Fiduciary Risk and Magnifi’s New Fi360 Scoring
Advisors know that private wealth management is an increasingly competitive market. And while all advisors in the field should act as responsible fiduciaries by minimizing fiduciary risk, not all do.
As an advisor, this leaves you with two challenges. First, minimizing fiduciary risk in all portfolios, and second, demonstrating this minimized risk to clients and prospective clients. While that might sound daunting, with the right technology, it’s entirely possible.
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Build Client Portfolios the Easy Way
Great news… your firm has landed new clients and is growing fast. The papers are signed, the money is in place, and now, all that you need to do is seamlessly deliver flawless, individualized portfolios for each of them that can weather the current tumultuous economy. No problem, right? If you have the right technology, it’s no problem at all.
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FINSUM + Magnifi: Potential Trouble in the High Yield Market
(October 2020)
The high yield bond market is sending some very odd signals. Over the month of September, something highly unusual happened—the most poorly rated bonds outperformed higher-rated ones. The junk bond market as a whole posted a 1% loss in September, but the lowest rung—CCC+ and below—gained 0.4%. According to well-known strategist Marty Fridson, “The market’s message, namely, that risk decreased in the riskiest high-yield bonds while increasing in the least risky bonds, is perplexing … If a weakening of economic prospects caused default risk to increase, then surely the issues most susceptible to default were the most affected”. According to Fridson, what might be happening is that two separate investor groups have settled into the market: “Our notion is that some investors respond to an increase in credit risk by shedding speculative-grade bonds, while others wait for just such opportunities to put money to work … We suggest that the former group dominates the action in the medium-to-upper end of the speculative-grade quality range, while the more opportunistic players exert greater influence on the bottom tier’s behavior.”
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FINSUM + Magnifi: Healthcare - The Winners and Losers in the Election
(October 2020)
One of the sectors that will be impacted most acutely by the election is healthcare. A win by Trump or Biden has highly divergent outcomes for the industry. To analyze the impact, it is best to look at the space by sub-sectors. For instance, in a Trump victory, pharmaceutical companies and insurers would likely thrive with the continuation of the status quo. If Biden were to win, there would be a very different reaction. Pharma and insurers would likely struggle under Biden, but equipment manufacturers and biotech generally would see gains. For a Biden win, check out ETFs like the IBB Biotech ETF or the IHI Medical devices ETF. For a Trump win, consider the SPDR S&P pharmaceuticals ETF (XPH) or the Fidelity MSCI Health Care ETF (FHLC).
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FINSUM + Magnifi: Wall Street Warns of Big S&P 500 Drop if Biden Wins
(October 2020)
Wall Street has been all over the place in its prognostications for this election. The clear market trend over the last few weeks has been higher alongside gains in the polls by Biden. Some think a Biden win would be good for markets, but today a Wall Street strategist, David Kalayjian, is warning of a 5% drop in the S&P 500 if Biden emerges victorious. “A lot of people are worried because they don't have the details of the Democrats policies. So, the potential blue wave causes uncertainty and will be negative for the markets for a long time”, says Kalayjian.
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FINSUM + Magnifi: These Stocks Benefit No Matter Who Wins the Election
(October 2020)
The election is well and truly underway, with tens of millions of early votes already cast. That has not made the outcome any clearer though and there is a still a lot of uncertainty about who will win. As this relates to client portfolios then, one good idea is to pick stocks that seem poised to benefit in any outcome. Interestingly, the stocks that seem most likely to benefit in either situation are budget consumer-facing companies—think McDonalds, Dollar General and beyond. None of them are regulatory targets, and many seem likely to benefit from additional stimulus the government seems likely to offer. Likewise, infrastructure funds appear as though they will gain because either party will probably pass a new infrastructure bill.
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FINSUM + Magnifi: This Sector Poised for Strong Yields
(October 2020)
Yields in the US are paltry, there is little other way to characterize it. Junk bonds even have weak yields, and the risk-return profile for many areas of US fixed income look quite poor. So where should investors look? According to UBS, the answer is emerging market debt. From Turkey to East Asia, yields are much stronger than in the US, and risks—especially in China—look lesser. According to Morgan Stanley, “China was the first country to enter the Covid-19 crisis and appears poised to be the first out. Resumption of economic activity during the second quarter should jump-start global growth, especially given huge government stimulus programs”. Yields on Chinese junk range from 7.7% to 8.4% across the sovereign and corporate spaces.
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FINSUM + Magnifi: BlackRock Says it is Very Bearish on This Sector
(October 2020)
BlackRock is the largest asset manager in the world, commanding over $7 tn of assets. So when it gives its opinion on an asset class, it is usually worth listening to. Well, the asset manager’s CEO has just issued his view on a key area—emerging markets. Larry Fink, CEO, says that he is bearish on emerging markets for multiple reasons. Firstly, COVID-19 has greatly raised the risk premia for holding EM securities, and he says many EM leaders don’t understand what it will take to restructure their debts, which seems like a necessity for some. Additionally, Fink says that the move towards stronger environmental standards means money will leave emerging markets. “When we talk about climate change, and we think that’s a big issue and a reallocation of capital … part of that reallocation of capital is movement out of the emerging world”.
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What Investors Need to Know About Buffer ETFs
Exchange-traded funds, or ETFs, are a type of investment vehicle that offer access to different themes and industries, and they’re one of the most popular asset classes available today. In 2019, ETF inflows totaled $326 billion, and that figure has already been surpassed as of September 2020. In fact, ETF inflows right now are only $144 billion short of 2017's record $476.1 billion.
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An Investors Guide to Yield
The greater the risk, the greater the reward, as the old adage goes. When it comes to yield funds, that’s mostly true. High-yield assets are for investors looking to make income from buying and holding their investments. While investor taste for risk has mostly declined with the market’s volatility, high-yield funds remain an option for those investors steadfast enough to weather the market swings.
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