(Washington)

A lot of financial industry participants have been hoping that the Trump administration might ultimately disassemble much of Dodd-Frank. Bits and pieces have been toned down so far, but the regulation remains mostly intact. Well, it seems like it is going to remain that way. SEC chief Jay Clayton just confirmed that while the SEC may seek to modify Dodd-Frank around the edges, there won’t be major changes. “I don’t think Dodd-Frank is changing a great deal, just to put a pin in it”, said Clayton.

FINSUM: Clearinghouses might see some changes, but otherwise Clayton seems fairly adamant that Dodd-Frank is staying put.

(Washington)

The Trump-era SEC is really starting to make itself felt. Not only has the SEC come out with a lighter touch “best interest” rule, but financial fines have been plummeting. In the six months from October to March, the SEC handed out $102m in fines, 93% lower than the year prior, and the lowest amount in at least 12 years. The total number of cases also fell by a quarter. The largest fine so far under SEC head Jay Clayton was $14m, tiny compared to the $415m fine levied against BAML under former SEC head Mary Jo White.

FINSUM: Financiers had been hoping that we were entering a regulatory-light era under Trump. It really seems to be materializing.

(New York)

Artificial intelligence is one of the hottest concepts in tech, and one of the most intangible from an investing standpoint. Since “AI” seems to be something that most companies are developing internally, the concept remains difficult to invest in directly for most investors. Those wanting to invest in AI can look beyond Google, Facebook, and the rest of the FAANGs, however. According to one analyst, one should look for specific software companies that have “tremendous expertise in their specific industry, understand their customers’ businesses, and provide highly tailored solutions”. These include Aspen Systems, Guidewire Software, and Veeva Systems.

FINSUM: AI doesn’t have many widely available direct investing opportunities, so these seem like some very interesting picks if you want to bet directly on the technology.

(New York)

Investors beware, the fundamentals of the junk bond market are looking terrible. The deterioration of the market has been happening for a long time, and thus it makes it easier not to realize it. The junk bond market is now about twice the size it was in 2007, and credit quality is lower. Protections for investors, in the form of covenants, are also much weaker as issuers were able to use the ultra-low rate market to their advantage. Now the big worry is that Libor is rising and many companies have floating rate debt that they cannot cover once it reaches certain levels.

FINSUM: According to the WSJ, the market should expect $500 bn of junk bond defaults over the next three years, and this figure could amplify considerably.

(Rome)

The big recovery after the huge losses in Italy might finally be underway. While downward pressure on Italian assets had subsided, there is now a big rally happening. The catalyst is that the country’s finance minster has just pledged that Italy will stay in the Euro, helping ease the market’s largest worry about the political crisis in Rome. The minister also pledged to avoid financial instability.

FINSUM: Italy’s two-year bond has already seen its yield fall 100 bp! That is quite a response. To be honest we doubt this pledge amounts to much, but it is good signaling for the market.