(Washington)

So at first the recent court ruling against the fiduciary rule looked like good news for the industry. A court had finally ruled against the rule, which seemed to be a sign that it would never fully be implemented, while also raising the odds it would be reviewed by the Supreme Court. However, Barron’s says that the ruling may have a perversely negative effect as it may cause the SEC to re-examine its efforts at drafting a fiduciary rule. According to the Investment Adviser Association, the ruling “is likely to give pause to the SEC with regard to its own fiduciary rulemaking”.

FINSUM: The SEC likely won’t want to get involved in a protracted legal process over whatever rule it proposes, so it may continue what it has done 2010 with regards to the fiduciary topic—nothing.

(New York)

All the biggest names in bonds—Gross, Gundlach, Dalio—have been warning that a major bond bear market is on the way. However, Bloomberg is arguing that bears may have to wait as the tide in the bond market is reversing. Treasury yields’ rise has stalled, and in certain parts of the world (e.g. Germany), yields are once again falling. The big reason why is global fears over a possible trade war which could sink the economy broadly. This would weaken inflation and hamper hikes by central banks, pinning rates.

FINSUM: We have repeatedly said that we do not think there will be a bond bear market. There is a lot of natural demand for bonds given the aging population, which should keep yields at bay even if other forces are causing them to rise.

(New York)

One of the market’s big fears at the moment is rising rates. Inflation is rising and the Fed is poised to hike rates three times this year. With that in mind, Barron’s has chosen some stocks that will help defend your portfolio against jumping interest rates. Stock with good dividends tend to perform poorly in rising rate periods, but if you are looking for good-yielding stocks which will continue do well, look at commodity-related companies, whose free cash flow can maintain dividends. Exxon Mobil, Schlumberger, General Motors, and Kimberly-Clark all look set to do well.

FINSUM: So what sets these stocks apart is that their dividends look sustainable AND they have attractive valuations, both of which make them more likely to perform well.

(Washington)

The scandal for Wells Fargo’s wealth management division is deepening. The bank has already experienced major reputational damage following its checking account scandal, and now the US Department of Justice is investigating the wealth management division’s alleged misconduct. The move is part of an extension of the investigation into the retail banking misconduct, and the FBI is reportedly holding interviews in the Phoenix area. Earlier this month the bank disclosed its own independent review of its wealth management unit included “whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company’s investment and fiduciary services business”.

FINSUM: This scandal looks like it is going to keep moving deeper and deeper. We wonder how much damage this might ultimately have on Wells Advisors’ own businesses. This seems like a situation where advisors might be seen by clients as guilty by association.

(Washington)

This weekend saw President Trump escalate his attacks on Robert Mueller’s special counsel investigation. Trump and his lawyers launched a public campaign to condemn the investigation which included Trump’s first tweets targeting Mueller by name. Trump tweeted that the investigation “should never have been started in that there was no collusion and there was no crime”, saying that the Mueller investigation was being led by “hardened Democrats” intent on taking down the Republican president. Trump’s more aggressive stance than in previous months led to several warnings from senators on both sides of the aisle that he should not try to end the investigation.

FINSUM: One keeps wondering if some bombshell accusation is going to arise from this investigation or whether it will end up being a long waste of time.