(New York)

The whole market is freaking out about the trade war. Between the yield curve inversion, plunging yields, and weakening economic indicators, investors are on bear market and recession watch. However, these worries are likely overdone, meaning the current market is a buying opportunity. There is little consensus that economic data is worsening and the economy is headed for a recession, but investors seemed compelled to believe this because the expansion is about to become the longest on record.

FINSUM: Investors seem to be feeling a sense of doom that has little basis in reality. There is no reason why the economy has to go south just because the expansion has reached a decade.

(New York)

There has been a lot of media coverage lately about how to protect one’s portfolio from the trade war. We came across an unusually clever idea recently, however, that has nothing to do with trying to forecasting the impact of tariffs on different sectors. Here is the strategy: buy exchange stocks (meaning the stock of stock exchanges, like the Nasdaq). The argument is that panicked buying and selling alongside a trade war will boost trading volumes, which in turn boosts revenue.

FINSUM: We think this is a brilliant strategy. If volatility rises, exchange stocks will likely do well. If volatility is down, meaning less trading volume, the rest of your portfolio is likely to be doing well.

(Brussels)

We thought it would be good to add a little European flavor to today’s coverage. The Financial Times has written a very insightful piece about the EU and the effect Brexit has had on it. In particular, it cites Donald Tusk, one of the EU’s top policymakers, who says that Brexit has been a “vaccine” against anti-EU parties across the continent. “As Europeans see what Brexit means in practice they also draw conclusions … vaccine against anti-EU propaganda and fake news”.

FINSUM: The EU has seen what Brexit has done to quell any anti-EU sentiment within the Union, which means it will never let off the gas pedal in making Britain’s departure a hellish ordeal.

(Washington)

It happened quickly, more quickly than almost anyone expected. The SEC redrafted its “Regulation best Interest” rule and put it to a vote yesterday, with the new version being approved by a 3-1 vote. The new version is a fairly large departure from the previous one, and went in the complete opposite direction versus expectations. Instead of tightening the rule to put more fiduciary duties on brokers, it did the opposite, eliminating language regarding best interests and seemingly watering down the current suitability standard itself. The vote against the rule came from the SEC’s only Democrat, who said “Rather than requiring Wall Street to put investors first, today's rules retain a muddled standard that exposes millions of Americans to the costs of conflicted advice. Even worse, contrary to what Americans have heard for a generation, the commission today concludes that investment advisors are not true fiduciaries. Today's actions fail to arm Americans with the tools they need to survive the nation's retirement crisis.”.

FINSUM: In addition to the changes mentioned above, it is also worth noting that the new rule significantly expanded the language regarding “solely incidental”, meaning many more brokers do not fall under the rule’s purview. Now it remains to be seen what the DOL does.

(New York)

Some of the market’s most important indicators are sending warning signs. Both oil and gold are trading in a way that has traditionally signaled that a big downturn is headed our way. Oil has fallen to near a bear market on concerns over growth, while gold has shot higher on the same worries. The extent of the moves is unique and has often presaged nasty movements in broader asset prices. In both the Dotcom bust and the Financial Crisis, oil and gold behaved similarly, so the question is whether they are sending the same message now. One market analyst noted, “Only three other times in history precious metals surged while oil plunged! All of them happened during severe bear markets and recessions … Buckle up, folks”.

FINSUM: It is odd to think that this has not happened more often as it is exactly what you would expect in times of anxiety about growth. Accordingly, this must be noted.