FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
4 Things Investors Should Remember After The January Sell-Off (Allianz Global Investors)
Sunday marked Groundhog Day, when according to legend if a groundhog emerges from its burrow and sees its shadow only to go back in, winter will continue for another six weeks.
“Perhaps Groundhog Day is an appropriate analogy for investors currently at a crossroads and looking for direction,” writes Kristina Hooper, US investment strategist at Allianz Global Investors. After returning 30% in 2013, the S&P 500 was down 4% in January. As investors plot their next moves, Hooper writes that they need to keep four things in mind.
1. Disregard the January Indicator, which suggests January stock performance predicts performance for the year.
2. Stop trying to time the market.
3. Save and invest in stocks.
4. “The Fed will likely highly accommodative with its overall monetary policy for longer, as it seeks to “stay behind the curve” and support the economy’s growth.”
Why Chinese Stocks Are Attractive Now (Charles Schwab)
The past four years has seen Chinese stocks underperform broader emerging markets. Despite slowing growth and concerns about a credit crisis, Michelle Gibley, director of international research at Schwab Center for Financial Research, thinks the reforms and current stock valuations make Chinese stocks attractive.
“Risk-tolerant investors should consider overweighting their holdings of Chinese stocks within their allocation to emerging market stocks. We’re not suggesting you increase your overall allocation to emerging markets, though, as our view on that stock universe, as a whole, remains neutral.
“But low valuations and depressed investor sentiment have created an opportunity in Chinese equities. And the government’s dedicated and sweeping reform efforts could provide the impetus for a new phase of growth, even if there are bumps along the way. We think investors should consider buying mutual funds and exchange-traded funds (ETFs) that invest in large-cap Chinese stocks, which could benefit the most over the next year or so since they offer diversification benefits and have the most discounted valuations.”
2013 was a terrible year for commodities with just natural gas, oil, palladium, and zinc posting year-over-year price gains. “The price movement of commodities is historically both seasonal and cyclical,” according to the folks at U.S. Funds. “That’s why when investing in natural resources, we believe it is important for your portfolio to hold a diversified basket of commodities and to be actively managed by professionals who understand these specialised assets and the global trends impacting them.”
A Third Of Advisors Plan To Leave Business In Next 10 Years (Investment News)
Over 33% per cent of U.S. financial advisors plan to exit the business over the next decade, according to the Q1 issue of The Cerulli Edge. “The volume of assets that require a continuity plan coupled with the number of advisers that don’t have a strong continuity or succession plan in place is scary,” Michael Paley of Focus Financial Partners told Joyce Hanson at Investment News.
Profit Margins Are Still Getting Fatter (Goldman Sachs)
The stock market rallied on the back of high corporate profit margins, and some expect profit margin to reverse to their long-term mean. “The rolling four-quarter operating margin is tracking at 8.9%, a return to the previous peak reached in 3Q 2011,” wrote Goldman Sachs’ Amanda Sneider, who cited information coming from Q4 earnings announcements.
“While the majority of operating margin expansion is due to the anniversary-ing of negative atypical operating items and pension-related gains this quarter, margin levels that exclude these items also returned to peak levels,” added Sneider. “We expect margins to remain flat over 2014, although consensus expects further expansion to 9.5%.”
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