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.
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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FINSUM + Magnifi: Vanguard Launches New Bond ETF with Custom ESG Strategy
(September 2020)
ESG has been flourishing since COVID began. ESG and COVID era investing naturally align—at their core, both are about risk mitigation. However, the challenge is figuring out the best way to invest in ESG. The whole area is vague. There are many funds to choose from, but the way fund providers separate good companies from bad is complicated and often opaque. To this environment, enter a new fund from Vanguard, the Vanguard ESG U.S. Corporate Bond ETF. The fund covers the broad corporate bond space with an ESG lens, but does so with a very well-defined methodology. The fund is using an ESG index specially developed by MSCI and Bloomberg. The index uses a “exclusionary screening process” which filters out companies involved in various vice industries, gas, GMOs, oil, thermal coal, firearms, and anything nuclear-related.
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FINSUM + Magnifi: DOL Plan to Ban ESG from 401(k)s Gets Attacked by Industry
(September 2020)
Anyone who invests significantly in ESG will already be aware: the DOL is going after the ESG sector and has a proposal making progress that would bar the inclusion of ESG funds in 401(k)s. The push—which the DOL seems very committed to—comes despite the fact that almost everyone in the wealth and asset management spaces says there is no real problem. The DOL is making the rule because it fears that ESG funds could be against a client’s long-term economic interests. However, according to BlackRock, over the last ten years “94% of sustainable indexes outperformed traditional indexes”. BlackRock and Fidelity have both come out publicly against the rule, with the latter publishing an 11-page letter to the DOL which said the rule was not “well grounded or supported by much of the emerging data”.
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FINSUM + Magnifi: Why Reg BI Will Get Scrapped Within a Year
(September 2020)
Make no mistake about it. If you were to make odds on whether Reg BI will still be in place one year from today, most would put the chance at less than 50%. That is a pretty dramatic reality for the SEC’s centerpiece legislation of the last half decade. The reason why is that the Democratic party and Joe Biden have made it very clear that they want to pursue a more robust fiduciary standard, and they are currently ahead in the polls. If Biden wins the election, they have many avenues to do this, such as by replacing the head of the SEC, or by passing legislation that alters the Dodd-Frank Act to require a true fiduciary component.
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How to Build Client Portfolios in a Time of Uncertainty
One by one over the years you met new clients, shook their hands, and they entrusted your firm with their investments. Slowly, word got around and your portfolio grew. In January of 2020, before the world was upended by the COVID-19 pandemic, years of progress and growth seemed like the norm.
All was well.