(New York)

The current rate environment has put investors in a pickle. How does one protect short-term income needs while also protecting against interest rate risk? One important factor is to remember is that one can balance short-term losses by holding bonds to maturity, so stringing together groups of short-term bonds can be a solid risk-mitigating, but yield-maximizing strategy. There are a number of funds to look at to make managing the situation easier. These include the Lord Abbott Short Duration Income Fund (LDLFX), Transamerica short-term bond (ITAAX), and the Nuveen Short Duration High Yield Municipal bond (NVHIX).

FINSUM: It is a difficult fixed income environment right now, with corporate bonds broadly in the red for the year. A well-crafted and balanced strategy is a must, and given that short-term bonds currently have strong yields and less interest rate risk, they seem like the best bet.

(New York)

The US real estate market is in a worrying period. New builds, home sales, and inventory have all been showing weak signs for the last few months, and it seems to portend the start of a reversal in the market after a long run higher. This week will see if the current downward trend holds, or whether the data was an aberration. New data this week will cover new and existing home sales, which the market will be watching closely for signs of a downturn.

FINSUM: Housing and building-related stocks have suffered this year on a worsening outlook. Our instinct is that housing has a hit a wall and may be at the start of a correction.

(New York)

One would think that 2018 is the perfect time to boost lending to consumers. The economy is strong, the job market is robust, and things are generally humming along nicely. Think again, as US banks are worried about US consumer credit quality and are starting to reign in lending. Bad debt is rising and so is the amount of bad credit banks are having to swallow. Beyond just fundamentals, the competition to lend has made the market uber-competitive, which heightens the risks for lenders because of weaker terms.

FINSUM: Consumer credit is tightening its belt across the board as credit balloons and standards fall. We wonder how much this tightening might impact the economy over the next year.

(San Francisco)

The market has become very worried about tech valuations. Even with recent selloffs, tech stock prices are very rich. However, despite the broad fears, some fund managers are ditching the concerns, as they think the obsession with P/E ratios is short-sighted for tech. In particular, one manager says that he likes to think about how tech companies will look as mature businesses, and thus judging them by their current P/E ratios is unfair.

FINSUM: We agree that it is hard to assess tech stocks according to standard P/E ratios. They are growing much faster, have much higher margins, and have a brighter future than stocks in any other sector of their size. Accordingly, it is hard to contextualize their P/E ratios because there is no benchmark.

(Washington)

Late last week President Trump announced a new idea that would be a major change for US markets. Trump requested that the SEC look into whether the US should abolish the quarterly earnings reporting requirement. The president says he is hoping the US can move to twice-a-year reporting instead of the current model of reporting four times. He says he got guidance from top business leaders before his request and that he thinks it would improve the US’ business environment.

FINSUM: The big hope here is that by reporting earnings half-yearly, companies would be able to be more strategic in their focus and less obsessed with short-termism. We would welcome the change, but it would have some risks, and we hardly think a six-month focus is “long-term”.