10-Year Treasury Yield Tops 3%

The yield on the 10-year U.S. Treasury notes hit its all-time high in more than four years at 3%. Yields have been a hot topic for many investors around the world as its movement significantly triggers the global finance markets and currencies around the world. Yields have been driven higher as strengthening inflation prospects added to expectations for a faster rate of monetary tightening from the Federal Reserve. One head of Equities in London claims, “The three percent level is a big psychological point for investors and has gained huge focus. It is not the move towards three percent yield that is unusual, but the historically low level of yields we’ve seen in recent years further reflect

Tensions Arise in the Eurozone

With tensions rising over trade disputes and the strengthening of the euro, the economy in the Eurozone has started to slow down. Taking into account all global market events, the European Central Bank (ECB) is now contemplating rate movement and rethinking its decisions on proceeding forward. Analysts have also dialed back their forecasts for when the ECB might increase short-term rates this year. Trade disputes have been an important concern for the central bank because the Eurozone was successfully able to escape the trenches of a major debt crisis through the strong export system around the world. The Eurozone exported goods and services worth 44% of its economic output last year and had

The Flattening Yield Curve

Despite a healthy equity risk premium and strong fundamentals, a flattening yield curve is causing concerns among investors. The gap in long- and short-term borrowing is hovering near its lowest in over ten years. While it might be true that flattening yield curves historically have significantly increased the probability of recessions, incoming NY Fed chief John Williams, and Chicago Fed President Charles Evan appeared to downplay concerns. Williams cautioned investors to wait for the shrinking balance sheet to help steepen the yield curve through upward pressure on longer-term rates. Overall, increasing spending by the US with lower expected Tax revenue are resulting in an overall higher e

Transformation of Retail Locations

With hundreds of retailers closing down stores across the country, malls have witnessed a sad reality in the modern world: foot traffic is declining. Online sales are cannibalizing on sales of retail stores, a story that is hardly new to most investors. While there is a negative investment stigma associated with malls, the recent transformation in investment should be watched carefully. Major owners of strip malls, such as the Federal Realty Investment Trust, are aware of the outlook and closings. Mall tenants in popular locations have re-strategized to transform malls into entertainment locations, shifting from retail-focused tenants. Amongst these new tenants are gyms and fitness centers.

Splitting Bets hit Facebook Stock

With the world largest asset manager, BlackRock ($6.32 tn), is increasing its holding in the Social Media giant, the world’s largest stock-picking fund stands out amongst other investors. Other funds managers have reduced or eliminated their position amidst controversy about the company’s data management. This position might reveal itself as an endorsement of Facebook by a major outside shareholder at a time when arise over stricter regulation. Among the bears are Swiss Vontobel Asset Management ($40bn), Copper Rock Capital ($5bn) Janus Henderson Global Technology Fund ($2.65bn). Before concerns about privacy arose, Wall Street was extremely bullish; 90% of analysts gave Facebook a “buy” rat

British Pound: Momentum?

On the US perspective, The British pound rose to the highest level since the Brexit referendum in June 2016, reaching $1.44. Besides a more positive outlook on the situation of Brexit, raising expectations of an interest rate hike by the Bank of England are seen as the culprits. Data from the Commodity Futures Trading Commission shows leveraged funds as most bullish on the Pound since 2014, marking the fifth successive week of improved sentiment towards the UK currency. Currently, the Pound is trading at a ten-month high against the Euro. The currency is suspected to be boosted by prospects of a 'soft Brexit'. Recently, Britain is expected to have struggled for foreign investment as consequ

Why Policymakers Shrug at Market Volatility?

The Fed will continue to use its methodical approach on slowly increasing interest rates after the Federal Open Market Committee (FOMC) meeting in March. One statement that caught a lot of attention last week was the relatively high chance for policymakers to change the current plan for two or three hikes in the year of 2018. Even though the full picture moving forward is a bit cloudy, there are talks of a mild overshoot of the inflation target of 2% by 2020. Keep in mind that this news does not reflect the more pronounced period of above-target inflation. The bar to change the plan of increasing rates two or three times in 2018 was further supported after most of the Fed officials upgraded

Are Government Bonds a Safe-Haven Asset against Equity Market Volatility?

Events that have recently been triggering the market have stimulated investor curiosity around the relationship between government bonds and the returns of equities. Looking back, the S&P 500 took a major downturn in January and February of 2018 due to poor market conditions. Not only that, but the 10-year government bonds also showed a positive trend from 2.6% - 2.8% in the beginning of the year. The reputation of bonds as a “safe-haven” asset during a time of crisis is being questioned by investors all around the world today. With the recent rise in bond yields due to positive results in hourly earnings numbers and payroll, investors reassessed their outlook on inflation. This was backed b

Direct Listings: Do the Investment Banks Have to Worry?

With the direct listing in the public market of Spotify S.A, many news articles have appeared in regard to the future of underwriting. A direct listing allows a company to transfer its shares to an exchange directly, avoiding the high fees of investment banks and the quiet lockup period. Yet, it remains critical for investors to take a look at the circumstances that led Spotify to choose a direct listing. While it is true that the range was continuously adjusted upwards in the hours leading up to the IPO, with the closing price much above the max of the range estimated by analysts, there is much more to direct listings. The direct listing choice has much to do with the financial and cultura

Earnings Week Volatility

With increased volatility in recent weeks, the US market is anticipating a tough earnings week. Investors fear missed expectations could change the narrative of strong global fundamentals. Strong earnings are believed to decrease volatility in current market and return optimism to the stage. With a market correction for the first time in two years, the SP500 closed below its 200-day moving average, down 2.6% from the beginning of the year. The S&P 500 recently traded at 16.3 times earnings estimates for the next 12 months, down from 18.6 times in January. Historically, US companies beat earnings expectations 68% of the time, and in the recent year have beaten earnings expectations 75% of the

US Inflation: No Signs of Overheating Yet

The Commerce Department released inflation numbers for the month of February on March 29th, revealing a 0.2% inflation figure for February, following a 0.2% figure in January. These figures are close to the 2% annual target the Federal Reserve set. Overall, the CPI increased by 2.2% YOY through February, compared with 2.1 percent in January. These figures exclude prices of what economists deem “volatile” categories, such as food and energy prices. James Powell, the new Fed Chairman, was quoted as saying “In coming months, as those earlier declines drop out of the calculation, inflation should move up closer to 2% and stabilize around that level over the medium term.” If inflation figures are

Wealth Management: China

Discussed earlier, the US wealth management industry is adapting to changing demands. This is also the case in China but under different circumstances. The Chinese industry is in the hands of the younger 30s-40s demographic. With the cultural emphasis on savings adapting towards investment, the Chinese have driven worldwide investments in recent years, allowing its country to be an investment powerhouse. These factors lead to a rapidly growing industry for wealth managers. The growth is part of Chinese incredible pace in digitization. Hence, in this industry the transition went from savings accounts to digital wealth management, skipping the personal advice from financial advisers. Generally

Municipal Bonds Performance

The first quarter of 2018 has been disappointing for investors due to concerns about rising interest rates, inflation, and newly established tax rules. In February and March, municipal bond mutual funds only saw an investment of $268 million – a 92% drop from the five-year average. In the past three months, a majority of municipal bonds ETFs have returned between a negative 1%-2%. A bad quarter for municipal bonds has not occurred in the markets since Q1 2008. Yet, despite concerns about such congruence, much of the effect is caused by lower taxes leading to lower demand for tax-exempt bonds. Due to worrying purchasing powers, investors are looking towards newly issued bonds rather than outs

The Future of Commercial Drones

With rumors going around about the number of drone pilots exceeding private manned aviators in a few years, U.S. regulators are expecting the number of commercial drones to quadruple over the next few years. The Federal Aviation Administration claims “450,000 such unmanned aerial vehicles will be operating in domestic airspace in 2022, versus today’s roughly 110,000.” The industry is predicted to show tremendous growth despite federal regulations. Commercial drones are said to “sky-rocket” up to 600,000 within the next decade helping many online shopping companies like Amazon grow exponentially within their delivery business. The FAA claims that airborne deliveries are “a lot closer than man

Consumer Spending Slows Down Despite Strong Economic Outlook

Consumer spending in the United States has slowed down in the recent months despite a tight labor market, a strong handle on short-term rates and steady economic activity around the world. Everyday consumers are puzzled by the fact that banks are becoming more cautious when it comes to lending or issuing new credit-card lines. According to the Commerce Department, household spending only rose by 0.2% in the early months of 2018. Compared to historical data, consumers were said to be saving more and spending less, which negatively impacted the retail industry who is heavily reliant on consumer spending. Sales in the retail industry have been spiraling downwards for the last three months in 20

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