Markets
Advisors don’t need to be told that rates are at ultra-low levels. Yet despite this, munis are still maintaining their attractiveness. See the full story here on our partner Magnifi's site.
(New York)
Gold has been hurting recently, with prices currently around $1,800 after some strong gains over the course of 2020. The big question is where gold is headed now that the vaccine is rolling out and a new administration is coming in. See the full story here on our partner Magnifi's site.
(Washington)
One of the big risks to the muni sector that has gone underappreciated by the financial media and investing community is the threat of the soon-to-be revamped SEC making some big changes to the asset class. See the full story here on our parnter Magnifi's site.
More...
(New York)
One of the big risks to the muni sector that has gone underappreciated by the financial media and investing community is the threat of the soon-to-be revamped SEC making some big changes to the asset class. The reason for concern is that Elad Roisman has just been appointed interim chief of the SEC. Roisman has long had a focus on transparency in fixed income markets, which he and others at the SEC feel is too opaque. This has raised the risk of new regulation in the space. That said, his short term before likely being replaced by Biden will limit his time frame to change any policy.
FINSUM: Roisman is a Republican and was previously chief counsel at NYSE Euronext, which gives him a very significant command of market structure. This would certainly equip him with the know-how to overhaul fixed income markets, but unless the Biden administration wants that to be a focus, it doesn’t seem he will have enough time. Bullet dodged or opportunity missed?
(New York)
Small caps have had a great run since the market’s bottom in March. The IWM ETF, which is the market’s effective benchmark for small cap performance has had an astonishing year. Since October alone IWM has returned 35%. If you look since the beginning of March, the return is over 100%. Many would be okay with earning that in almost a decade! With that in mind, some contend that it is time to take profits as the asset class is priced for perfection.
FINSUM: This is an interesting and classic debate. If performance is so stellar, should you take the victory and get out, or stick with your winner? If momentum investing has taught us anything in the last half decade, it is to stick with winners. Looking more fundamentally, small caps have historically outperformed when the economy is growing, so there should be some tailwind.
(New York)
Munis had a wild and rough year in 2020. Everyone who invests in the sector is wondering what’s next. While the lack of direct state and municipal aid in the recent congressional package is a downer for muni investors, there is a lot to be happy about. Election certainty, good news on the vaccine front, and the inauguration of Biden are all raising the sector’s prospects. Biden is seen as more likely to help local state and municipalities with aid, which has raised prospects for the sector. Downgrades are a risk, but widespread defaults seem unlikely.
FINSUM: On the whole, things seem like they are set up for a pretty positive year. As to the possibility of downgrades, it is worth noting that downgrades usually trail economic performance, so they would take a while to come through.