Annuities are one of the safest financial securities that exist, but that doesn't mean they are without some risk. Sure one of the biggest risks to an annuity is dying early, but there are other external risks like liquidity. Annuities are among the most illiquid contracts and often come with heavy penalty fees in withdrawals. Additionally, if an annuity company goes bankrupt they aren’t regulated by FINRA, and state and local insurance agencies only cover between $250,000-500,000 in losses. In the current environment, inflation growth is a substantial risk to annuities because it devalues the future payment stream in a fixed rate annuity, and even if the Fed raises rates to curb inflation this will only make it a less attractive yield in comparison to the market.

Finsum: Overall, annuities look like one of the safest securities and variable rate annuities may mitigate interest rate risk.

Coal is the forgotten younger child in the fossil fuel categories and in the age of ESG that has been exacerbated. Demand in the U.S. and Euro area has fallen drastically. For example, it's about half what it was a year ago in the U.S., However coals price has steadily grown as it averaged $168 per metric ton in January which is higher than $119 from all of 2021. What's driving that price increase is the shift in usage from West to East. Coal power is expected to grow by 4.1%, 11%, and 12% in China, India, and SEA respectively over the next three years. In many ways, it was the only available energy in developing countries and has prompted changes in supply chains in both Russia in Indonesia.

Finsum: Just because the U.S. has forgotten about coal doesn’t mean it won’t be a critical part of energy production in the next decade.

According to a recent ThinkAdvisor article, 2022 is expected to be another record-setting year for launches and fund flows, mostly actively managed ETFs. Interestingly, RIAs are seen introducing their own ETFs, based on their proprietary investment models.

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Finding a successful stock market predictor is like finding a needle in a haystack, but JPMorgan says they have the indicator, and now is the time to buy in the stock market. The buying guide is when the CBOE Volatility Index grows by over half of its one-month moving average. This has a near bulletproof historical record, only falling during recessions in the last 30 years. Markets gained an average of 9% in the equities in the two quarters after the metric was triggered. Overall, JPMorgan is bullish about the near future in equities and believes there is a lot of runway ahead.

Finsum: Metrics like this can be an anomaly or indicative of something structural underneath, still a recession isn’t out of question with Fed taper tantrum possibilities.

Vanguard turned the investing world upside down with the advent of index-based investing. In 2022 there could be a new predominant investment vehicle taking the reigns: custom indexing. However, this fad has failed to create traction globally the way it has in the US. The two keys that are preventing custom indexing from reaching the same level of success globally are technology and taxes. CI relies on the software tools and facilities to manage this algorithmic portfolio construction, and lots of global firms aren’t there yet. Additionally, tax-loss harvesting makes custom indexing wildly popular in the US, but those same advantages don’t exist in the fiscal structure of other countries.

Finsum: Many of the industry giants are buying up custom indexing firms left and right which will get rid of the technological barrier in custom indexing for countries around the globe.

Edward Jones and LPL are two industry titans in terms of total advisor employment, but these firms are moving in drastically different directions when it comes to talent acquisition and development. Once Jones had a 30,000 advisor target but since the pandemic, they have scaled back recruitment efforts and shifted strategy. This had their numbers dwindle by 2% year over year to 18,823 brokers. LPL on the other hand has doubled down on recruiting efforts and saw its head count surge by 15%. What drove this growth was a combination of new recruiting models and full-service firms and acquisitions. However, despite losing advisors Jones saw revenue grow by 22% from 2020 to 2021, because the rising markets increased the fee-based revenue.

Finsum: There are lots of transitional costs from squirting new talent: training, legal, etc in the short run this can eat at the bottom line when trying to grow.

Capital gains taxes vary based on a lot of factors. Those dwelling in California for example may pay up to capital gains like regular income for their state taxes, which can be brutal. However, variation in income and holding duration play a large part in the total expected payments for cap gains. Finally, medicare surtaxes for those couples with over a quarter of a million in income will face additional capital gains taxes. Investors should take early precautions at the beginning of 2022 to consider how to mitigate their tax bill for the upcoming year with tax-loss harvesting. Realizing certain losses in the middle of turmoil can minimize your final tax burden.

Finsum: There are great advantages in tax-loss harvesting that you can take advantage of in crypto still, and now might be a perfect time.

Everyone and their dog has been pivoting to ultra-short duration pseudo-cash bond ETFs in the fixed income balance of their portfolio and this is causing a sell-off of lots of corporate bond ETFs. LQD saw its fifth day of outflows which set a pandemic era record. This brought together a total of $856 million in investor outflows. This is part of a blogger trend where sentiment around investment-grade bonds is weakening. However, it's not because they are less likely to pay back but more a reflection of investment-grade corporate debt generally having a longer duration, which is the risk investors don’t want with upcoming rate hikes.

Finsum: The risk premium hasn’t changed with corporate debt just the term structure risk. Fundamentally these bonds could still be in a good place.

ESG ETFs continue a fire streak and every single Wallstreet mainstay is launching funds as fast as they can. Goldman launched their latest fund this week Goldman Sachs Bloomberg Clean Energy Equity ETF which will be traded with the ticker GCLN. It will hopefully capitalize on the US transition to clean energy with a strong focus on equities. ESG has a strong track record as last year 13 ESG index funds with large caps crushed the S&P 500 with an almost 30% return. Goldman thinks the ESG movement is just in its infancy and this fund is a long-term strategy.

Finsum: The rapid growth in ESG funds is starting to teeter on bubble territory, but that bubble could pop a long time from now.

That's correct, Joe Biden’s latest economic rebrand is really a diet version Ronald Reagan era policy. In a recent statement, Joe Biden said that in response to inflation we can either “increase the supply of cars” or “reduce demand for cars by making Americans poorer”. This is essential supply-side economics made famous by the Reagan administration. Additionally, Yellen coined the term ‘modern supply-side’ economics just two weeks later in order to push the Build Back Better bill. This is a liberal tilt on aiding the weakening supply chains that will hopefully strengthen the economic recovery. It's a response to republicans’ attacks that BBB will surge debt and inflation.

FINSUM: The economy is in a difficult place, there is still catch up needed but undoubtedly Americans are feeling the force of inflation and another stimulus package could only further that problem.