(New York)

Despite the big losses in Treasuries, high yield bonds have been doing well, and according to Fidelity that seems likely to continue. Advisors could be forgiven if they are wondering “how?”. The answer is that the big reason bonds are losing is interest rate risk, and it so happens that high yield bonds have some of the lowest interest rate risk around because of their higher coupons and shorter terms. According to Adam Kramer, who managers Fidelity’s Strategic Income Fund, “an economic recovery may be on the horizon and the Fed may avoid tightening monetary conditions for some time”, which he says means the high yield market “could offer investors the best of both worlds in 2021”.

FINSUM: High yield bonds have the lowest exposure to the market’s major risk at the moment and also the upside of an economic recovery. The picture is bright.

(Houston)

The turnaround that energy prices have seen over the last year are simply astounding. This time last year prices were plummeting and there were incredibly dire demand forecasts. Fast forward to the present and you have a very tight supply-demand picture and legitimate talk of the new commodities “supercycle”. With that in mind Goldman has chosen 3 stocks which they say are going to be winners in the new environment: ConocoPhillips (COP), Devon Energy (DVN), and Hess (HES).

FINSUM: Both Devon and Hess are primarily exploration and production companies, which means they are very tied to headline oil prices. Given the tightness of supply, it makes sense they could benefit nicely.

(New York)

Bank of America’s Sell-side indicator that tracks equity allocation increased to…see the full story on our partner Magnifi’s site

(New York)

Q1 ended about as poorly as possible for the treasury market as losses according to ICE indices hit…see the full story on our partner Magnifi’s site

(Los Angeles)

Two extreme water crises have occurred since the new year and are moving water conservation to the top of the ESG pecking order…see the full story on our partner Magnifi’s site

(Chicago)

This infrastructure package is a big deal in many ways. Not only has it been—and will it be—a major market-mover, but the deal is also expansive and intricate in scope. For example, did you know that $100 bn has been specifically earmarked for increasing internet connectivity/infrastructure, which Biden refers to as the new electricity. As one can imagine, this will creative strong returns for firms that specialize in the space. Accordingly, take a look at two stocks: Applied Materials (Nasdaq: AMAT), and American Tower Corporation (REIT) (NYSE: AMT). AMT is a chipmaker and the forthcoming expansion of internet connectivity is seen as a big driver for the chips they make. American Tower is a major provider of 5G broadband, which will be heavily supported the proposed infrastructure package.

FINSUM: If and when it passes, this package is going to be a huge market driver for years to come. These stocks seem like a no-brainer.

(Silicon Valley)

Those with a lot of money in tech stocks may be starting to breathe a sigh of relief. After a rough period to start the year. The last few weeks has been quite positive for tech, so the worst may be behind us, right? The answer is that it may not be, according to some analysts. There are two huge trends (and one macro factor) that look likely to weigh on the sector for the next year. Firstly, three of the very largest stocks—Facebook, Apple, and Google, have gotten to the point in size where their growth is going to start inevitably slowing, which means the narrative around them will change. Additionally, the success of the vaccine rollout is increasingly, which means a reversal to pre-COVID norms seems likely. Tech stocks are also quite rate sensitive, which gives them a lot of “Fed risk”.

FINSUM: While it is hard to argue with the interest rate risk, we cannot get on board with the other two narratives. Everyone knows FAANG stocks are huge, the growth story is no secret. More generally though, we just don’t buy into the narrative that these stocks will suffer from the “reopening”. Consumer habits in many areas (e.g. grocery shopping and increased food delivery) have changed and that will continue to allow big tech stocks to grab market share and grow. Just ask your grown children and friends how they feel about going back to the grocery store….

(New York)

You probably have not even registered it, but food prices have risen sharply since late last year. One big reason why this is going mostly unnoticed is that economists, and thus the media, like to report inflation with food and energy stripped out. According to Jefferies, “Almost unnoticed, broad food and agricultural prices have climbed vertically”. So the question is who will benefit, and luckily that is quite clear. Firstly, fertilizer companies tend to do well when food prices are high and are uncorrelated to other asset classes. And secondly, agricultural machinery is a big winner. The sector is already experiencing exceptional supply tightness, which is bullish for pricing. According to Barron’s “large tractor prices up roughly 20% year-over-year and small tractors up about 50%, on the back of significantly tighter inventories”.

FINSUM: Deere and AgCo seem like quite good buys given this backdrop.

(Washington)

One of Biden’s most important campaign promises was that he would not raise taxes on the middle class…see the full story on our partner Magnifi’s site

(New York)

Wells Fargo’s head of real asset strategy John LaForge says gold could hit…see the full story on our partner Magnifi’s site