(New York)

One of the most underappreciated areas of the bond market is in mortgage-backed securities. Anyone familiar with the Financial Crisis will instantly know why. However, the asset class itself offers many attractive advantages compared to other bonds. There are three main points of appeal: higher yields, liquidity, and low correlation to risk assets. MBS ETFs average 2.79% yields (much higher than Treasuries), have much greater liquidity than corporate bonds, and have the lowest correlation to risk assets of any fixed income instrument.

FINSUM: If you can get of the trauma that the acronym caused, MBS can be a very good asset class for many different market environments.

(Washington)

Here is an eye-opener for investors: one of the biggest market reactions to the midterms is likely to be in munis. In particular, yields on munis are expected to fall is the Democrats take the House, which would result in a split Congress. The reason why is that such an outcome would likely limit the further possible damage that could be wrought by Republican tax proposals. However, since the market is anticipating this outcome, if Republicans do maintain their hold on the House and Senate, then yields could rise sharply. The call on the moves comes from Barclays.

FINSUM: The most likely outcome right now seems to be a blue House and a Red Senate, which would mean smooth sailing and likely gains for munis.

(New York)

Wall Street is getting behind the stock market in a way that is atypical for the current environment. Following a big fall in stocks, banks and analysts usually get shy about calling a rally and generally stay neutral or call for further losses. However, following the best two consecutive trading days since February, they are getting behind stocks with unusual vigor. For instance, JP Morgan’s all-world analyst said that the “rolling bear market” might turn into a “rolling squeeze higher” and that “the potential for a violent upside rally is substantial”.

FINSUM: We are not as optimistic as Wall Street, but certainly don’t feel gloomy about the market given the strength of earnings and the economy.

(New York)

It is no secret, but new data is out showing just how much advisors don’t like the SEC’s new best interest rule. While there has been strong pushback about aspects of the rule, including its governance of the use of titles, there hadn’t been concrete data about how advisors felt about it. Well, now there is. A new survey from Fidelity shows that two-thirds of advisors say that the rule will either have a negative impact or won’t help. Only one third think it will have a positive impact. Interestingly, only 73% were actually aware of the SEC proposals in the first place.

FINSUM: The SEC rule is confusing and not well conceived. And when you combine with the updated DOL rule that is coming out in 2019, the new regulations could turn into a real headache.

(New York)

The market seems to have finally regained its footing after a very turbulent couple of weeks. This selloff felt different than any in recent memory and serious damage to the market’s psyche seems to have been done. But what might it say about the wider economy? The answer is little, according to the Wall Street Journal. The selloff will probably be just that, a market fall. In reality, tech companies, which led the losses, reported very solid earnings, with margins expanding very well. Little can be drawn from the results that might show the economy is in trouble.

FINSUM: The only aspect of this selloff we are somewhat worried about is how it might impact consumer confidence and spending this holiday season. However, so long as the market stays strong this month, we expect the impact to fade.