(Washington)

The fiduciary rule saga presses on. Just when it looked like it was all over and the DOL had finally avoided its own rule, the court battle is not over. A new group of state attorney generals has just asked the to be allowed to appeal the fifth circuit court’s ruling against the DOL rule. California, Oregon, and New York have all asked for a rehearing of the court’s May 2nd decision to deny their request to step in as defendant. In their appeal, the states said “The federal government is no longer pursuing this appeal … Given that posture, the exceptional importance of the issues, and the grave harm the states will suffer as a result of the panel opinion — billions of dollars in lost retirement income to their residents and tens of millions of dollars in lost tax revenue — the states respectfully request that the court reconsider the decision”.

FINSUM: This is dragging on so long it is even getting annoying to report on! This does not seem likely to be granted, but one can never be sure.

(New York)

Morgan Stanley has just put out a very bold prediction. The investment bank has picked a stock which it says will have a $1 tn market cap within a year. That stock is Microsoft. The stock current has a cap of around $740 bn and has risen more than 40% in the last year. But the big catalyst for a move higher is the success of its cloud computing division, Azure. Morgan Stanley summarizes its view this way, saying “Revenue drivers including Azure (Microsoft emerging as a public cloud winner), data center (share gains and positive pricing trends), Office 365 (base growth and per user pricing lift) and the integration of LinkedIn should drive durable double-digit revenue growth over the next three years”.

FINSUM: While bullish, this does not seem at all unlikely.

(New York)

Investors beware. US equity prices now seem to be entirely at the mercy of bond yields. Stocks have consistently struggled as yields have moved higher, and today Treasury yields seem to have broken an important threshold. Treasuries traded as high as 3.13% this morning, the highest level in seven years. Stock markets unsurprisingly fell. The markets were initially spooked by a solid US retail sales report that seemed to indicate the Fed might hike more aggressively than expected.

FINSUM: Yields definitely seem to have a strongly upward trend at the moment and have definitively broken out of that 2.9% band they had been locked in for a few weeks. Next stop 3.50%?

(Los Angeles)

US real estate has been humming along quite nicely for several years. The market has been so steady as to be considered in a goldilocks period. Rates were low, lending standards slowly slipped, and the market kept rolling with high demand. However, that period may finally now have come to an end as mortgage rates are rising quickly. Mortgage rates just hit a seven year high, which could mean demand for housing softens as borrowers are unwilling to pay higher rates. The average rate for a 30-year fixed mortgage now sits at 4.61%. Rates bottomed in 2012 at an average rate of 3.31%.

FINSUM: We think this is definitely going to have an effect on mortgage demand, especially on mortgages in urban areas, where amounts tend to be larger.

(New York)

There is a little known recession predictor that has done a good job historically of predicting when the economy is about to go into reverse: conception rate. Based on analysis from 1989 to 2016, a period with over 100 million US births, three economists have found that conception rate consistently dropped just prior to recessions. Conception rate is different than birth rate in that it measures the decision to have a baby, not the actual birth of one. The economists found that months or quarters before a recession, the decision to have a baby declined.

FINSUM: So conception rate and birth rate are different, but obviously very linked. So, what is scary to find out is that the US birth rate just hit its lowest level since 1987. Reason to worry?