(New York)

Ever since the big stock rally of a couple of weeks ago, the predominant mood of Wall Street analysts has been decidedly bearish. Most big research teams have said markets have further to fall before they hit bottom. However, Morgan Stanley has just come out with a contrarian opinion. Commenting that “the worst is behind us”, the bank says it is time for investors to jump back into stocks in a big way. Summarizing their view, the bank said “With the forced liquidation of assets in the past month largely behind us, unprecedented and unbridled monetary and fiscal intervention led by the U.S. and the most attractive valuation we have seen since 2011, we stick to our recent view that the worst is behind us for this cyclical bear market that began two years ago, not last month”.

FINSUM: The worst of the health crisis is still ahead of us, but it could be the case that the worst of the asset selloff is over. Our lingering worry about this is that a mortgage crisis could be brewing as a result of the stop in the flow of money, so we are worried about another sharp downturn in coming months.

(New York)

Advisors who are receiving inbound interest from clients about annuities might be interested in browsing a list of top recent providers. AIG, John Hancock, Lincoln Financial Group, Pacific Life, and Prudential regularly figure among the top players in the space. That said, data from 2019 has highlighted a new leader of the back—Jackson. “Jackson has dominated the variable annuity market for the past 7 years. In 2019, Jackson diversified its annuity sales to focus on growing its fixed annuity market share, which propelled its overall growth in 2019”, according to an annuities strategist.

FINSUM: One thing that is interesting is that the annuities industry is actually getting a little less consolidated (which stands in contrast to other product sectors, e.g. ETFs). The top three providers only account for 22% market share, down from 25% in 2014.

(New York)

New York is the epicenter of the US coronavirus crisis, and the hit it is taking to its finances may be an example of the risk that the muni bond market is facing all across the country. Government revenue is taking a huge cut at the same time as expenditure to support the economy and its people is jumping. While the threat of a downgrade from its AA perch is only moderate, New York does have several other muni issuers that are looking much more dangerous. For example, the Metropolitan Transit Authority (MTA) and the Transitional Finance Authority (TFA). The MTA, which runs the subway and other forms of public transportation, has taken a massive revenue hit during the lockdown, with ridership down 90%.

FINSUM: Certain muni credits are gong to be devastated. For instance, even though the MTA is getting $4 bn from the recent CARES act, it is still yielding 5% versus the 2% it yielded before the Covid eruption.

(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.

(New York)

Yes, you read that right, Bank of America is forecasting a 35%+ GDP fall for the YEAR, not just Q2. The bank thinks the Coronavirus downturn is so bad that the US economy will shrink 7% in Q1, 30% in Q2, and 1% in Q3, a cumulative 35.55% for the year. The downturn would be the worst to ever strike the US.

FINSUM: This is by far the bleakest projection we have seen. Goldman, for instance, sees 19% growth in Q3. So if the economy shrinks 35% this year, what is fair market value for the S&P 500?