(Washington)

It would be an understatement to say that a lot is riding on the midterms. Control of Congress is at stake, and within it, the whole policy agenda of the country. The stakes are even higher because of how politically divided the country is. Many think the Democrats will take the house but lose the Senate, resulting in a split Congress. This puts many investors at ease because it could block some of the right’s more extreme impulses (such as those against free trade). However, there is reason to worry that Republicans might fare far worse. That reason is that Donald Trump is the most unpopular president ever in such a buoyant economy. According to one polling expert, “There’s a huge disconnect … The economy doesn’t seem to be dominating in a way that it often does in elections”.

FINSUM: Our worry for the Republicans is that Trump is making the midterms more about himself than the party, and given the high degree of disapproval, that approach could really end up costing Republicans in the midterms. Consider an all-blue Congress come November a considerable tail risk.

(New York)

If there were ever a time to be worried about rate risk it is now. The US economy is red hot and the Fed continues to look hawkish. Two rate hikes by the end of the year look like a certainty. So how can one protect their portfolio? One answer is floating rate bonds, and especially floating rate investment grade bonds with a range of durations. One ETF that does just that is the X-trackers Investment Grade Bond – Interest Rate Hedged ETF (IGIH). The ETF sports a yield of over 3%, and very importantly, it has a duration of almost zero, meaning it should be almost completely unaffected by any movement in rates.

FINSUM: a 3% yield with no rate risk sounds like a very good investment in the current environment.

(New York)

Safe dividend stocks are absolutely prized by America’s retirees. No group relies on dividends more than retirees, and most seek safe and reliable dividends with underlying businesses that can provide some price appreciation too. With that in mind, three stocks to look at are McDonalds, Corning, and Starbucks. All three companies have strong and growing businesses and seem committed to rewarding shareholders. They also have the formidable capital position to be able to invest in continuing robust growth even in changing times.

FINSUM: We don’t know much about Corning, but McDonalds seems like a good bet to us. The company has responded well to the shifts in consumer tastes and it has been innovative in adapting its menu and model to the new environment.

(New York)

Retail clients, and some advisors, are adopting an increasingly defensive outlook on the market as the economy roars and rate hikes look more and more certain (not to mention soaring valuations). So what are the best defensive ETFs to protect a portfolio? The range of defensive strategies is broad—from dividend-focused, to shorting, to multi-factor. Some of the most popular include the AdvisorShares Dorsey Wright Short ETF, the Fidelity Dividend ETF for Rising Rates, or the Principal Mega-Cap Multi-Factor Index ETF.

FINSUM: It seems a smart choice to have defense ETFs be a decent portion of one’s portfolio right now. That said, we would be anxious to make shorting-focused ETFs a substantial holding.

(New York)

For several years Vanguard was seen as the champion of low-cost investing. It led the revolution in ever-lower cost ETFs. However, just recently, it seems to have fallen on hard times as it is facing challenges on multiple fronts. In particular, it is suffering at the hands of Fidelity, which is undercutting it on fund pricing. Fidelity’s recent no-fee index funds mean they are even cheaper than Vanguard’s lowest cost funds. The second, and perhaps even more worrisome challenge, relates to investment minimums, which Fidelity did away with on its cheapest funds. Vanguard’s minimums are now starting to look old-fashioned by comparison.

FINSUM: The best way for Vanguard to compete would be to merge some of the classes of their products. However, doing so would require a big revenue haircut, all of which means the company has some tough choices to make.