A small but substantial change may be shaking the bond ETF infrastructure to its core. The New York State Department Financial services is allowing insurers to label bond ETFs as individual bonds rather than as equity risk. Companies have issued lots of new debt setting records as record low interest rates have made it appealing. This regulation could change the way the Fed and other regulators interact with bond markets, and could lead to the sort of efforts that saved the bond market in 2020. These will allow more bond products and increase inflows, but for insurers bond ETFs have more complications than a traditional single fixed income security and could provide difficulties in the future.

Finsum: Small changes to regulator practices like this can lead to massive swings in credit creation, keep an eye on bond ETFs.

Most fixed income ETFs used to be linked to passive tracking products in the bond market, that is until more recently. Rules Adopted by the US SEC have steered many investors to active fixed income by making it easier to launch new active ETFs. Active funds are attractive for ETF producers because they draw higher fees (about .2 percent) than active funds. This has led to an explosion in active fixed income. Active bond fund creation is growing at nearly double the rate of the rest of the ETF market, and investors are ready as well as 2021 saw a record pace of inflows. One big factor in shifting more investors into active fixed income is aging global demographics which are still searching for yield and income.

Finsum: The world’s aging population is creating a safe asset shortage and pushing bond prices higher.

One of the biggest criticisms of model portfolios is that they are opaque black boxes that investors are worried about, but BlackRock could be shaking things up. A new suite of actively managed model portfolios will be registered on the Nasdaq Fund Network. The models will be available across a variety of ‘themes’ and will be registered with six-character symbols. NFN will dismantle statistics and strategy to increase transparency for the Models. Model portfolios were once an obscure investment but they are growing in popularity and hopefully building a better bridge to advisors and portfolio managers.

Finsum: This is a big step for models and will hopefully increase confidence in them as a product with investors.

Crypto could be a stress inducer when it comes to managing their tax solutions. However, a variety of portfolio products help investors navigate their digital wallets, track crypto investments, and manage their tax solutions. These portfolio trackers can help investors navigate the nuanced complexities in capital gains taxes that are constantly evolving. CoinTracker, TokenTax, and CoinLedger are all great crypto portfolio managers. TakenTax really lets investors take advantage of tax loss harvesting to optimize their crypto portfolio.

Finsum: Cryptos wash rule differences should incentivize investors to take advantage of tax loss harvesting.

Direct indexing is one of the fastest growing market segments and investors surveys confirm that customization is king of the modern landscape. Curulli Associates forecasts that direct indexing will grow faster than ETFs and mutual funds. Custom indexing has a legg up on traditional ETFs when it comes to volatility because investors can harvest losses as the market takes dips. With traditional ETFs investors have to just eat the losses as they slow the long run growth of the fund, but micro dips can be maximized by taking advantage for tax purposes, say industry quants.

Finsum: It's clear that direct indexing has advantages over traditional ETFs, but even when compared with their fees the tax savings is worth it for direct indexing strategies.

The mainstream financial world is all over the place when it comes to crypto however, Bridgewater Associates is planning on increasing their exposure to digital assets. The firm has made it clear they have some small investments in crypto, Dalio himself advises investors to allocate a small portion of their portfolios into crypto. It will most likely only be a small portion of their $150 billion portfolio but it is in phase 1 of 2. Marshall Wace, Point72 and Brevan Howard have all made crypto investments in the last year.

Finsum: Biden’s most recent crypto executive order legitimizes crypto in many investors eyes because it brings it into the traditional realm.

There has been an explosion of annuity interest by investors, a lot of that is being driven by the low-interest-rate environment and increased uncertainty more broadly. Health is a key factor in an annuity purchase, but a healthier individual will receive lower payments so they may want to delay their annuity purchase. If you are seeking a deferred annuity, however, then you may want to purchase it sooner and annuitize later in order to grow the value if it has a guaranteed interest. Finally, inflation can eat at the value of a fixed annuity which means it might devalue your payment stream later on. The optimal purchased time for a fixed annuity is generally a couple of years post-retirement: 70-75. A deferred annuity should be purchased much younger, the optimal age being in the mid-40s.

Finsum: Consult a financial advisor as to which annuity timeline makes the most sense for your portfolio.

Wells Fargo’s recruiting efforts have been no secret, but it looks like it is starting to pay off. In Q1 of 2022 they brought in over $5.4 billion in assets under management. Wells had seen advisors flee as a result of various public scandals in the last few years. They had lost 1.5% of their advisors in Q4 of 2021 and 8.5% in the whole year prior. The firm has said they are more pleased with their recruiting efforts as of late, but they are still putting forth efforts in the hiring process to retain and recruit advisors.

Finsum: Wells Fargo may be turning a new leaf and the bonuses related to advisor recruiting and retention are bringing in more assets.

The Fed hiked rates at the latest FOMC meeting but they were partially forced to with just about every measure of inflation hitting 30-year highs. However, more importantly they project that the federal funds rate will hit 2.75% by the end of 2023. This may have been the first hike in years but it will be one of eleven if they want to hit that mark. The bond market is pessimistic as they not only are projecting less hikes, but slower growth as well. The yield curve is indicating inflation will be under control but it might be costly. Typically this means that the Fed won’t mean to hike as frequently as they are indicating. There has been a lot of action in the TIPS market and it is indicating they expect inflation to average just shy of 2.8% in the next decade.

Finsum: Markets are most likely right in this scenario and that fewer rate hikes will get inflation under control; hopefully the economy can take the hit.

Private equity set many records for itself in 2021 with gigantic inflows and huge market outperformance, but could that all be slowed in 2022 by an escalating Russia-Ukraine conflict and inflation? Bain & Co said that steeper capital costs driven from these two scenarios will undercut PE as an asset class in 2022. Inflation will hurt growing PE investments and the cheap flow of capital is being reduced by the conflict. There are huge risks that valuations will be much flatter from this point out. This means that the huge inflows and record-setting outperformance might not hold up in 2022.

Finsum: 2021 inflows were already higher than market expectations a natural correction could have been in place, but this could be more severe than just a standard correction.