(New York)

One of the very interesting aspects—which is thoroughly underreported—is that despite the rise of ETFs, mutual funds have held a major portion of market share in the advisor allocation business. One of the trends which has emerged is that the growth of ETFs has not really cost mutual funds as much as one would expect. Rather, advisors have just started to use them in different ways. ETFs are seen as better for broad passive exposure, but when it comes to active management, mutual funds are seen as the superior choice. This helps explain why smart beta and other forms of active ETFs have been relatively unsuccessful.

FINSUM: It is not mutual funds that have suffered from the shift to ETFs, rather it has been variable annuities and individual stocks. This is a quite a positive development for the asset management industry, in our opinion.

(New York)

Consumer confidence in the United States is at an 18-year high. The last time Americans registered a feeling of confidence this high was in September 2000. However, that could be a big problem for the stock market. Consumer confidence can prove a counter-indicator. The highest ever reading for the measure was recorded in May 2000, just before the Dotcom crash. Small business confidence is even higher, running at a 45-year peak. According to one analyst, “[To] any market historian, that does not guarantee a low-risk market, or another big bull market leg on the horizon”.

FINSUM: These kind of ultra-high measures do worry us as we feel healthy gains come in periods of reasonable concern, not euphoria.

(San Francisco)

Two of Instagram’s founders have just left Facebook on acrimonious terms. The departures come six years after their company was bought by Facebook for about $1bn. They are leaving on poor terms because of recent changes Facebook has made which seem to prioritize Facebook’s growth at the expense of Instagram. Many analysts say the departures are a considerable negative for the stock, especially coming as part of a long string of troubles. There is also a serious threat that the two founders may come up with a competing product. Instagram accounted for 14% of Facebook’s revenue, or about $7.5 bn this year.

FINSUM: We don’t think a competing product is a worry, at least not yet. But image-wise, it does look like Facebook is a bit out of control.

(New York)

Treasury yields stayed pinned for most of this year. For many months it seemed like they were stuck in the ~2.85% range. This raised some hopes that we might have reached the crest in this hiking and rate rise cycle. However, Treasury yields have jumped considerably higher lately, and are now sitting close to their seven-year high of 3.11% from May. Yields have been moving higher as the trouble in emerging markets and Italy has waned, making investors turn to more pro-risk investments.

FINSUM: Yields are going to move in line with macroeconomic movements, especially right now. If the trade war worsens, or starts to show signs of hurting EM economies, expect a big retreat in yields.

(New York)

Value stocks have been hurting for years. They have lagged growth stocks considerably over the last decade, and have been underperforming growth stocks for so long that even some ardent value fans say the shares might never rebound. However, an increasing group of analysts are saying that value is set to stage a big comeback versus growth. Some indicators show that a reversal of growth stocks is imminent, and P/E ratios are running so high that value looks likely to appreciate. Morgan Stanley analyst Michael Wilson thinks that the current rotating bear market will end with growth and small caps sinking.

FINSUM: We don’t see much of a catalyst for growth stocks sinking while value stocks rise. Further, if stocks fall, they could all fall in unison without value seeing any outperformance.