(New York)

It might be a great time to buy gold, or at least that is what one of the top gold funds on the street is saying. VanEck International Investors Gold fund, which has routinely outperformed peers, says Gold is finally likely to break out its narrow trading range. Gold suffered a terrible bear market from 2011 to 2015, and prices are low and there is little selling pressure. This, coupled with heightened geopolitical risk and inflation, mean that gold seems likely to find a catalyst for strong performance.

FINSUM: We do agree that prices are low and there is little selling pressure, but there have been plenty of other times there were geopolitical catalysts, so it is hard for us to get behind that notion.

(Sao Paulo)

Investors who had been betting on emerging markets stocks might want to take notice of what is happening in the Treasuries market. While the explanation is a little technical, hear this: since the US deficit is set to rise rapidly, the US will see a surge in Treasury issuance. That big jump is issuance will suck up investor Dollars, and is likely to greatly wound Dollar-based EM funding. The Fed will also be forced to stop shrinking its balance sheet, which will also exacerbate the situation for EMs.

FINSUM: It sounds like the EM funding market is going to take a hit, which could have major ripple effects throughout the whole asset class.

(New York)

Credit rating agency Moody’s has just put out a broad and scary warning to investors: when the economy turns around, we have may have a junk bond crisis on our hands. Moody’s says that there will be widespread junk bond defaults in the next recession stemming from huge issuance and heavy indebtedness. With rates so low following the Crisis, indebted companies issued hugely risky and burdensome debt that was eagerly gobbled up by investors. According to Moody’s “The record number of highly leveraged companies has set the stage for a particularly large wave of defaults when the next period of broad economic stress eventually arrives”.

FINSUM: All that issuance was always going to come back to bite. Credit-worthiness was low and investors gave up a lot of safeguards. It seems inevitable the bill will come due.

(New York)

As if higher rates and Europe weren’t enough, there are plenty of other dangers currently weighing on the stock market. The two big ones are a potential trade war—sparked by Trump’s proposed tariffs on metals and beyond—which could lead to a bitter battle between the US and Europe or the US and China. The other big risk is FAANG, or big tech, regulation. Tech stocks have become such a stalwart of the market, that regulations reigning them in could prompt major losses.

FINSUM: The market does appear ripe for some regulation of tech stocks. GDPR just passed in Europe and the political climate seems ready for some regulation, but we believe it is still more likely that nothing happens.

(New York)

If you are worried that much higher rates will cause an exodus from the stock market, you are not alone. Many advisors across the country are closely watching the markets to see signs of a mass departure. The big worry is that even three-year Treasury bills now have yields which exceed the dividend yield of the S&P 500. So while for the last several years the theme was “there is no alternative”, now there are some very good ones, which could scuttle the market.

FINSUM: The good news here is that the so-called “Great Rotation” into stocks never really materialized, so there is not going to be a great rotation the other way, or at least everyone hopes so.

(Washington)

You know that Mercedes or BMW you have sitting in your driveway? Kiss it goodbye, maybe. In a move that seems likely to cause as much consternation at home as abroad, President Trump is planning a broad ban on German luxury cars. Trump’s proposals have ranged from a 25% tariff on German cars (extremely heavy) to outright bans. He reportedly told French leader Emmanuel Macron that he would maintain his trade policy until “no Mercedes models rolled on Fifth Avenue in New York”.

FINSUM: BMW alone makes $8-9 bn in annual revenue from sales of cars in the US. If Trump wanted to start a bitter trade war, this would be a good first step. Americans aren’t going to like this one either.

(Rome)

Well it just happened. The two alternative Italian parties—the Five Star movement and the League have just formed a coalition government to govern Italy. The new PM of the country will be Conte, a very inexperienced politician who comes from a legal and academic background. According to the WSJ, “Matteo Salvini, the 45-year-old leader of the League who pledged to deport hundreds of thousands of illegal immigrants, will become interior minister”.

FINSUM: There is now a strongly anti-Euro and anti-EU government in power in Italy. A default and a devolution to the old Lira are entirely within the realm of possibility.

(Madrid)

In what seems to be a spread of European unrest, Spain’s Parliament voted today to remove the country’s PM, Mariano Rajoy, who has been in power for seven years. While the reasons for his ouster are very different than in Italy, the move will add pressure to a European continent that is plagued by political unrest. Rajoy’s party was plagued by a corruption scandal, which seems to have ultimately undone the PM. He will be replaced by a PM from the Socialist party.

FINSUM: The worry we have here is that the socialist party may undo a lot of the budgetary gains that have been made during austerity—not totally dissimilar to Italy in effect. Then again, at least they are not Euro sceptics.

(New York)

If we were to tell you that median sales price per square foot was down 18% from a year ago in New York City, would that make you worry about the real estate market? Well, that is exactly what has happened, all alongside sales volume hitting its lowest level in six years in the Big Apple. The developments have brokers and real estate developers worried there, but perhaps the whole country should be paying attention. New York has experienced a great deal of new apartment inventory over the last few years as developers have pushed through many new projects, all of which seems to have conspired to oversupply the market.

FINSUM: The boom in real estate since the Crisis was always urban-driven, and so the downfall may be an urban-led one too. New York’s real estate woes are not unique, so we would not be shocked to see prime urban property fall in value across the country, especially with mortgage rates on the rise.

(Washington)

The SEC has already faced some stiff criticism for its “fiduciary rule” that does not include the word “fiduciary” in it. The SEC’s proposal makes for a rule much lighter than many expected and it is viewed as very industry-friendly. However, Investment News has put out a piece defending the rule. Investment News thinks that both the SEC and DOL have the same intent, but used a different approach. In its own words, Investment News says “The SEC initiative seeks to raise standards and let investors understand the motivations of their adviser, without limiting choice”.

FINSUM: We think those very last few words really hit at the heart of the SEC effort: it does not limit choice. One of our big gripes with the DOL rule was that it effectively constrained product choice. We feel the SEC likely won’t do that.