The muni market has seen sky-rocketing volatility the last ten days with the highest point since the onset of the pandemic. That volatility has hurt many investors as yields rose by over 11 basis points sending bond prices tumbling. Triggering this decline in muni bond prices was Fed Chair Powell’s hawkish turn which included tapering asset purchases and raising rates. This loss is positioning munis for their worst quarter in almost 30 years. Some muni bond issuers are pausing or flat out canceling their development in the wake of a flat out crisis.

Finsum: This could be a quarter for muni bonds which have a close pass through to the Feds target interest rate and are therefore more sensitive.

The SEC has splashed headlines recently with crypto and ESG rule changes, and they are once again widening their scope. They have proposed a new rule which would force trading firms to register as dealers and fall under oversight. Algorithm and high frequency traders woud now fall under SEC guidelines and scrutiny. Gensler believes these traders provide an important liquidity function for the US financial system and should be overseen by the SEC. The rules would not apply to those that manage less than $50 million. These requirements would put high costs on many financial market participants and might not be justified according to experts.

Finsum: These measures are to prevent a 2020 Fed step in again, but it's difficult to see if this much oversight is warranted given how much it will cost.

Bonds and equities have stood tall in the face of the many windfalls that have faced financial markets in the last month. However, even the bulls are getting worried and alternatives could provide relief and earn higher yield. Real estate via REITs are in a great position as an asset class and could perform well in the upcoming years with higher interest rates. Art is an overlooked alternative which has had high appreciation, outpacing 10 major classes since Covid according to CITI. Finally private equity has been a go to for many investors, and has seen record inflows post-covid while remaining less correlated with equities.

Finsum: The biggest draw to private equity is that fixed income is more correlated than ever with stocks and so alternatives provide a better hedge.

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.

Most think of millennials and they compartmentalize them into 3 categories: fee minimizers, crypto /alternative investors, or meme traders. However, a recent poll shows they have a strong desire for traditional income products. Over 82% of more affluent millennials are concerned with finding income products for retirement, which is almost 30 percentage points higher than Gen X. Additionally, almost a quarter of the poll were willing to purchase an annuity in the next quarter, and half of those were millennials. Many of these affluent millennials are looking to income products because they are skeptical that social security will be there for them in retirement.

Finsum: Millennials are bucking conventions and looking early to secure income products like annuities.

A small but substantial change may be shaking the bond ETF infrastructure to its core. The New York State Department Financial services is allowing insurers to label bond ETFs as individual bonds rather than as equity risk. Companies have issued lots of new debt setting records as record low interest rates have made it appealing. This regulation could change the way the Fed and other regulators interact with bond markets, and could lead to the sort of efforts that saved the bond market in 2020. These will allow more bond products and increase inflows, but for insurers bond ETFs have more complications than a traditional single fixed income security and could provide difficulties in the future.

Finsum: Small changes to regulator practices like this can lead to massive swings in credit creation, keep an eye on bond ETFs.

Most fixed income ETFs used to be linked to passive tracking products in the bond market, that is until more recently. Rules Adopted by the US SEC have steered many investors to active fixed income by making it easier to launch new active ETFs. Active funds are attractive for ETF producers because they draw higher fees (about .2 percent) than active funds. This has led to an explosion in active fixed income. Active bond fund creation is growing at nearly double the rate of the rest of the ETF market, and investors are ready as well as 2021 saw a record pace of inflows. One big factor in shifting more investors into active fixed income is aging global demographics which are still searching for yield and income.

Finsum: The world’s aging population is creating a safe asset shortage and pushing bond prices higher.

One of the biggest criticisms of model portfolios is that they are opaque black boxes that investors are worried about, but BlackRock could be shaking things up. A new suite of actively managed model portfolios will be registered on the Nasdaq Fund Network. The models will be available across a variety of ‘themes’ and will be registered with six-character symbols. NFN will dismantle statistics and strategy to increase transparency for the Models. Model portfolios were once an obscure investment but they are growing in popularity and hopefully building a better bridge to advisors and portfolio managers.

Finsum: This is a big step for models and will hopefully increase confidence in them as a product with investors.

Crypto could be a stress inducer when it comes to managing their tax solutions. However, a variety of portfolio products help investors navigate their digital wallets, track crypto investments, and manage their tax solutions. These portfolio trackers can help investors navigate the nuanced complexities in capital gains taxes that are constantly evolving. CoinTracker, TokenTax, and CoinLedger are all great crypto portfolio managers. TakenTax really lets investors take advantage of tax loss harvesting to optimize their crypto portfolio.

Finsum: Cryptos wash rule differences should incentivize investors to take advantage of tax loss harvesting.

Direct indexing is one of the fastest growing market segments and investors surveys confirm that customization is king of the modern landscape. Curulli Associates forecasts that direct indexing will grow faster than ETFs and mutual funds. Custom indexing has a legg up on traditional ETFs when it comes to volatility because investors can harvest losses as the market takes dips. With traditional ETFs investors have to just eat the losses as they slow the long run growth of the fund, but micro dips can be maximized by taking advantage for tax purposes, say industry quants.

Finsum: It's clear that direct indexing has advantages over traditional ETFs, but even when compared with their fees the tax savings is worth it for direct indexing strategies.