Treasuries gained momentum following a weaker-than-expected U.S. producer prices report, reinforcing the potential for the Federal Reserve to lower interest rates more aggressively. The two-year yield, which closely mirrors Fed policy expectations, fell by 8 basis points, while the 10-year yield decreased by 6 basis points. 

Market participants are now eagerly anticipating the upcoming consumer price index (CPI) data, which could further influence rate-cut expectations. However, some Federal Reserve officials remain cautious, emphasizing the need for more economic data before supporting any rate reductions.

Despite recent market volatility, with shifts from expectations of a soft landing to a hard landing, uncertainty persists. 

Finsum: Markets thought there was going to be an emergency Fed meeting last week, but look to Jackson Hole for better clarification.

Crypto ETFs are expected to be integrated into model portfolios by late 2024, according to Samara Cohen, BlackRock’s Chief Investment Officer for ETFs. Cohen emphasized the roles of Bitcoin and Ether as portfolio diversifiers, noting that major wirehouses are currently conducting due diligence on these assets. 

BlackRock projects significant growth in model portfolio management, anticipating an increase from $4.2 trillion to $10 trillion over the next five years. 

Cohen also mentioned that while Bitcoin and Ether are gaining traction, the introduction of spot ETFs for altcoins like Solana is unlikely in the near term. Despite net outflows from spot Ether ETFs since their launch, Cohen remains optimistic, viewing them as valuable entry points for investors seeking ETH exposure in their portfolios.

Finsum: Integration into standard financial products has been critical to cryptos success in recent years. 

Family offices are pivoting from conventional asset allocations towards a heavier focus on alternative investments like private equity, real estate, and venture capital. J.P. Morgan's recent report indicates that nearly half of these portfolios now consist of alternative assets, with larger family offices taking the lead in this shift. 

This approach is driven by the desire for higher returns, reduced volatility, and better alignment with long-term wealth preservation and growth goals. These offices are capitalizing on their ability to invest in illiquid assets, which offer the potential for higher returns over time.

 By engaging more directly in private companies, family offices are leveraging their entrepreneurial expertise to achieve greater alignment with their wealth preservation objectives. While traditional public markets still hold a portion of these portfolios, the emphasis is clearly shifting towards alternatives that can better meet the complex, multi-generational needs of these families.

Finsum: With macro volatility looming alts could offer more risk cover and should be heavily considered. 

The July Consumer Price Index (CPI) data indicated that inflation is slowing, prompting speculation about a potential interest rate cut by the Federal Reserve in September.

 Ken Mahoney, CEO of Mahoney Asset Management, suggests that investors should focus on large-cap stocks, which have been performing well, particularly in comparison to small-cap stocks in the Russell 2000, where the majority of companies are unprofitable. 

He also expresses caution about sectors such as autos, airlines, and retail, noting a lack of enthusiasm in those industries. Keep in mind this combination of size and industry for the fall. 

Finsum: It’s important to keep an eye on leverage as interest rates fall this factor will greatly help the more levered companies. 

The growing focus on private equity among family offices is driven by their longer-term outlook and the flexibility of deal-by-deal investing, offering higher potential returns and greater control. This approach is increasingly appealing amid global economic instability, high interest rates, and lingering pandemic effects, as traditional investments often underperform in such conditions. 

Private equity can cushion portfolios against market volatility, consistently outperforming listed equities over the past two decades. Family offices pursuing a deal-by-deal strategy face challenges like high minimum investment requirements and the need for specialized expertise. 

Embracing alternative investments enables family offices to seek superior returns, greater diversification, and enhanced risk management while contributing to innovation and economic dynamism.

Finsum: If the hedge is the clear concern, maybe investors should lean into alternatives, but look at historical correlations.