Monday, 22 October 2018 10:27

(New York)

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?

Why This Selloff May Change Everything

The Fed Might Take a Very Hawkish Turn

The Recession Will Arrive in 2019

Wednesday, 29 July 2020 14:39

(Washington)

There are just under 100 days left until the election and there is a lot on the line for markets. The economic approaches of the Trump administration and the potential incoming Democrats could not be more different, which means there are huge implications for stocks. Here is the good news—over the last 40 years, markets have historically risen leading up to the election, and volatility has usually decreased. Now the big possible twist is the COVID pandemic, a major factor that has not occurred during an election cycle. The most comparable election cycle seems to be 1968, when the US was going through similar levels of social unrest. The S&P 500 gained more than 3% in the run up to that election.


FINSUM: As we see it, the two big risks are COVID (and its economic consequences), and a leftward move by Biden. The Fed will certainly soften the blow of the former, while the latter remains.

New Stimulus Package Appears Close

Bank of America Sees a Bull Market Starting

JP Morgan Says the Fed Put Has Never Been Greater

Monday, 03 August 2020 15:28

(New York)

There has been a lot of hype about cloud computing for the last few years. Growth in the sector has been massive, and Amazon Web Services (Amazon’s cloud business) has become a key indicator for investors. A new report out today shows why now might be a good time to invest more in the sector. The report shows that large enterprises are planning to increase their overall spending on cloud product, and by 2021, the cloud will account for 32% of overall tech budgets versus 30% today. More impressively, spending on the cloud by large enterprises is up 59% since 2018 to $74m annually.


FINSUM: A 2% shift in tech spend into the cloud alone is a good driver of business. It is probably a good medium to long-term bet to take a look at a handful of cloud stocks.  Check out at Global X's CLOU for a good cloud computing ETF.

Microsoft Acquisition of TikTok Could be Game-changing

UBS Found a Great New Market Indicator

Tech Poised to Bring Down S&P 500

Friday, 17 July 2020 16:40

(New York)

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?

Trump is Weakening in a Key Battleground State

Twitter Starts Undermining Trump

Biden is Pulling Ahead of Trump in Key Swing States

Monday, 06 April 2020 14:06

(Brussels)

Even though cases and deaths are still rising rapidly across the European continent, many governments within the EU are planning their re-opening from the Covid lockdown. Spain, Italy, Austria, and more are undertaking and/or announcing plans to reopen as soon as this coming Monday. The rollouts don’t look likely to be rapid anywhere, but their announcement may be received as an important turning point both socially and economically.


FINSUM: Markets are up big today and this is a significant part of it. Might the US start to re-open in a 2-3 weeks (?)—that is the question on investors’ minds.

Eurozone on Brink of Recession

The People Will Finally Vote on Brexit

EU Agrees to Yet Another Extension for Brexit

Thursday, 15 August 2019 11:41

(Bangkok)

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.

Why EM Investing No Longer Makes Sense

3 Reasons Not to Panic Over the Trade War

Why It is Time to Buy Emerging Markets

Monday, 23 March 2020 16:06

(Washington)

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%.

Bond ETFs are Surging

The Fed is Considering a Big Change That Will Help Markets

Bond ETFs are Surging

Monday, 03 August 2020 15:24

(New York)

Junk bonds have been on a tear lately. July was the best month for the asset class in nearly nine years, with overall returns near 5%. The average junk bond yield fell from 6.85% to 5.46% over the course of the month on the back on continued monetary and fiscal stimulus. The market has risen so much that many are questioning if they have already missed the opportunity. To this question, one high yield fund manager says “I don’t think so . . . Governments across the world want to make sure credit is working properly”.


FINSUM: As long as sovereign yields stay super low and the Fed and government keep the life lines open, it is easy to imagine yields will keep falling for junk.

Dividend Stocks Pose a Major Risk

BoA Says High Yield to Outperform

Covered Calls are a Great Income Strategy

Monday, 03 August 2020 15:30

(Washington)

Last week Democrats published a wide-ranging agenda for the potential Biden presidency. One section of it—which received much publicity in our niche wealth management world—was about the party’s intent to get rid of the SEC’s new Reg BI. However, another part of that plan was much less covered, but no less important: the party also wants to bring back a true fiduciary rule, potentially very similar to the failed DOL rule 1.0. Interestingly, Barbara Roper, head of investor protection at the Consumer Federation of America, says that the approach the Democrats would likely take is not to create an entirely new rule, but edit and “reign in” conflicts in the existing rule.


FINSUM: So this is quite unsurprising, but very important. What was interesting to us is Roper’s comment about the way Democrats would likely go about this. In our view, modifying an existing rule would be much faster than crafting a new one, which means a new version might come into force a whole lot faster than expected.

Democrats Publish Plan to End Reg BI

The Fiduciary Rule’s Fate if Biden Wins

Advisors Need to Prepare Clients for Tax Hikes

Monday, 21 October 2019 10:51

(New York)

Gold has been doing well this year alongside all the market turmoil and uncertainty. While one could construe recent progress on a trade deal with China as potentially bad for gold—given its status as an uncertainty hedge—the reality is that rates are headed lower via Fed cuts. This means the Dollar will weaken, and in turn help gold. Societe Generale, for instance, is advising a maximum allocation to gold, saying investors should have 5% of their portfolios in it. Additionally, a resolution to the trade war would probably also weaken the Dollar as there would be less desire to take advantage of its safe haven status.


FINSUM: Basically Soc Gen is arguing that gold will benefit from both lower rates and a risk-on trade. The former aspect seems sound, but gold benefitting from less anxiety? Sounds a weak supposition to us.

Time to Load Up on Gold

JP Morgan Says it is Time to Sell Gold

Gold is at a Six-Year High

Monday, 20 January 2020 13:36

(New York)

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.

Gold Rush as $368m of Bars Fall from Plane

ESG is Now Mainstream

Why Hedge Fund Fees are High

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