(San Francisco)

There has been a lot of momentum flowing against tech stocks right now, and especially the FAANGs. Facebook has taken a great deal of the pain, with numerous headwinds facing shares. However, the reality is that the company has a very solid underlying business, and the recent volatility means it also has an attractive valuation. According to Deutsche Bank, “We continue to view Facebook as the best risk/reward in large cap internet given the potential for core Facebook engagement to stabilize … and given the extremely attractive current valuation”.

FINSUM: Facebook has been going through a very rough period over the last year, but the negative news cycle is going to abate, and when it does, the stock seems likely to gain.

(New York)

Retail stocks have seen management boost outlooks recently, but that hasn’t helped prices, which have been falling to end the year. However, despite headwinds in the sector, there are a handful of retailers that look likely to see good performance in the near term. Those stocks are Ulta Beauty, Target, and Kohl’s. All three stocks are up for the year but down big in the fourth quarter. One stock analyst summarized his views this way, saying “We like these three stocks given the strong underlying consumer, not easily replicable product assortments, digital investments and innovation”.

FINSUM: These are very consumer-staple oriented, which we think is a good choice for the currently tenuous market environment.

(New York)

Something very odd is happening at both the DOL and SEC. Ever since the fiduciary rule was killed by the courts earlier this year, a renewed sense of purpose seems to have washed over both agencies. While many thought complacency and a light hand would be the guiding approach of both regulators in the Trump era, somehow the opposite has happened. Now, industry lawyers say both regulators are pursuing enforcement at “epic levels of tenacity”. The focus has increasing been on the 401(k) business, but attention and activity has expanded across the board.

FINSUM: When the DOL declined to push its rule further, and the SEC stopped short of using the word “fiduciary”, most somewhat suspected there was going to be a lighter touch approach. Something has really changed.

(New York)

Banks are usually the last ones to forecast a recession. Saying things are heading south is usually not good for business. However, despite this a slew of major banks, including Goldman Sachs, JP Morgan, and BofA, are all saying that the risks of a recession in 2019 are rising. While they are still loath to say a recession will happen next year, JP Morgan just increased the odds considerably, saying there is a 35% chance. In March they said it was just 16%. Jobs data has just started to weaken, which is a warning sing, and the yield curve has begun to invert, another indicator of trouble ahead.

FINSUM: We know a recession is on the way, but the timing is the tough part. Our best bet is towards the end of 2019 or Q1 2020.

(New York)

This market is going against all precedent. December is usually a strong month for stocks, with momentum usually dominating trading. However, everyone knows this month has been brutal, continuing the strong volatility and losses that have plagued the market since October. The same old problems are dogging the market too—rising rates, a trade war, and the threat of recession. What has really gotten worse is that part of the rate curve has inverted, which seems to have really spooked investors globally. Last week the S&P 500 saw it worst performance since March, falling 4.6% for the week.

FINSUM: Here is a question for our audience: what is going to stop this market from falling? There are so many factors pushing the market down, none of them easy to resolve. This makes us worry that there is no floor on prices right now. Even the Trump-Xi “truce” didn’t save things.