(New York)

All the biggest names in bonds—Gross, Gundlach, Dalio—have been warning that a major bond bear market is on the way. However, Bloomberg is arguing that bears may have to wait as the tide in the bond market is reversing. Treasury yields’ rise has stalled, and in certain parts of the world (e.g. Germany), yields are once again falling. The big reason why is global fears over a possible trade war which could sink the economy broadly. This would weaken inflation and hamper hikes by central banks, pinning rates.

FINSUM: We have repeatedly said that we do not think there will be a bond bear market. There is a lot of natural demand for bonds given the aging population, which should keep yields at bay even if other forces are causing them to rise.

(New York)

One of the market’s big fears at the moment is rising rates. Inflation is rising and the Fed is poised to hike rates three times this year. With that in mind, Barron’s has chosen some stocks that will help defend your portfolio against jumping interest rates. Stock with good dividends tend to perform poorly in rising rate periods, but if you are looking for good-yielding stocks which will continue do well, look at commodity-related companies, whose free cash flow can maintain dividends. Exxon Mobil, Schlumberger, General Motors, and Kimberly-Clark all look set to do well.

FINSUM: So what sets these stocks apart is that their dividends look sustainable AND they have attractive valuations, both of which make them more likely to perform well.

(Washington)

The scandal for Wells Fargo’s wealth management division is deepening. The bank has already experienced major reputational damage following its checking account scandal, and now the US Department of Justice is investigating the wealth management division’s alleged misconduct. The move is part of an extension of the investigation into the retail banking misconduct, and the FBI is reportedly holding interviews in the Phoenix area. Earlier this month the bank disclosed its own independent review of its wealth management unit included “whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company’s investment and fiduciary services business”.

FINSUM: This scandal looks like it is going to keep moving deeper and deeper. We wonder how much damage this might ultimately have on Wells Advisors’ own businesses. This seems like a situation where advisors might be seen by clients as guilty by association.

(Washington)

This weekend saw President Trump escalate his attacks on Robert Mueller’s special counsel investigation. Trump and his lawyers launched a public campaign to condemn the investigation which included Trump’s first tweets targeting Mueller by name. Trump tweeted that the investigation “should never have been started in that there was no collusion and there was no crime”, saying that the Mueller investigation was being led by “hardened Democrats” intent on taking down the Republican president. Trump’s more aggressive stance than in previous months led to several warnings from senators on both sides of the aisle that he should not try to end the investigation.

FINSUM: One keeps wondering if some bombshell accusation is going to arise from this investigation or whether it will end up being a long waste of time.

(Frankfurt)

For investors looking for signs of bad things to come, this is a pretty strong one. US investors may need to focus overseas to see what’s coming, as Germany’s benchmark DAX index has just hit a “death cross”, or when the 50-day moving average falls below the 200-day moving average. This has only happened to the DAX four times in the last decade, and in all of the instances the market fell at least a further ten percent after the cross.

FINSUM: So the DAX is partly down because of the country’s exposure to a trade war, but it could be a first manifestation of what is to come for global markets.

(Washington)

If the fiduciary rule was on its last legs before, it is really in trouble now. The DOL’s rule suffered its first significant court defeat this week. A US circuit court struck down the rule, saying it was too broad and “unreasonable”. The court found fault with the government’s broadened definition of what constitutes financial advice and who gives it. The loss means circuit courts have split on the fiduciary rule and it now appears likely the Supreme Court will take up the case.

FINSUM: This is a major blow to the fiduciary rule, and may help usher an even quicker departure for it. It will certainly give the DOL more ground to shift to a new rule co-drafted with the SEC.

(Washington)

Special counsel Robert Mueller may very well have just crossed one of Trump’s red lines in his investigation into the White House’s connections to Russia. Mueller has just subpoenaed the Trump organization. The Trump organization has been voluntarily giving the special counsel documents to assist with its investigation, but now faces an official subpoena. The tactic mirrors the approach used by Mueller during his investigation into the White House itself. The story of the subpoena was first issued by the New York Times.

FINSUM: It will be interesting to see how sharply, if at all, Trump reacts to this move. Is this the action that moves him to try to end the investigation?

(Washington)

Stocks may do well after the midterm elections, but Barron’s is arguing that rise will be preceded by a fall in share pricing leading into the elections. The contention is based on two arguments which rely on historical trends for the market. One is that markets do well in the third year of a presidential cycle, and the other is that stocks tend to do poorly in the summer. All of that points to a market that is likely to start rallying in the Autumn, specifically November 1st, says Barron’s.

FINSUM: While Barron’s does point it out, it is very worthwhile to bear in mind that these types of calls are only as good as the actual catalysts one sees that could really drive them. In this case, the uncertainty over how the Republican party will fair in the midterms may be a key factor.

(New York)

Walmart stockholders beware, the company might be in for a big scandal. A whistleblower internal to the company has come out claiming that Walmart is using misleading ecommerce results to make investors believe it is catching up to Amazon. A former director of business development says he was fired after raising concerns at the company about its “overly aggressive push to show meteoric growth in its e-commerce business by any means possible -- even, illegitimate ones.” “Wal-Mart sacrificed and betrayed its founder’s key principles of integrity and honesty, pushing those core values aside in its rush to win the e-commerce war at all costs”, said the whistleblower.

FINSUM: So reading these claims, we do not see any evidence of the claimant saying Walmart actually falsified financial results, only that it used aggressive tactics (such as underpaying vendors), so the damage may not be that bad.

(New York)

Despite a very poor three months, there have been increasing amounts of articles arguing that Bitcoin may be a tipping point where it moves higher. However, Bloomberg has published a piece saying it is at a so-called death cross. The cryptocurrency’s 50-day moving average has dropped to its nearest point to its 200-day moving average in nine months, a move which spells doom for technical analysts. If it crosses below the 200-day threshold, it would signal the “death cross”.

FINSUM: While this does seem significant, we would argue that technical analysis is not as relevant in Bitcoin. The reason why being that the fundamentals of the market (e.g. a sound regulatory environment) are unstable, and there is little trading history from which to weigh technical indicators.