(New York)

There are some very worrying signals coming out of the high yield sector. In particular, stocks at the riskiest end of the market have been underperforming. Bonds rated CCC, CCC+, and CCC-, which are the three lowest rungs before default, have been underperforming all year and that weakness has now reached an “unprecedented size”. What is worrying is that very lowly rated bonds are usually the most influenced by economic perceptions, and it is unusual that with junk rallying so much this year that this cohort has not taken part.

FINSUM: So there are two options for what this could mean. Either it means investors are just being cautious, or much more negatively, that credit conditions are tightening, which would be a sign of a pending economic downturn.

(New York)

If it seems like value investing is dead, it is because it almost is. Even major adherents have moved away from the practice as growth stocks have greatly outperformed value stocks for so long. The growth sector has been led by large tech companies for the last several years, and many are wondering whether the gains can keep going. The answer, according to Credit Suisse, is “yes”. The bank has put out a piece reminding investors that in late stage bull markets growth stocks can often hit P/E multiples of 45-60x. The sector is currently only trading at 28x earnings. Credit Suisse singled out Microsoft and Raytheon as good cheap picks.

FINSUM: The optimism has been building in markets, so it would not be far-fetched to think a big late cycle run could be in the cards for growth stocks.

(New York)

Nike is one of the retail stocks that has had a very good year, and it may be about to get even better. Goldman Sachs has just jumped on the Nike bandwagon, saying that the stock is going to keep on rising. GS upgraded Nike to a Buy from Neutral and joined 25 other analysts who say the stock is a Buy. According the GS, their change in view is due to “Evidence of building pricing power, signs of operating leverage, accelerating shift to differentiated retail, sharply scaling app ecosystem, and a constructive global athletic growth backdrop”.

FINSUM: Brands are in a better position than retailers, and Nike is on the very good side of that better group.

(New York)

One asset manager called last year’s fourth quarter stock rout perfectly, and they are doubling down, saying it will happen again this year. Principal Global Investors’ Seema Shah says that stocks are facing another imminent selloff if the US and China can’t get a trade deal done before the December 15th tariff deadline. “If that trade deal doesn’t happen and if everything falls apart and it feels like tensions are getting worse, then I think we are facing a potential repeat of last year, and it will be worse”, said Shah. She says that the shock could be even bigger than in other parts of the year because of how liquidity disappears in December.

FINSUM: So we are dubious on this call, but what is interesting to us is that this argument was published on November 28th, and since then Trump has backtracked on the trade deal timeline.

(New York)

If you are considering going independent, Charles Schwab has an interesting new survey for you. Thousands of advisors have been flowing out of wirehouses and large regional brokerages over the last few years. They have either gone completely independent or joined independent broker-dealers. In either case, a new survey from Charles Schwab shows that such advisors are very happy. In fact, 90% of advisors who have gone independent report that they have no regrets about their choice to go it alone.

FINSUM: The reality is that most advisors say that whether you become an RIA or go to an IBD, you can serve clients better and make more money at the same time. The general opinion is that with an RIA you lose a lot of structural support, but you keep everything for yourself; while with an IBD you keep more structural support and still get much higher payouts than at a wire.

(Washington)

Joe Biden’s bid for the presidency has already been an interesting one. His campaign launched with a lot of attention and support and then faded for awhile, only to hold surprisingly steady since. He doesn’t get as much focus as Warren and Buttigieg, but he has a sustained following. Now it looks like he might jump ahead in the polls. Biden has had decent support from the African-American community and with Kamala Harris ending her campaign, he is likely to get her substantial following behind his own bid.

FINSUM: Harris was carrying about 3.7% support among Democrats. Most of that will likely go to Biden, helping his chances.

(New York)

Deutsche Bank has just gone on the record with a bold prognostication. The bank says that the global economy is “bottoming out”. While that may sound grave without further context, what Deutsche actually means is that the global economy has already seen the worst of the current downturn. The bank expects that the world’s economy will be improving next year, meaning we may have finally turned the corner on slowdown fears. “Key to our optimism is that the risks of trade wars and Brexit are evolving in positive ways, and the possibility of a radical policy shift to the far left in the U.S. and the U.K. after their respective elections seems remote”, says Deutsche Bank’s research team.

FINSUM: So did we just go through a “recession” and now the economy and market are ready to turn the jets back on? Quite optimistic (especially after a 25% gain in the S&P this year), but not altogether unlikely.

(New York)

Analysts from across the Street have now put their predictions in for 2020, and the outlook is not as rosy as one would expect from a bunch of analysts who get paid to be bullish. The consensus outlook for equities can best be described as “meeehhh”. Morgan Stanley, UBS, and Stifel are forecasting that the S&P 500 will fall next year, while Citi, BAML, and Goldman are forecasting rises, but modest ones (single digits at the high end). Taken as an average, analysts think stocks will rise just 3% next year.

FINSUM: A published 3% forecasted rise by Wall Street research analysts feels more like they are expecting a 10% loss.

(New York)

Retail is a hard sector to invest in right now. Generally speaking it seems better to buy into broad retailers like Walmart or Target than into clothing specialists like Gap, and discount retailers seem better than traditional, but the whole industry is a battlefield. With that in mind, here is a good stock to look at: Tanger Outlets (SKT). The REIT owns 39 discount malls across the US and has a cheap valuation that seems to have suffered simply from being in the sector. The company is not financially distressed and sports a 96% occupancy rate at its malls. It is trading at about half the valuation of some other popular REITs and sports a hefty 9%+ yield. Because it is in the outlet mall space, it faces considerably less turmoil than traditional malls.

FINSUM: You probably saw a Tanger last time you were on the interstate. The fundamentals of this stock make it look like a good investment.

(New York)

A lot of advisors have been going independent lately. Whether you are moving to start your own RIA or want to join a large independent broker-dealer network, there are a lot of intricacies involved with running your own shop. Before you even think about the logistics of moving, it is important to assess whether you have the skills to succeed. There are essentially three skills that one needs to become a successful independent advisor: operational experience, in-depth relationship management skills, and sales/business development acumen. Operationally, you will likely have a tight budget when first breaking away, so understanding the nuts and bolts of the business, like migrating client accounts, is critical. Secondly, you will need to be able to concisely define the nature and scope of your relationship with clients in order to keep them happy for the long-term. Finally, you will need to be able to convince people why they should manage your money (without the weight of a wirehouse brand behind you!).

FINSUM: As a companion to the above, Michael Kitces notes that most successful independent advisors had seven years experience before going it alone.