Model portfolios are a great tool to increase flexibility, growth, and optimization, and Principal is launching almost 40 new products in response to demand. Jill Brown, director of their U.S. Wealth Platform says they will give solutions that are easy to manage and deliver results to clients. These portfolios will leverage the full power of their fintech platform to help advisors hit their goals. The end products will include mutual funds and ETFs and will allow clients to personalize their portfolios with different risk-based suites. Capital appreciation will be the main goal of the three of the core suites, while total returns will be the main goal of the last suite.

Finsum: Third-party model portfolios give tailored solutions, and make customization easier than ever.

Goldman Sachs put out its views on the market’s volatility and how to handle it. The bank is not bullish on markets but thinks there are some very good stocks to help weather the storm. Unsurprisingly, Goldman says investors should buy stable stocks to help get through the turbulence, as such hum-drum stocks look like they have room to run. "Stable stocks also trade with undemanding valuations, supporting the likelihood that they will outperform if the macro environment grows increasingly challenging. Stocks with stable share prices and stable earnings growth generally trade with a valuation premium relative to more volatile peers and to the typical S&P 500 stock. However, relative valuations today are much lower than they have generally been during the last few years."

FINSUM: This is essentially a low-vol, value play, and that makes perfect sense right now. Very stable companies are likely to get through the economic upheaval better than their peers, so on a relative basis they should outperform.

Recession panic is rampant and over four-fifths of the US think the economy is going to turn into a recession in 2022 according to a CNBC poll. The rising inflation is the primary concern and a major factor give how well other area of the economy are performing. As a result, investors and hedge funds are turning to mid-cap stocks to prepare for the worst. Capri Holdings Limited is being held by over 40 hedge funds and carries an attractive P/E ratio of 14.23 for many investors. Next up is Valvoline Inc. which has seen its sales boom as it expanded into EV. Finally, nearly 50 hedge funds are holding luxury accessory company Tapestry Inc. and have almost $900 million in investments there.

FINSUM: Stable stocks could provide some recession cushion if things turn for the worst.

Model portfolios continue to grow in prominence among advisors. Every quarter, a higher percentage of advisors are adopting models and AUM has been growing considerably. Some evidence suggests a lot of the AUM growth is coming from some “power users” but the movement is still broad-based. On the back of that growth, Fidelity is expanding its suite of popular model portfolios. The company has launched Fidelity Target Allocation Tax-Aware Model Portfolios, which include nine equity and fixed income mixes, each versioned for I and Z share classes. The models are available through its managed account platform, Fidelity Managed Account Xchange (FMAX), and the Envestnet platform.

FINSUM: Models are making it easier and easier for advisors to manage money and save time, which boosts margins and enhances client service overall.

The IMF has warned investors that there are growing concerns about an emerging market debt crisis. There is anxiety that sluggish growth, higher interest rates, and surging inflation will hurt developing economies much more severely than developed ones. They will be disproportionately affected because highly indebted countries will have a dip in their investment and suffocate their currencies. These concerns aren’t new and emerged at the start of the pandemic, but this swell seems different. The Fed responded by pumping trillions into the economy in 2020 and they are doing the exact opposite now. Additionally, war and other risks are heightened now with Russia-Ukraine’s escalation.

Finsum: Investors searching for yield should be wary of emerging market bond funds given unprecedented risk levels.

There are several threats that are targeting portfolios right now in terms of volatility. The first is inflation, and investors need to make considerations like planning ahead for the near term for big financial costs. Advisors can also help investors with rising interest rates. Rising interest rates mean variable debt will become more costly so more payments are better in the short run, and locking in fixed rates could be smart before yields climb too high. Finally, concerning general volatility due to slowing growth, it really depends on demographics. For young investors, advisors should steer them through market difficulty by bringing their experience with it previously. For more seasoned investors nearer to retirement, investors should consider pivoting to safer assets in order to avoid sharp losses in market swings.

Finsum: There are intricate strategies or specific funds to help in terms of volatility that advisors should consider.

Direct Indexing is being heralded as the next big wave of investment products, as it gives investors the power to take advantage of tax-loss harvesting and customize it to their interests. However, the dual objectives that they propose could come to compete with each other and undermine investor interests. If investors maximize the tax-alpha they aren’t really aligned with their interests which younger investors are holding as a high priority. Riding a portfolio of all ‘greenwashers’ gives investors few options for tax purposes and deviates too far from the underlying index. The most effective solution might be for financial advisors to develop a better understanding of client interests rather than leaning on a magical new product.

Finsum: Some are calling direct indexing active management in disguise, but investors trying to capitalize on either customization or tax loss might still find it an attractive option.

China has another Covid-19 outbreak that could potentially shut down Beijing in the same way that the world saw a lockdown in Shanghai previously. This outbreak is sending a shockwave across all assets that are spiking volatility. The VIX hit its highest point since mid-March, and there was a mild reservation in the bond market. 10-year treasury yields spiked 14 basis points. Bonds and equities aren’t even the whole stories; everyone knows commodities are in a super cycle, but this outbreak is putting that at risk. A variety of different commodities' prices fell in response. Finally, Wall Street is starting to be concerned that a global recession is a possibility with Ukraine-Russia ongoing, Covid surging, and serious inflation risk.

Finsum: The yield curve is also starting to turn which could be really bad for equities markets.

Calling bond prices stubborn would be an understatement, and the bears have been continuing to pull investors out of the bond market in the mass exodus of outflows. The tides could be starting to shift, and the reasons are on opposite ends of the spectrum. Investing yield curves and recession indicators are flashing, which means investors will flock back to the bond market as a safe asset when equities fall. On the other side of things, if inflation is being driven by supply-side factors more than the Fed thinks, then inflation will fall dramatically, and less tapering will be needed to get there. This means bond prices could rise as yields fail to. Broad bond exposure is still a good idea with volatility rising.

Finsum: It’s been rough in the bond market the last few months, but there are economic reasons that could turn around.

Hedge funds have made it clear they are gonna short those not meeting ESG criteria, but the broader market is still willing to short Tesla because the bottom line means more. Despite all of its sustainability credentials investors are making bets against Tesla. Bill Gates took a big short position apparently, and Tesla CEO Elon Musk chirped back on Twitter, saying it's incompatible with their environmental concerns. All of this happens as Musk secured $44 billion to buy Twitter Inc. This isn't the first time Tesla is no stranger to short-sellers as sharks swarmed the brand for years as they thought they couldn't ramp up production to meet the actual demand. Tesla’s stock skyrocketed nonetheless.

Finsum: Short positions on these public favorites can be extremely risky poisons, there have been lots of strange rallies in the internet era.