(New York)

Goldman Sachs put out a bearish article today that is calling for the tail end of this bull market. The bank thinks the rest of this year is going to be a dud and that PE multiples will not rise above 17. Therefore, they are suggesting a group of stocks that can thrive in such an environment. Here is a selection of 10 of their 20 choices: Texas Instruments, VeriSign, Gilead Sciences, Abbvie, Amgen, Starbucks, Lam Research, AT&T, Foot Locker, HanesBrands.

FINSUM: Appears like there are a lot of defensive stocks in this basket, which seems like a good plan for a sideways or bearish market.

(San Francisco)

One of the core tenants of US central banking is being shunned by Jay Powell’s Fed. Former central bank leadership had always taken the approach that tight labor markets posed a serious threat for higher inflation. However, Powell is stepping away from that view. Labor markets remain tight, with unemployment very low and strong job creation consistent. Yet, the Fed has completely stepped off the gas pedal on rate hikes, a position that runs counter to previous approaches.

FINSUM: At least in this cycle, the relationship between labor markets and inflation seems to be thoroughly broken. The reality is that no one can give a great answer as to why, but Powell’s policy nonetheless sticks to the idea that the link is severed.

(New York)

Investors may be worried about a big fall in stock prices, but that is looking less likely than the opposite, at least according to BlackRock. The asset manager’s CEO, Larry Fink, said yesterday that records amount of cash may suddenly flow into the market, driving prices sharply higher. He points out that despite the good year in stocks so far, not a lot of money has been flowing into equities. Fink said dovishness by the Fed has created a shortage of” good assets”, which puts the market further at risk of a melt up.

FINSUM: A melt up could certainly happen, but we wonder what the catalyst would be. Maybe a solid trade deal with China?

(New York)

Most of the industry was hoping that states would back off, or at least slow down, their fiduciary rule efforts after the SEC announced it was working alongside them to craft a more comprehensive Best Interest Rule. The idea is that if the SEC could create a rule satisfactory to states, then it would obviate individual state regulations. However, New Jersey is pressing ahead with its own rule. The state formally put forward a new rule yesterday via the Attorney General Burbir Grewal. The rule is comprehensive and advisors would have serious penalties for not abiding. “Conduct falling short of this fiduciary duty would, under the proposed rule, constitute a dishonest and unethical practice,” says an announcement for the state’s Consumer Affairs Division.

FINSUM: We are still hoping the SEC can make a rule that satisfies states, because the last thing consumers or advisors need is fragmentation.

(New York)

One of the odd things about the recession fears since December is that spreads on junk bonds have not risen. Usually, junk bonds sell-off when there are recession fears, as they are the riskiest credits and likely to suffer the worst downturns. However, the opposite has happened in junk, with spreads to investment grade very tight. In fact, investors are picking up so little extra yield in junk bonds, that in many cases they are not even worth the risk. Spreads are tied for their narrowest since the Financial Crisis at just 60 basis points.

FINSUM: The last time spreads got this tight was last October, right before the market tanked. Warning sign.