Displaying items by tag: stocks

As market volatility persists, major equity indexes hit new highs, prompting investors to shift from AI and technology stocks to small-caps. The Dow Jones rose 700 points on July 16, achieving a record high, while the S&P 500 followed suit, driven by interest rate cut hopes. 

Natixis Investment Managers advises using selective, active strategies and high-conviction portfolio construction to navigate market peaks. They recommend not waiting for stock declines, as equity markets historically increase 70% of the time. 

For an offensive strategy, focus on growth-oriented, small, and midcap stocks. Active management and model portfolios can help manage risks and optimize tax implications.

Finsum: Prepping your portfolio for the fall election is more crucial than ever. 

Active ETFs have surged in popularity, dominating new launches, inflows, and headlines in the ETF market. At the 2024 Morningstar Investment Conference, industry experts discussed how active ETFs are reshaping the investment landscape.

Nicole Hunter from Dimensional Fund Advisors highlighted DFA’s aggressive entry into active ETFs, converting $30 billion from mutual funds and now holding over $140 billion in assets across 38 active ETFs. T. Rowe Price noted that although active ETFs account for only 5% of ETF assets, they represent 70% of recent launches.

 Despite their growth, active ETFs also face a high closure rate, with over 100 shutting down last year. The panelists discussed the benefits of ETFs, including tax efficiency and transparency, while also acknowledging that traditional mutual funds still have their place in the market.

Finsum: Some volatility is hard to read but both geopolitical and interest rates are relatively easy to capitalize on for active funds. 

In wealth management, the portfolio is the product and it’s crucial for achieving clients' long-term goals. Despite the additional services offered, the portfolio's performance is paramount. 

One key challenge is adapting portfolio construction to ever-changing market conditions, such as the recent shift to positive bond/stock correlations. Previously, low or negative correlations enhanced diversification benefits, but this advantage has lessened. 

As a result, professionals are exploring new ways to diversify, though it's important not to over-rely on these new methods. While increased correlations make reducing volatility more difficult and investors should turn to alts in these types of environments, a measured approach to diversification is essential to maintain long-term returns.

Finsum: Privates and alts are more necessary than ever to hedge the current increased stock-bond correlation. 

Fixed-income professionals at Franklin Templeton and its affiliates expect fixed-income investments to be a safe haven from equities volatility since the financial markets are showing signs of stress. Tracy Chen, a portfolio manager at Brandywine Global, stated that “We believed something would break, even before this banking crisis happened. Now bonds provide safe haven protection for people’s portfolios because our timeline for recession is pulled forward because of this banking stress.” She recently spoke at a webinar on fixed-income mega-trends, entitled “Navigating Rates and Risk.” She was also joined by Jennifer Johnston, senior vice president and director of municipal bond research at Franklin Templeton, and Annabel Rudebeck, head of non-US corporate credit at Western Asset. Currently, yields are around 5% for corporates, which is considered attractive when compared to the longer-term history and government issuances. Johnston added that the tax-free attributes of municipal bonds provide an extra boost, while the muni market tends to be of higher quality than the corporate market. She stated, “We do see some opportunities, particularly out long, where munis are still relatively cheaper than where they’ve been in the past.” Chen also added that “This banking stress is very unique. It’s not driven by credit risk, but by mismanagement of duration.”

Finsum:With the financial markets showing stress, bond professionals at Franklin Templeton and its affiliates believe that fixed-income instruments provide a safe haven for the current stock volatility.

While many ESG investors are drawn to the appeal of helping the environment with their investments, the two-year rally in oil and gas stocks has become too much to ignore. The energy sector has led the market for two years rising 135% in 2021 and 2022 compared with a 2.2% gain in the S&P 500 Index. Analysts expect the sector to jump another 22% in 2023, despite its 5.8% decline so far, according to data compiled by Bloomberg. ESG firms have taken notice. Rockefeller Capital Management takes pride in its ESG investing record. While the firm’s larger portfolio follows multiple strategies that include ESG and non-ESG, its $19 billion equity portfolio now has a 6% energy weighting. This is even more than the S&P 500’s energy weighting of 4.8%. Plus, clients in Rockefeller’s wealth management arm, which is separate from its asset management arm, have almost tripled their holdings in Chevron Corp. In fact, the stake’s value has quintupled to $251 million over two years. Their clients have also been buying tens of thousands of shares in Brazilian oil producer Petroleo Brasileiro SA, Diamond Offshore Drilling Inc., and several other S&P 500 Energy Index members, including Exxon Mobil Corp. and APA Corp.

Finsum:With a massive two-year run, and a strong return expected this year, energy stocks have attracted clients of firms such as Rockefeller Capital Management that take pride in their ESG investing record.