The roaring post comeback of equities post pandemic has been wonderful but investors have few places to turn to mitigate their tax bill, except for the bond market. All major categories in the S&P 500 were up this year, and enjoying the broader rally. Bonds have suffered and so have many bond ETFs however, the glimmer of hope is how they can contribute to help offset tax loss. Bond ETF holders will already be in a better position just given their construction and exposure to taxes, and investors are also jumping between fixed income ETFs to manage fees as some ETF managers are cutting in order to synchronize for the tax loss harvesters. However, the 2-3% fall off in bond ETFs won’t be enough to entirely offset the equities rally this year.

FINSUM: This is the perfect time to capture low fees in bond ETFs because they are mainly a tax vehicle at this moment and return is secondary.

Bonds and equities are more correlated than ever and on top of that there isn’t any yield in the bond market these days due to the trillions in QE. Investors are now searching for an uncorrelated hedge to what looks like a looming equity bubble, and private credit markets are giving investors an alternative. High fees, opaque transactions, illiquid markets, and locked up finances are downsizing private credit but more companies are searching for financing partnerships in private markets. Middleman companies like Blackstone and Carlyle Tactical Private Credit can match companies in transactions that wouldn’t be possible in public markets and generate yield that wouldn’t normally be possible. In order to meet the rising demand private creditors are pitching to larger companies that could have access to the public bond market and giving persuasive pitches.

FINSUM: Private credit is the most enticing alternative to the volatile bond market. 

A new study by Alliance for Lifetime Income and CANNEX is shaking the foundation of the standard portfolio construction which uses 60/40 equity bond split to simultaneously grow and protect/provide income. Investors in hypothetical allocation, 20% of their portfolio into equities 14% into real estate and annuities made up the next largest category of 13% followed by CDs, bonds, and alternatives. This overwhelming support for annuities is interesting but even more intriguing iis that nearly 85% of investors were interested in a lifetime guaranteed income annuity or already own one. Advisors should hear their clients desires for annuities rather than push the traditional portfolio allocation. The increased interest in annuities is a growing trend for investors and will be a more prominent feature in the average portfolio.

FINSUM: The pandemic and the current financial landscape has upended what many investors thought of as a safe asset, and guaranteed income (even at a cost) is worth it for many.

Saying the bond market is difficult would be more than an understatement, and while yields are creeping it's still hard to get the historic performance. However, many investors are turning to active fixed income ETFs. This has led to a swelling of inflows into the market category making up 16% of ETF inflows in 2021 through October. Turmoil at the Fed and the continual threat of a taper tantrum have many investors looking to pros to sort out the difficulties in the bond market. Active FI ETFs can also fit narrower targets and accommodate the rapidly shifting macroeconomic environment.

FINSUM: Seasoned veterans at the helm make the most sense when the environment is shifting, and active ETF can edge out when the future is uncertain.

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November was full of volatility, and that's more than leaked into December, but Goldman warned investors about buying the dip hoping for a post Christmas rally. The biggest two threats Goldman sees are ongoing, the new omicron Covid 19 variant and the newfound inflation hawkishness by the Fed. The bear wave has hit a variety of asset classes whether its tech or bitcoin, and their risk appetite is low. The street is mixed however as some indications of omicron is it won’t be severe and Fed actions haven’t taken hold just yet. The VIX is still above its short and longer run moving averages which should keep investors cautious.

FINSUM: There is really no reason to move drastically right now, the Fed will be more transparent in the next couple of months.