(New York)

The S&P 500 just recently emerged from its longest correction period in over 30 years. The big question is what will it do next. Well, there are a number of key issues/events that could either send it tumbling again, or push it higher. Three are easy to see on a timeline: this Friday’s jobs report, a Fed policy meeting, and another week of corporate earnings (140 companies in the S&P 500). There is also the looming trade war/tariff issue that could threaten the market, or support it, at any time.

FINSUM: Look out for the jobs report this Friday. There is going to be very high expectations, and if things don’t go as planned, the market could have a seriously adverse reaction.

(New York)

A 7% yield admittedly sounds attractive. However, what if it comes from a shipping company, and at the beginning of a trade war no less? That must be crazy. Think again, says Barron’s. The company is Triton International, which is the largest shipping container lessor in the world, owning 3.5m containers. It is a highly experienced operator and has 26% market share. However, worries over a trade war have hammered the stock, which is down 18% this year and trading at just over 7x earnings. Fears of how a trade war might affect its business look overblown and a fair market valuation for the company seems about 40% higher.

FINSUM: So this is a bet that the market will reevaluate the stock’s business model and see it is not that vulnerable. Sounds like a risky bet to us, but a 7% yield is nice cushion.

(Miami)

Bad news continues to mount in the real estate market. While commercial real estate is seeing big players move out as prices are rich and inventory plentiful, residential real estate has been healthier but is just showing the first signs of strain, with inventories rising and home sales dropping. Now, more bad news. New data shows that foreign investment in US real estate is dropping quickly. In the year ended in March, sales of US homes to international buyers dropped 21% to $121 bn, the biggest ever annual drop. The drop will mostly affect high-priced US destinations like New York, San Francisco, and Miami, where foreign buyers account for a much larger percentage of the overall market, especially at the high end.

FINSUM: The bad news is starting to pile up for real estate. One wonders how a downturn might play out. Given that lending for residential real estate has been modest compared to pre-Crisis, we don’t expect this to be a grave correction.

(Istanbul)

Emerging markets have had a rough year, with many major indexes, including in China and Brazil being in or near bear markets. This has led to a great deal of anxiety over the direction of assets, both stocks and bonds, in EM nations. Well, July may be the start of a new phase, at least according to Goldman Sachs. The bank says the emerging markets have hit their bottom and are now poised for a rally. Goldman reminds investors that big asset price moves in EMs are not uncommon, and that this year’s losses are quite ordinary.

FINSUM: The big question here is whether EM equities or credit are a better bet at the moment. Looking historically, credit seems to have a better risk/reward proposition when getting in early in a rally.

(New York)

The Wall Street Journal has put out an article painting an interesting, and perhaps realistic, view of how the trade war might play out. Their argument is essentially that the market itself will stop any trade war from becoming too serious. The WSJ says it best, “If the Trump trade war starts to squeeze economic growth, markets will react badly. When this happens, the impatient American president will have no choice but to declare victory, call off the war, and limit the damage”.

FINSUM: We tend to think this view is probably correct. That said, these kind of tariff wars can have unintended consequences that could make the damage more extensive and permanent than it is currently easy to foresee.

(Washington)

The whole market has been waiting on today’s GDP report for weeks, and this morning it finally hit the tape. With so much anxiety about the possible impact of a trade war, coupled with the expectation that the tax cut gave the economy a big boost, it is hard to remember a time when a GDP report was more relevant. Well, the figure is in, and it is a winner—the US economy expanded at 4.1% in the second quarter.

FINSUM: This is a great number, but the issue is that it takes very little of the most recent developments—trade tensions—into a account because it is for the second quarter only. We imagine the third quarter GDP figure will be even more important.

(New York)

Anyone who owns or works for an RIA will probably be aware of the huge boom in M&A in the sector. There seem to be many willing buyers of RIAs at the moment and the acquisition terms for such deals have been getting increasingly sweet. However, within the apparent euphoria, make sure you don’t make a bad decision. For instance, some RIAs might be seeing offers with good valuations, but all in stock of the buyer. There have been a lot of unsolicited purchase offers, which may characterize “an unsophisticated, stupid buyer who is just trying to grab assets”, according to on managing partner at an RIA speaking at a Pershing industry conference. RIAs need to beware because “[Buyers] aren’t just overpaying but may also overpromise and not be able to deliver”.

FINSUM: We suppose the old mantra is best here— if it sounds too good to be true, it probably is.

(New York)

How about some high growth and low risk stocks for your portfolio? Sounds too good to be true, but Barron’s has run a piece today highlighting the top picks of a midcap fund manager who is aiming for that profile. The idea of the Touchstone Mid Cap Growth Fund (TEGAX) is to find good growth at a reasonable price. The fund has returned 13.6% per year over the last five years. Their top holdings include: Worldpay, Pioneer Natural Resources, FleetCor Technologies, TransUnion, Tiffany, and Cooper.

FINSUM: These are some very diverse picks. Examining the fund’s methodology, we like their approach and suspect these stocks are worth a look.

(New York)

The US commercial and residential real estate markets have been headed in opposite directions for a little while now, with the former looking weak and the latter looking strong. However, new data suggests that US residential real estate now looks headed for its worst downturn in years. The market is suffering from heavy prices and rising rates, which are constraining buyers. Those realities are now starting to play out in the data, as the latest US market info shows that existing home sales dropped in June (for the third straight month), new home purchases are at their slowest pace in eight months, and inventory is finally starting to increase. Annual price gains in May were also their slowest in almost a year and a half.

FINSUM: It is still early days to predict a big downturn, but these three data points are a big warning sign. We are especially paying attention to rising inventory, as really tight supply has been the hallmark of the market for at least five years.

(New York)

Emerging markets have been on a wild ride this year, with many entering into bear markets. But what about EM debt? That market has faced headwinds as the US Dollar is strengthening on the back of expectations for higher rates. However, some bond fund managers really like EM debt right now. While USD denominated debt from countries like Argentina get a lot of the attention, local currency EM debt can be very rewarding. In Brazil and Mexico, for instance, local currency bonds are yielding 10% and 7%, respectively. Other countries with solid local currency debt are South Africa, India, and Indonesia.

FINSUM: So there seem to be two big risks here. One is the exchange rate risk, and the other is credit risk. That said, these yields do seem to be rewarding, and worthwhile if they are a small part of a portfolio.