Displaying items by tag: bull market

Tuesday, 02 January 2024 15:56

Are Single-Stock ETFs Here to Stay?

Single-stock ETFs were introduced in Europe in 2018 and last year in the US. Now, there are nearly 50 single-stock ETFs with the majority of them tracking mega cap tech stocks like Microsoft, Nvidia, Amazon, and Tesla. Collectively, they have $3.3 billion in assets. Providers include Direxion, AXS, GraniteShares, and YieldMax and strategies fall under option income, bull, or bear.

 

The largest one is the Direxion Daily TSLA Bull 1.5x Shares which has over $1 billion in assets and tracks the underlying stock with leverage by using swaps and other derivatives. The second-largest at $841 million in assets is the YieldMax TSLA Option Income Strategy ETF. This category of single-stock ETFs will sell call options on the underlying stock to generate monthly income. 

 

The recent success of these ETFs isn’t surprising given the strong performance of tech stocks this year with many hitting all-time highs. According to Rich Lee, the head of ETF trading at Robert W. Baird & Co., more single-stock ETFs will be hitting the market due to strong demand for these products, and he expects more innovation as well.

 

The current crop of single-stock ETFs are more suited for short-term speculation rather than long-term investing given higher costs. In August, the SEC issued a warning about these products, “Because leveraged single-stock ETFs in particular amplify the effect of price movements of the underlying individual stocks, investors holding these funds will experience even greater volatility and risk than investors who hold the underlying stock itself,” which encapsulates the risks. 


Finsum: Single-stock ETFs are a small but fast-growing category. While they’ve performed well due to the bull market in tech, they remain unsuitable for long-term investors. 

 

Published in Eq: Tech
Friday, 19 August 2022 12:13

Beware the Bull in Bear Clothing

Equities have rallied, inflation is falling in the month of July, and global gas prices seem to be easing; investors can shake off the volatility concerns, right? Not just yet. Volatility experts Paul Britton founder of Capstone Investment Advisors told the FT that we aren’t through the weeds just yet as the corporate debt crisis looms at the end of 2022. Britton says there is a significant repricing as companies might struggle to pay off high corporate debt with rising interest rates. Capstone looks to profit on increasing volatility as they are a considerable hedge fund, but the VIX is still falling below its long-run moving average for the first time in four months. Fed experts like Mary Daly, president of the SF Fed branch, say the inflation battle hasn’t been won yet, signaling more rate hikes may be needed to bury inflation.


Finsum: Failing to consider the fact that inflation favors borrowers, real borrowing costs on corporate debt have decreased considerably.

Published in Eq: Large Cap

As the economy’s taken a wicked turn toward the dark side, the clamor for fixed income ETFs has parachuted, according to usnews.com.

Peng Cheng, JP Morgan strategist, explained that this includes retail investors, who hopped on the bandwagon last month, loading into credit ETFs like SPDR Bloomberg High Yield Bond ETF and the share iBoxx $ Inv Grade Corporate Bond ETF.

Earlier in the month, a new series of exchanged-traded funds launched, the US Benchmark Series. That will help ease they way for individual and institutional investors to trade the must updated individual benchmark U.S. Treasuries, which will shone a light on the maturing ETFs in the fixed income category, according to reuters.com. "This gives (investors) a tool to say, we really want to focus on how we execute our investment strategy, as opposed to how effectively we trade Treasury bonds," said F/m President Alex Morris.

 

Published in Bonds: Total Market
Sunday, 01 May 2022 15:42

Bond Market Rally on the Horizon

Calling bond prices stubborn would be an understatement, and the bears have been continuing to pull investors out of the bond market in the mass exodus of outflows. The tides could be starting to shift, and the reasons are on opposite ends of the spectrum. Investing yield curves and recession indicators are flashing, which means investors will flock back to the bond market as a safe asset when equities fall. On the other side of things, if inflation is being driven by supply-side factors more than the Fed thinks, then inflation will fall dramatically, and less tapering will be needed to get there. This means bond prices could rise as yields fail to. Broad bond exposure is still a good idea with volatility rising.


Finsum: It’s been rough in the bond market the last few months, but there are economic reasons that could turn around.

Published in Bonds: Total Market
Monday, 25 April 2022 07:47

Four Reasons to be Bullish

The average investor is scared of market conditions and as a result we have seen various measures of sentiment plummet, but now could be the exact moment to hit the dip and ride a bull wave. The first reason is the Bull/Bear ratio which was a 1.12 which below two is buy territory and approaching or below one is a strong buy. The other reason is comically low sentiment which usually proceeds a booming period. While inflation fears are rampant, core inflation took a strong movement in the right direction which means that the Fed won’t have to tighten as much. Finally, the pandemic is starting to show sings of trickling out, and while new variants are spreading each subsequent new variant has had a smaller impact and been less lived. This could be a huge win for supply chains which could trickle into lower inflation and much higher growth.


Finsum: There are early signs of optimism for stocks and bonds; the time to strike could be very soon.

Published in Economy
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