FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
We’re Far From Euphoria (MarketMinder)
Stocks had a record year in 2013, with the S&P 500 returning 30%. Now many wonder if the market looks frothy and if we’re overdue for a correction. “It’s been a long time since investors witnessed euphoric equity markets firsthand,” write the staff of Fisher Investments. The 2000-2007 bull market didn’t reach the euphoric stage either. What’s more, concerns over Crimea and profit margins means there are few “similarities to the prevailing sentiment in 2000,” when the tech bubble burst.
“Two words you didn’t hear much in 2000? Bubble and euphoria. They are easy to find today — evidence of lingering scepticism, not euphoria. (Bubble fears, in this way, are somewhat self-deflating!) We’re only starting to see sentiment tiptoe toward optimism — investors could warm to stocks significantly before reaching euphoria. And as they do, stocks should rise with sentiment until you reach an eventual bubble likely few will be discussing.”
What Advisors Need To Do In A Scarce Yield Environment (The Wall Street Journal)
It’s getting harder to find yield, and for advisors it “might mean adopting an investment approach that’s more opportunistic and active than you’re accustomed to,” writes Mike Sorrentino of Global Financial Private Capital in a new WSJ column. Advisors can do this by looking for income-generating stocks. “At our firm, the kind of event we’re keeping an eye out for is a market correction that affects stocks that look like bonds–telecom stocks for example, that have high dividend yields and relatively low volatility,” he writes. But advisors also need to be mindful of the emotional toll this can take on their clients.
Bonds Are Not In A Bubble (Business Insider)
Some argue that low rates mean bonds are in a bubble, but Steve Feiss, an interest rate strategist at Government Perspectives, told Business Insider’s Matthew Boesler that this is one of the most misunderstood thing in markets today. “I’m biased as a bond guy but offended almost daily at the flagrant misunderstanding that is “sold” to/through mainstream media regarding the association of low rates with an asset class that is in a bubble.”
“U.S. Treasury rates are as much a “future” discounting mechanism as are the equity markets. What were stock prices thinking back in 1999? Exactly WHAT multiple were they OK with, again? How’d that work out? While I get that low rates hurt savers and retirees, simply selling low rates as a bubble like tech stocks were in 1999 seems to leave out the discussion/distinction between components OF the fixed income markets as well as the fact that as a country, we generally speaking like buying cheap stuff at Target and Wal-Mart. And as long as that continues, China will continue to have an abundance of U.S. dollars, and so will continue to be natural buyers OF our U.S. Treasuries. Low rates are likely here to stay for quite a while. Still. Like it or not…”
UBS Is Considering Expanding Into The Independent Advisor Space (Investment News)
UBS is considering expanding into the independent advisory channel as competition from registered investment advisors (RIAs) grows, reports Mason Braswell at Investment News. UBS has considered having an independent arm but John Mathews, head of UBS’s Private Wealth Management group thinks this could be distracting for employees. “Culturally, we’re at a pretty good place right now, and if we introduce a new channel, it could be viewed as, ‘Why are those people getting paid more,’ or something like that,” Mathews told Braswell. “But we’re pragmatic, too, so if the market turned that direction years from now, we’d have to consider it.”
A report from New Jersey wealth-management firm Regent Atlantic Capital, that says the wealthy are leaving the garden state for lower-tax states like Florida and Pennsylvania, is getting a lot of attention. The report says this follows the implementation of New Jersey’s “millionaire’s tax” in 2004 which raised taxes on those making $US500,000 or more.
But Robert Frank at CNBC tells us we should take the report with a grain of salt because it relies on “anecdotal evidence” and because the report itself says it has no “proof or hard evidence” that the reason they’re leaving is because of high taxes. He also points out that New Jersey is also creating new millionaires. “The report points out that the high costs and restrictions to doing business in the state have been costly. But it remains unclear whether the millionaire’s tax is the sole reason some of New Jersey’s rich are moving to Florida,” Frank writes.
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