Eq: Total Market
The predominant sentiment in financial markets is that active funds have an edge during volatile periods because picks are more apparent and therefore easier to execute. However, according to the Euro Securities and Market Authority, active funds didn’t outperform passive funds during the critical stressed market conditions from February 19th to June 30th, 2020. This full cycle in financial markets didn’t give active funds an advantage and actually underperformed by 6.6% annualized in that period. This research backs up previous reports by morningstar that active funds didn’t outperform during high volatility Covid-19.
Finsum: Covid-19’s cycle was the K-shaped recovery Economists dream of, so this isn’t the nail in the coffin for active management.
There have been huge sectoral pains for tech, bio-tech, emerging market, and growth stocks in the last couple of weeks, but JPMorgan says it's time to turn bullish on these beta positions. Analyst Kolanovic said that these equity sectors are about to benefit because many of the geopolitical risk and macro pressures are about to ease. JPMorgan’s analyst believes that there will be little inflation and the US will avoid a recession. Biotech has been beat down since last August when the Nasdaq Biotech Index peaked; it is now at 75% of its previous high.
Finsum: The Fed projections could be bad for tech stocks as higher interest rates decrease the relative value of techs profits.
Wells Fargo has employed a number of strategies in both advisor recruiting and retention but is still losing teams. Recently Stratos Wealth Holdings added Jason Howerd, Shane Kunz, and Chad Horne who oversaw $1billion at Wells before their move. It was the additional resources and financial software that were key drivers in their decision-making process. LPL’s affiliate Gladstone Wealth Partners also added nearly a half dozen advisors from Wells, with well over $400 million in AUM. Overall Gladstone has seen strong growth already in 2022 adding 20 advisors in the first two months.
FINSUM: It appears technology and tools are a growing part of the decisions advisors are considering when transitioning between financial firms.
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Investors, advisors included, seem to be wondering why the stock market has done quite well since Thursday morning when Russia invaded Ukraine. Many expected stocks to tumble—and they initially did—but the opposite has happened, with the S&P 500 up around 5% since the close of business on the 23rd. The reason why has everything to do with the Fed and interest rates. The market now thinks the Fed is in a bind and won’t be able to hike rates as fast as they would have been able to before the conflict. This would mean a slower stop of the easy money surge that has gone on for years. Markets are now only forecasting a 12.5% chance of a 50 bp hike in March.
FINSUM: Stocks have jumped as a simple reaction to the fact that the path of rate hikes looks less steep right now than it did a week ago, which is also why the tech-heavy Nasdaq has jumped the most.
Markets are flummoxed as to the variety of risks right now, and it is just unclear how aggressively if at all the Fed and Biden are going to respond to the economic threats. There are two ways to capitalize on the current dip that is hitting your portfolio. The first is tax-loss harvesting; these risks are ones that are more than a month long which could give you the opportunity to repurchase the drops you made in the upcoming months. For those investors who feel adequately equipped in the tax-loss harvesting space, rebalancing is the main tool. That is if your portfolio has lost 10% value inequities with the drops, then up your share to meet the ratios you were at pre-dip. Once stocks have rebounded you can capitalize and re-tool in the opposite direction to maintain the portfolio balance you want in order to serve your risk preferences.
Finsum: Don’t sit during the volatility, but don’t sell off unless you are going to capitalize on the tax efficiency in your portfolio.
Finding a successful stock market predictor is like finding a needle in a haystack, but JPMorgan says they have the indicator, and now is the time to buy in the stock market. The buying guide is when the CBOE Volatility Index grows by over half of its one-month moving average. This has a near bulletproof historical record, only falling during recessions in the last 30 years. Markets gained an average of 9% in the equities in the two quarters after the metric was triggered. Overall, JPMorgan is bullish about the near future in equities and believes there is a lot of runway ahead.
Finsum: Metrics like this can be an anomaly or indicative of something structural underneath, still a recession isn’t out of question with Fed taper tantrum possibilities.