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FINSUM

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Goldman told their investors that their best-case scenario for stocks had the S&P closing 2022 at 4,700, which might mean a 4% increase through the end of the year, but it would still finish below 2021’s close of 4,766. However, their worst-case scenario is very dower and predicts equities tumbling 21%. This scenario has the U.S. falling into a recession. Recession probability is higher than normal right now too as the US saw a 2-and 10-year yield curve investigation which has been the strongest indicator of a recession since the Great Depression.


FinsumWe wouldn’t pick a fight with the yield curve however, there is substantially more inflation pressure in this yield curve than in the previous ones reducing the probability of a recession.

Acquisitions and launches are running hot in direct indexing and in an attempt to match rival Fidelity, Charles Schwab announced the launch of their new direct indexing products. The funds will be available starting on April 30th, but unlike Fidelity’s ultra-low initial investment of $5k, Schwab will require a $100,000 minimum. They want their direct index investors to have a better conceptualization of the market and think the minimum will attract this. The launch comes fresh off of tax season and will hopefully drive interest as tax is an advantage of DI. Schwab will concentrate on the tax advantages of their custom offerings as opposed to ESG or other flavors popular with these funds.


Finsum: The timing of this launch could put investors over the hump when it comes to taking advantage of tax-loss harvesting with their DI products. 

BlackRock sent waves through the market announcing they were slashing fees from 0.04% to 0.03% for the largest bond fund in the world the iShares Core U.S. Aggregate Bond ETF (AGG). This wasn’t the only move they made as equity funds LRGF and INTF got their fees reduced as well. The fee battle is a prominent part of the game as lower expense ratios definitely garner more attention from investors. Previously BR had reduced fees on other fixed-income products as part of the escalating competition with Vanguard.


FinsumFI income investors should keep an eye out, with prices and fees at lows, bond market ETFs could be in the ‘buy the dip’ territory’. 

Schwab made a splash when they announced they were tossing their hat into the direct indexing ring, but details are coming surrounding what the final products will look like. Schwab is going to limit investors to eliminate up to 3 stocks from their Direct Indexing, which means its only use will really be for tax purposes. Even starting with a relatively green index, if investors want to eliminate greenwashing their options are limited. Fidelity will offer more options to investors when it comes to custom indexing, and also has much lower minimum investments. Specific ESG focus portfolios are in production and can eliminate two more stocks or an entire industry providing more flexibility.


Finsum: Fidelity has an ESG edge and lower minimum investments. Schwab will need to develop more options if it wants to compete with ESG options.

Friday, 15 April 2022 12:07

Inflation Beating Closed-End Funds

Inflation is now everyone’s primary concern, including the Fed. A strategy to outpace inflation is to find an income strategy that can keep up. Closed-end funds with high returns are a great way to do this. Virtus AlllianzGI Diversified Income & Convertible Fund is a great option as it has an 8.96% yield and has averaged over 8% in the last 5 years. Calamos Convertible & High Income is also a great option along with Advent Convertible and Income. Investors looking to rely on Treasury inflation-protected securities have gotten hammered because the rising yield has destroyed their value, and TIPS funds have equally suffered.


FinsumHigh yield corporate debt is a great pace to look for yield right now, and is less sensitive to Fed risk than many other bonds.

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