(Washington)

There has been a lot of speculation that the midterm elections could cause a big problem for markets. If the Democrats sweep into congress, causing a major power shift, many worry markets might crumple. However, the reality is that the most likely outcome—a blue House and Red Senate—would actually be bullish for stocks. One analyst who specializes in political-driven investing says that investors would be relieved to have a split Congress. If somehow both chambers go blue, then there would likely be a selloff in bonds, stocks, and the Dollar, but even that might prove a buying opportunity as Democrats “are not unified around anything”.

FINSUM: Depending on the election’s outcome, different sectors are going to see different results, as some are blue-positive (like auto suppliers, homebuilders, hospitals etc), while others are red-positive (like biotech, banking, credit cards, and defense).

(New York)

This is a tough time to be buying bonds. Prices have become very rich over the last several years and on top of sky high valuations and low yields the risk of rising rates causing big losses is high as the Fed sticks to its hawkish path. With that in mind, floating rate bonds and ETFs are a good strategy to combat the situation, as their yields rise as the market’s do. Most also invest in short-term bonds to lessen interest rate risk. Two of the most popular floating rate ETFs are the iShares Floating Rate Bond ETF (FLOT) and SPDR Blmbg Barclays Inv Grd Flt Rt ETF (FLRN). Both hold floating rate bonds with maturities of 5 years and under.

FINSUM: These seem like good options. The one downside to these ETF is that yields are quite low given their conservative nature, but they obviously have great downside protection.

(New York)

Here is a proposition. What if you could have stocks in your portfolio that help you earn income, combat rising rates, and support you during a recession. Look no further than this group of rising dividends stocks that should perform very well in a recession. All three are medical device makers with wide moats and long growth runways that shouldn’t be thrown off path by an economic downturn. The three are Johnson & Johnson, Medtronic, and LeMaitre Vascular. The first two companies are aristocrats and have increased their dividends steadily for over 40 years.

FINSUM: These are interesting choices. Medical device makers do some like good recession-time bets because healthcare demand should hold up nicely in any downturn.

(New York)

As the ten-year anniversary of the last crisis has arrived this month, it is a fitting time to be thinking about what might cause the next one. In fact, many investors, professional and retail alike, are fairly obsessed with calling the next big blow up. But what might cause it? While trade war and political strife grab a lot of headlines, the real driver of the next crisis will be the Fed. The two big worries on that front are rising rates, but perhaps even more worryingly, its shrinking balance sheet. Crises have historically happened when money supply grew tighter, and that is what is occurring right now.

FINSUM: The markets have never been through the winding down of a major QE program, so it is hard to foresee how this may playout. Logic says that the next big blowout will probably be tied to the end of easing.

(Beijing)

The pain rippling through emerging markets has spread from Turkey and Argentina to Indonesia, the Philippines, and South Africa. Some are calling the major selloffs a full blown crisis. Now, a big threat looms as the trouble may spread to the big one: China. The major worry is that the pressure on EMs, coupled with rising US sanctions on China, could conspire to drive the Yuan down as much as 15%. Other EMs would be forced to weaken their currencies, and the pandemonium could hit the global economy and markets in a way it hasn’t so far.

FINSUM: China’s weight looms large not just in an economic sense, but in the market’s psychology. If real trouble started to flare up there, it would quickly spread to western markets.