(New York)

Yields are really low, right? No! In fact, they are high. That is how investors may need to start thinking about yields. Everything we thought we knew from the last 50 years might be worthless now. The CIO of Northern Trust explains “I continue to be surprised by my fellow asset management professionals who think that the long-term norm for the 10-year U.S. Treasury should be closer to 4% or even 4.5% … This is just too high when you consider among other facts that there is $15 trillion invested the bond markets globally right now that is carrying a negative interest rate”. He continued “On the day of this discussion the Swiss 10-year is at negative 90 basis points, the German 10-year is trading at negative 56 basis points, and the Japanese 10-year is at minus 20 basis points … So, why would the U.S. 10-year trading at close to 1.5% or 1.75% seem low? It’s in fact unusually high in the global context”.

FINSUM: Maybe super “low” yields are the new normal, and we should think of the US’ yield level as abnormally high right now. It is hard to stomach and has enormous implications, but it may very well be the truth.

(Bangkok)

While many are worried about the domestic economy and whether the US is headed for a recession, those invested in emerging markets should perhaps be even more concerned. One of the fears specialists in the area have is that there is probably about $200 bn of unreported Chinese loans on the books of emerging market borrowers. China is not obligated to report these loans anywhere, so no one is quite sure of the size of the exposure. The risk is that as the economy sours, and these credits debts become distressed, China could impose some severe conditions on borrowers, which could cause emerging markets to seize up.

FINSUM: We could see this becoming an issue, especially because China will be feeling distress itself, which means it is likely to use a heavy hand. Even if nothing comes of this, it will likely weigh on EM asset prices in the near-term because of the uncertainty.

(New York)

All the signs seem to point to commodity prices headed lower. Why you may ask? Pretty simple—the economy looks to be weakening, so demand will be lower at a time when supply will stay high. But no so fast, says Evercore, who argues that oil prices may be in for a counterintuitive rise of at least 19% by the end of the year. Evercore contends that production will be flat this year, as OPEC is curtailing output. At the same time, global monetary policy easing is likely to sustain demand, meaning the basic picture for oil may be more bullish.

FINSUM: We think this is an optimistic view that does not take full account of the worsening economic outlook.

(Washington)

In may seem like an eternity in market terms, but 2021 is right around the corner if you are a regulator. The DOL is reportedly racing to get a new DOL rule finalized and implemented before a new administration may takeover in January 2021. The DOL is reportedly set to release a new version of its signature rule this December. But even if it does so, experts say it will a tight push to get a rule implemented before a new administration might take over. In fact, many say the DOL will need to debut its proposal for the new rule by October in order to achieve the January 2021 deadline.

FINSUM: So we know this rule is supposed to be “harmonized” with the SEC’s rule, but there is preciously little additional information. We do think the tight timeline will push the department (which has a new chief after Acosta resigned) to issue a rule more quickly than most in our industry probably realized.

(San Francisco)

Bad news for tech investors and Silicon Valley executives—it looks like Big Tech is going to bear the brunt of the trade war. The group of stocks surged yesterday on the announcement of the delay of tariffs on China. This is because a major part of the tariffs relates to hardware that is core to technology companies’ products. Most specifically, the Treasury said it would delay tariffs until December 15th on “cellphones, laptop computers, videogame consoles, certain toys, computer monitors, and certain items of footwear and clothing”.

FINSUM: While this development offers some relief, it will likely be fleeting. The trade war with China is looking increasingly intractable and tech is right in the middle of it.