(New York)

The bond market seems to have lost all touch with reality. Yields are extremely low, and given the more relaxed inflation reading this month, seem likely to stay pinned. Now consider this: European corporate debt real yields just turned negative. Yes, you are paying for the privilege of holding corporate debt. The ICE BofA index of European high-yield bonds is now at 2.34%, well below inflation.

FINSUM: Is there were ever a sign of a peak, this is it. Bond yields have nowhere to go but up, as there is no defensible logic that they could sustainably move lower. Unfortunately, it seems as though bonds and equity could move hand in hand, as the catalyst for big losses would be the Fed, which would trigger both asset classes.

Active funds are finding themselves in a better position than ever. Outflows are at their lowest levels in over half a decade, inflows are starting to swell, so what is the key to their success? The predominant factor driving them is the wide range of dispersion in the stock market’s performance. Sure, the aggregate performance has been great post-pandemic but the difference between the bottom and top quintiles has been above average for the last year. This gives pickers an advantage over passive funds. They are making their picks by not overreacting to inflation news and doubling down on stocks that benefit from stay-at-home orders and the covid environment. Active funds tend to downplay value-oriented stocks, and the few they are bullish on are bargains in communications companies. Finally, Facebook is the through-line, as nearly two-thirds of active funds hold the largest social network.

FINSUM: This is definitely a ‘pickem’ environment with large dispersion in the S&P 500, and broad index/passive funds will lag active managers.

Chinese regulators have come after everything from internet companies to education platforms, and this has left many investors skittish. Investors that would have maintained their convictions would have been well-suited, as since mid-August Chinese internet companies have bounced. Over this same time frame the MSCI Emerging Market Index, which holds a large share of Chinese companies, has doubled the return in the S&P 500. China’s focus on future regulation will better promote growth moving forward. The structure formed may benefit semiconductor companies, smart manufacturing, alternative energy, machine learning, cloud computing, autonomous vehicles, and other internet-related companies. Finally, Chinese companies have been quick to undue overwrought regulation and long-term regulation will be moderate.

FINSUM: Investors shouldn’t be too fickle with China, don’t spend too much time trying to nail regulatory swells, and embrace the long haul.

Artificial Intelligence is being adopted across the financial industry. In a recent poll by the World Economic Forum, executives at 151 leading financial institutions were asked questions about the prospects of AI in their business. 77% expect AI to be a critical part of their business in the next two years and 64% expect to be mass adopters. Magnifi can bring this cutting-edge technology to your financial institution. Adopters of Magnifi’s products will utilize machine learning techniques that can optimize portfolios for their clients across risk, return, themes, fees, and other factors. AI’s wide adoption is being utilized to lower high labor costs, or even better, to augment current labor for more productivity. Finally, Magnifi delivers all of this with a simple set of tools that are easy for advisors to interact with to deliver their clients the best product possible.

(San Francsico)

There are mixed signals as to how to currently position oneself in the market as news reports are calling many things a good buy, from doubling down on momentum to cyclical value stocks, but Goldman Sachs is bullish on lots of large-cap internet stocks. Amazon, Facebook, Snap, Uber, Lyft, and Expedia all received buy ratings from Goldman’s investment team. They see secular trends in revenue growth and operating efficiencies scaling these companies even larger over the next couple of years. While they don’t consider themselves overly bullish, they see digital advertising being a key lever to push for these companies to have their full upside priced correctly by the wider market. Subscriptions, the creator economy, cloud computing, and augmented reality are all reasons to be fans of large-cap growth, but they are staying away from Airbnb and Twitter. FINSUM: The fed-keeping rates low is very promising for growth companies that are reliant on the credit-frothy economy. But rate moves are also the key risk.