Meredith Whitney, who previously forecasted the financial crisis in the mid-2000s, sees downside for the housing market, driven by changes in behavior among younger men. She sees the beginning of a multiyear decline in housing prices as the lower levels of household formation among men negatively impact demand. 

On the supply side, she sees more homes for sale due to the aging demographics of homeowners. Whitney’s perspective deviates from the consensus, which sees home prices as remaining elevated due to a lack of supply, coupled with a bulge in demand as Millennials enter their peak consumption years over the next decade. This year, most Wall Street banks are forecasting a mid-single digits increase in home prices. 

Another factor impacting housing supply is that the vast majority of mortgages were made at much lower rates. While many asset prices have declined due to the impact of high rates, home prices are an exception. Whitney contends that “normally you would think as rates go up, home prices would go down, and that hasn’t happened over the last two years. I think home prices will normalize because as more inventory and supply come on the market, you’ll see a true clearing price that is lower than it is today. So, I would say 20% lower than it is today.” 

Finsum: The consensus view is that home prices will continue rising due to low supply and demographic-driven demand. Meredith Whitney, well-regarded for predicting the financial crisis, is bearish on the asset class.

Many financial advisors are understandably uneasy about artificial intelligence (AI). Like any new technology, there will be considerable opportunities for those who can properly leverage and implement it. 

However, it’s also important to understand its limitations, as it lacks human intuition and the ability to understand and respond to a client's deeper, emotional needs. Instead, AI can be thought of as a way to enhance an advisors' capabilities and can be quite useful in areas such as fraud detection, estate planning, and tax strategies. Additionally, many advisors are already using technology that has elements of AI, especially for making forecasts and future projections. 

AI excels at tasks that require pattern recognition, optimization, and identifying trends. This means that it has applications in multiple areas such as prospecting, marketing, and planning. For example, estate planning is an area where AI is having a positive impact, as documents can be more quickly and easily understood by advisors and clients. It can also be used to streamline the process of updating documents based on notes taken from previous client interactions. 

Overall, AI is like previous technologies in that it can potentially help advisors gain more leverage, increase productivity, and result in more time spent on value-added activities. With financial advice, it can be particularly useful in terms of increasing responsiveness and personalization on a larger scale. 

Finsum: Artificial intelligence will affect nearly every industry and change how businesses operate. Here is how financial advisors should be thinking about this technology. 

Following the better than expected March jobs report showing a gain of 303,000 jobs, Treasury yields moved higher across the curve. The 10-year yield initially rose 14 basis points to a new 2024 high of 4.43% before backing off a bit. Overall, the jobs report reduces the urgency of the Federal Reserve to cut rates given the labor market’s resilience.

Going into the report, consensus expectations were for an increase of 200,000 jobs, which would be a softening from the 270,000 jobs added in February. It adds to the data showing inflation moving sideways rather than lower over the past couple of months. 

Yields also rose on Thursday following comments from Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, questioning the likelihood of rate cuts if inflation continues to linger above 2%. As a result, the odds of the Fed not cutting rates at the May and June meetings have increased. 

Some other positives from the report were the unemployment rate declining to 3.8%, despite an increase in the labor force participation rate to 62.7%. Average hourly wages increased by 0.3% on a monthly basis and by 4.1% annually. Both figures were in line with expectations. Job gains were strong across the board, with the biggest contributors being healthcare, government, leisure and hospitality, and construction. 

Finsum: Treasury yields moved higher following a stronger than expected March jobs report. Overall, the report led to a decrease in the odds of a rate cut at upcoming Fed meetings.

In 2023, the global financial markets experienced an unprecedented surge known as the "everything" rally, marked by significant gains in various asset classes. Factors driving this unexpected shift included lower inflation, the resilience of the U.S. economy, and the anticipation of looser monetary policies and declining interest rates in the near future.

Looking forward, private markets are poised to offer competitive returns and diversification advantages compared to public markets, with private credit emerging as a particularly promising strategy amidst prevailing interest rate challenges. Investors are urged to carefully evaluate the risks associated with private markets and consider their potential impact on portfolio performance.

According to JPMorgan, exploring alternative strategies for 2024, such as private equity, real estate, infrastructure, and secondary markets, presents opportunities for growth and portfolio enhancement, contingent upon thorough due diligence and selective fund allocation.

Finsum: As the Fed takes its foot off the gas pedal alts might in the biggest position to rally in 2024

A recent study indicates that private credit investments fail to yield significant additional returns once fees are factored in. Despite the allure of higher potential returns, the study suggests that the added expenses associated with private credit largely offset any potential gains. 

Researchers found that private credit funds typically charge higher fees compared to traditional fixed-income investments, which could erode investors' returns over time. This revelation challenges the notion that private credit offers superior returns, urging investors to carefully assess the costs involved before committing capital. 

The study underscores the importance of transparency and due diligence in evaluating investment opportunities, particularly in alternative asset classes like private credit. Consequently, investors are advised to weigh the potential benefits against the associated costs to make informed decisions in their portfolios.

Finsum: Alpha can be sucked up by fees but the real draw of private credit would be the uncorrelated returns.