Monday, 22 October 2018 10:27

(New York)

Investors have gotten so used to low inflation that it is sometimes hard to imagine seeing it rise. However, Morgan Stanley is warning that inflation is rising across the globe and investors need to keep an eye on it. In Europe, Asia, and the US, inflation has risen from 1.1% to 1.4%, and it is bound to move higher, according to Morgan Stanley’s chief global economist. Interestingly, MS argues that the Euro area and Japan will see a higher rise in inflation than the US.


FINSUM: If inflation rises more strongly in other developed markets than the US, will that lead to even more foreign buying of US bonds because yields in those locations are so much lower? In other words, will there be even more demand for US bonds?

Why This Selloff May Change Everything

The Fed Might Take a Very Hawkish Turn

The Recession Will Arrive in 2019

Monday, 04 January 2021 17:22

(New York)

With the calendar flipping to 2021, the big question on everyone’s mind is what 2021 will hold. 2020 was an exceptionally wild, and ultimately very profitable, year for investors. And within the final few months of 2020 was a developing buy signal that rarely occurs. That signal was the constant revision of earnings estimates in an upward direction. Remember that analysts’ earnings estimates are very frequently revised just before earnings are released, and the large majority of the time those revisions are towards the downside. However, in nearly every week of Q4, revisions moved estimates higher. According to Jefferies, “We’d argue that this is one of the most important tailwinds for equities, as earnings revisions are rarely positive”.


FINSUM: Revising earnings upwards breaks almost all rules of the equity research game, so when it happens it is quite notable. This suggests some strongly positive momentum for the economy.

Morgan Stanley Warns Investors of Imminent S&P 500 Drop

2020’s Biggest Stock Losers are Now White Hot

Why 2021 Will Be Very Bullish for Investors

Thursday, 14 January 2021 13:21

(Silicon Valley)

The Apple Car (capital C!) has been hyped all over the internet over the last year, and investors seem to be frothing over the idea. See the full story here on our partner Magnifi's site.

M2M ETF: The Next Phase of the Technological Revolution

Why This Tech Winning Streak Means More to Come

Are Big Tech Companies Overvalued?

Friday, 17 July 2020 16:40

(New York)

Because of how the polls are trending, very few seem to be thinking about the fact that a Republican sweep of all three chambers of the government could happen. When you step away from the polls and think about the fact that Republicans currently control two of the three chambers, it becomes more realistic; and even more so when you consider that polls are likely skewed towards Democrats because of “silent” Republican supporters. If the Republicans sweep, or even just if Trump wins, then the sectors that will surge are energy, banks, healthcare, and defense. In particular, think names like Marathon Petroleum, Bank of America, Pfizer, and Northrop Grumman.


FINSUM: This may be unlikely, but it is not as wildly unrealistic as some make it sound. Perhaps smart to have a portion of the portfolio in these sectors headed into the election?

Trump is Weakening in a Key Battleground State

Twitter Starts Undermining Trump

Biden is Pulling Ahead of Trump in Key Swing States

Thursday, 10 December 2020 10:27

(New York)

JP Morgan put out an interesting recommendation to investors recently. They said the best place to make money in the recovery might not be in the US, but rather in international stocks. According to Gabriela Santos, global market strategist at JP Morgan Asset Management, “When you have a cyclical recovery like we expect in 2021, it’s really international’s time to shine … We think it’s really important for investors to have a balance between U.S. equity exposure and international exposure as we go into the year of the vaccine for 2021”. The key argument here is that international indexes are more dominated by cyclical stocks than tech, and those are the share poised to really gain as the vaccine plays out.


FINSUM: This is all pretty basic. International indexes have not recovered as much as US stocks, and are composed of companies that are likely to start outperforming at this stage of the recovery. Europe in particular seems to be a good bet.

Why it is a Great Time for International Stocks

Why European Stocks are Gaining Popularity with US Investors

Europe Plans the Great Re-opening

Thursday, 15 August 2019 11:41

(Bangkok)

While many are worried about the domestic economy and whether the US is headed for a recession, those invested in emerging markets should perhaps be even more concerned. One of the fears specialists in the area have is that there is probably about $200 bn of unreported Chinese loans on the books of emerging market borrowers. China is not obligated to report these loans anywhere, so no one is quite sure of the size of the exposure. The risk is that as the economy sours, and these credits debts become distressed, China could impose some severe conditions on borrowers, which could cause emerging markets to seize up.


FINSUM: We could see this becoming an issue, especially because China will be feeling distress itself, which means it is likely to use a heavy hand. Even if nothing comes of this, it will likely weigh on EM asset prices in the near-term because of the uncertainty.

Why EM Investing No Longer Makes Sense

3 Reasons Not to Panic Over the Trade War

Why It is Time to Buy Emerging Markets

Monday, 23 March 2020 16:06

(Washington)

The Fed announced an unprecedented monetary stimulus package this morning. The central bank declared that its new bond buying program was unlimited, and that it would immediately start buying hundreds of billions of different types of bonds in an effort to unclog credit markets. They also extended lending facilities to new markets such as municipal bonds.


FINSUM: The Fed has been far from shy to in reacting to this crisis, but nothing it is doing seems to be helping markets much. Post-announcement, the Dow is already down over 3%.

Bond ETFs are Surging

The Fed is Considering a Big Change That Will Help Markets

Bond ETFs are Surging

Monday, 21 December 2020 17:00

(New York)

The annual next-year forecast cycle for Wall Street’s investment banks is in and some of the findings are interesting. As usual, banks are fairly bullish. However, that was certainly not automatic this year given the huge tumult in markets in 2020. One particular forecast stood out—Goldman Sachs. The bank’s research team, led by David Kostin, has its official 2021 S&P 500 price target as 4,200, or just about 14% ahead of today. Interestingly, the bank also thinks gold is going to rise strongly, from the mid 1,800s today to 2,300. According to Kostin, “On absolute metrics like price/earnings...the market is very expensive relative to its history, in the 90th percentile or greater … But relative to interest rates, the stock market is somewhat attractively valued. Those are two different stories—absolute valuation versus relative valuation”.


FINSUM: As tough as it is to swallow on a historical basis, we think the interest-rates measured basis for current valuations makes a great deal of sense.

Goldman Says a Sizable Correction Isn’t Coming

Recovery Check: Jobless Claims Come in Way Higher Than Expected

Big Banks Say the S&P 500 Will Surge in 2021

Friday, 15 January 2021 14:46

(Washington)

The general understanding among wealth management regulatory experts has been that the Biden administration was not overly likely to overturn Reg BI. However, that faith might be waning in the face of some developments out of Congress. The House Financial Services Committee, led by Maxine Waters, has been adamantly pushing for Biden to completely overturn the rule and bring in new legislation. To this point, most thought Biden would simply install a new SEC chair that would become a stronger enforcer of the rule rather than trying to write an entirely new one. And with the name of former prosecutor Preet Bharara as the rumored next head of the SEC, the focus on enforcement makes sense.


FINSUM: We wonder to what extent Biden might reward his Democratic allies in Congress by pushing an agenda that writes an entirely new rule. On the one hand, it does not appear too farfetched, but on the other, it seems Reg BI may be way down the priority list given the pandemic.

How New Tech Can Help Wealth Management

SEC Makes a Big Move to Tighten Reg BI

Why Fixed Index Annuities Work Right Now

Monday, 21 October 2019 10:51

(New York)

Gold has been doing well this year alongside all the market turmoil and uncertainty. While one could construe recent progress on a trade deal with China as potentially bad for gold—given its status as an uncertainty hedge—the reality is that rates are headed lower via Fed cuts. This means the Dollar will weaken, and in turn help gold. Societe Generale, for instance, is advising a maximum allocation to gold, saying investors should have 5% of their portfolios in it. Additionally, a resolution to the trade war would probably also weaken the Dollar as there would be less desire to take advantage of its safe haven status.


FINSUM: Basically Soc Gen is arguing that gold will benefit from both lower rates and a risk-on trade. The former aspect seems sound, but gold benefitting from less anxiety? Sounds a weak supposition to us.

Time to Load Up on Gold

JP Morgan Says it is Time to Sell Gold

Gold is at a Six-Year High

Monday, 20 January 2020 13:36

(New York)

Financial advisors often wonder about the best way to get client money into private equity. The industry has long had very high hurdles for investing directly in funds, and publicly traded funds that try to replicate private equity returns are still nascent. However, there is another good way to get PE like returns by proxy—buy publicly traded private equity company stocks. KKR is a very well known firm that is currently trading very cheaply and seems like a good buy. The stock rose 50% last year but badly trailed its rivals in a year that saw many PE companies double in value as they shifted from partnerships to corporations.


FINSUM: The market seems to be underpricing KKR’s ability to create management fees based on its dry powder, which is causing the weaker valuation.

Gold Rush as $368m of Bars Fall from Plane

ESG is Now Mainstream

Why Hedge Fund Fees are High

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