(New York)

Federal workers will now have the option to invest their retirement and savings accounts directly into…see the full story on our partner Magnifi’s site.

(New York)

Whether investors—or Jerome Powell—like it or not, inflation is rising, and is as high as it has been in a generation. Sure, it could prove temporary, but in the near and medium term, investors are worried about it, which means it will be dictating returns. How to hedge inflation is a question that investors haven’t had to worry about in some time, so it is worth noting that REITs have traditionally performed very well in inflationary periods. Since many leases are tied to inflation, rents tend to rise directly in line with inflation, providing an excellent hedge.

FINSUM: REITs are not as well appreciated as an inflation hedge as some others asset classes, but that is exactly why they might be a great buy right now.

(New York)

Earnings are beginning to roll in for Q2 for many US companies. The expectations…see the full story on our partner Magnifi’s site.

(Brussels)

In the US, the Fed has only started kicking the tires on climate change talks at its regional branches. However…see the full story on our partner Magnifi’s site.

(New York)

Treasury yields sank last week, before rebounding strongly late in the week…see the full story on our partner Magnifi’s site.

(New York)

There has been rising anxiety of late that the growing assets in ESG stocks have created a valuation bubble in the most popular shares in the category. The idea is that rush into ESG has funneled a ton of capital into a relatively small group of shares, “artificially” inflating valuation. However, the Financial Times argues that there is definitively no bubble in these stocks. In fact, they are not valued any more richly than any average basket of shares. Overall, the average PE ratio of a global basket of ESG stocks is the same for an average basket of all stocks: 14x.

FINSUM: This is actually quite a relieving study, as there have been some very lofty AUM growth figures thrown around lately for ESG. And in case you are nervous, the same metrics/comparison listed above also hold for US/domestic ESG stocks.

(New York)

They do not get a great deal of attention, but annuities are having a real moment this year. Total annuities sales jumped 4% in Q1 versus the prior year. That is a pretty nice job for a product many would not think of as “fresh”. Variable annuities drove the gains, with a 7.5% quarterly jump.

FINSUM: Annuities have several tailwinds right now. The giant mass of baby Boomers entering retirement is one, Generation X liking annuities more than older generations is another, as are increasingly accommodative regulatory policies for annuities, such as their inclusion in retirement plans.

(New York)

Any advisor will have noticed the big industry push towards model portfolios, and in particular, model ETF portfolios. To many, this might be a “what gives?” moment. The reason why is actually a simple one for both advisors and asset managers. For asset managers, models can be a very nice singular location to gather up assets. For advisors, it is all about saving time and getting the best of a wide array of ETFs. Model portfolio can allow advisors to get access to a range of best-of-breed products without the need to proactively take the time to diversify client Dollars into those funds.

FINSUM: Model portfolios are going to keep growing. They are generally a win-win for both advisors and managers.

(Washington)

All advisors are already nervous about Biden’s planned tax hikes on wealthy clients. As a quick refresher, the Biden administration wants to raise long-term capital gains taxes to 39.6% (in addition to applicable local and state taxes), as well as eliminate the “step-up in basis” at death in inheritance. This has major implications on its own, but advisors and CPAs have brought up another significant issue with the tax hikes completely aside from the increased level of taxation: it is extremely hard to document the original basis for many assets. This is particularly true for illiquid assets like real estate and small businesses—which often constitute the largest portion of an estate. According to Ed Zollars, a CPA, “How do you estimate the basis, especially when the person who had the best chance to answer that is deceased?”. KPMG summarized the difficulty of the situation further, saying “For a flow-through entity that’s been around for 45 years, in theory, I’d have to go through 45 years of tax returns … Many times, records aren’t handily available, and obtaining transcripts from the IRS is hard, too”.

FINSUM: On top of everything mentioned, remember that basis changes all the time in both LLCs and real estate, either by capital put in the company or through 1031 exchanges. This will be a reporting nightmare!

(New York)

The market took a nosedive in the middle of the day today as investors were walloped with a hot CPI inflation reading. The CPI rose an eye-popping 5.4% in June, with core inflation coming in at 4.5%. The market was anticipating a flat 5.0% CPI number. Indexes turned downward immediately following the report. It should be noted than June 2020 was the nadir of the pandemic inflation readings, so that makes this report look even bigger.

FINSUM: The inflation boogeyman returns. Beware a big sell-off across the board in bonds, especially if the Fed or a member of the Fed makes any tightening comments.