(New York)

One of the most ominous signs surrounding the equity market this year are the inflow numbers into stock funds. In 2017, $517.2 bn of new money flowed into US ETFs and mutual funds from the start of the year through September. This year that number is down by almost 50% for the same period, as only $281.7 bn has flowed in. Actively managed mutual funds are seeing net withdrawals. According to Deloitte “It feels like investors are in the early stages of positioning themselves for a potential downturn … [they] are returning to cash and relatively defensive positions”.

FINSUM: Retail inflows and outflows have never been a very good indicator of coming market performance (much like sentiment), so take these figures with a grain of salt.

(Houston)

You want to know an asset class that has performed well in periods of rising rates? Take a look at oil. In periods of quickly rising rates and yields, oil and oil-related stocks have done very well. In fact, Van Eck’s Vectors Oil Service ETF (OIH) has been the best performing fund of its type in such periods. “Shares in the VanEck Vectors Oil Services ETF saw a 6.5 percent boost over the month when rates jumped, while shares of the United States Oil Fund ETF ran up 4.5 percent”, according to Kensho.

FINSUM: Oil and banks tend to do well in periods of rising rates. The former because rising rates usually mean a strengthening economy, and the latter because of both an improving economy, but also wider net interest margins.

(New York)

Most investors are worried about the potential impact of the trade war, not to mention rising rates and yields. However, there is one stock that should shine through all of it—Weight Watchers (not what you were expecting, right? Us either). The company, now called WW, seems poised to gain. As one financial reporter puts it “This is a subscription-heavy company relying on decent employment rates, a country in need of wellness advice, and a charismatic spokesperson (Oprah!) trading at a below-growth multiple”. The company is looking to improve its revenue by a quarter by 2020 to $2 bn, 80% of which is subscription-based.

FINSUM: There does not seem to be any reason that WW would be at the mercy of many of the forces hurting markets right now. It could be a good bet.

(Houston)

It is a trying time to be picking where to allocate capital. Bonds are getting walloped and rate rises and trade war fears are weighing on stocks. Recession looms as a threat. With all that in mind, Goldman Sachs thinks it is a good time to buy MLPs. MLPs have been roughly flat this year, but GS thinks good times are ahead. Kinder Morgan is one of the bank’s top picks and they believe the sector will rise on improving cash flow and gains that result from simplifying their corporate structures (most will likely change to C-Corps following last year’s change in the tax code).

FINSUM: MLPs have been pretty flat and this is not the first time Wall Street analysts have called for a surge. Still, this is interesting to consider.

(New York)

The US economy is on fire. Growth is strong, consumer confidence is high, and (somewhat worryingly) the Fed is almost giddy. However, even the greatest optimists will have a gnawing fear caused by the US housing market, which has been in decline for the past handful of months. The huge rising gap between home prices and wages has finally stalled the market, all while rates move higher and dampen demand. The big risk that no one is pointing out, though, is how that trouble in housing will flow through to the broader economy. It will likely not be via mass mortgage defaults and foreclosures like last time, but rather through a severe tightening of purse strings. The big rise in home prices means Americans disproportionately hold their wealth in home values, so a decline will cause a major loss of wealth, and thus spending, seizing up the economy.

FINSUM: In 1978 a 20% decline in home prices would have caused a 1% decline in aggregate income. Today, the same decline would cause a five percent drop, or about $600 bn of lost equity. Housing may still lead the economy downward.