(New York)

Anyone who has been looking at the bond markets is likely to be shocked at the recent moves in the space. Many “high yield” bonds (it is now necessary to use quotes) are yielding what very high quality investment grade bonds were just months ago. A recent sale saw $1 bn of new issuance for a BB+ company at a 3% yield. The huge move downward in bond yields is the result of the Fed’s unprecedented stimulus action, and in particular, their mandate to backstop corporate bonds.

FINSUM: The Fed’s actions have been so warping that they have called into question the very definition of a high yield bond. If every bond is backed by the Fed, then it makes perfect sense that their yields would equalize. In this way the market’s reaction is entirely predictable.

(New York)

There has been a lot of negative press about the fate of retail under COVID, and with good reason. Brick and mortar businesses have been devastated and the bankruptcies have been relentless. However, one of the less noticed aspects is that many ecommerce businesses are doing very well. In fact, some retail ETFs, like the Amplify Online Retail ETF (IBUY) have been surging as stocks like Carvana, Overstock.com, and Peloton have seen their shares soar.

FINSUM: Ecommerce is a great bet for right now and for the foreseeable future. In its most basic sense, all COVID did to retail was accelerate the shift to ecommerce into a much faster gear. It was like a five-year jump in four months. There is no reason to expect that to revert any time soon.

(Washington)

A lot of investors are worried about what will happen to stocks if Biden wins, and even more worryingly, if the Democrats sweep the election. The general fear is that without at least a Republican Senate, the Democrats could give in to their more leftist impulses and create policies which would be detrimental to the financial-economic paradigm. However, UBS argues that even if Biden hikes corporate taxes up to his planned 28%, he will offset that with big economic spending to accelerate the recovery, which should more than make up for the loss of profits because of taxes.

FINSUM: This makes pretty good sense. Even if taxes are raised, it is not like the Democrats are planning to balance the budget. Large amounts of deficit spending will likely help keep stocks afloat.

(New York)

LPL has been a true leader on the recruiting front in 2020. One should expect no less from the largest independent broker-dealer. As one of their new initiatives, they have just launched a program—called the “independent employee” model—to try to attract new advisors who want some of the benefits of being independent, but also want to be a W-2 employee. Such models have been around for a long time, and are most prevalent at Raymond James and Ameriprise, but LPL thinks there is an opportunity to scale it up. The program is designed to appeal to wirehouse advisors who like being W-2s but want to earn higher payouts. Payouts for the program range from 50-70%.

FINSUM: If an IBD is a halfway house between being a wirehouse advisor and being an independent RIA, then this is a one-quarter-way house. It does seem like this might be a smart move—W-2 benefits with higher payouts.

(Washington)

Advisors are mostly a conservative bunch, so many are incredulous of the current political polls. Others just don’t want to think about a Biden presidency. That said, if oddsmakers are right and the Democrats take over in a January, a strict new fiduciary rule is likely on the way much faster than almost anyone in the industry suspects. The reason why is the method the Democrats are likely to use to make a new rule. While all of us have seen how slow the rulemaking process has been at the DOL and SEC—and have probably thought of that as the status quo—Barbara Roper from the Consumer Federation of America pointed out this week that instead of crafting a new rule, democrats are probably just going to use the existing Reg BI framework and modify it.

FINSUM: Using an existing rule infrastructure and just beefing up parts of it would be a much quicker process than crafting a new rule. We might have a strict fiduciary rule by June 2021. You have been warned.