(Los Angeles)

One of the most disruptive technologies in industry might not seem that disruptive—batteries. Yet advances in batteries are about to reshape many areas, not least of which is the power grid. Home energy storage and car battery power are two of the biggest areas of disruption, and investors need to understand the dynamics in play. Better batteries mean less energy costs as power can be stored to smooth out demand-based pricing. It also makes electric vehicles legitimate, and possibly cheaper competitors to gas vehicles. Additionally, improved energy storage makes renewables profitable.

FINSUM: Batteries are going to change the economics of almost everything related to power. Make sure you understand some of the key battles because share prices are going to start reflecting the changes.

(New York)

While Treasury yields, especially at the short end of the curve, have improved a great deal recently. Many investors may still be interested in adding some stocks with good dividends to their portfolios. With that in mind, pharma may be a great place to look. The sector is having a tough time this year—down over 6% to-date—but that means dividend yields are looking strong. The sector is averaging 2.9%, but the best payers are near 4%, including some big names. For instance, AbbVie and Pfizer are both yielding 3.7% or over, and both seem to have rock solid outlooks where that dividend is not going to shrink.

FINSUM: These seem to be some great choices. The risk here does not appear to be in the fundamentals, but more related to interest rates.

(Washington)

Investors, be worried about the Fed, and not for the reasons you think. While all the market’s focus has been on how quickly the Fed will raise rates, what could really cause problems is the Fed’s unwinding of its balance sheet. According to the Indian central bank, this unwinding is sucking Dollars out of the system and causing a Dollar liquidity squeeze. According to Urjit Patel, the governor of India’s central bank, this Dollar-squeeze means “a crisis in the rest of the dollar bond markets is inevitable”, with a growing “possibility . . . a ‘sudden stop’ for the global economic recovery”.

FINSUM: It sounds like emerging markets are going to have increasing trouble issuing Dollar bonds, which could definitely throw a wrench into the recovery. Maybe this is how the Fed sparks a global recession and not just an American one.

(Washington)

Advisors all over the country are wondering when the SEC rule might be implemented. The DOL’s fiduciary rule took ages to be a reality (and never quite made it), but the SEC rule seems like it will be faster. But how fast? Realistically, probably one year from now, according to one industry expert. BNY Mellon Pershing urges advisors to stay engaged and not catch “fiduciary rule fatigue”. “We still have an opportunity to shape the fiduciary landscape … It's really important that we don't grow weary of the standard of care issue, because we have an opportunity to take the lead”.

FINSUM: A year sounds reasonable. The rule is only in its first iteration now, and we suspect there will be significant changes.

(New York)

The US real estate market looks set to change in a big way. Brokers and developers are sensing it, and consumers are making it happen. The change is in the geography of the market. The new SALT limits in the updated tax code mean that wealthy residents of higher tax states like New York, New Jersey, and California, now face much higher tax liabilities. As a response, many of them are seeking to buy homes and domicile themselves in tax-free states like Florida, Texas, or Nevada. One real estate developer in Nevada explains the situation, saying “If you’re a wealthy tech executive from the Bay Area who can live wherever you want and you have a $3 million income, you would have $399,000 a year in savings here. That’s a lot of money to spend on real estate”.

FINSUM: We think this trend will be both long-term and very bullish for markets like south Florida and other sizable metropolitan areas in low tax states . The high tax states might face a reckoning, especially those without a major metropolitan area to suck in residents (e.g. Oregon).

(New York)

Increasingly, investing in tech companies means you need to go big or go home. What we mean is that large cap tech companies have been outperforming their smaller peers handily. The S&P 500 Information Technology Sector is up about 14% this year, much better than the index’s 3.7% overall gain, but the S&P 600 Information Technology Sector has only gained 9.9%. That means that the largest tech company are significantly outperforming their smaller peers.

FINSUM: This is not a surprise given the overall momentum the FAANGs have had over the last few years. However, given the worries over regulation, it is odd to see they have outperformed smaller rivals very recently.

(New York)

Retail has been stuck in a rut for some years. Big retailers have been closing stores left and right, so unless you are a contrarian, it is a tough time to invest in the sector. However, there is an ETF that might offer the best way to play the current environment. That ETF is called Amplify Online Retail (IBUY). IBUY has returned just over 15% this year, and tracks an index of companies that make at least 70% of their revenue from online or virtual sales. Three quarters of its holdings are in the US. Only about 10% of retail sales happen online in the US, but that is expected to double over the next five years.

FINSUM: If you are a believer in ecommerce’s ability to disrupt the predominant retail model and make profit, then this seems like a good way to play the sector.

(New York)

Small cap stocks have done well this year, and many are growing more interested in the area following underperformance in the last few years. With that in mind, here are some picks from a top global small caps fund manager. The first thing to know is that international small caps are one of the few areas where active management adds value because many companies are poorly covered by analysts. The other thing to know is that at small caps the CEO really makes a difference in a way that is impossible at much larger organizations. The manager picks shares like Japan’s Horiba, or ABC-MART, or Britain’s Electrocomponents.

FINSUM: Picking international small caps is definitely an area where management needs to be outsourced to a specialist, and to be honest, this fund’s (Vanguard FTSE All-World ex-US Small-Cap) picks and approach were to us impressive.

(New York)

All the press is on the growth of ETFs, but today some surprise data has come out—mutual fund inflows are outpacing ETFs this year, at least according to Pershing. So far this year mutual funds on Pershing’s platform have seen about $8 bn of inflows, while ETFs have seen just over $6 bn. The explanation for the trend, according to BNY Mellon Pershing is that “As advisors look to diversify their investment strategies to actively manage against emerging risks in the market, we are starting to see mutual fund inflows close the gap with ETFs”.

FINSUM: Active management and once-a-day liquidity do seem to give mutual funds an advantage in the risk avoidance department.

(New York)

Investors hang onto your hats, a big fixed income rout might be coming. While it was easy to write Italy’s big bond losses off to its recent political crisis, the Wall Street Journal is arguing that all risky bonds may be in for a reckoning. There are a couple reasons. One is that just as in Italy’s two-year bond, many fixed income securities may hit a “double bottom”, which could lead to serious losses. But more fundamentally, many investors are now starting to view bonds higher up the quality spectrum more favorably, which means the market may suffer a significant “risk-off” period. Global high-yield bonds are down almost 4% already this year.

FINSUM: Our bigger worry than the points mentioned here is that as safer bonds start to get better yields from rising rates, there is less and less incentive to buy junk. That is a major change from the paradigm of the last few years.