FINSUM + Magnifi: BofA Says the Market is Flashing a Big Warning Sign
April 6, 2021
Bank of America’s Sell-side indicator that tracks equity allocation increased to 59.4%. It's the
third month in a row on the rise. This puts it within one percentage point from the bearish sell
sign and its highest level since 2007. This would be contrarian as investors are bullish on stocks
as both S&P 500 and Dow Jones are trading at or near all-time highs. Investors should be
cautious because stimulus and a strong economy are already priced into the market. But
investors looking to hedge might be wise to hold off or look for cyclical or value funds, rather
than a full-blown exit. Although volatility should be expected to resume nonetheless in the
second half of the year as the economy settles back to normal.
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.
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: 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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