(New York)

Markets are doing well this year, but there is a lot for investors to worry about. Aside from the current ongoing shutdown, there is a debt ceiling deadline on March 1st (which is sure to be another political nightmare, and may yet intersect with the shutdown), a deadline for a Chinese trade deal, and a scheduled Brexit on March 29th. That is a lot of potential crises on the calendar. However, valuations have fallen considerably alongside share price falls and P/E declines, and the market seems to be regaining its optimistic footing. Corporate earnings look to stay strong in 2019, which will help support the market.

FINSUM: There are a lot of analysts who think this is a bear market bounce, and many others who think the worst is behind us. We are starting to side with the optimists.

(New York)

One of the big themes in the asset management industry right now is the possibility of consolidation. A big plunge in asset manager share prices and falling fees has added motivation for managers to tie up to increase scale and efficiency. Invesco’s recent deal to acquire OppenheimerFunds is a great example. However, regulators are reporting discussing such deals and are apparently concluding that the passive management business has grown uncompetitive, with just three firms dominating the space. Interestingly, the worries over competitiveness are not centered on the asset management industry itself, but rather how having a few large managers, each of whom own each other and other companies’ shares, makes the whole economy less competitive. The big three asset managers—BlackRock, Vanguard, and State Street, are not the largest shareholders in 88% of S&P 500 companies. This whole situation, and the worries attached to it are referred to as “common ownership”.

FINSUM: One can see how this would make the economy less competitive, but more specifically, it may mean that it is harder for asset managers to push deals through.

(London)

If you look at it from the outside, a second Brexit referendum has had the feeling of inevitably for at least a year now. The chaos and unexpected fallout from the fraught negotiations between the EU and UK have made it seem likely that the British people would need to settle the matter with another vote. That expectation is now looking likely to turn into a reality as Britain’s opposition party, Labour is backing a plan to bring forward a second vote.

FINSUM: In our mind, the claims that holding a second vote is undemocratic are ridiculous. On the one hand, no voter back in 2016 could have known how this Brexit mess would actually progress, which means the people should get a second chance to decide on the deal at hand. On the other, how can a whole nation voting on an issue ever be considered undemocratic?

(Beijing)

Those of you who read our opinions on how the trade war with the US is affecting China will know that one of main concerns is about the relationship between the government and the people in China. This week, Xi has echoed that warning. The Chinese leader stressed the need to maintain political stability in the face of economic challenges. The warning, which came at an unusual meeting of Chinese leaders, shows the ruling party’s anxieties over the social implications of the slowing economy.

FINSUM: Chinese leadership is in a tight jam. On the one hand they have the US squeezing them with tariffs, and on the other, they have the need to maintain the economy’s strong growth to keep people happy. Remember that leaders are unelected, so their grip on control is very tied to keeping everyone satisfied.

(New York)

One of the most respected hedge fund managers, Jeremy Grantham, believes that this is a false rebound. And not only is it a false rebound, rather, it is the beginning of a big bubble bursting. The head of GMO believes as far as the fourth quarter is concerned, “The volatility is consistent with a bubble bursting”. Though he does caution that stocks could reflate before the burst continues, as they did in 1998-2000. Grantham is famous for his calls of the 2000 and 2008 downturns, but has been criticized for being overly bearish during this bull market.

FINSUM: We do not think there is going to be a further meltdown. Valuations reached their nadir at a 13.6 p/e ratio last month, down from eye popping numbers. Between earnings gains and price declines, we think the worst may be behind stocks for now.