(Washington)

Many advisors may not have realized it yet, but the new COVID relief package passed by Congress recently has many benefits for upper middle class Americans and even those in the mass affluent category (which constitute tens of millions of clients for advisors). Other than the $1,400 checks, there are also two lesser known details advisors need to be aware of. If a client qualified for a check last time, but did not get one, they can claim the money they would have been entitled to as a credit against their taxes. It is a bottom line deduction that comes directly out of taxes owed. If no taxes are owed, they should get the credit as a refund check Additionally, the package offers enhanced child tax credits. This is $3,600 per child under 6 years old, and $3,000 per child between 6 and under 18 years old. The latter used to be for those under 17, so this helps those with 17 year-old children. Finally, those who have student loans that will be forgiven will not have to pay taxes on the forgiven amounts, which is a massive benefit for those who qualify.

FINSUM: There is a lot more to this package than many realize. Advisors should take a deeper dive to see what applies to their clients.

(New York)

There might be a great migration in the cards for bonds. While many have spoken of a broad migration into equities that occurred over the last year, a smaller scale change might be about to occur within bonds. Treasuries have been getting hammered, and corporate bonds are appearing increasingly attractive to investors for a number of reasons. Firstly, their durations tend to be much shorter, meaning they have significantly lower interest rate risk—crucial right now. And secondly, with the economy picking up, earnings and business health are looking brighter and brighter.

FINSUM: Aviva Investors thinks corporate bonds have a nice pathway to gain. While rates are working against corporate bonds, the fundamentals are strong. If yields finally stabilize under 2%, it is easy to imagine investors piling into corporate bonds as the recovery strengthens.

(New York)

Commodities have been doing great this year. The big rise in demand coupled with weak supplies because of COVID have led to a surge in prices. However, one bright spot—metals—might have some trouble looming on the horizon. There is increasing speculation that the US may scrap pennies. If that happens, it could put a dent in the copper and zinc markets. This dent would not only come from a lack of new demand, but the fact that pennies would be taken out of circulation and recycled. This would amplify the effect by boosting supply to the system and lowering demand for newly-mined metal.

FINSUM: This might have a strong psychological effect even though the total quantity of zinc from pennies accounts for less than 4% of total annual output.

(New York)

In an eye-opening “expose” type article, for CIO of Blackrock’s ESG division went on the record saying that ESG was largely just hype and had little substance behind it. According to former CIO Tariq Fancy, “In truth, sustainable investing boils down to little more than marketing hype, PR spin and disingenuous promises from the investment community”. The comments ran in USA Today on March 16th.

FINSUM: The reality is a little more complicated. ESG does suffer from a great deal of greenwashing, and firms—at first—did little to genuinely integrate ESG into their decision-making. Over time, they have taken greater account of real ESG factors in investment selection, but at the same time much of what constitutes “ESG” and “green investment” is muddled and unclear. There is a reporting issue that the whole industry suffers from—there is not enough data to separate good from bad companies—and thus much of the investment selection gets generalized according to industries (e.g. tech is good, energy is bad), which is so broad as to be almost useless.

(New York)

Are annuities a good deal? This is a seemingly simple question with an incredible range of answers. The reality is that the answer depends on who you ask. If your main consideration is stable income in retirement with little risk to principal, then the answer is a resounding yes. If you are looking for great upside great and are not concerned with losses of principal, then the answer is no. And therein lays the most important part of annuities—they need to fit client goals. Studies show that despite the lack of “fit” for some clients, annuities do add value to almost all portfolios, even if clients are often reluctant to buy them.

FINSUM: Annuities are about to be allowed into 401(k)s, which is a big growth opportunity for the space. Insurers are going to have to keep honing their positioning and messaging to appeal to retail buyers directly.