According to a new report by Edelman Financial Engines, inflation, recessionary fears, and geopolitical uncertainty are undermining financial confidence. The report found that just 23% of more than 2,000 adults that were polled earlier this fall felt “very comfortable” about their finances and only 12% consider themselves wealthy. Even high-net-worth investors are concerned about their finances. Only 44% of millionaires feel “very comfortable” about their finances, with only 29% feeling wealthy. Jason Van de Loo, head of wealth planning and marketing at Edelman Financial Engines, had this to say about the results, “Becoming a millionaire was always the pinnacle of financial success. But at a time when inflation and stress levels are up, and markets and portfolios are down, very few Americans actually feel wealthy.” Edelman Financial Engines also found that most adults feel less financially secure than they would have hoped at this stage in their life. The results match similar responses from other surveys. A separate report by Bank of America found that 71% of workers feel their pay isn’t keeping up with the rising cost of living which brings the number of people who feel financially secure to a five-year low.

Finsum:A poll conducted by Edelman Financial Engines revealed that Americans are less confident about their finances due to inflation and recessionary concerns.

The $4 trillion municipal debt market is expected to have a “bounce back year” in 2023, according to Charles Schwab’s Cooper Howard. The director and fixed-income strategist for the Schwab Center for Financial Research said in a recent Bloomberg TV interview that “A slower pace of interest-rate hikes, attractive yields, and relatively healthy state and local government finances should lure investors back after demand plunged this year.” He also stated “Credit quality is very high in the municipal bond market. State and local revenues have surged to record-level highs driven by the economic recovery. Given the rise in yields, it is more attractive for retail investors, so there will be more demand coming into the market.” Munis had fallen out of favor due to a combination of inflation and recessionary concerns. According to data compiled by Bloomberg, muni sales are down nearly 19% this year at about $351 billion. However, 10-year municipal yields have more than doubled since the start of the year. While recessionary fears may continue, the municipal market won’t be as affected due to healthy credit ratings. Howard expects municipal debt tied to public transportation to lead the rebound as the airline industry is bouncing back.

Finsum:Schwab strategist Cooper Howard predicts a bounce-back year for munis due to slow rate hikes, attractive yields, and healthy credit in state and local governments.

Registered index-linked annuities (RILA) are currently the fastest-growing variable annuity in the industry due to their downside limits and upside crediting formula. Now that the Senate unanimously passed legislation to make it easier for the industry to register new products, RILAs should see even more growth. The legislation directs the SEC to issue a new form that replaces the IPO paperwork annuity issuers are currently required to use for RILAs. With the passage of the Senate bill, insurers filing for RILAs would be able to forgo the requirement that they disclose financial information using generally accepted accounting principles (GAAP). This will make it easier for insurers since GAAP is something they typically don’t use. Sales of RILAs for the first half of the year came in at $20.4 billion, a 6% jump from 2021. According to the insurance industry trade group Limra, the product now makes up 40% of overall variable annuity sales. Inflation and market volatility have made the RILA product attractive to investors due to its loss protection features and potential for upside growth.

Finsum: Registered index-linked annuities, which are already the fastest-growing variable annuity, should see even more growth as the Senate passed legislation that makes it easier to register them.

Direct Indexing is expected to grow faster than ETFs, mutual funds, and separate accounts over the next five years and is poised to reach more than $800 billion in assets by 2026. This is according to The Case for Direct Indexing: Differentiation in a Competitive Marketplace, Cerulli Associates’ second annual report on direct indexing. The report, which was sponsored by Parametric Portfolio Associates, provides the first comprehensive analysis of how advisory firms are using direct indexing to address client needs. It revealed that assets in direct index products reached $462 billion in the first quarter of this year, growing at a 15% rate from the second quarter of last year. However, a recent Cerulli survey showed that only 14% of financial advisors are aware of and recommend direct indexing solutions to their clients. Cerulli expects that number to increase, resulting in direct indexing assets growing at an annualized rate of 12.3% as it becomes more mainstream. The report was designed to help advisors identify situations where direct indexing can help their clients. It examined seven real-world use cases by advisors, which included Tax-Loss Harvesting, Trimming Highly Appreciated Stock Positions, Planned Charitable Giving, and ESG Investing.

Finsum:According to a new report from Cerulli Associates, direct indexing is expected to grow 12.3% annually and reach $800 billion in assets by 2026.

PIMCO recently announced the launch of the PIMCO Flexible Real Estate Income Fund (REFLX). The fund is the firm’s first real-estate-focused interval fund that will invest in public and private markets and will seek to harness the expertise and resources of its $190 billion commercial real estate (CRE) platform. REFLX will have the flexibility to invest in four distinct quadrants of the commercial real estate markets: private equity by acquiring stabilized income-oriented CRE, private real estate loans, public debt such as commercial mortgage-backed securities, and public equity such as REITs. Dan Ivascyn, PIMCO Managing Director and Group Investment Officer and head of the team managing the fund stated, “Higher yields and lower valuations in both public and private markets make for an attractive environment for patient investors ready to deploy funds in a flexible vehicle that can allocate investments across commercial real estate.” Similar to a mutual fund, interval funds are continuously offered. Investors can sell their shares back to the fund, but unlike a mutual fund, they may only be able to do so quarterly through the fund’s periodic repurchase offers.

Finsum:PIMCO adds to its stable of interval funds with the launch of the commercial real estate-focused Flexible Real Estate Income Fund.