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Markets

(Shanghai)

The US is considering some new rules that could cause a stock market calamity in China. The government is considering putting new restrictions on US capital flowing to the Chinese mainland. The move is considered the third and worst-case-scenario stage for Chinese markets in the current trade war. In particular, the big risk is that MSCI de-lists Chinese stocks from its broader indexes, meaning all that capital would need to be pulled out. That amount is currently around $50 to $60 bn.


FINSUM: This is not hugely massive, but it is certainly enough to hurt markets on a technical front, but perhaps even more from a perception angle.

(New York)

If you are looking for some good muni bonds to add to your portfolio, take a look at an interesting new offering from a group of US universities. Georgetown, University of Pennsylvania, and Rutgers have all issued “century” muni bonds, and they may prove a good investment. Rutgers’, as an example, yields 3.9% and has an A+ rating, a significant spread to the typical 3.2% yield on other long-term muni bonds. Even BBB bonds, which are in a tenuous position, are only yielding 3.2%.


FINSUM: The yield is great, but your great grandchildren will be getting the principal back!

(New York)

If there were ever a small cap sector overwhelmed by their larger cousins, it would be in technology. Small cap tech stocks are so overshadowed by FAANGs and the like that one would be forgiven for not even realizing they exist. However, they do, and they may very well be a good buy at the moment. The S&P 600 Small-Cap Technology currently trades at half the valuation of the S&P 500 Technology index, way down from its historical spread. What’s more, profit estimates are healthier too. Calling small cap stocks “mini-fangs”, Leuthold Group argues that “the mini-Fangs offer a significantly higher growth profile at a substantially lower valuation”.


FINSUM: A couple notes here. Firstly, the FAANGs aren’t even really “tech” stocks anymore after the sector realignment, so the valuation comparisons are not perfect. Secondly, what is the catalyst? Leuthold argues that if the economy does a little better than expected then higher inflation will boost tech stocks. That sounds flimsy.

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