Companies Newfound Research and Simplify Asset management are partnering on a selection of new model portfolios that are giving investors more options on their equity holdings. The structured alpha portfolios are designed to target different growth offerings and provide different risk exposure. With the four portfolios coming in 20/80, 40/60, 60/40, and 80/20 equity allocations investors will have exposure to equity, rate, and volatility markets to mitigate financial risk. Fund advisors are trying to get outperformance from strategic capital efficiency rather than trying to pick winning stocks at the right time.
FINSUM: Even basic equity/bond allocation strategies in model portfolios are a good way for advisors to drill down the risk in a portfolio.
Covid-19’s continued crisis and the growing number of new strands have put lots of pressure on bond markets which has spiked an interest in annuities because there is no yield in fixed income. However, ETFs are looking to capitalize on annuities growing popularity because a defined outcome ETFs offer a lot of the same advantages as annuities. Buffer or defined outcome ETFs use options to track indices which means that by buying a series of put options and selling a series of call options they cap and floor their earnings which means a smooth stable ride that is an alternative to bond markets and annuities as an equity hedge. They also have an advantage over annuities because they don’t have the hefty upfront costs annuities usually have.
FINSUM: This is a great product to hedge the S&P but it isn’t the guaranteed income an annuity provides.
There are a record number of people with over a million in the 401(k) accounts which means even more people are considering retirement in the upcoming year. However, there are lots of factors that investors need to consider before even thinking about early retirement. Many consider a $1 million nest egg enough however the 25x rule (retirement is 25 times your annual expenses) might not go far enough. Rising healthcare costs are eating away at existing retirement accounts, and many fail to accurately gauge their retirement healthcare costs. Additionally, rising inflation is eating away at the paper wealth and needs to be a factor in. If you are planning on retiring early you will need a series of tax loopholes to do so without paying high penalties. Finally, an early retirement needs to rebalance their portfolio to a less risky strategy sooner which may leave you with less than you were projecting.
FINSUM: Meet with an accountant or your financial advisors so you can fully gauge how expensive an early retirement could actually cost.
Goldman Sachs updated its path for Fed tightening in 2022 calling for four rate hikes instead of three in 2022. This is a fairly aggressive path for tightening as the current Fed target interest rate is between 0%-.25% which means it will hit around 1-1.25 by Goldman’s forecast. The biggest reason for the rate rises is the tightening labor market. Previously the Fed leaned on slack in the labor market as an excuse to brush off inflation concerns but now they are no longer doing that. Goldman has the hikes penciled in for each quarter March, June, September, and now December. Goldman saw regional San Francisco President Mary Daly’s comments of shedding some balance sheet weight of indicating the Fed’s future path.
Finsum: The Fed hasn’t tightened this quickly in the post-financial crisis era, but broadly the markets and yields are in lock step with Goldman’s predictions.
Wells Fargo sent out a thank you note to external recruiters for their work and efforts in locking in lots of senior hires in 2021. Well’s is going to continue and extend many of the measures it implemented in 2021 into 2022 such as hiring offers for brokers and higher referral fees for outside recruiters. Wells saw their recruiting and retention drop after their scandal in 2016 and it’s been a continuing effort to get back to par with hires. In addition to all the sweetened deals surrounding recruiting there are also measures such as pay cuts if managers lose brokers or don’t hit sufficient hiring statistics. Well’s decision to close their international business has also been a major contributor to their inability to gain transactions in recruiting efforts.
Finsum: Wells used to stand out for their Broker compensation, however competitors are stepping up, and Wells no longer stands out.