Displaying items by tag: stocks

(New York)

Go back a few years and the big fear of the wealth management market was robo advisors, especially upstarts like Betterment and Wealthfront. Fast forward to 2018 and fears of robos have largely receded as they seem to have found their niche in the industry alongside human advisors. Now the big worry is about large tech companies pushing into wealth and asset management. The anxiety most commonly manifests in worrying that Amazon might launch a digital wealth management platform of its own. However, Charles Schwab’s CEO just sent out a warning to the FANGS, saying that “If you’re a FAANG-type company and you decide you want to come into our space in a manner consistent with the way we operate, you will invite the Federal Reserve into every single thing you do”.

FINSUM: It is true that if the FANGS were to become full-fledged financial service providers they would suddenly be subject to much stricter regulations. It could be an obstacle that holds them off, at least for a while.

(San Francisco)

For all the worries about tech companies and the threat of regulations, one of the best supporting points for the stocks was the strength of their underlying businesses. Despite suffering some losses in share price over the last couple of months, Facebook showed yesterday why the FANGS still look like a good buy. Net income in the first quarter was up 63% versus last year to $5 bn. Earnings per share was up 25% versus estimates. Revenue also jumped 49% versus last year.

FINSUM: Despite all the controversies, Facebook’s advertising business continues to rake in cash by the truckload.

(New York)

On Tuesday markets seemed to reverse course. Even as stocks plunged, it appeared that for the first time in recent memory, they were the asset class driving bonds rather than the other way around. Yesterday, the idea of equities taking on a life of their own seemed to reinforce itself, as stock rose modestly even as bond yields jumped higher and stayed steady above 3%.

FINSUM: This is a very tenuous time for markets. Something is definitely happening in bonds, but no one—Wall Street included—knows exactly what.

(New York)

Bloomberg has just made a bold call—they say the bull market ended yesterday. While stocks dropped sharply, 1.7% for the Dow, which basically eliminates all the progress they had made over the last couple of weeks, it is hard to say that it means the end of the bull market. The reason Bloomberg argues so is that the market has been stuck in a rut for three months, and yesterday, investors digested a dark survey which showed that Americans, on average, expect stocks to be lower 12 months from now, a sharp turnaround in sentiment. One portfolio manager from Stifel Nicolaus summarizes where the market is now, ”Investors have this understanding that equity markets are at lofty levels and we are in a low-return environment, so as the risk-free rate moves higher, even in a gradual manner, that becomes more of a competitive asset class”.

FINSUM: We are not particularly bearish, but do concede that if rates keep moving higher it is going to be hard for equities to do the same.

(New York)

The ten-year Treasury rose to just above 3% for the first time in years yesterday, possibly signaling the start of a new era for fixed income. Therefore, one would be forgiven for thinking the bond market drove the big losses in stocks yesterday. However, the opposite may be true, as for the first time in a while, it seems that worries over earnings and new measures of investor sentiment sent the market sharply downward. In a total reversal from January, investors are now very bearish on the market according to economic surveys. This news appeared to spook investors and then in turn disturb the bond market.

FINSUM: Yesterday might be the start of a poor cycle, where stocks and bonds take turns scaring one another to steeper losses. Perhaps that is just a manifestation of a changing cycle.