FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Rosenberg: “The Bull Market May Well Be In Complacency” (Gluskin Sheff)
“The gold-silver ratio has risen to its highest point in three years (august 2010) and in the past this served as a flash-point for a renewed risk-off trade. See the chart below and the divergence (S&P 500 surging and the gold-silver ratio sliding — historically this has a 71% correlation, likely because silver has far more industrial applications and as such this ratio is viewed as somewhat of a global economic barometer.) I have to say that when I read the front page of the USA Today business section and see this lead title: With Stocks This Hot, Why Worry?, with famed strategist Ed Yardeni declaring this to be the “mother of all melt-ups,” I do begin to worry. The bull market may well be in complacency.”
BlackRock’s Russ Koesterich Identifies 3 Places To Put Your Cash (Advisor Perspectives)
BlackRock’s Russ Koesterich writes that it isn’t too late to move cash into the market, though he warns that certain parts of the stock market look very expensive. Instead he suggests investors focus on 1. Some international markets like Brazil, China and Hong Kong. 2. U.S. Mega Caps – “they’re the cheapest area of the U.S. market and 10 to be less volatile that small and mid-cap names.” 3. Some cyclical sectors like energy and technology.
Speaking at FINRA’s annual conference, chairman and CEO Richard Ketchum told advisors that they should speak to their clients about risks in the fixed income market.
“Take the fixed income market for example. In this zero-yield environment, where investors are understandably frustrated with the return on many of their investments, many are taking on more risk by moving to longer-duration or high-yield fixed income products. We’re worried about investors taking on risks that they either don’t understand or cannot afford.
“I don’t come today with Cassandra-like warnings about the fixed income market. Given the activism of central banks and the complex challenges facing the global economy, I don’t claim any ability to predict whether inflation will rise or interest rates increase from their historically low levels in the near term.
“But it is clear that interest rates have far more room to go up than down and that history would tell us that, in this environment, the quality of non-investment-grade bonds able to be floated is likely to go down. Accordingly, it is a great time to have conversations with your clients about the risks and possible negative scenarios of concentrated holdings in longer duration or more speculative fixed income securities. Similarly, it is a great time to remind clients that bond funds are not the same as directly owning fixed securities—if the market moves, losses will occur instantaneously and there will be no ability to hold a bond to maturity.”
Goldman Sachs raised its S&P 500 price target to 1,750 by year end. They expect it to rise 9% to 1900 in 2013, and 10% to 2100 in 2015.
“Our positive 2013 outlook for S&P 500 has played out much faster than we expected. Earlier this year we raised our earnings and return forecasts but the index has soared 15% YTD and has rallied 18% during the past six months. Multiple expansion accounts for three fourths of the YTD return. We ascribe the rally to a combination of moderating policy risk in the US; improvement in housing and employment that have been primary post-crisis economic risk barometers; and the FOMC commitment to easy monetary policy despite stronger housing data and a 100 bp fall in the unemployment rate to 7.5% in 16 months.”
LPL Financial Gets Biggest Ever FINRA Fine (Investment News)
LPL Financial has been fined $7.5 million by the Financial Industry Regulatory Authority (FINRA) for 35 email system failures between 2007 and 2013. It was also ordered to create a $1.5 million fund to compensate clients that could have been affected by this failure. FINRA also said that LPL made misstatements to the regulator during the investigation.
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