(New York)

Gold is an interesting asset class right now. Everyone knows it has been in the doldrums for many years, but with recession fears brewing, and rates falling, the outlook is an interesting one. Goldman Sachs thinks gold is headed higher. Their thesis is that late cycle worries and falling rates will combine to push up the shiny metal. Falling rates will weaken the Dollar, further helping overseas buyers purchase gold.

FINSUM: In general, we like this thesis. However, we think gold would do better if there was more worry about a huge downturn/crisis, which there doesn’t seem to be. Fears right now are about a standard recession, which would help gold, but maybe not be ultra bullish.

(New York)

In another sign of a weakening economic landscape, new retail sales data was released for February, and it was not pretty. The data didn’t just slow, it actually reversed, with retail sales falling 0.2% month over month in February. The data was a big shock as economists were expecting a gain, especially after a revised 0.7% increase in January. The numbers suggest the economy may be in line for a contraction in Q1, as December also saw a big 1.6% decline in retail sales.

FINSUM: There are a lot of economic indicators looking negative right now. We are still optimistic, but the signs are getting harder to ignore.

(New York)

We wanted to write an article about a new fund we discovered in our regular course of business, but that got us excited. One of our gripes with ETFs is that there always seems to be a dearth of ways to express short-term tactical opportunities, or own a fund that does so. That is why we were excited to find a fund in New York Life’s IndexIQ ETF lineup. The fund, the IQ Merger Arbitrage ETF (MNA), seeks to gain capital appreciation by buying companies that have had public takeover announcements. The fund also includes a short on global equities as a partial hedge. Merger arbitrage is a common hedge fund strategy.

FINSUM: This is one of those area where we often wish we had exposure, but don’t have the time to actually enact a strategy, so this IndexIQ fund is very useful. The fund has a 75 basis point expense ratio.

(New York)

It has been a long time since value stocks had a chance to shine. A LONG time. Growth stocks have handily outperformed their growth cousins, so much so that even some diehard value investors have talked about giving up on the practice. Value stocks took a pounding in March following the Fed’s dovish turn and spreads versus the market’s most expensive stocks are at their widest in 70 years. This means it may be a good time to buy, says Bernstein’s equity research team. If you look away from financial value stocks, the sector did not actually get wounded much last month. The reason why it may be time to buy is two-part: the first is that value stocks tend to outperform when the economy is slowing, but not in outright recession. The second is that high value stock spreads are seen all across the economy, and not just in challenged sectors, which means they are less likely indicative of real challenges and are more likely just a market symptom.

FINSUM: We understand this analysis, but have to disagree. We just don’t think the old precedents for value stocks hold much water at the point. Our view is that as growth slows, investors will buy the stocks with the most growth, not the cheapest ones.

(Washington)

The fiduciary rule saga has been long and confusing. Firs the DOL Rule fell flat, then the SEC proposed its own rule, only to face harsh criticism from everyone but the brokerage industry. Now there is a new piece of news that we find encouraging: the SEC is apparently working directly with states as part of an effort to craft a new framework that will eliminate any conflicts with state-level fiduciary rules. The SEC is consulting with states like Maryland, Connecticut, Nevada, and New Jersey to make sure there aren’t grey areas or loopholes that create nightmares for advisors and their clients.

FINSUM: There are two positive developments here. On the one hand, it is great that the SEC is trying to iron out any conflicts with state-level rules, but on the other, it is even better that this consultation might actually lead to the dissolution of those state rules.