In what comes as a potentially very good sign, the Treasury Department announced yesterday that a trade deal with China was close to becoming a reality. Steve Mnuchin, head of the Treasury, said that a deal with China was “90% of the way there”. On a slightly less positive note, he continued “The message we want to hear is that they want to come back to the table and continue because I think there is a good outcome for their economy and the U.S. economy to get balanced trade and to continue to build on this relationship”. Trump will meet Xi at the G20 gathering this weekend.
FINSUM: Mnuchin is not particularly given to exaggeration, so we take this 90% number as pretty meaningful. The downside is that the Chinese aren’t at the negotiating table right now.
It is getting to be the time of year when everyone is trying to predict next year’s election. A lot of polls show Trump is trailing, which has given Democrats hope and some comfort. However, a new chart published by Goldman Sachs offers a different view. The bank analyzed historical approval ratings against economic data heading into elections and found that when the economy is healthy, that factor outweighs approval rating. Goldman concluded that should the economy stay on decent footing, Trump has a clear path to victory.
FINSUM: This makes a lot of sense to us and we think it offers a more realistic picture than more minutely-focused opinion polls.
The market’s outlook grew significantly dimmer yesterday. The Fed made clear that investors should not expect a rate cut in a July, which took the wind out of equity investors’ sails. With that in mind, here is a list of ten stocks that should help investors win in a downturn. The theme here is “low volatility” stocks, or stocks with less risk that should outperform the market in a choppy environment. The list: Aflac, Amdocs, American States Water, Atmos Energy, DTE Energy, Duke Energy, McDonalds, NextEra Energy, OGE Energy, WEC Energy Group.
FINSUM: Given the Fed’s reversal from what the market thought was its stance yesterday, right now does seem like a good time for low volatility stocks.
A US District Judge is allowing a lawsuit from Democrats against President Trump to proceed. The lawsuit is from Congressional Democrats and the green light they have received will allow them to begin collecting records from businesses owned by the president. The judge denied a request by the DOJ to pause the case in order for it to be reviewed by a higher court. “This case should have been dismissed. It presents important questions that warrant immediate appellate review and is another impractical attempt to disrupt and distract the president from his official duties”, said the DOJ. The department will now try a long-shot emergency plea to an appeals court in Washington.
FINSUM: This did not get covered much in the media, but it is an important development as this will bring the Democrats closer to getting all the records they want. The fight is escalating.
The SEC’s Best Interest rule is still being digested by markets. It contains some potentially big changes, including the definition of fiduciary duty. The DOL is yet to release its new Fiduciary Rule, but it will reportedly work smoothly alongside the SEC’s rule. One of the questions that has arisen in this context is whether under the new rules it may be increasingly easy for fiduciaries to accept commissions. The idea of fiduciaries accepting commissions is generally a big no-no in the current paradigm, but top industry lawyers like Fred Reish see this loosening under the new rules. In particular, it is seeming as though broker-dealers could accept commissions when offering fiduciary advice, but the jury is still out on RIAs.
FINSUM: This is just one of the many new changes that are on the horizon. The combination of new rules will likely create grey areas, risks, and opportunities that are not yet apparent.