(New York)

The $36.6 bn Vanguard Dividend Growth fund (VDIGX) is finally reopening its doors to new investors. The fund has been closed to new investors for 3 years, but the manager says “After careful analysis of the fund’s current cash flows, we’re confident that there is ample capacity to reopen the fund”. The fund’s five-year annual return is 12.1%, besting the Russell 1000 by 1%. The fund’s average stock holding has a market cap of $110.6 bn, and its top five holdings are McDonald’s, Coca-Cola, American Tower, Medtronic, and Microsoft.

FINSUM: Vanguard funds are enormously popular for a reason, and this is an exceptionally well-performing fund that is finally reopening. Seems like a good buy.

(New York)

While headline economic numbers for the US economy have been good, there are some signs on the margins that things may not all be well. For instance, new data out of the shipping and trucking industry looks poor. The whole US trucking industry is in bad shape because of excess inventory and soft demand. “We’re three months into a freight recession”, says a transport analyst. Relative to last year at this time, there is less demand for capacity and that, coupled with an oversupply of trucks, means there’s little to no spot freight and all truckload prices have come down dramatically”, says the CEO of a freight broker. “Freight as we measure it is growing at less than 1% in 2019”, says the owner of an industry data provider.

FINSUM: So part of this is excess inventory, but another important factor is waning demand for freight, which is a leading indicator of an economic slowdown.

(New York)

Right now is high time for investors to be worried about bonds. Bond funds have received a lot of fast money in recent months because of the well-telegraphed rate cut. According to BAML, the net inflows into fixed income funds have reached a “staggering record” of $455 bn in 2019. That compares to just $1.7 tn in the last decade. Yields have tumbled this year, with ten-year yields down from 3.2% in November to just 2.06% now.

FINSUM: The outlook for bonds got murkier yesterday with the Fed’s relative lack of dovishness. It is not entirely clear that rates are going to keep falling, so it is not hard to imagine bonds facing some losses now given how much speculation there was of a large Fed rate-cutting program.

(Washington)

The Fed meeting yesterday was not what everyone expected. While the central bank did cut rates 25 basis points, the commentary was far from what investors expected. The attitude on the Fed had turned so dovish prior to the meeting that some thought Powell might cut rates by 50 bp. The whole meeting took a different course, with the Fed saying this was just a “mid-cycle adjustment” and refusing to commit to a further cutting plan. This upset markets, with indexes all diving over 1%.

FINSUM: We think this was smart from the Fed and ultimately good for markets. It left things more uncertain as to policy and direction, which means stocks will trade more on fundamentals. This reinstates the “wall of worry” that always seems necessary to build bull markets.

(New York)

We are back in the weird world of the 2013-2016 era. Remember the time when weak/moderate economic news was great for stock prices? Welcome back. Investors are hoping that economic data trends flat or just a tiny bit weak, which would cause the Fed to loosen policy. However, if the economy does well, that would lead to tighter monetary conditions, which investors don’t favor. Therefore, right now, bad economic news is good for the market, and vice versa.

FINSUM: We have always found these kind of “goldilocks” scenarios rather perverse, but they are the reality nonetheless.

(San Francisco)

The whole market is worried about tech, and with good reason. Current government investigations into antitrust practices could harm Silicon Valley’s biggest tech companies. However, all the anxiety has created a potentially great way to profit from them—sell puts. Puts on tech companies are currently trading at a steep premium because of anxieties, but selling puts—a practice which profits when the share prices rise—can be a quite profitable at the moment.

FINSUM: We think this could be a good strategy for the next year. The likelihood of heavy tech regulation seems less under Republicans, so for the next year we think there is potentially smoother sailing for Silicon Valley. That said, regulating the industry is one of the few things both Trump and the Democrats agree on.

(New York)

Not a day after warning about the unstable financial practices of S&P 500 companies, Goldman Sachs has just gone on the record saying that the S&P 500 is set for another round of big gains. The bank raised its year-end forecast for the index to 3,100. Goldman thinks that stocks are currently trading at fair valuations, and that “The dovish Fed pivot has driven the equity market rally in 2019, and we expect low interest rates will continue to support above-average valuations going forward”. The bank contends stocks will rise a further 10% in 2020.

FINSUM: We think stocks are going to move in line with the economy. If growth stays okay, and the Fed stays dovish, we are in for a move higher. We think the best odds are for a bull case.

(New York)

Gold has had an extraordinary run over the last few months. It is the first time it has really broken out of its funk since just after the Crisis. However, both JP Morgan and Barclays are saying it is probably time to cash out. Both argue that gold’s recent rise has been driven by speculation and not real fundamentals, such as the direction of the Dollar and interest rates. As such, these prices look vulnerable.

FINSUM: This is good analysis, but we also have another reason for you—if the Fed cuts and investors switch to risk-on assets, where does that leave gold?

(Washington)

The first round of the second Democratic debate occurred last night, and it was full of fireworks. Candidates ramped up their attacks on one another, with most of the aggressiveness directed at Bernie Sanders and Elizabeth Warren for their Medicare for All bills that would create an entirely government-run healthcare system. Other candidates criticized the plan as “fairy tale economics”.

FINSUM: We again think that the debate last night showed why Republicans are most likely to win this election—many in the party recognize the need to play more toward the middle to win the race.

(Beijing)

It has been a very bumpy run for US-China trade talks this year, but after a significant hiatus, China will again return to the negotiating table with the US in September. The most recent round of talks, in Shanghai, just concluded without an agreement, but there were some signs of life, as China buying US farm goods was discussed. The negotiators only stayed in Shanghai about 24 hours.

FINSUM: This seems to us like quite an intractable issue. We do not expect a forthcoming agreement any time soon.