(New York)

Fighting the impact of rising rates on one’s portfolio is likely a primary goal of many advisors and investors right now, so we will be running a series of stories on the topic. For instance, Goldman Sachs has just released a new ETF in the area. In what is being called “smart beta exposure to bond markets”, Goldman has launched the Goldman Sachs Access Inflation Protected US Bond ETF (GTIP). The fund selectively chooses Treasury Inflation Protected Securities and costs 0.12% per year. “TIPS present an attractive diversification opportunity for many investors with relatively low correlations to other major asset classes”, says Goldman.

FINSUM: TIPS seem like a good investment right now, but we wonder how this will perform versus other rate hedged ETFs, most of which seem to have a different angle.. On the plus side, it is quite low cost.

(New York)

JP Morgan has put out an interesting piece of analysis this week. The banks says that the Fed, and Chairman Jerome Powell in particular, have cost investors over $1 tn this year just through his statements. For some reason, the market particularly dislikes hearing Powell. On average, the market drops significantly (0.40% or more) when the Chairman speaks. Further, his remarks usually cause an intraday inflection point, which means he is actually the one moving the markets, it is not just bad timing. JP Morgan summarizes that “While we acknowledge that it is not possible to attribute the market impact of each speech with certainty, simple math indicates that about $1.5 trillion of U.S. equity market value was lost this year following these speeches”.

FINSUM: We do not think this is anything to do with Powell specifically. It is more just about being a Fed chairman during a rising rate era.

(Los Angeles)

In a turn of events that stretches the boundaries of our understanding, Elon Musk took to Twitter yesterday to mock the SEC. The move comes in the same week that the CEO agreed to settle a suit with the regulator over his misleading tweets this summer. Musk tweeted yesterday afternoon that “Just want to [say] that the Shortseller Enrichment Commission is doing incredible work … And the name change is so on point!”. Legal experts say the tweets jeopardize his potential settlement the SEC as they violate specific clauses of the agreement.

FINSUM: We know he is a defiant character, but this kind of behavior seems to show extremely poor judgment, if not borderline mental instability.

(New York)

Gold has been in an extraordinary multi-year slump. From its peak of around $1,900 a few years ago, the shiny metal has sunk into a multi-year bear market, recently settling at around $1,200 an ounce. However, a couple of factors are coming together that may mean the bad times are over. The first is that there has been consolidation in the mining sector, but secondly, because the pending trade wars have meant that central banks have been buying more gold as a safe haven. This type of demand rose 8% since last year, and gold buying by central banks is off to its best start since 2015.

FINSUM: Unfortunately, we have to disagree with this article. Buying gold as we move into a higher-rate and stronger Dollar period contradicts all the fundamentals of the market. Furthermore, we think if gold was going to benefit from trade war fears, it would have already started.

(New York)

As almost all investors are aware at this point, global markets, including the US, saw huge moves in yields yesterday. Trading of the 10-year US Treasury bonds saw yields as high as 3.22% today, sharply higher than just a week ago. The Dollar also soared. This led to a big selloff in stocks as well as major losses across emerging markets and US corporate bonds.

FINSUM: In our view, there are two ways to interpret this big move higher in yields. One is that it was just reactionary to new US economic data and that yields will stall again. The other is that the market has finally woken up to the reality that higher rates and yields are a certainty and that expectations need to be reset. We favor the latter view and think this could be a paradigm-shifting move that finally sparks losses in bonds and rate-sensitive stocks.