FINSUM + Magnifi: The Biggest Market Impact of COVID is Just Beginning
(September 2020)
While the pandemic has hit the economy and markets hard, the real long-term effect that the recession could have on the economy likely hasn’t even started yet. What is that effect you might ask? Deflation. When the pandemic first hit there were worries about inflation because of price spikes in certain consumer goods. However, over time those have proven to be transitory, and instead, what is taking hold is the realization that average costs are falling in many parts of the economy, such as rent, medical care, and college tuition. For example, if you strip out housing and used car prices, the latter of which has surged during the pandemic, consumer prices as a whole fell in September.
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FINSUM + Magnifi: Funds That Enable You To Invest in Diversity
(September 2020)
At its heart, ESG investing is about risk mitigation. While morality is at the heart of the endeavor, ESG is an attractive investment for some people because it may screen out some risks while earning good returns. While climate change gets the bulk of attention within ESG, diversity is an increasingly important component in 2020. So how can investors specifically invest in companies who are making advances in the area of diversity? Here are three ETFs to consider. The first is the SPDR SSGA Gender Diversity ETF (ticker: SHE); secondly is the Pax Ellevate Global Women’s Leadership Fund (PXWEX). Both funds focus on companies with gender-diverse leadership teams and policies that support the empowerment of women in the workplace. Another fund, focused on racial diversity is the Impact Shares NAACP Minority Empowerment ETF (NACP), which invests in companies that are taking real action to fight for racial justice.
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FINSUM + Magnifi: This Major Bank Just Warned Investors to Dump Big Tech Stocks
(September 2020)
With the decline in big tech stocks a month ago and increasing breadth across indexes in the last couple of weeks, there has been increasing concern about the risks associated with tech megacaps. Worries about holding FAAMG have lost some of their potency with investors. That is a mistake, according to Societe Generale, who has just warned investors it is time to cash in their chips on those stocks. SocGen reminds investors that by the end of August, technology comprised 64% of the S&P 500, close to the 70% reached in the early 2000s tech bubble. They argue that with the economy healing and potential increases for regulation in the sector, it is time to look elsewhere.
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FINSUM + Magnifi: Why Gold is a Good Bet Right Now
(October 2020)
Gold is looking like a good bet right now. The metal has had a very strong year after almost a decade of lagging, and it is no surprise—global calamities are the perfect environment for gold appreciation. But we are clearly past the initial panic of the pandemic, so what is the current case for the shiny metal? The answer is that the roadmap looks very positive. Two tailwinds appear to be in place, one in the short-term, the other in the medium- to long-term. Firstly, the election is likely to cause a great deal of uncertainty and volatility which gold will probably benefit from. Secondly, as a new stimulus package draws nearer, the credit quality of US Treasuries is causing some anxiety. Gold has been rising alongside this fear, with a 1.8% gain yesterday as investors increasingly believed a stimulus package would be passed.
FINSUM + Magnifi: Morgan Stanley Says Now is the Time to Go All-in on Stocks
(October 2020)
In an unusually bullish opinion, one of Morgan Stanley’s best-known and most bearish strategists—Andrew Sheets—has just released a very bullish outlook. The bank’s chief cross-asset strategist is telling investors to dump their defensive positioning in large tech and long-dated Treasuries and switch to risk-on asset like small caps. Sheets contends—in contrast to many other analysts—that growth will continue unabated, saying “The glass half-full view of stimulus talks is if you don’t get it today you’ll get it tomorrow from whomever wins the election”. He points to the recent outperformance of cyclical and value stocks as evidence that investors are getting more bullish.
FINSUM + Magnifi: Look Out for a US Economic Stall
(October 2020)
The outlook for US economic performance took a significant hit this week. That hit was when President Trump called off further negotiations about a stimulus bill until after the election. That means the odds for more stimulus dollars to land in consumer bank accounts in the next couple months plummeted. Oxford Economics argues that with the recent expiration of Trump’s extra payments that he created via executive order, there is going to be an income “cliff” for most Americans. “Without faster job growth — unlikely at this stage of the recovery — or increased fiscal aid, households, businesses and state and local governments will be increasingly susceptible to a deterioration of the health situation”, says Oxford Economics, adding that it may mean the US enters “stall speed”.
FINSUM + Magnifi: The China Situation Will Grow More Tense, and Not Because of Trump
(October 2020)
President Trump has been very critical of China and the US’ relationship to Beijing over the last four years. He has almost single-handedly driven a tense trade war between the two countries. However, following almost four years of escalating stand-offs, something odd is happening—policy experts say that a Biden victory might actually make the US-China relationship even worse than it is with Trump. According to the top Asia official from the Obama years, “I think there is a broad recognition in the Democratic Party that Trump was largely accurate in diagnosing China’s predatory practices”. And according to a former Chinese trade negotiator, “If Biden is elected, I think this could be more dangerous for China, because he will work with allies to target China, whereas Trump is destroying U.S. alliances”. To that point, another commentator, a Chinese policy expert at Renmin University in Beijing says “Biden would make the hard lines more effective and more efficient”.
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.