FINSUM

FINSUM

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Monday, 24 June 2019 08:34

Trade Truce is Becoming Less Likely

(New York)

The trade war between the US and China has been pretty intense for some months, but many are wondering if it is headed for a cool down as the countries come to an agreement. The odds of such a development look bleak, according to Bloomberg, because each side’s alternative is looking better. Trump and Xi will meet at the G-20 summit this week to talk over their country’s trade issues, but given that both countries have realized they have good options outside of one another, it seems unlikely a deal will materialize.


FINSUM: We think a symbolic deal could still happen, but it is hard to envision an impactful and comprehensive deal being agreed any time soon.

Friday, 21 June 2019 10:26

SEC Rule Mean Brokers Will Beat RIAs

(Washington)

RIAs need to ready themselves for an onslaught of broker marketing. Changes to the SEC’s rules on fiduciary advice means brokers can now say that they put client interests ahead of their own. This is leading industry experts to expect a marketing bonanza that is expected to help brokers capture market share back from RIAs, who are having their niche diluted by the changing rules. Accordingly, RIAs will need to recraft their narrative, changing marketing language in order to re-differentiate themselves from brokers.


FINSUM: The big loser in the new regulatory push has been RIAs, as they have essentially had their turf artificially eaten away from some shifts in language by the SEC. That said, they have been gaining market share for years, so are in a better position to begin with.

(New York)

Low volatility stocks aren’t behaving the way they are suppose to right now, but that is what makes them interesting. Stocks chosen because of their generally low volatility tend to perform poorly in up markets as their low beta means they underperform benchmarks. But the nature of this year’s rally has defied that idea. Stocks are up 18% this year, but there are still many worries about the economy, the combination of which has given a big boost to otherwise boring stocks. Even during the losses of May to June, low vol stocks barely lost anything even though the market plunged.


FINSUM: There are a number of low vol funds like USMV and SPLV which are good choices for this area. These stocks seem like they have found a sweet spot in the current market environment.

(New York)

For many years after the Crisis, the main theme around consumer debt was the idea that Americans were deleveraging. However, steadily, consumer debt has risen back to alarming levels. In the first quarter of this year, consumer debt hit $14 tn, surpassing the $13 tn of leverage pre-Crisis. Student debt has been a major area of credit expansion. Even when comparing debt to the population, the debt per person is a little higher than in 2008.


FINSUM: So obviously inflation needs to be accounted for here, but the picture is still worrying. It is yet another sign that we may be nearing the end of this run.

Friday, 21 June 2019 10:20

How to Play Gold with ETFs

(New York)

Gold is doing well, and it is no surprise. Markets are worried about an economic downturn, and yields are falling, both of which are bullish for gold. The metal is up almost 7% in July alone. But what is the best way to play the commodity using ETFs? Owning gold directly is costly, so passive structures are great. Consider the SPDR Gold Shares ETF (0.40% fee), the iShares Gold Trust (0.25%), and the GraniteShares Gold Trust.


FINSUM: Passive is definitely the best way to play gold. We like the outlook for the metal as rates and yields are definitely headed lower, which helps gold in multiple ways.

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