MoneyController

MoneyController

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SFDR drives global disclosure as asset managers fear legal consequences

  • 54
  • 0
  • ESG - sustainability
Posted on 15.10.2021

The Sustainable Finance Disclosure Regulation (SFDR) came into effect in March, leading asset managers to reassess their environmental, social, and governance (ESG) fund labels. Since then, investment firms have tried to decipher if these regulations impact them or not. The industry is realising slowly that the SFDR could impact the global $35 trillion ESG market and not only EU investment firms.  According to S&P Global, $3 trillion worth of non-EU investment firms must adhere to the SFDR. The figure could be much higher as S&P’s figures include only listed managers. Lucian Firth, a lawyer from law office Simmons & Simmons, advises clients to provide SFDR disclosures for funds with marketing materials targeting the EU. Firms outside Europe are starting to comply if they don’t fall within the SFDR scope.  Nina Hodzic from Allianz Global Investors mentioned that clients from Asia and the US are watching what’s happening in the EU. She added that ...

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7 investment products that aren’t as risk-free as you might think

  • 39
  • 0
  • Financial strategy and management
Posted on 15.10.2021

When investing in shares, you may suffer several risks. One includes selling your holdings at a lower price than you've bought them, which would result in a capital loss. The second risk is from an income reduction, where companies slash the dividends they payout. You could find financial products that help you reduce such risks, but are they effective?  1. Structured products Structured products pay you based on the performance of bonds and derivatives linked to stock market performance. You aren't directly investing in shares; instead, you're establishing a contract with the financial institution. The provider would pay you a pre-agreed return. The financial institution only extends such a return if the market beats a predetermined performance level. That way, the financial institution caps your returns. If you’ve agreed to a 10% return with the financial institution and the market achieves a higher gain, you’d only receive 10%. Still, if the market ac ...

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How are investors reacting to economic data announcements across the globe?

  • 34
  • 0
  • Financial markets/economy
Posted on 15.10.2021

The Office of National Statistics (ONS) announced a 0.4% growth in the UK economy in August, falling short of the 0.5% estimate despite easing pandemic restrictions. The ONS also reported an unexpected drop in output in July. That means that the British economy is 0.8% smaller than February 2020 pre-pandemic levels. Consumer-facing services reported the highest rise of 1.2%, followed by the services sector at 0.3%. Other services inched up slightly, rising by 0.1%.  The figures resulted in the FTSE 100 trading in the red for most of the day only to recover by market close. The market was held back by consumer goods, miners, and pharmaceuticals. European markets performed better as the French CAC and German DAX reported 0.8% gains.  The UK also reported increasing production outputs, rising by 0.8% as oil rigs reopen. That beat construction output, which only grew by 0.2%, and remained below pre-pandemic levels by 1.5%. According to Susannah Streeter from Hargreaves Lansdown ...

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Will your 60/40 portfolio survive high inflation and interest rates?

  • 38
  • 0
  • Asset management
Posted on 14.10.2021

Wall Street strategists warn that the popular 60/40 stock-bond portfolio construction strategy might be over. Bank of America Corp. labelled it as reaching its end, and Goldman Sachs Group Inc. mentioned that losses could top 10% for such portfolios. Strategists added that the recent Treasury and equity selloff is only the start of what’s to come. Deutsche Bank AG issued similar warnings as Jim Reid mentioned that the stock-bond relationship shift might lead money managers to change their thinking.  Money managers have long used the stock-bond negative correlation as a buffer. The 60/40 strategy had offered returns in an environment of subdued growth for at least two decades as countries had been spending for years to evade deflation. Now, they’re suffering increased inflationary pressures that threaten the go-to strategy. For the past six months, stocks and bonds moved in tandem, reporting gains between April and August and strong losses in September.  As inf ...

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Supply shortages force Apple to reduce iPhone production for Q4 2021

Posted on 14.10.2021

The supply crunch hits Apple as it announces plans to make 10 million fewer iPhones than planned this year. The company had planned to produce 90 million iPhone 13 models in Q4 2021 but is now instructing manufacturing partners that production could diminish. Suppliers, Broadcom Inc. and Texas Instruments Inc., are struggling to provide the needed components for Apple’s new iPhone production. Apple has strong buying power since it’s the world’s largest chip buyer and often sets the stage for annual electronics supply. Still, the tech giant is suffering the same supply disruptions seen across industries. The supply problems may spill over to next year and even beyond, as stated by major chipmakers.  Texas Instruments provides display parts for Apple, while Broadcom offers wireless components. Currently, Apple is short on the supply of a chip that powers the OLED display in its latest iPhone. Apple faces other supply bottlenecks and not just from Texas Instrument ...

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How to transfer your wealth while limiting taxes?

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  • Asset management
Posted on 14.10.2021

The pandemic has led many to help the next generation get back on their feet and survive the financial implications. Still, taxes often complicate the process as you figure out how much capital gains tax (CGT) or inheritance tax (IHT) you’d have to pay. You can plan for the Great Wealth Transfer to reduce your tax burden. Consider these 5 ways to transfer your wealth tax-efficiently.  1. Start gifting early If you start gifting early, most gifts benefit from the seven-year rule. That means if you survive for seven years from transferring your wealth, it will be IHT-free. If you don’t, you can still reduce how much IHT the recipient has to pay.  After year 3, the recipient would benefit from a discount on the tax charge. That increases with time, and by year six, the funds would be subject to an 8% nil rate versus 40%. Finally, any growth that the gifted funds benefit from after the transfer isn’t subject to IHT since it’s growing outside your estate ...

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What are cyclical stocks and what you should know before investing

  • 37
  • 0
  • Financial strategy and management
Posted on 13.10.2021

Markets are suffering strong volatility due to the growing uncertainties regarding monetary policies, supply chain constraints, inflation, and the pandemic. Still, not all stocks report the same performance. During the 2020 crash following the pandemic, the market was affected as a whole. Some stocks, like dining and airlines, were hit harder than others like life and health insurance.  Market volatility means stock prices can go down depending on market conditions. Cyclical stocks often follow market directions beating market gains when the economy is booming and reporting heavy losses during a recession. Though it’s better to hold a diversified portfolio than timing the market with individual stock picks, knowing more about cyclical stocks helps you make informed investment decisions.  According to Mabel Nuñez from Girl$ on the Money, cyclical stocks are more prone to boom and bust pricing and experience wild price swings as economic situations change. Non-cy ...

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Will the earnings season boost market confidence?

  • 39
  • 0
  • Asset management
Posted on 13.10.2021

Supply shortages, inflation concerns, and earnings season weigh in on US stocks as traders await insight. Chip shortages resulted in reports that Apple Inc. would likely cut its iPhone 13 production targets for 2021. That led the $184 billion Nasdaq 100-tracking exchange-traded fund (ETF) to drop yesterday.  Inflation is also broadening, bucking claims that inflation is transitory due to the low base numbers resulting from the pandemic. The president of the Federal Reserve Bank of Atlanta, Raphael Bostic, commented that the surge in inflation is lasting longer than expected. Vice-chair Richard Clarida also noted that the conditions to start tapering the bond-buying program had been met.  Now traders await the earnings season that would test market confidence. Quarterly guidance is deteriorating as analysts project a 28% rise in S&P 500 firms’ earnings to $49 per share. The figure is down from the whopping projected 94% rise for Q3 2021. That signals a slowdown whi ...

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IMF warns of slowing growth as oil prices continue to rise amid global energy crisis

  • 41
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  • Raw materials
Posted on 13.10.2021

The global energy crisis is fuelling oil price gains as demand rises amid natural gas and coal shortages. That led oil futures in New York to increase for their fourth day in a row as traders assessed how winter demand would affect the global power crisis. That also resulted in the International Monetary Fund (IMF) expressing its concerns that the global economic recovery is slowing.  Rebecca Babin from CIBC Private Wealth Management explained that the market is trying to calibrate what’s happening within the energy sector. She added that traders don’t know what would happen when natural gas prices rise to the equivalent of $250 per barrel in crude prices.  Yesterday’s volatility comes on the back of stabilising oil prices within the $80 per barrel range. Due to the stronger demand for oil from the power and travel sectors, UBS Group AG raised its oil estimates for Brent and WTI. OPEC's cautious stance to increase supply is also driving prices higher ...

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Advisers view younger clients as driving sustainable investing

  • 56
  • 0
  • ESG - sustainability
Posted on 12.10.2021

Advisors find that younger clients are more likely to invest sustainably compared to older generations. According to a recent study carried out by Pru, 46% of UK advisers find their clients want to invest sustainably but don’t know where to begin. The Power of Advice report showed that media commentaries, societal pressures, and younger family members influence clients to invest sustainably.  The report also found that advisers are concerned about shifting their clients’ investment perceptions and behaviours towards ESG investing. More than 65% of advisers find it difficult to get their clients to change or challenge their investing behaviours as they grow older.  Still, almost half of advisers agreed that their clients have an increased appetite for responsible investing. They also called for more educational and supportive material to help highlight ESG investing benefits. More than a fifth of advisers felt their clients had little incentive to shift to sustai ...

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Investors favour Russia and pull out from China as the world energy crisis deepens

  • 38
  • 0
  • Investments
Posted on 12.10.2021

The world’s energy crisis is leading investors to shift their money from Chinese assets towards energy exporters. It has also led the Ruble and Colombian peso to rise, benefiting from higher oil revenues. Investors await the upcoming OPEC monthly report this week to find more clarity on the outlook of oil prices.  The Russian ruble has been the top-performing emerging-market currency this month, supported by improved prospects due to higher oil revenues. Russian stocks also outperformed their peers where broad market developing gauges sank.  Investors had lost their appetite for emerging economies’ stocks, bonds, and currencies. The debt situation of Chinese developers, led by Evergrande and any cross-defaults from private bonds, is worrying investors. Investors also await a potential policy tightening from the Federal Reserve. That’s resulting in a declining investment appetite across the board.  That led investors to shift to energy exporter asse ...

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BoE preps the market for a significantly sooner rate hike

  • 42
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  • Banks and banking products
Posted on 12.10.2021

The Bank of England (BoE) reinforced its signals of an imminent rate hike in the UK to curb inflation. Governor Andrew Bailey and Michael Saunders expressed a more hawkish view on when rates would change. Bailey warned of a period of potentially very damaging inflation which should prompt policymakers to take action sooner. Saunders expects the increase to land sooner than expected.  The BoE officials’ remarks led the pound to gain 0.4% yesterday and trade at $1.3650 as of 9:14 am. Money markets also priced a 25 basis point rate hike before paring bets to almost 18 basis points.  BoE officials tend to prepare the market for rate hikes before at least one meeting of making a move. Saunders had been pushing for rate increases both in 2017 and 2018.  According to Bailey, unemployment rates won’t rise further after the furlough program ended last month. Economists anticipate the BoE to wait for the jobs data before deciding to raise the rates from their record ...

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