FINSUM + Magnifi: Why the Volatility Isn’t Going Anywhere
(September 2020)
For the last several weeks the market has been mired in a rut of high volatility, mostly to the downside. Investors seem to have the impression that it will abate at any moment, but the reality is that a calming seems unlikely. This is for two reasons. Firstly, we are nearing the end of the month and quarter, and stocks are still up significantly on the quarter. This means many investors are likely to take some gains and rotate into fixed income—a negative for equities. Secondly, anxiety about the election seems to be rising, which should keep the markets volatile.
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FINSUM + Magnifi: Here is How to Play the Tension with China
(September 2020)
US tension with China is reaching new heights over the last few weeks. Not only are the two countries in an escalating trade war that has finally started to see China getting more assertive vis-a-vis Trump’s actions, but now Beijing and Washington are squaring off over TikTok. With trade relations between the countries devolving, Goldman says the best action investors can take is to invest in funds which have exposure to US onshoring efforts. Goldman’s thesis is that economic tension with China will lead to the onshoring of US supply lines, and that such a transition will benefit a handful of sectors. In particular, pharmaceuticals may do well as it is becoming very plausible that the US government might mandate that pharmaceutical drugs need to be made in the US. Additionally, automation and robotics companies stand to gain as the expense of reshoring US manufacturing leads to investments in automation.
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FINSUM + Magnifi: This Volatility is the Second Leg of a Bear Market say Analysts
(September 2020)
The volatility and losses over the last four weeks have been more severe than most imagined they would be. What started as the market “taking a breather” has morphed into very significant losses and a market teetering on the brink of returning to a bear market. Now a chorus of Wall Street analysts are saying something similar: this may indeed be the next phase of a bear market. Aside from the short-term warning sign of large investors taking profits, the long-term driver of the next phase of a bear market might be the rise of deflation. With so many workers losing their jobs, and automation taking over in many areas, deflation seems quite likely. If that happens, an extended bear market reaching into 2021 may take hold.
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Building a Reliable Retirement Income Stream
What will life be like in the days, months, and years after you retire? A lot of that depends on the income that you have after you stop working. That’s right, there’s more than one income stream that all near and far future retirees should cultivate, starting now.
FINSUM + Magnifi: Why the Senate May Not Even Try to Confirm a New Justice
(September 2020)
Since Ruth Bader Ginsburg’s death over the weekend, the news cycle has been intensely focused on Republican efforts to nominate and confirm a new justice. A lot of attention has been paid as to the exact number of supporters in the Senate as a way of deciphering whether a confirmation can be achieved ahead of the election. However, one fact that is not being discussed much is the reality that many in the Senate don’t even want to try to confirm a justice ahead of the election. The reason why is that while confirming a new conservative justice would be advantageous for them in the long run, holding a confirmation process now could have severe repercussions in the upcoming election. Many embattled Republican senators in tight Senate races could be significantly wounded by confirming a new justice now, meaning that the Republicans could risk losing control of the Senate if they press ahead with a confirmation so close to the election.
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FINSUM + Magnifi: 6 ETFs to Buy as Spending Recovers
(September 2020)
Now that many signs are pointing to an improving US economy, some investors think it is time to shift out of growth stocks and into more cyclical sectors. That said, cyclicals—which rely on consumer spending improvements—are going to be a hard place to invest because of the highly variable recovery path for different sectors created by COVID. With that in mind here are a few places to look: transportation (excluding airlines), such as the iShares Transportation ETF (IYT); or infrastructure, like the Global X Infrastructure Development ETF (PAVE); e-commerce and home entertainment, such as the Amplify Online Retail ETF (IBUY); or housing, either through single names like Home Depot and Lowe’s, or a broader homebuilders ETF like the SPDR S&P Homebuilders ETF (XHB).
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FINSUM + Magnifi: Morningstar Says Plans are in Motion for Overturn of Reg BI
(September 2020)
2020 has seen both the implementation of the SEC’s new Reg BI rule as well as the introduction of a new DOL Fiduciary Rule proposal. While both have faced opposition on all sides, it was uniformly less intense than the scorn the first fiduciary rule received. That said, Morningstar is reporting that plans are underway to scrap the new Reg BI rule, which only became official in June. More specifically, Biden is planning to scrap both rules if he takes office. That is obviously still a very big if, but the process is quite clear. Biden would appoint a new head of the SEC, who would then scrap the rule. Or, the Dodd-Frank act could be amended to make clear a full fiduciary rule needs to be in place.
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What Investors Need to Know About Minimum Volatility Funds
When the economy tanks, most people don’t rush to spend the cash left in their wallets on lottery tickets. So, why is “more risk equals more return” still such a common investing misconception?
FINSUM + Magnifi: These Tech Stocks are Still Worth Buying
(September 2020)
As a whole, the tech sector has performed splendidly during COVID. It is not just FAAMG either, numerous names across the board have seen big jumps. Investors are nervous about such high valuations, but some of the stocks’ underlying businesses justify the growth and even deserve more investment. One place to look is in advertising, which KeyBanc Capital Markets considers a “second derivative” to e-commerce growth. Accordingly, Facebook, Pinterest, and Snap seem like good buys and continued 20-30% growth looks likely. Content plays also look promising, for example Roku, which has under-appreciated monetization channels.
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FINSUM + Magnifi: The Best Way to Invest in Tech Right Now
(September 2020)
Tech mega caps have been beaten up over the last couple of weeks, but their valuations still feel staggering high and risky. That said, technology growth stocks seem like a good bet. So where is the best place to invest? The answer appears to be a diversified approach to the kinds of tech that will succeed during COVID, not just FAAMG. One way to think about this is the kind of companies that will benefit from the growing use of shared technology, infrastructure and services, internet-based products, new payment technologies, big data, the internet of things, and social media.
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