Displaying items by tag: income

Thursday, 03 February 2022 19:20

Investors Want Variable Annuities

Sure the Fed is beginning to taper, and with that comes rising interest rates. However, for the end of 2021, it was the near-zero interest rates that pushed investors out of fixed-rate annuities, and into variable index annuities and RILAs. Fixed-rate annuity sales plummeted in the final quarter while the aforementioned variable products all grew by 10%. Sales in annuities grew by a staggering 16% in 2021, however, a lot of that growth was generated by a much lower 2020 due to the pandemic. Investors will look to shift back into fixed-rate products if rates begin to normalize or hit higher historical levels.


FINSUM: Look for fixed-rate annuities to make a come back in later 2022 because as interest rate hikes are coming and investors will capitalize on relatively higher real rates.

Published in Wealth Management
Tuesday, 01 February 2022 19:22

HSAs Are Your Ace in the Hole for Retirement

Many individuals overlook the value of a health savings account as they are preparing for retirement, particularly as healthcare costs are rising rapidly. High deductible plans have a number of tax advantages because they grow tax-free and can be used for out-of-pocket expenses well into retirement. Additionally, these HSA accounts come with many of the options and more than traditional retirement accounts and are easily moveable. Finally, these accounts have no rollover cap if funds move to an additional year.


FINSUM: HSAs are a great retirement vehicle, however, chronic investors with chronic illness should avoid high deductible plans that HSAs benefit.

Published in Wealth Management
Friday, 28 January 2022 14:11

Fixed Income ETFs Grant Freedom and Flexibility

New survey data is out regarding how investors are utilizing fixed income ETFs and how they are represented in a portfolio. In 2021 Fixed income represented about 18% of global ETF assets under management, and many investors plan on increasing their use going forward. The number one purpose for fixed income ETFs was for liquidity management as 83% of surveyors use them in this way. However, transition management, derivative complementarity, and tactical adjustments were also highly cited reasons for their use. Many draw on fixed income ETFs for liquidity purposes, and this is particularly evident in the bid-ask spreads. Relative to their underlying securities ETF spreads for HYG were 48x smiler than the underlying assets.


FINSUM: It's clear investors aren’t terribly worried about lower yields and rising interest rates, these ETFs are giving freedom and flexibility in investors’ portfolios.

Published in Bonds: Total Market
Wednesday, 26 January 2022 12:21

Has Biden Has Lost Touch With Inflation?

Inflation is picking up as PCE and CPI numbers are setting decade-long records, and the Fed is rapidly trying to regain control. The American people are beginning to show signs of angst as 65% of American’s say that Biden’s admin has not put enough attention on handling inflation and almost 60% say the same thing about the economy. This comes a swathe of low approval rating numbers come in where he has fallen almost 20 percentage points all the way down to the low 40’s. Overall about half of Americans say they feel frustrated and disappointed in the Biden admin. Biden’s focus has been on a series of regulatory and economic-centered packages, and many American’s don’t feel he is focusing on the issues they ‘don’t care about’.


FINSUM: Biden should stop pushing for another big fiscal package immediately if he has any hopes of reigning in inflation in 2022.

Published in Bonds: Total Market
Monday, 24 January 2022 09:38

A Fallen Angel Could be Your Bond Market Savior

If the treasury market isn’t upside down it’s certainly moving there. Yields are rising which means prices are falling. The worst part is with inflation picking up there is a lot of room to move in longer-term treasury bonds. So where should investors turn to? Fallen angel bonds and their associated funds. Fallen angels are investment-grade bonds that have been recently downgraded to junk status. The biggest benefactor is that these relatively riskier bonds have a way higher return but there is less interest rate pass-through. That means as the Fed begins to strangle the government bond market the lower-grade corporate bonds won’t feel much of the pain. Many of these corporations have relatively strong balance sheets and the risk is overblown, so profits can recover quickly.


FINSUM: The fallen angel fixed income ETF market has an incredible yield advantage, and there is so much fiscal and monetary support that the risk is probably smaller than the yields are saying.

Published in Bonds: High Yield
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