Amid ongoing concerns over inflation, the Federal Reserve opted to maintain its key interest rate at its highest level in over a decade, ranging between 5.25% and 5.5%. Despite solid economic expansion and strong job gains, the central bank noted a persistent lack of progress toward its 2% inflation target. Annual inflation rates remained elevated, with the consumer price index registering at 3.5%, driven primarily by surging housing and insurance costs.

Although there is optimism about reaching the 2% inflation goal, economists caution that significant progress is still needed. The Fed's strategy of keeping interest rates elevated to curb inflation has yielded mixed results, with inflation rates plateauing between 3% and 4% after initial declines. Complex factors, including rising costs passed on by insurance companies and varying consumer spending behaviors, contribute to the inflationary pressures beyond the Fed's control.

While concerns about the labor market and future business conditions persist, analysts believe the likelihood of a recession remains low. Fed Chair Jerome Powell emphasized the ongoing uncertainty, indicating a cautious approach to monetary policy adjustments in the near term.

Finsum: Expect rates to hold steadier than markets might expect with this stubborn of inflation. 

Bitcoin faced a nearly 6% downturn on Wednesday, marking its weakest monthly performance since late 2022, as investors divested from cryptocurrencies prior to the Federal Reserve's interest rate decision. The primary cryptocurrency globally witnessed a drop of nearly 16% in April, as investors cashed out gains from a scorching rally that propelled prices above $70,000.

Bitcoin saw a decline of up to 5.6%, hitting its lowest point since late February, hovering at $57,001, while ether saw more modest losses, down 3.6% at $2,857, also reaching its lowest level since February.  Despite being down 22% from March's peak, bitcoin remains up 35% this year and has doubled in value since this time last year, largely due to significant capital inflows into newly established exchange-traded funds since January. 

Crypto-related stocks, including Coinbase, Riot, and Marathon Digital, dipped in U.S. premarket trading, reflecting broader market uncertainties surrounding the Federal Open Market Committee's stance on interest rates.

Finsum: The original link between bitcoin and inflation/interest rates has deteriorated, but regulation will clear up the future for cryptocurrency. 

Active ETFs have been steadily gaining market share from mutual funds, experiencing a consistent 20% growth in assets annually over the past five years, reflecting investors' growing preference for the cost-efficient and adaptable nature of ETFs. During this period, they have expanded their share of the overall ETF market, skyrocketing from 2% to 8.5%, as indicated by Morningstar's recent analysis on actively managed funds.

 Despite their current assets standing just above $600 million amidst the $8.9 trillion U.S. ETF landscape, they are advancing at a faster pace than both the overall market and their passive counterparts. Investors have injected $375 billion into actively managed ETFs in the last five years, while active mutual funds have witnessed a staggering outflow of $1.8 trillion, according to Morningstar's data.

Investors can anticipate continued growth for active ETFs, asserting their burgeoning prominence within the fund industry, fueled by investor demand and their role in alleviating the outflows from active mutual funds.

Finsum: Investors tend to think pickers have their largest advantage in volatility and macro environments, so this trend could continue. 

Real estate investment trusts, known as REITs, are renowned for their attractive dividend yields, as they are legally obligated to distribute 90% of their post-tax earnings to shareholders. However, REITs are highly sensitive to various market factors such as interest rates, inflation, leverage, and regulatory changes, posing liquidity concerns for investors.

While dividend yield is crucial, conservative investors also consider factors like analyst ratings and liquidity when evaluating REITs. The highest-yielding REITs, according to Rick Orford, based on specific criteria, including annual dividend percentage, trading volume, number of analysts, and current analyst ratings are Vici Properties, showcasing notable revenue growth and offering a promising dividend yield of 5.71%. Starwood Property Trust, recognized as the largest commercial mortgage REIT in the US, presents a forward yield of 9.81%, notwithstanding mixed financial performance in 2023. Redwood Trust emerges as a standout contender with the highest forward yield of 11.24% and an optimistic outlook for future earnings growth, bolstered by its diversified investment portfolio.

Finsum: If interest rates have peaked REITs are poised to deliver huge returns in 2024 and 2025.

Rising inflation and heightened borrowing costs are diminishing the appeal of leveraged private-market investments, but despite these challenges, institutional investors in the Asia-Pacific region remain committed to expanding their allocations in private assets, particularly in real estate and private debt, as highlighted in the firm's recent annual report. 

Among the 120 Asia-Pacific-based institutional investors surveyed, 58% anticipate further inflation escalation, while 65% express concerns about elevated borrowing expenses linked to inflation affecting leveraged private-market investments adversely.

However, amid these macroeconomic headwinds, financial institutions in the region remain bullish on private markets and are planning to boost allocations in the short and medium terms, with private debt emerging as a favored asset class.  The survey also indicated a growing trend of institutional investors allocating more than 30% of their portfolios to private markets, with approximately 64% planning to elevate their allocations to private real estate in the medium run.

Finsum: Private real estate could be posed for a comeback as interest rates fall and remote work becomes more sparse.

In the first quarter of 2024, the momentum of private credit fundraising decelerated, impacted by global economic uncertainties, as per the latest findings from Preqin. Fundraising in this sector amassed $30.6 billion during the period, marking a 14% decrease from the typical first-quarter figures recorded since 2017. 

RJ Joshua, VP of research insights at Prequin, notes that there are large concerns around the future of interest rates and inflation, but this slow down might just be for a limited time. The slowdown in fundraising during the initial quarter may prove temporary and regain traction later in the year, according to Joshua.

Notably, there has been a noticeable rise in fund concentration, with the top 10 funds garnering a larger share of the total fundraising. Investors are very satisfied with private credit and over 90% feel the asset class is meeting their expectations. 

Finsum: The future path of interest rates is appearing more certain, which could bode well for private debt through the end of the year. 

The IMF estimates that the private credit industry is now over $2 trillion in size, with 75% of it located in the US. It now rivals the leveraged loan and high-yield credit markets in size. Private credit offers borrowers more speed and flexibility and provides higher returns and less volatility to investors. 

While the advantages are clear, the IMF warns that as lending moves away from regulated financial institutions to private markets, systemic risks will increase. With private credit, there is less transparency, price discovery, and information about credit quality. Additionally, there is less information about how various players in the ecosystem are connected. Therefore, the IMF doesn’t see near-term risks but believes that as private credit keeps growing, there will be a need for greater regulation. 

On average, private credit borrowers tend to be smaller and have weaker balance sheets than companies raising money through syndicated loans or public markets. This means more downside risk in the event of rising rates or a negative economic shock. 

Currently, the IMF estimates that ⅓ of private credit borrowers’ financing costs are higher than earnings. It also warns that lending standards have weakened amid increased competition among lenders due to the influx of capital in the sector. 

Finsum: The private credit industry has experienced rapid growth over the last few years and now rivals the size of the high-yield credit and leveraged loan markets. Here’s why the IMF is concerned that continued growth could lead to systemic risks to financial stability.

In late 2022, the SEC amended its marketing rules for financial advisors. One change was that client testimonials were permitted under certain conditions. Many practices are seeing success by showcasing testimonials from satisfied clients. 

Michelle Tigani, the director of marketing and communications at Cassaday & Co., added a client testimonial page to the firm’s website, which simply shares positive feedback that the practice has received over the years. She plans to use these testimonials in ads, emails, and targeted campaigns. She notes that the client testimonial page is the most visited on the firm’s website, underscoring their efficacy.

Susan Wilkinson, the founder of Wilkinson Wealth Management, recommends reaching out to long-term clients to ask if they would be willing to share a testimonial. The firm displays these on their website and integrates quotes from clients into various marketing mediums such as social media, emails, and print. She believes it’s more effective and authentic for prospects to hear from satisfied clients rather than traditional forms of marketing which many instinctively tuneout.

Finally, Terra McBride, the chief marketing officer at Prime Capital Investment Advisors, asserts that financial advisors are in the relationship business. Client testimonials are the most effective way to communicate your ability to form positive and successful relationships. She recommends using testimonials in multiple formats, including websites, videos, and marketing campaigns. Ultimately, it adds more credibility and layers to help prospects get a feel for the client experience.  

Finsum: Late in 2022, the SEC amended its rules for client testimonials. Here’s why they are effective and how some practices are integrating testimonials into their marketing strategy.

Grayscale has been a pioneer in terms of bringing crypto investments to a wider group of investors with the launch of Grayscale Bitcoin Trust (GBTC) in 2016. For some time, it was the primary vehicle to get exposure to the asset through traditional means. However, the SEC’s approval of bitcoin ETFs means that the landscape is more competitive, with offerings from leading asset managers at lower costs. 

Now, Grayscale is launching a spinoff version of GBTC, which will have a much lower fee of 0.15% vs. 1.5% for GBTC. The new ETF, Grayscale Bitcoin Mini Trust (BTC), will have the lowest fee among all spot bitcoin ETFs. At launch, about 10% of GBTC’s assets will be moved to BTC, which means GBTC shareholders can convert holdings into BTC without having to pay capital gains taxes. 

With the launch of several spot bitcoin ETFs, there were net outflows from GBTC despite bitcoin’s impressive gains over the past few months. Previously, gains in bitcoin would coincide with a surge in inflows into GBTC. 

The success of new bitcoin ETFs from Blackrock, Fidelity, Bitwise, and Ark also shows that there is strong demand for low-cost ETFs in the crypto space. In contrast, GBTC was structured more like a mutual fund. 

Finsum: Grayscale is launching a spinoff version of its Grayscale Bitcoin Trust (GBTC), which will come with significantly lower costs as the asset manager looks to compete with the launch of several bitcoin ETFs.

JPMorgan had six advisor groups, managing a cumulative of nearly $15 billion in assets, leave the company on April 19. In total, 50 employees left the company to join competitors including Merril Lynch, Morgan Stanley, Citizens, and Wells Fargo.

Notably, all of the teams were originally from First Republic Bank, which collapsed last year during the regional bank crisis and was taken over by JPMorgan. About a third of its advisors departed First Republic during its turmoil, prior to the acquisition. Following these exits, First Republic’s private banking segment still had over 200 financial advisors, managing $200 billion in assets. 

First Republic was a leading provider of private banking and wealth management solutions for high-net-worth clients. It was also an aggressive recruiter of advisors and brokers from Wall Street banks, luring them with generous packages. In fact, one departing team was recruited from JPMorgan by First Republic in 2020.

Currently, JPMorgan has $3.3 trillion in client assets, managed by advisors at bank branches and its wealth management group, which services high  and ultra high-net-worth investors. It’s an indication that growing wealth management through acquisitions is not a straightforward process and is dependent on retaining advisors. 

Finsum: JPMorgan had six advisor teams depart the company last week. These advisors came to the company through the acquisition of First Republic and managed nearly $15 billion in assets.