Recession Coming?

From an economic perspective, leading indicators are designed to forecast the likelihood of a recession. Recent movements in the data, particularly the spread between 3-month and 10-year Treasury yields, suggest an increasing probability. See article here, WSJ.

Members Exchange (MEMEX)

In a recent move, some large financial firms such as Morgan Stanley and Fidelity have banded together to create the Members Exchange, or MEMEX. The idea is to create a trading venue that has lower fees than the NYSE and is controlled by its members as opposed to stockholders, similar to how the NYSE was originally created. The success of this new exchange is yet to be determined. See article here, WSJ.

Passive Funds Continue to Grow

As of the end of 2018, passively managed funds now represent about 48 percent of fund investment, and Bloomberg is reporting that they expect passively managed funds to overtake actively managed mutual funds by the end of 2019.

Hurricane Brings Focus on CAT Bonds

Bond investors (not just insurers) may be on the hook for damage from Hurricane Michael. The reason for this is so-called catastrophe (or CAT) bonds. Under this arrangement, insurance companies sell bonds to investors, with the stipulation that bond payments cease if a prearranged event (such as a hurricane) occurs in a particular location and above a particular intensity. This obviously helps insurers during times of significant payouts, but why would an investor take such risk? The answer is a higher interest rate. See article here, WSJ.

Active Managers Struggle Again

Once again, active managers have struggled to outperform market indexes. In fact, over the past year, only 36% of actively managed funds have beaten the index. This result provides additional support for the inflow of investment into passively managed funds. See article here, WSJ.

Tesla Shorts Hit Hard

Excluding ETFs, Tesla is the most heavily shorted stock in the US, suggesting that many investors don't believe in the business. However, recent positive statements surrounding earnings caused the stock price to jump 16% in one day. As a result, short sellers lost $1.7 Billion. See article here, WSJ.

Apple Value Hits $1 Trillion

Following strong earnings, Apple's market value increased to $1 Trillion, making it the first company to ever hit this mark. Next on the list are Amazon and Google, both around $775 Billion. To put this in context, only 16 countries in the world have nominal GDPs about $1 Trillion.