Displaying items by tag: bubble

Thursday, 14 March 2024 13:36

Keys to Buffer ETFs

Buffer ETFs have surged in popularity among financial advisors aiming to placate nervous clients while maintaining their investment positions. Their widespread adoption has led to major expansion, from less than $200 million to $36.7 billion since 2018, according to Morningstar. 

 

Operating on the defined outcome strategy, buffer ETFs use equity options to mirror benchmark performance while offering downside protection in exchange for an upside cap within specific 12-month life cycles, available monthly or quarterly. 

 

Jeff Schwartz, president at Markov Processes International, underscores the importance of comprehending the intricacies of these vehicles, given the multitude of variables involved, and that the intricacies around the buffer and cap structure are pivotal. Advisors must carefully consider market conditions when purchasing buffer ETFs at any point during their lifecycle to prevent diluting the intended benefits. 


Finsum: Timing conditions are still important when it comes to buffer ETFs despite their built in protections.

Published in Wealth Management
Friday, 25 March 2022 20:00

Bubble in ESG Markets

The boom in credit inflows to ESG might be an obvious sign environmental risk isn’t actually priced in. Coal companies have got credit ratings boosts, mortgage increases in flood zones, and a myriad of other issues. These are all signals that risks aren’t properly priced into fixed income markets according to Tom Graff of Brown Advisory. Natural disasters are becoming more frequent yet greenwashing keeps this from accurately being a factor in ESG. However, there is an advantage for investors to take advantage of mispricing, if disasters isolate countries energy independence could be underpriced in many countries around the world, the anti-Russia position.


Finsum: Fixed income regulators are could be turning a blind eye to sources of credit risk which investors might be able to exploit in the early days of greenwashing.

Published in Eq: Tech
Thursday, 24 February 2022 23:48

ESG on the Verge of a Scandal

Environmental, social, and governance investing have been one of the largest sources of outperformance in the last two years, however, a mis-selling scandal could be coming to ESG investing. Most investors know mis-selling scandals from PPI, endowment mortgages, and diesel cars. ‘Greenwashing’ is not new by any means but high-profile cases with DWS and BlackRock are both escalating. BlackRock whistleblower Tariq Fancy said this could just be the beginning and that a combination of marketing hype and false promises could cause more scandal in the upcoming years. The difference will be if funds are on the hook for the language they put forth and that the Paris Agreement could be critical to holding them accountable.


Finsum: ESG investing could be reaching its peak performance, time will tell howgGovernments begin the crackdown.

Published in Eq: Tech
Monday, 10 January 2022 14:50

The Housing Bubble Burst Looms

House prices are at all-time highs, and since a small slump at the start of the pandemic have really seen rapid growth but are they in a bubble? Long story short, probably not, because a few key metrics are keeping them elevated. Federal Gov assistance programs have diminished the foreclosure numbers. Added to that the trillions poured into countless QE and MBS purchases have made mortgage rates be at near all-time lows. Finally, there appear to be real shortfalls in different housing markets, and the pandemics work from anywhere policies are having strong growth in places like Boise, Austin, and Orlando. All of these factors come together to say that there is a relatively low risk of a housing bubble but to keep your eyes peeled.


Finsum: The Case Shiller home price index is at an all-time high but more importantly growing at an all-time rate, this is getting close to bubble territory but it is lacking the speculative component.

Published in Eq: Real Estate
Friday, 22 October 2021 17:43

ESG is on the Verge of Bubbling Over

Environmental, social, and governance investing drew in almost $35 trillion last year and that number is expected to grow another 42% by 2025, and while those dollars might be better for the environment the large inflows from unseasoned investors are pushing ESG into a price bubble. Large inflows are can disregarding traditional financial discipline which can affect debt/equity ratios, dividends, and distort valuations for future mergers and acquisitions. New companies in the onset of their financial growth are already being evaluated at 15 times revenue, on top of that investments in the traditional sector are suffering as outflows continue this could cause supply shortages and further inflation. Continued inflows into ESG could swell the bubble further and risk a collapse.


FINSUM: ESG could be swelling into risky territory, investors should be cautious particularly with retirement vehicles.

Published in Eq: Tech
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