(New York)

Here is a tough question to judge—are Treasury bonds yielding 3% good news or bad for the markets? Investors themselves haven’t made up their minds. At first the prospect of rising yields spooked investors, but they have recently grown much more tolerant. While at first investors were shy about rising rates ending the recovery, higher yields now seem to be interpreted as a sign that we have finally overcome worries about “secular stagnation” in the economy.

FINSUM: Our own view is that rates rising back to “normal” is a sign of the economy doing well, and thus is nothing to fear for equity investors.

(Washington)

Make no mistake about it, the Fed minutes from last month’s meeting today are a big risk. Economic data is a big driver of the market right now, and nothing could be more important than the Fed’s attitude on rates. If the minutes show a very hawkish Fed, then expect some volatility as investors interpret the odds for more and faster rate hikes. If the notes are dovish, expect gains. The minutes may include the Fed’s views on how the tax cut will affect the economy, which is another x-factor.

FINSUM: The market seems have grown slightly less worried about higher rates over the last couple of weeks, which we were readily expecting. But this could still be a risky minutes release.

(New York)

Many advisors still dismiss green investment, and do so for a number of reasons. Some of these include the asset class as having lower returns, or just being a “niche” interest that is too small of a market. While the perception on returns has already been readily proven to be a fallacy, there is another area where green investment could help clients—in a downturn. Recent evidence from the US downturn showed that green funds tended to perform much better than the market overall during the selloff, suggesting that the underlying securities are more resistant to losses than their conventional share counterparts.

FINSUM: This is hardly a mountain of evidence, but it is certainly suggestive of a potential benefit for green shares.

(New York)

Morgan Stanley has just come out with a big warning for investors. The bank says that the selloff over the last few weeks, which amounted to around 10% at its peak, was just a tiny start to what is to come. Describing the recent losses as the “Appetizer, not the main course”, Morgan Stanley says that big trouble will occur when growth weakens but inflation keeps moving ahead. “Strong global growth and a good first-quarter reporting season provided an important offset. We remain on watch for ‘tricky hand-off’ in the second quarter, as core inflation rises and activity indicators moderate”.

FINSUM: If growth starts to weaken, but inflation and rates are still rising, that is the catalyst for a big correction, or more likely, a prolonged bear market. But we are not there yet.

(Washington)

In what will surely go down as a landmark case, the state of Massachusetts is going after Scottrade in the first prosecution of misconduct under the fiduciary rule. Massachusetts says the broker held sales contests for its reps, before the acquisition by TD Ameritrade in September, which violated fiduciary standards. The state said about the prosecution that “If the Department of Labor will not enforce its own laws and rules, then the states must do what they can to protect retirees from firms who believe they can play with peoples’ life savings by conducting sophomoric contests”.

FINSUM: The developing role of states in both creating and enforcing the fiduciary rule/s is quite interesting. We are afraid the leadership vacuum currently surrounding the federal law might lead to a patchwork nightmare.

(New York)

When you think of the big wealth management players in the country, even just the big wirehouses, Goldman Sachs is not a name that comes to mind. More associated with investment banking, the bank now plans to greatly expand its wealth management practice as it tries to bring in ultra high net worth individuals as customers. The bank plans to grow advisor headcount by 30% by 2020, with CEO Lloyd Blankfein commenting “The world seems to be growing rich people faster than we can grow advisers to cover them”. Goldman Sachs currently has 700 advisors.

FINSUM: So they only have 700 advisors, but the typical client has over $50m in assets. Goldman is certainly going after the high margin strategy here.

(New York)

After years in the doldrums, the country (and world) now seems to be on a definitive path to higher interest rates. This reality has set the markets on fire, with bonds dropping and equities swinging all over the map. Understandably then, investors are looking for safe income even as rates rise, especially those who are headed towards retirement. In response, Barron’s has searched for companies whose free cash flow exceeds their dividend as a way of finding income one can rely on. The names that come up when doing this sort of screen also resonate a sense of stability just by their stature, and include UPS, Cisco, and JP Morgan. Walmart, Pfizer, and 3M are also in the mix, amongst others.

FINSUM: Companies with stable and positive free cash flow margins seem like a good bet for maintaining or raising dividends.

(New York)

This bull market is getting old. We mean very long in the tooth. However, even if you are anxious about a broader downturn, there are still some good plays, says Barron’s. The two big sectors to consider when planning for the end of a bull market include financials and industrials, as both benefit from rising rates. That said, stocks may not perform as poorly as many imagine, as some argue that stocks never fully priced in ultra low rates, so as they rise, they should be less affected.

FINSUM: Stocks not fully pricing low rates is an interesting argument, and it is somewhat supported by the fact that equities did not sell-off alongside bonds when inflation came out the other day. We think of stocks as both an inflation hedge, and as a direct beneficiary of economic growth, which often accompanies rising rates, so we are not too bearish.

(New York)

Well the market may have been very chaotic in recent weeks, but at least one sector is sending an unequivocal buy signal. That sector is REITs, and the context for the call is that the sector has performed terribly over the last year. REITS were down 5% in 2017 versus an S&P 500 gain of 25%. This year, they are off 10%. Those losses mean REITs are yielding almost 5%. The sector looks fundamentally healthy and will benefit if the economy continues to expand. Big fears over rates rising, which affect REITs, seem to already be priced in.

FINSUM: A simple return to the mean-based investment hypothesis would dictate that REITs should rise, but with so many worries over rates right now, it might take some time for that to play out.

(New York)

There have been a lot of bearish articles lately and few bullish ones. But today we are running are covering an optimistic argument that supports our own view of the market. We have been saying for some time that inflation is not necessarily bad for stocks—they are in fact an inflationary hedge. Now, Barron’s is making a key point about the current relationship between stocks and bonds to show why equities don’t stand to lose much if inflation and rates rise. The reason why is that the spread between equity yields and Treasuries is over 300 basis points, meaning there is a lot of room for rates to move higher before they would be wounded.

FINSUM: We think this is quite an astute view. And while we don’t believe the market is in for another strong run, we think it has a nice cushion for modest gains.