(New York)

Investors are always looking for good yields. While bonds are seeing higher yields now, high paying stocks offer something special because of the chance of capital appreciation. Such investors might be tempted by financial stocks right now, which are sporting juicy yields. However, Goldman Sachs is warning that investors need to beware. JP Morgan and other banks have been beaten up over the last year and are sporting payouts of above 3% in some cases. However, the big risk that is financial stocks are highly rate sensitive and tend to lose value as rates fall because of their lower profitability in such times. This pushes up dividends, but moves prices lower.

FINSUM: If you think we are even close to heading into a recession, buying financials is not a good idea. If you think this is a false signal, then banks may be a great buying opportunity right now.

(New York)

We don’t want to say that we told you so, but we have been broadcasting that bond markets had overreacted to the Fed’s change of tune. This week, bond investors have started to correct themselves as yields on the ten-year have jumped considerably on better economic news. With that in mind, limiting rate risk on bond holdings has taken on renewed importance. Accordingly, where better to be that in short-term, less rate-sensitive, bond funds. For options here, take a look at the Vanguard Short-Term Bond ETF (BSV), yielding 2.8%, and the PIMCO Enhance Short Maturity Active ETF (MINT), yielding almost 3%.

FINSUM: We think there could be some significant yield volatility in the next few months, and therefore feel it is best to stay rate hedged/defensive.

(New York)

Residents of many high tax states are likely feeling the pinch. The reality of much higher tax bills is trickling through for residents in states like New York, New jersey, Connecticut, Oregon, and California. In the New York area, there seems to be a particular downturn in real estate. Many large suburban properties are seeing their prices slashed. Some selling prices for luxury properties are 50% below what they were just a few years ago. While the downturn is partly a product of changing real estate preferences (i.e. buyers wants smaller urban homes), the new SALT limit is a major headwind.

FINSUM: This important for advisors to pay attention to as many clients may have much less value in their home than they anticipate.

(New York)

The economic picture is growing increasingly gloomy for the US. While there has been sporadically good data, the general trend is downward across many areas. Today, more information on the labor market is signaling a further deterioration. ADP hiring data has been released and it shows that sector hiring has fallen to an 18-month low. The private sector hired 129,000 new workers, missing expectations. “The job market is weakening”, says Moody’s Analytics, bluntly.

FINSUM: The job market seems like a good leading indicator right now. Company’s may be tightening purse strings, which could be a sign that everything is slowing.

(New York)

The fiduciary rule’s journey has been a seemingly endless saga. Opponents of the rule thought they had finally defeated it when the fifth circuit court ruled against it last year. However, its path is far from over and is showing an interesting parallel: marijuana. Fierce proponents of cannabis legalization have taken a different tact after a federal level push failed—they have gone to the state level. As most will have noticed, marijuana has been legalized in many states as part of a grassroots push for cannabis. The fiduciary rule is now playing out the same way, as new state-level rules have been popping up all over the country, threatening to bring patch work regulation.

FINSUM: One would not naturally think to compare the fiduciary rule and marijuana, but the regulatory path for both is looking quite similar. This would not be a good outcome for broker-dealers.