(Washington)

It is not even close to approved yet, but the Biden infrastructure deal has been making serious waves. The implications of the deal are large and would send trillions of government dollars flowing into the private sector. With that in mind, here are four stocks that look like big winners from the package: Eaton Corporation (ETN), Jacobs Engineering Group (J), Herc Holdings (HRI), Mastec (MTZ). Three of these companies (other than HRI) are engineering/construction oriented, which makes sense. Herc Holdings is a rental company that leases vehicles (yes, the Hertz that went bankrupt last year).

FINSUM: Herc is interesting to us because they rent construction and earth-moving equipment. This injection of government dollars would flow through to them and provide a nice hedge against the headwind of the pandemic, which has slowed down retail car rental.

(New York)

Data from 2020 is in and it is clear: annuities are increasingly popular among advisors, and we mean that in the strictest sense of “advisors”. Annuities sales have not just grown with broker-dealers, but also with RIAs. For many years RIAs shunned annuities, but recently two major changes have made RIAs warm to them. Firstly, annuities compensation has become more aligned with RIA pay models, and secondly, with so many clients retiring in a period of high volatility, there is a greater need than ever before. According to David Lau, CEO of DPL Financial, “RIAs historically have used mostly investment-only variable annuities with the occasional single-premium immediate annuity mixed in, and that is because annuities until recently haven’t been built to fit into their business model. He continued “One of the things that’s misunderstood about annuities is that in a low-interest-rate environment, it’s something you may not want to consider … In today’s market with interest rates where they are, it is about 41% more expensive to fund retirement income using a bond portfolio than it is using an annuity.”

FINSUM: That last quote about the affordability of annuities is a really key point. Annuities can play an important role in a portfolio more cheaply than most instruments right now, and do so with less risk.

(New York)

Bonds are incredibly expensive right now, but despite this, they may keep going higher, says Goldman Sachs. The firm is specifically referring to high yield bonds, which are very pricey right now and have low spreads to Treasuries. For example, only 10% of high yield bonds currently trade with spreads above 5 percentage points above Treasuries, compared to 25% in November. This makes Goldman believe the easiest gains are already in the bag, but given that high yield bonds are sensitive to an improving economy and they have appreciated even while Treasuries have fallen, Goldman feels the asset class could be in for more appreciation.

FINSUM: This makes sense. It is also worth noting that historically speaking, high yield bonds have no correlation to the performance of Treasuries.

(New York)

Annuities have had a good 12 months and it is starting to seem like they are entering a golden age. Not only are the country’s demographics trending in favor of annuities, but the last year’s volatility and the recent rule change allowing annuities into 401(k)s are big tailwinds. Another big trend which helps is that since more and more companies are opting to offer 401(k) programs instead of DB plans, then people are ever more in need of guaranteed income. According to AIG, “It’s less about the vehicle. More plan sponsors and participants need to get comfortable with the creation of income … The only way to get guaranteed income is to annuitize retirement benefits. The question then is will annuities be offered in-plan or out-of-plan”.

FINSUM: The market and regulatory context are becoming better and better for utilizing annuities for clients. It might be time to think about these options if you aren’t already.

(Washington)

The infrastructure bill is not only making waves in Washington, but also on stock exchanges. The bill is going to send many stocks surging, but here are six names that look likely to do very well if the current plan passes, with a particular focus on semiconductors. One little known detail is that the Biden plan earmarks $50 bn for the US semiconductor industry and an extra ~$175 bn for electric vehicles, which will also help semiconductors. Accordingly, check out these stocks, all of which seem like good candidates for appreciation: Vishay Intertechnology (VSH), Applied Materials (AMAT), Macom Technology Solutions Holdings (MTSI), Micron Technology (MU), Analog Devices (ADI), Maxim Integrated (MXIM).

FINSUM: The semiconductor industry has been lobbying for this to help increase its eroding market share versus China and it seems like the Biden plan will deliver.