(New York)

For around a year now, the yield curve has been scaring investors. The inversion of the curve sent a grave warning sign to the market that a recession may be on its way. Many investors fled the market for fear of a big reversal. However, as we enter 2020, the yield curve is sending a very different signal—optimism. The curve is at its steepest level since October 2018, showing investors’ increasing confidence in the US economy. One CIO described the situation this way, saying “If the stock market is right that everything is amazing, I don’t see how long rates can stay as low as they are … The stock market is rallying on hope. Hope that things will inflect higher with this trade deal and Fed accommodation”.

FINSUM: If there is one thing we have learned in the last decade, it is that the Fed does not want to over-hike on rates. Overall, we think this is a very healthy direction for yields.

(New York)

It should not be this easy to beat the Dow, but it is. In the last ten years, investors could have used a very simple strategy to outperform the index by a significant level. The strategy is called “Dogs of the Dow”, which is the method of buying the ten highest yielding stocks in the Dow. Over the last decade, the strategy outperformed the index in 7 years and overall outpaced the Dow by 1.7% per year, returning an average of 15% per year for a decade. It also outperformed the S&P 500 considerably.

FINSUM: Who sad value investing is dead? This is a classic strategy that has worked to great effect.

(New York)

The best thing an investor can do right now is to ignore all the market predictions being released for 2020. Every research department has to put out a prediction, and most of them are not worth the paper they are written on. So what does one do? Invest in dividend stocks. It is an important but preciously little known fact that the lowly dividend has historically accounted for 45% of all stock market returns. They are also tangible and predictable in a way stock prices are not, giving them a crucial place in a portfolio.

FINSUM: An additional stimulus for dividend stocks is that the aging population is hungry for them since bond yields are so anemic. Check out AT&T at 5.3%.

(New York)

There is a little known stimulus behind the current trend of advisors breaking away from wirehouses. While many cite freedom of operations and compensation as key reasons for leaving wirehouses, one of the big driving forces is much less appreciated: the requests of clients themselves. According to Shirl Penney, CEO of RIA network Dynasty Financial Partners, “Clients are not simply following their advisors, but sometimes giving them the idea to break free … That’s the dirty little secret that not a lot have been talking about”. High net worth clients increasingly want their advice separated from the manufacturers of the products they buy, which means going independent makes sense for advisors. “So if you’re a million-dollar client of one of our advisors, you now can get independent advice, separate and safe custody and products from around the street the same way that may have been reserved for a billionaire 20 years ago”, according to Penney.

FINSUM: This topic is quite poorly discussed, but seems very salient. We would welcome any emails/opinions from advisors about the extent to which they hear this from clients. Reach us at This email address is being protected from spambots. You need JavaScript enabled to view it..

(New York)

If your natural instinct is to worry about a looming recession, you are not alone. Logic dictates that with the economy and bull market having been rolling for so long, a downturn is inevitably around the corner. However, the chief economist at Deutsche Bank is making the exact opposite argument. Torsten Slok contends that the economic expansion will likely go on for “many more years”. His explanation: “The lack of willingness to spend on consumer durables and corporate capex is also the reason why this expansion has been so weak … And it is also the reason why this expansion could continue for many more years; we are simply less vulnerable to shocks in 2020 because there are few imbalances in the economy”.

FINSUM: We don’t dislike this view, but in our opinion the artificially low interest rates maintained by the Fed have much more to do with the length of this recovery (and its future prospects), than financial conservatism amongst businesses and consumers.