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FINSUM

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Sunday, 05 May 2024 07:05

SMAs Booming In Bitcoin Space

The gigantic win for spot Bitcoin ETFs with the SEC represents a significant milestone in facilitating compliant access to the leading cryptocurrency. Since January 10, inflows exceeding $10 billion have bolstered optimism for Bitcoin and the broader market outlook. For retail investors, these ETFs offer a streamlined pathway to securely backed Bitcoin, simplifying the complexities associated with managing private keys.

 

As institutions grapple with meeting client demand for digital asset exposure, crypto separately managed accounts (SMAs) have emerged as a complementary investment solution gaining traction among wealth managers, family offices, and registered investment advisors (RIAs). SMAs, a staple in traditional asset classes, allow for direct ownership of underlying assets and provide customizable portfolios tailored to individual client preferences and investment strategies.

 

 With their ability to offer regulatory compliance, security measures, and tax optimization strategies, SMAs present a compelling option alongside spot Bitcoin ETFs for navigating the evolving landscape of digital asset investments.


Finsum: SMAs are a great pathway to optimize tax structure for investors and get simplicity in a turbulent alternative space like crypto.

Sunday, 05 May 2024 07:04

Fed Can’t Reign in Inflation

Amid ongoing concerns over inflation, the Federal Reserve opted to maintain its key interest rate at its highest level in over a decade, ranging between 5.25% and 5.5%. Despite solid economic expansion and strong job gains, the central bank noted a persistent lack of progress toward its 2% inflation target. Annual inflation rates remained elevated, with the consumer price index registering at 3.5%, driven primarily by surging housing and insurance costs.

 

Although there is optimism about reaching the 2% inflation goal, economists caution that significant progress is still needed. The Fed's strategy of keeping interest rates elevated to curb inflation has yielded mixed results, with inflation rates plateauing between 3% and 4% after initial declines. Complex factors, including rising costs passed on by insurance companies and varying consumer spending behaviors, contribute to the inflationary pressures beyond the Fed's control.

 

While concerns about the labor market and future business conditions persist, analysts believe the likelihood of a recession remains low. Fed Chair Jerome Powell emphasized the ongoing uncertainty, indicating a cautious approach to monetary policy adjustments in the near term.


Finsum: Expect rates to hold steadier than markets might expect with this stubborn of inflation. 

Sunday, 05 May 2024 07:02

Flat Rates Cause Bitcoin Free Fall

Bitcoin faced a nearly 6% downturn on Wednesday, marking its weakest monthly performance since late 2022, as investors divested from cryptocurrencies prior to the Federal Reserve's interest rate decision. The primary cryptocurrency globally witnessed a drop of nearly 16% in April, as investors cashed out gains from a scorching rally that propelled prices above $70,000.

 

Bitcoin saw a decline of up to 5.6%, hitting its lowest point since late February, hovering at $57,001, while ether saw more modest losses, down 3.6% at $2,857, also reaching its lowest level since February.  Despite being down 22% from March's peak, bitcoin remains up 35% this year and has doubled in value since this time last year, largely due to significant capital inflows into newly established exchange-traded funds since January. 

 

Crypto-related stocks, including Coinbase, Riot, and Marathon Digital, dipped in U.S. premarket trading, reflecting broader market uncertainties surrounding the Federal Open Market Committee's stance on interest rates.


Finsum: The original link between bitcoin and inflation/interest rates has deteriorated, but regulation will clear up the future for cryptocurrency. 

Thursday, 02 May 2024 12:42

Active ETFs Eating Up Market Share

Active ETFs have been steadily gaining market share from mutual funds, experiencing a consistent 20% growth in assets annually over the past five years, reflecting investors' growing preference for the cost-efficient and adaptable nature of ETFs. During this period, they have expanded their share of the overall ETF market, skyrocketing from 2% to 8.5%, as indicated by Morningstar's recent analysis on actively managed funds.

 

 Despite their current assets standing just above $600 million amidst the $8.9 trillion U.S. ETF landscape, they are advancing at a faster pace than both the overall market and their passive counterparts. Investors have injected $375 billion into actively managed ETFs in the last five years, while active mutual funds have witnessed a staggering outflow of $1.8 trillion, according to Morningstar's data.

 

Investors can anticipate continued growth for active ETFs, asserting their burgeoning prominence within the fund industry, fueled by investor demand and their role in alleviating the outflows from active mutual funds.


Finsum: Investors tend to think pickers have their largest advantage in volatility and macro environments, so this trend could continue. 

Thursday, 02 May 2024 12:40

Private REITs for the Highest Yield

Real estate investment trusts, known as REITs, are renowned for their attractive dividend yields, as they are legally obligated to distribute 90% of their post-tax earnings to shareholders. However, REITs are highly sensitive to various market factors such as interest rates, inflation, leverage, and regulatory changes, posing liquidity concerns for investors.

 

While dividend yield is crucial, conservative investors also consider factors like analyst ratings and liquidity when evaluating REITs. The highest-yielding REITs, according to Rick Orford, based on specific criteria, including annual dividend percentage, trading volume, number of analysts, and current analyst ratings are Vici Properties, showcasing notable revenue growth and offering a promising dividend yield of 5.71%. Starwood Property Trust, recognized as the largest commercial mortgage REIT in the US, presents a forward yield of 9.81%, notwithstanding mixed financial performance in 2023. Redwood Trust emerges as a standout contender with the highest forward yield of 11.24% and an optimistic outlook for future earnings growth, bolstered by its diversified investment portfolio.


Finsum: If interest rates have peaked REITs are poised to deliver huge returns in 2024 and 2025.

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