Investors have gotten so used to low inflation that it is sometimes hard to imagine seeing it rise. However, Morgan Stanley is warning that inflation is rising across the globe and investors need to keep an eye on it. In Europe, Asia, and the US, inflation has risen from 1.1% to 1.4%, and it is bound to move higher, according to Morgan Stanley’s chief global economist. Interestingly, MS argues that the Euro area and Japan will see a higher rise in inflation than the US.
FINSUM: If inflation rises more strongly in other developed markets than the US, will that lead to even more foreign buying of US bonds because yields in those locations are so much lower? In other words, will there be even more demand for US bonds?
The stock market has been on one of the most historic recoveries in market history, but…see the full story on our partner Magnifi’s site
More investors and their financial advisors are considering the gig economy as a potential high-growth investment and an effective way to have their portfolios benefit from long-term, global labor and technology trends. The “gig economy” refers to the group of companies that embrace, support or otherwise benefit from a workforce where independent consultants, contractors, temporary, or on-call workers are empowered to create their own freelance business by leveraging recent developments in technology platforms that enable individuals to offer their services directly to retail and commercial customers. In its best form it represents the personalization of employment and empowerment of workers. For businesses, it’s about being able to tap into on-demand talent in a convenient and customized manner.
Why Invest in the Gig Economy
Declining/Changing Work Force:
Many countries around the world have been seeing declining birth rates for decades, which is reducing their labor pools and therefore forcing companies to find an alternative workforce. COVID has forced the exit of millions of people who cannot work and meet the increased demands at home at the same time.
Many of them are looking for flexible schedules and prefer remote jobs so they can manage home learning and other personal demands, not just in the short term but also longer term.
More businesses are viewing talent as networked ecosystems and are taking steps to create business talent models that integrate internal and external workers in teams, blending full-time/permanent hires with freelance, contract, or on-demand talent for flexibility, speed and workforce sustainability.
Rapidly accelerating technological changes in processing power and connectivity have created a data revolution, which is placing unprecedented amounts of information in the hands of consumers and businesses and enabling a proliferation of technology-enabled business models like GrubHub and Lyft.
The furious pace of technological innovation is shortening the lifecycle of companies, enabling rapid introduction and adoption of gig-related tools and platforms. Equally, it is changing the economies of scale equation, allowing small companies to compete in a global marketplace.
Ultimately, many believe the growing development and acceptance of technology may disintermediate the employment model*.
About the SoFi Gig Economy ETF
GIGE is the first ETF to seek long-term capital appreciation concentrating specifically on companies involved in the revolutionary shift towards a gig economy. GIGE is very much a theme of themes by tapping into the global trends in the workforce and technology, providing access to the companies that have transformed the way people access goods, services and work. The fund is actively managed by Toroso Investments to keep on top of emerging companies and market trends and conditions. The fund is structured so most companies that IPO and fit GIGE’s criteria can be included in the portfolio after one month of trading, as opposed to traditional passive funds that typically wait 60 to 90 days to include a new IPO.
GIGE’s breadth of holdings represents the broadest definition of the gig economy to tap into its high growth potential. GIGE’s holding are approximately 40-50% outside the U.S. and include large-, mid and small-cap securities. Their investment strategy considers many household gig names, but they also use a “pick-and-shovel” strategy, meaning they research many companies that support the gig economy.
GIGE companies include four categories:
This is likely what most people think of when they hear gig economy. This category includes: app-based platforms, web-based stores, auction sites, and other commission-based platforms such as Alibaba, eBay and Etsy.
Services and Transactions Businesses:
This includes companies that facilitate transactions and support the operations of the gig economy such as DocuSign, PayPal and Square.
Traditional marketing is expensive and doesn’t work in the gig economy. However, social media and messaging companies work well and therefore make up a large portion of this segment. Examples include Eventbrite, Facebook, Tencent, and Twitter.
This category includes non-traditional companies, such as HealthEquity, that are not directly related to the gig economy but support and/or benefit from the gig economy.
The SoFi Gig Economy ETF offers a compelling investment option for investors and financial advisors to position portfolios to help benefit from global demographic changes and technology innovations. Investors are already engaging with the rapidly growing gig economy and now they can more readily invest in it.
n.b. This is sponsored content and is not FINSUM editorial
Because of how the polls are trending, very few seem to be thinking about the fact that a Republican sweep of all three chambers of the government could happen. When you step away from the polls and think about the fact that Republicans currently control two of the three chambers, it becomes more realistic; and even more so when you consider that polls are likely skewed towards Democrats because of “silent” Republican supporters. If the Republicans sweep, or even just if Trump wins, then the sectors that will surge are energy, banks, healthcare, and defense. In particular, think names like Marathon Petroleum, Bank of America, Pfizer, and Northrop Grumman.
FINSUM: This may be unlikely, but it is not as wildly unrealistic as some make it sound. Perhaps smart to have a portion of the portfolio in these sectors headed into the election?
JP Morgan put out an interesting recommendation to investors recently. They said the best place to make money in the recovery might not be in the US, but rather in international stocks. According to Gabriela Santos, global market strategist at JP Morgan Asset Management, “When you have a cyclical recovery like we expect in 2021, it’s really international’s time to shine … We think it’s really important for investors to have a balance between U.S. equity exposure and international exposure as we go into the year of the vaccine for 2021”. The key argument here is that international indexes are more dominated by cyclical stocks than tech, and those are the share poised to really gain as the vaccine plays out.
FINSUM: This is all pretty basic. International indexes have not recovered as much as US stocks, and are composed of companies that are likely to start outperforming at this stage of the recovery. Europe in particular seems to be a good bet.
While many are worried about the domestic economy and whether the US is headed for a recession, those invested in emerging markets should perhaps be even more concerned. One of the fears specialists in the area have is that there is probably about $200 bn of unreported Chinese loans on the books of emerging market borrowers. China is not obligated to report these loans anywhere, so no one is quite sure of the size of the exposure. The risk is that as the economy sours, and these credits debts become distressed, China could impose some severe conditions on borrowers, which could cause emerging markets to seize up.
FINSUM: We could see this becoming an issue, especially because China will be feeling distress itself, which means it is likely to use a heavy hand. Even if nothing comes of this, it will likely weigh on EM asset prices in the near-term because of the uncertainty.
The Fed announced an unprecedented monetary stimulus package this morning. The central bank declared that its new bond buying program was unlimited, and that it would immediately start buying hundreds of billions of different types of bonds in an effort to unclog credit markets. They also extended lending facilities to new markets such as municipal bonds.
FINSUM: The Fed has been far from shy to in reacting to this crisis, but nothing it is doing seems to be helping markets much. Post-announcement, the Dow is already down over 3%.
The recovery has boosted the junk bond market as investors saw investment-grade bonds and government debt perform…see the full story on our partner Magnifi’s site
The Biden admin is tackling some of the changes made during Trump's administration, particularly to environmental social governance, fair lending, and consumer protection rules. The administration will not allow a set of measures that disincentivize ESG factors by shareholder voting restrictions. They have also reinstated the Consumer Financial Protection Bureau’s ability to seek monetary penalties for abusive practices and expanded the Equal Credit Opportunity Act to gender and sexual orientation protection. Finally, the administration reinforced the SEC’s ability to investigate and subpoena companies and individuals for investigation. These measures are just some of the ways the new administration is changing the regulatory landscape.
FINSUM: These regulations could have a profound impact on companies in the near and long term. One result is more definite, that this is just one more of many ways that the Biden Admin is incentivizing ESG.
Gold had one of its biggest runs last August, but gold stocks and ETFs have been the real…see the full story on our partner Magnifi’s site
Financial advisors often wonder about the best way to get client money into private equity. The industry has long had very high hurdles for investing directly in funds, and publicly traded funds that try to replicate private equity returns are still nascent. However, there is another good way to get PE like returns by proxy—buy publicly traded private equity company stocks. KKR is a very well known firm that is currently trading very cheaply and seems like a good buy. The stock rose 50% last year but badly trailed its rivals in a year that saw many PE companies double in value as they shifted from partnerships to corporations.
FINSUM: The market seems to be underpricing KKR’s ability to create management fees based on its dry powder, which is causing the weaker valuation.