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Markets

(Chicago)

There is no arguing it, small caps have had a rough year. While the S&P 500 is up 9.4% from a year ago, the SmallCap 600 is down 8.4%. The divergence has been surprising to many, as several macro trends appear favorable for small cap appreciation, such as the trade war. However, for small caps to really get wind in their sails, things needing to be looking up in the economy, which seems unlikely in the short term. Therefore, one of the best ways to bet on size in your portfolio is to buy a specialized fund like the iShares Edge MSCI USA Size Factor ETF, which holds stocks in inverse proportion to their size. The smaller the stock, the greater its weight in the fund, helping investors skew towards small stocks, but not totally away from larger ones. The fund has outperformed the S&P 500 this year.


FINSUM: This is a very specialized angle, but does make some sense. We agree with the assessment of small caps right now—the underlying economy is not favorable for small cap bullishness.

(Washington)

It is no secret that Trump is a critic of the current Federal Reserve. He has frequently complained about Powell and wishes the Fed would take a more dovish stance. Well, he took a step towards making that dovish position a reality this week as he has just appointed two notable doves to the Fed. One is Judy Shelton, an economic adviser to his 2016 campaign, who will now be on the Fed’s board. The other is Christopher Waller, who will be the head of research at the St. Louis Fed. Shelton has numerous times expressed extremely dovish views and has said she does not like the Fed’s way of setting rates and would instead prefer a market-set rate.


FINSUM: Shelton’s views are pretty revolutionary, so it seems like she could really shake things up.

(New York)

Gold has been doing well recently. Between global trade turmoil, a falling economy, and decreasing yields, the metal has thrived. Here are three reasons the gains won’t reverse. The first is that the stock market continues to look risky, meaning gold’s allure as a safe haven seems assured. Secondly, yields on bonds have a definitively downward direction, which makes gold more attractive. Finally, inflation is unlikely to stay low forever. When it starts to rise, it would give investors another reason to bet on gold instead of bonds.


FINSUM: We don’t really think inflation will be much of a factor for gold in the immediate term, but the first two points are material.

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