FINSUM + Magnifi: Big Near-Term Losses in Bonds May Have Just Begun
(October 2020)
Anyone watching the fixed income markets this week will have noticed a surprising and worrying trend: the yield curve steepened without any real positive signs from the economy. The spread between five-year and thirty-year Treasuries reached its highest point since 2016 this week. The reason why is that with Trump having COVID, markets have been betting more on a Biden victory and a possible blue sweep. That has raised expectations for more debt issuance as part of additional stimulus, all of which would change the supply and demand picture in the Treasury market.
Defensive Investing in a Pandemic
None of us have ever lived through anything like this before. The COVID-19 pandemic has touched every corner of the globe, sickening nearly 45 million and killing more than a million worldwide. It truly is the defining story of our time and a great human tragedy.
Yet, as we all work to protect those most at risk and get through this together, savvy investors are finding novel ways to, not profit off the pandemic, but uncover new opportunities as a result of COVID-19. This is being driven by everything from increased spending on sweatpants and leisure wear, to reduced gasoline sales as commutes faded into memory, to new opportunities for the grocery sector thanks to at-home food prep. These trends and others have formed the foundation of new defensive investment plays.Read more
FINSUM + Magnifi: The Best Bond Funds for These Volatile Times
(October 2020)
Not only is the market worried about the election and its possible contestation, but there is a pandemic and ultra-low interest rates complicating matters for the bond market. Some have compared the current rate environment to Japan, but in reality, it is worse since the US still has inflation, and thus genuinely negative rates. This has made fixed income one of the most volatile parts of any portfolio when it used to be the safe haven. So how can investors construct a robust and healthy allocation to fixed income? The key is balancing the need for income with the need for safety. Here are some top bond funds whose managers are seeking to do just that: the BlackRock High Yield Bond / BHYAX, the T. Rowe Price Spectrum Income / RPSIX, and the Baird Aggregate Bond / BAGSX.
FINSUM + Magnifi: The Best Funds for the Election
(October 2020)
Investors have a great deal of consternation about the election. Not only does the outcome offer two very different realities, but the odds of a hotly contested election are high, with a potentially brutal effect on market prices because of the long period of uncertainty that would ensue. With that in mind, here are some ideas for how to play the election. In a Democratic sweep, where higher taxes seem likely, big stocks might face some headwinds. However, consumers would probably receive some extra stimulus, which means spending would be better. In this scenario, look at McDonalds, Target, Dollar General, and Nike. If the election is split, with a Democratic president and a split Congress, that would likely mean a slower recovery and less spending, so think about Walmart, Dollar Tree, and Home Depot. Finally, in a Republican sweep, most things would stay the same as now, and Best Buy, Walmart, Dollar General, and LuluLemon could do well.
FINSUM + Magnifi: Why the Election Means the New DOL Rule Is Dead
(October 2020)
For much of the year, the wealth management industry has been concerned about the fiduciary rule. While it is not as onerous as the first version of the rule, it is universally disliked—those who are against a fiduciary concept for brokers dislike it, but so do those who want a uniform fiduciary rule. Well, everybody is likely to be happy then as it is appearing increasingly uncertain whether the new DOL rule will ever come into force. The reason why is simple—the DOL has probably run out of time. According to partner Bradford Campbell at industry-leading law firm Faegre Drinker Biddle & Reath, there just isn’t enough time to do the full rewrite of the rule that the DOL needs to accomplish before the effective November 1st deadline. November 1st is essentially the safe date for the rule, as it needs to be on the books before then to have a good chance of becoming permanent. Speaking about the possibility of Biden becoming president and overturning the rule, “Basically speaking, if a rule has been on the books for more than 60 days, to displace it, you have to do new notice and comment rulemaking," says Campbell.
Data Infrastructure
We shop online, we send emails, we subscribe to newsletters, we stream television shows, we listen to podcasts, we Instagram, we tweet, we share on Facebook, we Google, and in doing so, we create data. We create tons of data.
In fact, 1.7MB of data is created by every person on earth every second of the day. In the last two years alone, 90% of the world’s data has been created according to the Information Overload Research Group (IORG).
Where is all of this data coming from?
Every day, 306.4 billion emails are sent, and 5 million thoughts are Tweeted. One scroll through our inbox might make us feel like the extent of data overload isn’t that unbelievable, after all.
The fact is that we do a lot of online sharing. Companies that want consumer dollars know this, and they aren’t standing idly by. Beyond the giants of the tech industry like Google and Amazon, small- and medium-sized enterprises increasingly want effective data analytics tools to maximize revenue, according to Advance Market Analytics.
Interestingly, according to Forbes, jobs including Data Scientists and Big Data Engineers are in demand now more than ever before. These companies are investing in better data infrastructure to get better data.
All of that data, and all of those needs, make the data infrastructure ecosystem increasingly complex. Here’s what investors should know about this growing industry that’s not expected to slow down anytime soon.
What Is Data Infrastructure?
Before diving into data infrastructure, let’s discuss big data—or, the information that companies everywhere are trying to generate insights from. Big data has four “Vs” or measures of value: volume-based, velocity-based, variety-based, and veracity-based.
Volume-based value means that “the more comprehensive your integrated view of the customer and the more historical data you have on them, the more insight you can extract.”
Velocity-based value means that the faster that “you can process information into your data and analytics platform, the more flexibility you get to find answers to your questions via queries, reports, dashboards, etc.”
Variety-based value means that “the more varied customer data you have – from the CRM system, social media, call-center logs, etc. – the more multifaceted view you develop about your customers.”
Veracity-based value refers to the accuracy and cleanliness of customer data.
Why do these Vs matter, again? They are the end goal of good data infrastructure, which is the way that data is used to provide useful insights. It means having the “right tools for storing, processing and analyzing data.
Let’s start with storage. It seems like almost everything is stored on the cloud these days, but where exactly is that?
The cloud is typically an off-premises data center that is accessed remotely through the internet. Cloud data centers allow clients to manage their data through third-party managed services, using hardware that’s run and serviced offsite by cloud companies in physical locations around the world. In essence, these companies are creating a virtual infrastructure for the systems that used to be housed on-site in every corporation.
With the overwhelming growth in data creation, physical data centers that service these cloud companies are multiplying, and so is investment in them.
Storage, of course, is only one component of data infrastructure. Beyond storage, data infrastructure includes the network that transfers the data, the applications that host the analytics tools and “the backup or archive infrastructure that backs it up after analysis is complete.”
Why Invest in Data Infrastructure?
According to a report by the Motley Fool, “data is the oil of the digital economy.”
Effective data infrastructure means more money and more efficiency, and not just for retailers figuring out how to get an online shopper back to their site to add something to a shopping cart.
Bankers, for example, can use big data to help minimize risk and fraud. Moreover, manufacturers can use it to quickly troubleshoot problems, making better business decisions.
For all sorts of businesses, benefits of using data strategically or prioritizing good data infrastructure include reduced costs, reduced time spent, optimization of product development and allocation, and more informed decision making.
According to an Advance Market Analytics report, the demand for big data as a service is driven by (1) an increasing demand for real time data analytics solutions, (2) the growing use of big data to identify fraud, and (3) a significant data influx for small and medium sized enterprises that want effective data analytics tools to maximize revenue. These are aided by market trends including the (1) the rise of cloud computing and the integration of big data with cloud-based services, (2) a huge influx of data, and (3) more modern business models.
The power of big data is a frontier of sorts. And, beyond the companies looking to improve their own businesses by employing data services, there are a multitude of innovative companies streamlining huge amounts of data into useful information.
For investors, this means that there is more than one way to invest in this growing industry. Fortunately, there are a number of ETFs and mutual funds available for investors interested in supporting big data and the growth of data infrastructure. For instance, a search on Magnifi suggests a number of different options.
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The information and data are as of the October 1, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Everything Investors Need to Know About Actively Managed ETFs
Over the past 20 years, ETFs have become an increasingly popular alternative to traditional mutual funds. They’re easy to access, trade like stocks and available to all investors no matter how much they want to invest at any one time. And, while passively managed ETFs have become increasingly popular as an investment tool, there’s more to the ETF asset class than just passive funds.
ETFs simply aren’t one-size-fits-all.
FINSUM + Magnifi: How Hot New Buffer ETFs can Help in the Current Environment
(October 2020)
If there is one corner of the vast ETF world that has been getting attention recently, it is buffer ETFs. Relatively new to the scene, this type of ETF tries to ensure returns to investors within a set range. For example, some will allow you returns of up to 16%, while protecting against any losses of more than 10%. They have a defined timeline, with one year being common. There are currently about 50 buffer ETFs in the market, with over $4 bn in assets total. Two of the top buffer ETFs by AUM are the FT CBOE Vest US Equity Deep Buffer ETF- February (DFEB, $531m AUM), and the Innovator S&P 500 Power Buffer ETF (PJAN, $295.81m AUM).
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FINSUM + Magnifi: The Best Minimum Volatility ETFs
(October 2020)
If there were ever a time for minimum volatility ETFs, it is now. Minimum volatility ETFs are a name for a broad group of funds that seek to minimize volatility by choosing a basket of stocks that have historically been more placid than their cohort. With virus numbers rising again, and a potentially very turbulent election, many think markets are going to be highly volatile—or just sharply negative—for the rest of the year. With that in mind, here are some of the best low volatility ETFs: BlackRock’s iShares Edge MSCI Min Vol USA ETF (USMV), the Invesco S&P 500 Low Volatility ETF (SPLV), and the iShares Edge MSCI USA Quality Factor ETF (QUAL).
FINSUM + Magnifi: Goldman Warns the Election is a Big Lose-Lose for Stocks
(October 2020)
Goldman Sachs is worried about the election. In particular, they are concerned about what a contested outcome could mean for stock prices. Because of that they think the debates, which started this week, have the potential to be an “important catalyst for investors to assess risks”. The debates have the possibility of swinging the election strongly one way or the other, which means they can be tipping points for investors. “One way to lower the odds of a contested outcome (that brings noise and volatility) is via a large margin of victory that cannot be undermined”. That said, according to the bank’s strategists, even a big win could have risks: “Although undoubtedly under the clean-sweep scenario there is the negative implications for risk assets to be considered, stemming from a Democratic legislative agenda including higher corporate taxes and increased capital-gains taxes”.
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