Monday, 22 October 2018 10:27

(New York)

Investors have gotten so used to low inflation that it is sometimes hard to imagine seeing it rise. However, Morgan Stanley is warning that inflation is rising across the globe and investors need to keep an eye on it. In Europe, Asia, and the US, inflation has risen from 1.1% to 1.4%, and it is bound to move higher, according to Morgan Stanley’s chief global economist. Interestingly, MS argues that the Euro area and Japan will see a higher rise in inflation than the US.


FINSUM: If inflation rises more strongly in other developed markets than the US, will that lead to even more foreign buying of US bonds because yields in those locations are so much lower? In other words, will there be even more demand for US bonds?

Why This Selloff May Change Everything

The Fed Might Take a Very Hawkish Turn

The Recession Will Arrive in 2019

Friday, 24 May 2019 11:33

(New York)

For most of this year and last, the idea of a nasty full-blown trade war was like a boogey man that stalked investors, but still seemed a slightly distant threat. That is no longer the case, as an ugly trade war has rapidly developed into the status quo. Accordingly, many top analysts, such as at JP Morgan and Nomura, are saying that high US tariffs on China are here to stay. Market volatility is likely to continue as new news continues to stream out.


FINSUM: There is a lot to worry about in this trade war, but one of our immediate, but less discussed, concerns is about the intersection of tariffs, the Fed, and inflation. The tariffs are likely to raise US inflation by boosting prices for goods, which could keep the Fed from hiking, trapping us in a difficult environment.

Stocks to Drop 20% say Money Markets

Get Ready for a Big US Slowdown

How to Manage Bear Market Volatility

Wednesday, 22 May 2019 08:55

(San Francisco)

Investors probably won’t see it coming, but big losses are likely on the way for FANG stocks. The bank says that the group of companies is about to be “smacked down” by regulators. Savita Subramanian, Head of US equity strategy at BAML, says that the risk for investors is heavily skewed to the downside. “These companies are about to be smacked down from a regulatory perspective … Look at the fact that Mark Zuckerberg was testifying before Congress a year ago. That’s exactly what all the financial CEOs were doing 10 years ago”. Subramanian likens the coming losses to what happened to financial stocks in 2008-2009.


FINSUM: We doubt any forthcoming losses will be Financial Crisis-like but the regulatory risk is surely a big one. Will new regulations be related to anti-trust or data protection? Or both?

Why the Trade War Means You Need to Dump Apple

Trump Grants Reprieve for Huawei

Tech Will Feel the Sting of Huawei Blacklist

Tuesday, 21 May 2019 08:38

(New York)

In a great example of how Trump’s new tariffs on China will reverberate around the US economy, Nike and Adidas are panicking over the new Trump moves. The pair just led a consortium of 173 companies who penned an open letter to the President imploring him to stop the tariff move immediately. Nike and Adidas say the tariffs will be “catastrophic”. Clothing and footwear already endure some of the highest tariffs, so hiking them further will increase costs and create huge logistical complications. The letter summarized their view this way, saying they will be ”catastrophic for our customers, our companies, and the American economy as a whole”.


FINSUM: If you are a company that makes or imports a lot of your merchandise from China, this is going to be a very rough period. We expect the market will start to take this into account as the full impact of the trade war is digested.

Trump Warns of War with Iran

Trump Blacklists Huawei

Another Big Escalation in Trade War Looms

Friday, 26 April 2019 11:26

(New York)

One the tail risks for markets right now is the sharp downturn that is supposed to happen to the stock buyback market. Huge levels of corporate buybacks have been supporting US equities for years, but that is forecast to drop dramatically. While that may wound US stocks, it poses a major opportunity for another area: Europe. European stocks don’t see much in the way of buybacks, which has left them much less loved than the US recently. However, the declines in US buybacks are likely to make Europe look much more attractive.


FINSUM: European valuations are significantly more attractive than in the US, which means that if the playing field gets levelled by decreased buybacks, there is probably a good opportunity here. That said, Europe has a lot of economic issues right now.

Where Active Management is Best

A Second Brexit Referendum Looking Likely

A Second Brexit Referendum Looms

Wednesday, 22 May 2019 08:53

(New York)

The trade war is very scary for everybody. From politicians to executives to investors (in both nations), everyone is afraid of the implications of the trade war. However, there are some good reasons not to be. Firstly, while there are fears of a market tailspin, the reality is that the dovish Fed should provide a safety net. Secondly, many worry the trade war could bring the economy to a standstill, but remember that only 2.4% of US economic output is at risk of Chinese tariffs. Finally, many fear China could dump its $1.1 tn of Treasuries. The truth is that doing so is very unlikely, and even if they do, it is a small portion of the $22 tn market.


FINSUM: The general theme to take away here is that China is not as big a part of the US economy and markets as many seem to assume it is. That said, the secondary effects of a trade war, such as the psychological impact on business and the effect on the rest of the world, could be considerable.

Why It is Time to Buy Emerging Markets

Emerging Markets are Falling Hard

The Emerging Markets Rally May Be for Real

Friday, 10 May 2019 12:10

(New York)

Bond ETFs ae set to break a landmark record this year—$1 tn in AUM. The number is a big deal for bond ETFs, which got off to a slower start than their equity counterparts. In recent years, though, bond ETFs have seen huge inflows as they allow investors a more liquid option for both strategic and longer-term allocations. The market is also seeing a good deal of innovation, with more nuanced approaches spreading much like they have in equities.


FINSUM: Overall this is excellent news for investors. More AUM means more liquidity, more options, and lower costs. There are still some fears about a liquidity mismatch between the ETF and the underlying blowing up during a crisis, but those have never materialized.

Recession Watch: Data Worsening

How to Profit from Rising Rates

Bond Funds are Bleeding

Tuesday, 14 May 2019 06:31

(New York)

Markets are getting more volatile by the day. Last week was a rough one and yesterday was total carnage. Investors might be thinking about allocating shares into some safer sectors. With that in mind, here are 7 safe dividend payers to take shelter in: JP Morgan (2.8% yield), Sempra Energy (3.1%), NextEra Energy (2.6%), Air Products & Chemicals (2.3%), Honeywell International (1.9%), McCormick (1.5%), Microsoft (1.5%).


FINSUM: One of the big things to remember here is that with the Fed on hold, the big headwind against dividend stocks is pretty much removed.

This Big Stock has 50% Upside

The Most Popular Mutual Fund Stocks

A Big Long-Term Problem for Auto Companies

Friday, 24 May 2019 11:35

(Washington)

It has largely faded from the news, but Americans in high tax states are feeling the pinch from the SALT cap limits. States are currently mounting a last ditch attempt to stop the new limit through a highly creative legal argument that relies on court precedent from as far back as the Civil War. However, early indications are that the push will fail, finally sounding a death knell for any hopes the cap would be overturned.


FINSUM: As one of our esteemed readers pointed out to us, this SALT cap has much more significant implications than real estate prices or asset allocations. The bigger worry is that the tax-home migration of the wealthy could hollow out the public finances of already precarious state and local governments.

Wirehouse Market Share Keeps Declining

How to Personalize Portfolios with ETFs

A Great New-Old Tax Loophole

Friday, 12 April 2019 13:36

(New York)

Precious metals are heating up, much to the joy of the investors that have stuck with the shiny laggards. Gold has been enjoying a good rally, and that should help pull up silver, which has been in a slump. “It is difficult to be pessimistic about silver at these levels”, says one portfolio manager. Silver is down more than 9% this year, even as gold has rallied. However, eventually gold will start pulling investors into silver. “Silver has lacked retail investment demand, so a sustained rally in gold will lead to the speculators coming and buying silver”, says the portfolio manager.


FINSUM: Precious metals have not been getting much attention for years, but gold is off on the right foot this year. Importantly for silver, a recession doesn’t hurt demand because it isn’t an industrial commodity.

The Best Outlook for Gold in Years

Why It is Time for Gold to Shine

Gold is Finally at a Bottom

Tuesday, 20 March 2018 10:12

(Moscow)

Sometimes we just have to run a story for fun that has no relevance to markets or investing. This is one of them. Evidently, last week a plane flowing over Siberia (Yakutia to be exact) had its cargo hatch break open. When it did, $368m worth of gold bars, silver, and diamonds fell from the sky down onto the frozen landscape. The “drop” happened right near the airport and the company who owned the goods had to get trusted staff to recover the bounty, but not before going through metal detectors before they went home. Now locals think that not all the gold has been recovered and flights to the area are sold out all over Russia as treasure seekers come to the frozen region.


FINSUM: Sorry for the irrelevance of the story, but treasure falling from the sky and oversold flights full of treasure hunters was too much not to share.

ESG is Now Mainstream

Why Hedge Fund Fees are High

There is a Dangerous Bubble You Don’t Know About

Tuesday, 19 September 2017 11:06

(San Francisco)

The new Apple iPhone X has gotten a lot of hype in media. Aside from all its new features, which are admittedly extensive, its ~50% price hike to $1,000 has received a great deal of attention. That price hike is testing a long-held economic principle which says that as prices for a good rise, demand falls. However, for the last 100 years there has been a view that rising prices could raise demand for certain goods because they amounted to “conspicuous consumption”, or saw their demand rise as prices did because owning them signaled wealth and status.


FINSUM: Apple’s new iPhone X, with a lofty $1,000 price tag, may just prove conspicuous consumption true.

Amazon is About to Redefine the Grocery Business

Big Banks May See Profits Surge

Banks Think Rates Won’t Rise

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