(Washington)

Elizabeth Warren, top Democrat in the running for the presidency, has been looming over the wealth management sector for months. She has staunchly consumer-protectionist leanings, but yesterday she made very apparent how she feels about forthcoming regulation in wealth management. Warren wrote a letter to DOL Chief Scalia warning him about the forthcoming DOL rule. “Given your past statements that the fiduciary rule ‘is a matter that ought to be addressed by the SEC,’ I am concerned that the DOL may simply copy the wholly inadequate standards of conduct framework developed by the [SEC] in its recently-finalized Regulation Best Interest (Reg BI)”, she said, continuing “Americans’ savings should never be willfully compromised by conflicted actors operating under anemic rules — but they are … broker-dealers to give clients advice that is not in their best interest”.

FINSUM: Usually one would argue that politicians don’t know much about the ins and outs of wealth management, but Warren knows much more than usual given her background with the CFP. That makes her a very significant opponent for the industry.

(New York)

Which stocks dominated the 2010s? It is an easy question, not a trick—tech stocks. The FAANGs absolutely ruled in the past decade, but such patterns rarely continue and the best stocks in the next 10 years might be very different. Instead, UBS recommends stocks that focus on sustainable investing, genetic therapies, digital transformation, and alleviating water scarcity. The world and its governments and investors are likely to move towards sustainable tech in the next decade, which should support this nascent space, says UBS. Meanwhile technologies like 5G and gene-based therapeutics will revolutionize the technology and healthcare sectors. The world also has a significant supply and demand issue in water (mismatches between where water is and where it is needed), which will create significant revenue opportunities.

FINSUM: This is quite a progressive view, especially in respect to the water and sustainability forecasts. That said, it does seem like a good thesis.

(New York)

So which stock will lead the way in 2020. Many are of two minds about this question. One the one hand, growth stocks look so pricey that value seems to have a good chance of taking the lead; but on the other, growth has been dominating for so long that it is hard to imagine such stocks not leading. Goldman Sachs say the middle road, or GARP (growth at a reasonable price) stocks, will be the big winners, as they have characteristics of both groups. “During periods of very strong or accelerating growth, investors embrace the risk of low valuation stocks because even lower quality stocks can successfully generate [earnings] growth in rapid GDP growth environments”, says David Kostin, chief US equity strategist at Goldman. Take Google for instance, which trades at 26x earnings, which is only in the 56th percentile for the communications sector, but has strong earnings growth characteristics. Other names to look at include Estee Lauder, MGM Resorts, and Lockheed Martin.

FINSUM: Interesting thesis and we like it in principal. Our issue is that investors just don’t seem to care about price right now.

(New York)

Wall Street analysts area all over the map about where stocks are headed next year. Some firms are bearish (Morgan Stanley), some are neutral, and some are bullish. Put Bank of America in the latter category, as the bank says that stocks are set to surge in the first couple months of 2020. Calling the year “front-loaded”, Bank of America analysts say that the S&P 500 should rise by 5.2% by March 3rd. Michael Hartnett from BAML says that the combination of easing trade worries, diminished Brexit fears, and loose monetary policy should combine to cause a “melt-up” in risk assets.

FINSUM: We like this call. All the fears for the winter seemed to have ebbed, and there will be a few months before election worries really kick in.

(New York)

Breaking away is one of the biggest moments of an advisor’s lives. So much can go wrong and so much can go right. One of the most daunting aspects of breaking away is losing the infrastructure of a large firm, especially the tech infrastructure. So much of the success of breaking away depends on giving your clients a great experience during the transition, so choosing the right infrastructure is crucial. In order to avoid making a mistake, it is crucial to hire a consultant who specializes in the area. They will be able to tailor the tech you should get to the unique needs of your clients and your firm.

FINSUM: This is a very good idea as one of the biggest headaches (and potential sources of nightmarish stories) is making poor tech choices. Checkout LibertyFi, a specialist consultant in the area.

(New York)

Some investors live and die by it, but all should pay attention. The stock-bond ratio is an old investing indicator that can tell you when one asset class may be ready to head higher, and right now it is sending a strong signal. Ned Davis Research says that the ratio tends to bottom before economic recoveries. Therefore, if we have truly hit the bottom of the current economic cycle, then the ratio (S&P 500 divided by the US long-term treasury bond index) should start improving. “Barring an escalation in the trade war, we should see a recovery in early 2020 based on historical lead times”, said Ned Davis Research.

FINSUM: This is a very handy way to think about, and keep track of, risk-on/risk-off.

(New York)

One thing about the wealth management landscape that has never made much sense is how JP Morgan is not early as big a player as one might expect given the overall strength of its brand. Morgan Stanley and Merrill Lynch hog all the AUM and attention, with JP Morgan and Goldman Sachs mostly on the outside looking in. Well, that may be about to change, as JP Morgan is now planning some big changes to its wealth management business. According to the WSJ “The bank is creating a unit that will combine its U.S. wealth-management operations for affluent clients and the Chase branch network’s financial-advisory business”.

FINSUM: This sounds like a plan to go after mass market wealth management like Morgan Stanley or the Thundering Herd. Could be a big play.

(New York)

Investors should take a look at big banks. Executives at top financial companies are excited about potential Q4 performance. Earnings estimates are moving higher based on more bullish guidance. Last year’s fourth quarter saw a dismal performance from big banks, so that sets up a very favorable comparison to this year. Morgan Stanley’s earnings may be up 41% according to analysts surveyed by Bloomberg.

FINSUM: It will probably be well-telegraphed, but big bank stocks still seem like they might see movement higher now and a pop on earnings releases.

(New York)

Gold had a great first nine months of the year, rising 25%. Since September though, it has been quite bad, falling 7% versus an S&P 500 gain of 10%. So where is it headed? Godman Sachs says the metal still has a strong case. The bank’s research team says “gold’s strategic case is still strong … We expect ‘Fear’-driven investment demand for gold to be supported by late cycle concerns, political uncertainty and high [developing market] household savings”. Even if the Fed increases rates, GS thinks gold will be solid because rates still remain so low, which is a positive for the zero-yielding metal.

FINSUM: If you think the risk-on rally will continue, then stay away. However, if you think the market is going to be flat in 2020 because of political and economic uncertainty, then gold is at a decent buying point right now.

(New York)

Despite all the worries that plagued the market this year, things have actually been very strong. Exceedingly so. But don’t expect that any longer, says Blackrock. The world’s largest asset manager expects returns in 2020 to come way down. The firm says that the big changes in monetary policy this year outweighed the geopolitical issues and caused huge returns, which won’t happen next year. Blackrock thinks returns in the mid single digits in 2020 seem realistic.

FINSUM: This is sort of a middle of the road call in terms of forecasted numbers, but we like the summary of what happened this year and how next year’s performance is not likely to be duplicated.