Eq: Large Cap
(San Francisco)
Tech stocks have had a poor last couple of months. March was especially brutal, with tech falling 4%. And while some think tech stocks still look like a good bet, Barron’s has put out an article based on a BAML opinion which contends that tech stocks look very vulnerable. The key reason why is what the piece calls an “Occupy Silicon Valley” mindset (recalling the Occupy Wall Street movement from several years ago). This mindset leaves the Valley at risk in two very core ways. Firstly, by regulation, which the government (and the public) seem increasingly intent upon delivering. And secondly, to a tax raid, especially if government finances continue to deteriorate.
FINSUM: We are of a mixed mind on tech right now. On the one hand, these arguments hold water with us. But on the other, the underlying businesses of tech companies are strong and this could all blow over.
(New York)
The actively managed ETF used to be a rare breed, and one that didn’t even make sense so long ago. However, with the rise of the asset class has come an explosion of variety, and especially, the overlaying of themes into ETFs. With all that said, the difficulty is choosing the best actively managed ETFs. Here are some to look at: Fidelity’s Total Bond fund, Davis Worldwide Select fund, Vanguard U.S. Multifactor, the iShares Russell 1000 Growth, JPMorgan Disciplined High Yield, iShares iBoxx $ High Yield Corporate Bond.
FINSUM: This is an interesting mix of funds, and most have expense ratios under 0.65%. Generally speaking, we like the idea of actively managed ETFs so long as the fees stay low.
(New York)
A huge investment bank has just put out an eye-opening, no, eye-watering, article that jumps right off your browser window. Societe Generale is now saying that the S&P 500 will fall to its 2009 lows. And not just that, as SocGen says we will fall into a new financial “ice age”. The argument is based on analysis of what happened to Japan’s markets and economy in the 1990s, a fate Societe Generale says the West is doomed to repeat. The bank argues that the West was headed for this fate when the Financial Crisis kicked off, but that the Fed managed to reverse the pattern by inflating assets.
FINSUM: This is one of the most bearish arguments we have ever read. We doubt this will occur, but nonetheless felt compelled to share it.
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(New York)
There are a lot of reasons to be bearish on stocks right now. Aside from worries about rates and a recession, there is the big issue of a potential trade war to consider. However, there is at least one reason to be optimistic—the overall pessimism of investors. In one of the classic contra indicators, contrarians often see market pessimism as a strong buy signal. Investor sentiment has abruptly swung from very bullish to strongly bearish, with negative sentiment its highest in seven months. A strategist at BNP Paribas commented that ““There’s more of an extreme fear reaction now … As a contrarian indicator, that makes me actually bullish”.
FINSUM: We don’t think this signal means anything other than investors are afraid of rates rising, a recession, and a trade war. Since all of those things could come true regardless of how investors feel about stocks, we don’t believe there is much significance to this.
(Washington)
The Wall Street Journal says that the source of Donald Trump’s push to regulate Amazon has nothing to do with tech industry issues or the Post Office. They say it is personal. In particular, the WSJ contends that Trump’s anger is personally directed toward Amazon CEO Jeff Bezos, who owns the Washington Post, a publication with which there is mutual ire with Trump. The president dislikes the Post’s coverage of him, so he attacking Amazon as a proxy, says the WSJ.
FINSUM: If you are in investor in Amazon, then this is likely good news, as Trump’s ire might just be hot air that doesn’t materialize into any new rules.
(Washington)
Amazon has been in President Trump’s crosshairs since the election, but the president has recently upped his rhetoric about bringing regulation to the company and the tech industry. The push has spooked stock markets. However, news is out that Amazon is making a push of its own. The retailer is building a huge army of lobbyists in Washington to combat the rising risk of regulation. Since Trump’s election, the company has doubled its staff of in-house lobbyists to 28, giving it more than double Google’s manpower.
FINSUM: The rumors coming out of the White House—that this is all just rhetoric—seems encouraging (if you are an investor). However, Amazon seems to be taking the risk seriously, which it should.