(Beijing)

China is one of the largest gold consumers in the world, but the pandemic has…see the full story on our partner Magnifi’s site

(Washington)

Joe Biden jut rocked markets in a big way. Yesterday afternoon, Bloomberg reported that Biden was planning to increase the capital gains tax rate on the wealthiest Americans by double, or up to just under 40%. The same rate as income taxes. Market reversed very sharply, but have been strong today. The tax would only affect Americans earning over $1m per year, which is 0.3% of the population, but taken in conjunction with other proposals to change the basis for capital gains taxes as it concerns inheritance, this is another big step.

FINSUM: The full scale tax overhaul on the wealthy has begun in earnest. Inheritance taxes and now capital gains taxes look likely to soar, with the latter not only on the wealthy. Advisors need to be very mindful of these changes as they disproportionately affect those who employ financial advisors.

(New York)

There are a number of forces propelling annuities forward at the moment. Not only is their component of tax deferral getting more and more valuable given the new administration’s tax plans, but the need and desire to lock-in guaranteed income has grown over the last year. The single biggest force, however, is the US demographic trend. An astonishing 10,000 people per day are turning 65, and 16.5% of the population is now 65 or older. By 2030 all Baby Boomers will be over 65. That means this gigantic cohort is moving out of their wealth accumulating years and into their drawdown years. Many need guaranteed income.

FINSUM: A lot of advisors have an automatically negative reaction to annuities, but the market has improved a great deal in recent years, and for any clients they are a good option.

(New York)

Model portfolios are getting ever more popular for advisors. Not only do they help outsource some portfolio management, but there is such a wide variety of them that they can be tailored to many different plans. In some cases, there are almost too many! One area where they make a lot of sense is in tax minimization strategies. Biden and the Democrats look like to hike taxes considerably, and that fact coupled with ultra-low yields and highly variant financial situations in muni bonds, means there is a lot to gain from models in this area.

FINSUM: COVID affected municipalities in very different ways, and spreads to Treasuries are historically low, so there is a of risk. Nuveen is seen as a leader in the munis space, so a good place to start the search.

One of the surest ways to deliver value as an advisor is to help clients identify stocks that are poised to see a step change in their growth. If the last decade has shown us anything, it is that tech companies can scale quickly, and their stock prices may move accordingly. With that in mind, we believe one of the best ways to find the next big thing is to check out the VictoryShares Nasdaq Next 50 ETF (QQQN).

The ETF tracks the Nasdaq Q-50 index, and deliberately invests in the 50 stocks next in line to be included into the Nasdaq-100. This accomplishes two critical tasks. First, QQQN puts client capital into Nasdaq stocks that are well established (ranked 101-150 based on market capitalization in the entire Nasdaq Stock Exchange; ex. Financial), but presumably at an earlier stage with still long runways of potential growth. In other words, high profile companies that could become household names. Since 2007, 110 constituents have “graduated” from the Nasdaq Q-50 (the “next 50”) into the full Nasdaq-100*. Just in the last few years, this includes names like Netflix, Facebook, Lululemon, and Expedia, which highlights the rapid pace of innovation that Q-50 stocks may experience and QQQN seeks to capture with its methodology. In 2020 alone, the graduates included Docusign, Peloton, and Moderna among five other companies. Since 2007, in the 12 months prior to “graduating”, these 110 graduates returned 76.2% on average**. QQQN allows investors access to these quick-growing companies before they have experienced the market appreciation that “graduates” them into the Nasdaq-100. Second, buying into QQQN also helps one diversify out of the hyper-concentrated top end of the Nasdaq-100, which is heavily weighted towards just three stocks as of 2020 year-end. We feel this allows potential returns of QQQN to be more in line with those of companies on the cusp of transitioning between mid-cap and large-cap or mega-cap. Taking these two points in combination, the ETF is quite distinct from strategies that track the Nasdaq-100, and tracks an index that is fully complementary rather than competitive.

Finally, another unique aspect of QQQN is that it rebalances quarterly. This construction allows the ETF to both capture the value of potential hyper-growth names and IPOs more nimbly and drop losers more quickly than half-yearly or annual rebalancers. In summary, QQQN offers unique value and relevant exposure to the next generation of innovators.

 N.b. this content was paid for by Victory Capital and is not FINSUM editorial.

Notes: *Source: Nasdaq as of 12/31/2020; Constituent counts by year include some double-counting. For example, Illumina was originally moved into the Nasdaq-100 in 2008, subsequently kicked back out to Q-50, then moved back in 2013. Of the 106 constituent “graduations,” there were 98 unique companies. In addition to Illumina, Ctrip.com International; Green Mountain Coffee Roasters; Hansen Natural; Hologic; J.B. Hunt Transport Services; Netflix; and NXP Semiconductors moved from the Q-50 into the Nasdaq-100 twice during the 2007-2019 period.

** Source: Nasdaq as of 12/31/2020; In the case of the 12 month statistics, names added in 2020 were excluded from averages and medians.

Carefully consider a fund's investment objectives, risks, charges and expenses before investing.
To obtain a prospectus or summary prospectus containing this and other important information, visit www.vcm.com/prospectus. Read it carefully before investing.

Investing involves risk, including the potential loss of principal. In addition to the normal risks associated with investing, investments in small- and mid-cap companies and narrowly focused investments typically exhibit higher volatility. International investing may involve risk of capital loss from unfavorable fluctuations in currency values, differences in generally accepted accounting principles, or economic or political instability. Technology companies are often subject to severe competition and product obsolescence. The Fund has the same risks as the underlying securities traded on the exchange throughout the day. Redemptions are limited, and commissions are often charged on each trade. ETFs may trade at a premium or discount to their net asset value. The Fund is not actively managed and may be affected by a general decline in market segments related to the Index. The Fund invests in securities included in, or representative of securities included in, the Index, regardless of their investment merits. The performance of the Fund may diverge from that of the Index.

The Nasdaq Q-50 Index is a market-capitalization weighted index designed to track the performance of companies that are next-eligible for inclusion into the Nasdaq-100 Index. The Index is comprised of 50 securities and reflects companies across major industry groups, except financial companies. Nothing in this illustration should be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes.

VictoryShares ETFs are distributed by Foreside Fund Services, LLC.

Victory Capital Management Inc. is the adviser to the VictoryShares ETFs. Victory Capital is not affiliated with Foreside Fund Services, LLC. Nasdaq is a registered trademark of Nasdaq, Inc. and its affiliates (together, “Nasdaq”) and is licensed for use by Victory Capital. The product(s) are not issued, endorsed, sold, or promoted by Nasdaq. Nasdaq makes no warranties as to the legality or suitability of, and bears no liability for, the product(s).

Holdings are as of the date noted and subject to change without notice. 

©2021 Victory Capital Management Inc.

20210416-1593090