Wealth Management
This week’s muni bond selloff has created a buying opportunity, Wall Street strategists suggest. Following a selloff in U.S. Treasuries, muni yields rose sharply as economic strength tempered hopes for rate cuts.
Despite a Thursday rally, the 10-year benchmark muni yield remains 26 basis points higher than its start-of-week level, marking one of the year’s steepest weekly declines. JPMorgan strategists see value at current levels, particularly with supportive market conditions anticipated in November.
The iShares National Muni Bond ETF drew $362 million in inflows on Thursday, helping bolster the market. Barclays strategist Mikhail Foux expects favorable muni performance later this year, though he advises caution until rates stabilize.
Finsum: We think munis might present one of the best options in the bond market as rates begin their descent
Bitcoin exchange-traded funds (ETFs) are seeing exceptional demand, outpacing most new ETFs launched this year. According to recent Bloomberg data, 14 out of the top 30 ETFs launched in 2024 focus on Bitcoin or Ethereum, with Bitcoin ETFs holding the top positions.
BlackRock’s iShares Bitcoin Trust, in particular, has attracted record inflows, becoming one of the most popular ETFs in recent years. These ETFs give investors a secure way to track Bitcoin's price directly on the stock market, something that was previously difficult to achieve.
After a decade of rejections, the SEC approved several Bitcoin ETFs in January, fueling rapid market inflows that hit $20 billion in just ten months—a pace much faster than gold ETFs, which took five years to reach that milestone.
Finsum: There is the possibility that demand for Ethereum ETFs may rise as investor interest grows.
ETFs remain a favorite for investors due to their diversification and tax efficiency, making them easy additions to retirement portfolios. However, direct indexing is an increasingly attractive strategy, allowing investors to hold individual stocks that mirror an index and personalize holdings.
This approach enables adjustments for specific preferences, such as excluding certain sectors, while also offering tax advantages through targeted loss harvesting.
Direct indexing can lower tax liability by selling underperforming stocks to offset gains, a flexibility that ETFs don’t provide. Costs have decreased, making direct indexing more accessible and competitive with ETFs.
Finsum: A combination of direct indexing and ETFs could form a well-rounded balance for customization and tax needs
More...
Private equity's growing control of rental housing has sparked concern as rents continue to rise, prompting calls for scrutiny from lawmakers. Senator Elizabeth Warren, joined by three colleagues, recently questioned KKR on how its recent $2.1 billion investment in rental units across eight states will impact long-term tenants and rental rates.
KKR asserts its investments provide high-quality housing, but critics argue these acquisitions contribute to rising costs and fewer homeownership opportunities for regular buyers.
A Harvard report shows that rents have surged far faster than household incomes, putting financial strain on tenants who are forced to limit spending on essentials. Vice President Kamala Harris and other leaders have also highlighted private equity’s role in pricing out individual buyers and impacting housing affordability.
Finsum: This type of regulation will obviously depend on the election results but there is little doubt that the Harris administration will make large changes to housing.
California’s new retirement law, effective January 1, 2025, reduces protections on tax-qualified retirement plans, impacting debtors who may now face increased vulnerability to creditor claims. This law applies a means test to assets in 401(k)s and similar plans, allowing judges to assess how much of these funds can be claimed by creditors based on the debtor’s other assets and timeline to retirement.
While federal ERISA protections still shield assets within qualified plans from creditors, these safeguards do not extend to distributions, meaning assets will be only partially protected once withdrawn.
Some debtors may consider relocating to states offering full retirement asset exemptions, while others might roll their assets into self-directed IRAs, potentially securing greater protection through international investments.
Finsum: The election will play a pivotal roll in the future of retirement regulation and advisors should monitor the developments.
Expanding tax-efficient investing options, firms are now utilizing direct indexing technology to make separately managed accounts (SMAs) more advantageous for tax management. Unlike funds, SMAs allow for individualized tax strategies because the investor owns the underlying assets directly, an option now expanding with high demand.
Direct indexing remains the most common approach for tax-efficient SMAs, enabling tailored tax-loss harvesting by strategically selling select stocks. Some firms are also adapting this approach to actively managed equities, though balancing loss harvesting with stock selection can be complex.
Tax management in fixed-income portfolios, though more limited, still offers advantages, especially during interest rate hikes.
Finsum: Model portfolios are gaining traction, for similar tax efficiency reasons.