Displaying items by tag: stocks

(New York)

One way to judge the fear level of investors in regards to inflation is to look at flows into TIPS, or Treasury Inflation-Protected Securities. The bond market had its biggest bout of volatility in around a decade over the last 6 weeks, and one big upshot of that has been a surge into TIPS, as investors seek a safe haven for the strong rise in inflation which they see coming. BlackRock’s TIPS ETF, for instance, just hit a new high with $25 bn under management.

FINSUM: Interest in TIPS has a lot to do with the Fed and rates, but also with the government’s budget deficit, which is set to widen.

(New York)

There are currently a lot of catalysts for small caps. The idea of favoring the segment started around the time of Trump’s election, when import tariffs seemed likely. Trump’s America first stance was also generally seen as favorable to small caps, which tend to have a high proportion of domestic sales compared to their larger cap peers. Now, with Trump set to implement metal tariffs and the threat of a trade war looking like a reality, small caps may once again shine, as they would be shielded from most of the international trade fallout. Furthermore, small caps will benefit the most from the new tax cut package.

FINSUM: There are a lot of catalysts that will help small caps. It seems like a great time to buy.

(New York)

One of the biggest surprises in the rise of ETFs has been the dominance of stocks over bonds. Bonds have always had some liquidity challenges for individual investors, so at the outset one would have expected bond ETFs to do well since they greatly enhanced accessibility to the asset class. However, while stock ETFs have exploded, bond ETFs have been more of a steady progression, but things are heating up. Bonds represent 15% of the total ETF market, but are growing quickly, with the market size doubling to $1.5 tn by 2022.

FINSUM: We think bond ETF demand will rise in line with rates. Once people start seeing 5% yields plus on solid bonds with short durations we think there will be more and more buying.

(Chicago)

McDonalds’ stock has not been doing so well lately, but guess what, that has not diminished its prospects. Well, at least not in the eyes of Wall Street stock analysts. McDonalds had a great 2017, but has fallen 12% this year. The introduction of its new $1-$2-$3 menu is part of the reason. However, most analysts still rate it a buy and it looks like a good long-term value proposition. The stock currently trades for 20x earnings, versus a high of almost 25 last year.

FINSUM: We think CEO Steve Easterbook is a great leader for the company and we have high long-term conviction for old Mickey Ds.

(New York)

Okay investors, hold on to your hats. A big name has just come down with a stern and gloomy warning for the markets. JP Morgan is saying that stocks may have a giant bear market. How big? Try a 40% correction, according to the bank’s co-president. Daniel Pinto, the bank’s co-president who oversees trading and investment banking, says that markets are bound for a big correction because of fears over rising interest rates and inflation. The bank thinks the market will see a two- to three-year downturn where prices will fall up to 40%.

FINSUM: This is a big correction that JP Morgan is calling for. We do think the market might go through a rough patch, but we don’t know if it is going to reach these kind of Financial Crisis era proportions.