Market Recap – Executive Actions Planned for Dodd-Frank & Fiduciary Rule

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Market Digest – Week Ending 2/3/2017

The second week of the new administration brought more controversy. Early in the week came a 120-day suspension of refugee admissions and a 90-day travel ban from seven predominantly Muslim countries. Friday brought comments suggesting the administration will do away with much of Dodd-Frank and the Department of Labor fiduciary duty. Yet once again, capital markets advanced in a somewhat sleepy fashion. The S&P 500 rose 0.1%. In corporate news, Apple beat earnings expectations, Amazon disappointed, and Snapchat filed for an IPO that would value the company at roughly $25 billion.

Weekly Returns:
S&P 500: 2,297 (+0.1%)
FTSE All-World ex-US: (+0.5%)
US 10 Year Treasury Yield: 2.46% (-0.02%)
Gold: $1,220 (+2.4%)
USD/EUR: $1.078 (+0.8%)

Major Events:

  • Monday – Microsoft issued $17 billion in bonds, in part to help pay for LinkedIn
  • Monday – Walgreen’s and Rite Aid agreed to lower the price Walgreen’s will pay to acquire Rite Aid by $2 billion
  • Tuesday – Deutsche Bank agreed to pay $630 million to settle investigations into Russian equity trades that violated anti-money laundering rules
  • Tuesday – U.S. home ownership rate ticked down to 63.7%, modestly below the historical average of 65%
  • Tuesday – Apple reported sales of $78 billion, exceeding most expectations
  • Thursday – Annual inflation across 35 developed economies rose 1.8%, the most in about two years and close to the target for many countries of around 2%
  • Thursday – Snap Inc. filed for an IPO, saying it would seek a $20-$25 billion valuation
  • Friday – The new administration signed executive actions which sets in motion a game plan to scale back Dodd Frank and roll back a Department of Labor rule aimed at creating a fiduciary standard for managing retirement assets

Our take:
The new administration’s executive actions on Friday mean there will be significant changes to Dodd-Frank and the recent Department of Labor rule requiring a fiduciary standard for advising on retirement assets. What those changes will be is unclear, but pretty soon we will start to see how much the GOP-majority Congress is able to get signed into law in this deeply contentious period.

Dodd-Frank is a long and complicated bill with many parts. One of its primary intentions was to protect the financial system from banks, following the realization in 2008 that risks to major banks were also risks to the whole economy. Banks rallied on the news that it will likely be amended. That makes sense – fewer regulations should mean more opportunities and more profit in the short term. It could also help open the door for them to self-destruct again at some point in the future, but presumably that wouldn’t happen for a long time, if ever.

Like any law passed in a hurry and in the midst of turmoil, Dodd-Frank leaves room for improvement. Hopefully the president and Congress find a way to amend it without destroying some of its legitimate benefits.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as the Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

One Response

  1. John R Knox

    I was hoping that the fiduciary rule would become law. It seems to me that it would cause small harm and benefit advisors. As a part time tax preparer I have seen to many cases of neglect.


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