers are sensing it, and consumers are making it happen. The change is in the geography of the market. The new SALT limits in the updated tax code mean that wealthy residents of higher tax states like New York, New Jersey, and California, now face much higher tax liabilities. As a response, many of them are seeking to buy homes and domicile themselves in tax-free states like Florida, Texas, or Nevada. One real estate developer in Nevada explains the situation, saying “If you’re a wealthy tech executive from the Bay Area who can live wherever you want and you have a $3 million income, you would have $399,000 a year in savings here. That’s a lot of money to spend on real estate”.

FINSUM: We think this trend will be both long-term and very bullish for markets like south Florida and other sizable metropolitan areas in low tax states . The high tax states might face a reckoning, especially those without a major metropolitan area to suck in residents (e.g. Oregon).

(New York)

Increasingly, investing in tech companies means you need to go big or go home. What we mean is that large cap tech companies have been outperforming their smaller peers handily. The S&P 500 Information Technology Sector is up about 14% this year, much better than the index’s 3.7% overall gain, but the S&P 600 Information Technology Sector has only gained 9.9%. That means that the largest tech company are significantly outperforming their smaller peers.

FINSUM: This is not a surprise given the overall momentum the FAANGs have had over the last few years. However, given the worries over regulation, it is odd to see they have outperformed smaller rivals very recently.

(New York)

Retail has been stuck in a rut for some years. Big retailers have been closing stores left and right, so unless you are a contrarian, it is a tough time to invest in the sector. However, there is an ETF that might offer the best way to play the current environment. That ETF is called Amplify Online Retail (IBUY). IBUY has returned just over 15% this year, and tracks an index of companies that make at least 70% of their revenue from online or virtual sales. Three quarters of its holdings are in the US. Only about 10% of retail sales happen online in the US, but that is expected to double over the next five years.

FINSUM: If you are a believer in ecommerce’s ability to disrupt the predominant retail model and make profit, then this seems like a good way to play the sector.