SCHWAB: Every Bond Investor Needs To Know These 5 Things

FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.

5 Things Every Bond Investor Needs To Know (Charles Schwab)

Bond funds have recently been awash with redemptions. And recent signals from global central banks have created a rout in markets and U.S. Treasury yields have climbed over 50 basis points since May. In this environment Kathy Jones, Rob Williams and Collin Martin of Charles Schwab write that there a few things bond investors need to know. 

1. “Tapering is not tightening, and the Fed may not change policy until later this year, but an increase in interest rates is warranted on the prospects of less QE down the road.” 2. “Riskier assets are being repriced.” 3. “Markets may be overreacting, but breaking up is hard to do.” Investors reaching for yield often end up having to liquidate their positions in the early stage of a shift to higher rates. 4. There are opportunities in higher yields. 5. Go over your fixed income portfolio to make sure that the bonds you own match up to your investment goals.

Abnormal Returns Crowdsources A Summer Reading List For You (Abnormal Returns)

Abnormal Returns reached out to some independent finance bloggers and asked them for some good financial books they read in the past year. Here are some of the bloggers and their recommendations. 

Here are five books that Robert Seawright of Above the Market recommended. 1. Forecast by Mark Buchanan 2. The Storytelling Animal: How Stories Make Us Human by Jonathan Gottschall 3. Investing: The Last Liberal Art byRobert G. Hagstrom 4. The Signal and the Noise by Nate Silver 5. The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing by Michael J Mauboussin. Find the complete list at Abnormal Returns.

The Most Important Chart In The World According To Aswath Damodaran (Business Insider)

Business Insider reached out to some of Wall Street’s brightest for their most important charts. NYU professor Aswath Damodaran sent over a chart of equity risk premiums in the U.S.

“My point is a simple one. Stocks looks reasonably priced only because the treasury bond rate is at historic lows. If the Fed loses its ability to con markets into keeping rates low (and it is a con game), stocks have nowhere to go but down. (For those who are sceptical, look at Japan).”

damodaran chart

FINRA Will Conduct More Background Checks On Arbitrators (The Wall Street Journal)

The Financial Industry Regulatory Authority (FINRA) will conduct more background checks on arbitrators, according to The Wall Street Journal. This comes after a lawsuit alleging that arbitrator Demetrio Timban, who presided over a dispute brought by Athena Venture Partners against Goldman Sachs, had been indicted in New Jersey for practicing law without a licence. 

FINRA previously only conducted a background checks on arbitrators when they first applied, now arbitrators will be subject to annual checks.

Treasury Bonds No Longer Provide A Hedge To The Stocks In Your Portfolio (Walter Kurtz)

“The last time short term correlation between treasuries and US equities turned positive was at the beginning of Fed’s QE2 in 2010. At the time both equities and treasuries rallied in anticipation of the new stimulus,” writes Walter Kurtz of Sober Look.

“Now we are back to positive correlation, except this time the reverse is taking place (at least in terms of expectations). Treasuries no longer provide the hedge for equities portfolios that the markets have become accustomed to (see discussion). It may take another crisis to send the correlation back into negative territory.”

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.