(Washington)

Recent polls have shown strong gains for Democrats, raising the prospect that the party will take back the House and maybe even the Senate. So what would that mean for stocks? Well, the historical picture is mixed. Generally speaking, stocks have a rough September heading into the November midterms. However, immediately before and after the election, they are relatively unaffected, no matter the outcome. Generally speaking, from the beginning of October until the end of the year (in a midterm year), stocks rally strongly.

FINSUM: The basic picture here is that we could be in for a rocky month, but that stocks may do well as we approach and move past the midterms and investors get used to the ‘new normal’, whatever that may be.

(New York)

The yield curve is very close to inverting, an action that is widely considered to be the strongest and most reliable indicator of a forthcoming recession. Investors are afraid of it, and with good reason. So what is the best way to approach one’s portfolio as a dreaded inversion looms? The first tip is to re-evaluate any bank stocks you own. Banks become less profitable as the yield curve flattens, so they could see some big losses. Secondly, mentally prepare that returns over the next five years are probably going to be a lot lower than in the previous five. Be selective with your purchases and be defensive. Finally, don’t be too afraid to buy stocks you have a high conviction on, and that hold strong risk/reward profiles.

FINSUM: These seem like sound tips. Another obvious one is to buy stocks and bonds that will perform better in this kind of environment, such as strong dividend growing stocks or floating rate bonds.

(Buenos Aires)

A couple of weeks ago investors seemed ready to accept that the brief emerging markets selloff was just a minor Turkey-induced tantrum, but would not blossom into something worse. Well, that view seems to be waning, as the selloff in EMs has spread and is starting to have all the hallmarks of a full crisis. One analyst summarized the situation this way, explaining that this has all the hallmarks of an EM crisis: “a large dose of debt and an associated domestic credit bubble, including misallocation of capital into uneconomic trophy projects or financial speculation. Then add: a weak banking sector, budget deficits, current-account gaps, substantial short-term foreign-currency debt and inadequate forex reserves”.

FINSUM:EMs are facing a lot of headwinds, but the economies in most of them seem healthy, so hopefully the problems will be contained to just the most troubled (e.g. Turkey and Argentina).

(New York)

Passive funds have seen a meteoric rise since the Financial Crisis, with AUM soaring by trillions. But within that huge growth, what have been the best returning passive funds? Financial Planning produced a slide show presenting the twenty best. The top performing funds list is dominated by the big three providers—BlackRock, Vanguard, and State Street, who also have 82% of all passive AUM. The top five returning funds are the SPDR S&P Biotech (XBI), Invesco Dynamic Pharmaceuticals ETF (PJP), the First Trust NYSE Arca Biotech ETF (FBT), the Invesco Nasdaq Internet ETF (PNQI), and the First Trust Dow Jones Internet ETF (FDN).

FINSUM: Looks like biotech and tech stocks had a great decade (nor surprise there). The rest of the top twenty is similarly dominated by tech and healthcare, but consumer stocks, defense, and semiconductors also show up.

(New York)

All precious metals have been in a tough bear market for several years. Rising rates and a strengthening Dollar have effectively blocked any recovery. The question then is when do they get cheap enough that it is a no-brainer buy? Perhaps right now. Gold’s ratio to silver just hit its highest point since 2008, making silver a buy. Silver has fallen 16% this year, almost double gold’s fall, making it the cheapest in a decade. Gold currently trades at over 80x silver, compared to a ratio of just above 30x in 2011.

FINSUM: The big question here is a catalyst. What would spark a rally? We are not specialists in precious metals, so we won’t comment, but we are sure it will take something significant to break a 6-year slump like this one.