(Houston)

Many investors are simply unfazed by the current trade war erupting between the US and China (just look at share prices for evidence). However, even those who may be bullish on equities need to be worried for oil. While the increasing sanctions on Iran are supportive of prices, a trade war would likely be very bad. The reason why is that increasing tariffs would likely cause an economic downturn in emerging markets, which would then heavily sap oil demand, leading prices lower.

FINSUM: The oil and other commodity markets are demand-driven (and realistic) in a way that stocks aren’t. Watch them for where the economy is actually headed.

(New York)

One would think that with rates and yields rising, and set to continue doing so, dividend focused stock sectors might be suffering. Yet, the opposite is true in the last month, the biggest gainers in the S&P 500 have been the dividend stalwarts—utilities, consumer staples, and telecoms. The driver of the gains seems to be less about the returns provided by dividends, and more about the fact that these are defensive sectors that can protect against a downturn.

FINSUM: This development is a little confusing (but then again so is the whole market), as the defensive characteristics would seem to be somewhat offset by the downside of rising rates’ impact on these sectors.

(New York)

The market has been doing very well lately. Political worries, trade wars, it doesn’t matter, nothing seems to be able to contain the market’s optimism. Despite all this, though, Bank of America says it is all about to come to an end. The bank’s top strategist says that weakening growth, rising rates, and a glut of debt will conspire to weaken stocks. “The Fed is now in the midst of a tightening cycle, ignoring structural deflation, focusing on cyclical inflation … Until this Fed hiking cycle ends we suspect absolute returns from financial assets will remain slim & volatile”. BAML says that weakening bank stocks even in the face of rising rates (which should be good for them) may be a sign of how badly the Fed’s tightening will affect of the overall economy.

FINSUM: This is quite a gloomy and contrarian opinion. We see the argument, but it certainly seems to contradict everything one can observe in the market and economy right now.

(New York)

There has been a lot of focus in the media lately about rising rates and what they will mean for investor portfolios. The ten-year yield is now well over 3% again, and the Fed looks likely to hike twice more before the end of the year. If your fixed income exposure (and equity exposure) isn’t carefully hedge, it could spell losses. Accordingly, here are three ETFs to help offset rate risk: the SPDR Blmbg Barclays Inv Grd Flt Rt ETF (FLRN), the iShares Floating Rate Bond ETF (FLOT), and the ProShares High Yield—Interest Rate Hdgd (HYHG). The first two rely on floating rate bonds of short maturities, while the ProShares fund goes long corporate bonds and short Treasuries.

FINSUM: The performance of these kind of hedged ETFs has been good since rates started rising a couple years ago. They seem to have an important role to play in portfolios right now.

(Seattle)

A provocative headline, we know. But it turns out there are some good reasons why Amazon should consider splitting itself up before regulators do. There are two big reasons the company should consider cleaving itself. The first is that if regulators eventually do it, it will likely be much more messy and painful. But secondly, and perhaps more interestingly, Amazon’s web services business has become so large that it is starting to negatively impact its retail business. Amazon web services (AWS) accounted for more than 100% of the company’s operating income, and analysts estimate it would be worth $600 bn on its own, versus just $400 bn for the retail business. Its might is now getting in the way, however, as former AWS customers like Target have now moved away from using it because the don’t want to share information with Amazon’s retail business, which is a major competitor.

FINSUM: We are quite sure this won’t happen any time soon, but it is beginning to be easier to see the value in doing so.