(San Francisco)

Apple’s stock got hit in a big way last week as the company announced it would no longer announce unit sales of iPhones. The announcement was taken as a sign of weakening iPhone demand. An analyst summed it up this way, saying “Apple Reduces Disclosure; Typically Not a Good Sign”. The stock has fallen 10% since the announcement. The more positive view is that Apple wants investors to focus more on its earnings than on its unit sales, as earnings are ultimately what will drive the shares forward.

FINSUM: Apple’s shares often fall on earnings (8 out of the last 15 times), so the company has little to lose by eliminating unit sales. We think this is a smart move, especially as the iPhone transitions to being a highly saturated and mature product.

(Seattle)

The Wall Street Journal ran a major headline on Amazon’s search for a new headquarters yesterday. The newspaper says that Amazon is now planning to not host a single headquarters but open two new smaller offices, splitting the total of 50,000 new hires between two locations. New York and Northern Virginia are said to be the choices. The WSJ says Amazon decided to have two because it would make hiring the tech talent they want easier.

FINSUM: While they were under no obligation follow through, this development does seem a little unfair to the cities bidding. Cities put in resources to get the full as-promised HQ from Amazon, so only getting half the return is perhaps a little disappointing (though still very positive).

(New York)

Over the last couple of years there has been a movement on the fringes of the active management space. That movement was towards funds that only charge investors full and/or rising fees if they outperform a given benchmark. If they underperform, their fees would fall back to ETF levels. Well, that idea has taken a big step recently as major fund provider AllianceBernstein has a handful of so-called “fulcrum funds”. The largest is the AB FlexFee Large Cap Growth Advisor Fund, with $106m under management. A top figure at AB put the goals most clearly, saying “The big impact of this will be if we can take money from passive, or money that would’ve gone there … That’s the ultimate goal here”.

FINSUM: Fulcrum funds make a lot of sense for active managers and clients. If the fund managers do their job and seriously outperform a benchmark, then higher fees make sense. If they don’t, then fees stay low.

(New York)

Housing stocks are in a real slump right now. Many homebuilders are in a full bear market following months of slowing home sales and new construction. For instance, the iShares U.S. Home Construction ETF is down 26% this year. That said, take a look at two stocks that seem like they have strong upside—Ingersoll-Rand (IR) and Lennox International (LII). Both companies are in the HVAC sector of housing, which is a strong niche.

FINSUM: What is so strong about the air conditioning and heating (HVAC) sector is that it is at the start of a big replacement cycle. These machines typically last 12 to 15 years, so there is an ongoing boom in replacement of the huge amounts of these systems installed in the 2003 to 2006 housing surge.

(New York)

Barron’s has made an argument to investors. Despite all the turmoil recently, and the potential threat of the midterm elections, it says you should stick with stocks. Part of the reason is historical—stocks have usually continued to do well even when Congress flips (though the sample size historically is small). For instance, the stock market continued to perform well when Congress turned against Obama. On a policy front, the outcome looks positive too, as Democrats could limit some of the less popular policies of the Republicans, like a trade war, which would help US corporates.

FINSUM: We think the election is going to be positive for shares if everything goes as it is forecasted to. Any change from the blue House-red Senate prediction might shake markets.

(Washington)

One of the big questions financial advisors may have about the midterms has not been discussed much. That question is how the midterm outcome may affect regulation, specifically regarding the SEC rule or forthcoming fiduciary rule 2.0. The answer is that in the most likely scenario—Democrats taking the House and Republicans holding onto the Senate—regulations would get tougher for the wealth management industry. Staunch fiduciary advocate Rep Maxine Waters (D-Calif.) would become the chair of the House Financial Services Committee, and would likely push for much tougher regulation. She has already railed against the new SEC rule for what she sees as a lack of strength.

FINSUM: Democrats taking the house could change the regulatory picture considerably. This seems likely to be one of the biggest risks to a Democrat victory for advisors.

(New York)

The world may be on the verge of a recession and a bear market, or maybe not. But either way, investors need to think about the possibility and have a plan for how to handle it if it comes. With that in mind, some experts have weighed in on the topic. T. Rowe Price says that in a downturn, investors need to buy more emerging markets and hold less bank loans. Charles Schwab thinks investors need to get more defensive, moving out of growth stocks and into defensive sectors, like healthcare. Northern Trust is more benign and does not see big changes coming to the market or economy.

FINSUM: If the economy really goes south, we think the market will go with it, which means defensive sectors would be a good bet. We imagine the Dollar would stay strong and yields would be lower, so income investments could shine(which also happen to be quite defensive).

(New York)

There is some alarming data flowing out of the bond market. First it was the huge amounts of bond fund withdrawals, and now new info—issuance is plunging. US investment grade issuance fell 34% in October (from September). High yield issuance was down 50% from last October. Overall annual issuance fell a great deal on both fronts as well. The numbers reflect slumping demand for bonds as rates and yields rise. Investors also pulled $3.1 bn from investment grade bond funds in the week leading up to November 1st.

FINSUM: This is not surprising given what has been going on in markets this month. Even the annual figures make sense given the rise in rates. The big worry is to what degree this will translate into lower demand for Treasuries at the same time as the deficit (and issuance) is about to surge?

(Seattle)

Amazon has been hit hard lately. The company’s surprise earnings caught the market off guard, which led to a big tumble in the shares, with the stock dropping over 10%. However, that presents a good buying opportunity, says Barron’s. The market was nervous because of the slowdown in revenue growth, but according to one analyst “We believe revenue growth is becoming a less relevant metric for Amazon given the outsize growth of the company’s cloud and advertising businesses”.

FINSUM: Amazon is still a fast growing business, but it is becoming more mature, which means expanding margins are going to be a key metric to watch. That is an area the company is excelling in.

(New York)

Bloomberg is arguing that the world may be on the verge of a big synchronized recession. In the words of the publication, there is “risk of synchronized slowdown in global growth as Europe wobbles, China sputters and stock markets around the world keep crumbling”. China is finally feeling real heat from the tariffs of the trade war and European growth is slumping. That begs the question of how long the US can remain the fast-growing outlier.

FINSUM: Growth is still good in the US but it does seem to be past peak. Just not as far past peak as in the rest of the world.