(New York)

Do you remember those glory years between the taper tantrum and the end of 2017? The time when inflation was low, but not totally weak, growth was solid but not great, and the Fed decided to do nothing and say little? That was the time when the market surged. Well, those days may be here again as the economic signals right now, and the Fed’s language, are starting to look like they are returning to the post-Crisis “new normal” of moderate growth and inflation, but not enough to bring on a policy response.

FINSUM: Our own view is that we are not headed for recession, but rather a return to the pre-tax cut rate of growth and inflation. This is a solid setup for markets as it produces a dependable environment and a good atmosphere for corporate earnings growth.

(New York)

The S&P 500 is up almost 4% since the end of February. Those are good numbers in anyone’s book. But some stocks in the index are absolutely scorching the market. Take a look at: Nvidia (NVDA), Advanced Micro Devices (AMD), Conagra Foods (CAG), Dentsply Sirona (XRAY), and Chipotle (CMG). NVDA is up 24% since the end of February, while Chipotle is up 17% since then, and about 123% in the last year. All the stocks have positive drivers behind them.

FINSUM: If you are momentum investor, these stocks are certainly top picks.

The so-called “feemageddon” in the asset management industry has been unequivocally good for investors. Fees have dropped across the board, starting with ETFs, but also flowing through to actively managed mutual funds. However, the downward pressure on fees has also created interesting new fee structures. The first one to discuss is the most obvious—free funds. Both Fidelity and Sofi have introduced free index mutual funds and free ETFs, so the line in the sand on fees has been crossed. Other firms, such as Westwood Holdings and AllianceBernstein, have come up with entirely new concepts. AllianceBernstein has a “Flex Fees” actively managed mutual fund which has a low basic fee (ETF-level fee) and then only charges a mark up if it outperforms, offering much better economics to investors. Westwood Holdings, has a little bit different but similar fee arrangement which tries to mitigate the potential for misaligned incentives in “fee only when you outperform” structures, which incentivize portfolio managers to take risks. Their approach is called Sensible Fees, and only rewards incentive compensation to managers based on risk-adjusted performance.

FINSUM: We think the fee disruption going on in the industry is leading to some healthy innovation amongst fund managers. These new funds seem like they will only grow in popularity, especially as fiduciary advisors get more popular.

(Washington)

In what likely comes as frustrating news for a lot of the wealth management industry, it is time to start worrying once again about the return of the fiduciary rule. And we are not talking about state level rules, or new interpretations of the SEC rule, we mean the old DOL rule itself. The DOL announced towards the end of 2018 that it was planning to re-release a new version of the rule in fall of 2019. However, it had been quiet until now. This week, a top industry lawyer has commented that the DOL is again working on new fiduciary regulations and may launch in tandem with the SEC, though specifics are lacking.

FINSUM: So what do we know? Firstly, we know the DOL said it would re-release the rule in the fall of this year. We also know that it seems to be actively working on crafting new fiduciary regulation. We’ll let you put two and two together.

(New York)

Anyone paying attention will have noticed there has been a change in linguistics surrounding the global climate situation in recent years. What was once called “global warming” is now referred to as “climate change”. However, we think that fact has helped to obscure perhaps the best way to play the changing environment. The world has been getting warmer (whether you think it is human created or not), so what better way to invest in the transformation than in air conditioning companies. HVAC companies, such as Ingersoll-Rand and United Technologies, are also good recession hedges. The companies earn the bulk of their revenue from servicing and repairs, businesses which hold up well even in recession because nobody wants to live without air conditioning.

FINSUM: We see this as a good long-term play with nice short-term downside protection. Asymmetric risk on this idea, heavily skewed to the upside.