Fidelity Introduces New Technology Offerings for Small and Mid-Sized Wealth Management Firms

  |   For  |  0 Comentarios

Pixabay CC0 Public Domain

Fidelity Investments announced two new technology offerings developed specifically for smaller and mid-sized registered investment advisors (RIAs) looking to establish and grow their business.

The all-in-one technology stack and the advisory bundle featuring FMAX Essentials, a new, streamlined managed account platform, each aim to reduce two common technology barriers for smaller firms: resources and cost.

Fidelity’s latest Advisor Technology Stack study found that firms with less than $250M are 1.8x less likely to embrace technology best practices than firms with $1T+ AUM. This lack of technology adoption could affect the rate of growth that small and medium sized firms experience as the study also found that wealth management firms deploying technology best practices are growing significantly faster than peers. To help small and medium size firms establish a scalable technology infrastructure, Fidelity developed an all-in-one offering that brings together key components we believe advisors need to run their business.

“Technology has incredible power as a growth driver and firms that harness it best have dedicated the time to research, evaluate, and implement it at scale,” said Noni Robinson, head of Emerging RIAs at Fidelity Institutional Wealth Management Services, a division of Fidelity Investments that provides platform solutions and clearing and custody services to wealth management firms. “Smaller firms and advisors launching their own business, however, often have fewer resources, which can put them at a disadvantage. Our offering takes the guesswork out of selecting a technology stack with solutions that support front-, middle-, and back-office employees at these firms.”

Fidelity collaborated with eMoney Advisor, LLC (eMoney), an expert in financial planning solutions, and Advyzon, an expert in advisor technology, to secure access to special pricing and support models for its all-in-one technology offering. Available today, this solution aims to reduce the time leaders spend on evaluating a technology stack. It includes a variety of tools that are deeply integrated to help streamline advisors’ critical workflows:

  • WealthscapeSM, Fidelity’s robust brokerage platform that allows firms to seamlessly open accounts, manage money, trade, access hundreds of integrations for further customization, and access a variety of reporting and analytics tools to optimize client outcomes.
  • eMoney’s comprehensive and collaborative financial planning capabilities to help advisors map strategies to their clients’ goals, with integration points such as single sign on, document sharing, streamlined household views, and more.
  • Advyzon’s suite of operational and portfolio management software, including customer relationship management (CRM), performance reporting, and billing for middle- and back-office support, as well as investment management tools such as trading and rebalancing offered by Advyzon Investment Management (AIM), a subsidiary of Advyzon. Its integration with Wealthscape also supports digital account opening, single sign on, and APIs to view account positions and balances.

For firms looking to grow their advisory capabilities, Fidelity is also introducing an advisory bundle that includes Wealthscape, eMoney, and a new product, Fidelity Managed Account Xchange® Essentials (FMAX Essentials).

FMAX Essentials offers end-to-end wealth advisory capabilities with a streamlined investment lineup of both Fidelity and third-party products. This provides a lower cost platform for firms looking to expand access to sophisticated managed account solutions like model portfolios, as well as deepen their investment advice and financial planning capabilities.

The FMAX Essentials investment menu includes roughly a quarter of the options found on the FMAX platform, FIWA’s larger scale customizable advisory offering, including a variety of mutual funds and ETFs, as well as model portfolios, SMAs, and UMA wrappers. FMAX Essentials is currently available to firms that custody with Fidelity and will introduce additional features and investment options over time.

Wealth management firms of all sizes will maintain access to Fidelity’s à la carte menu of platforms, tools, and integrations for fully customized technology solutions that can grow with them. Integration Xchange, Fidelity’s open architecture digital store for wealth management firms, offers integrations with more than 200 fintech companies and API analytics to make it easier for firms to discover, evaluate, and implement new tech stack components.

Alternative Providers Are Increasingly Partnering to Capture Retail Assets

  |   For  |  0 Comentarios

Pixabay CC0 Public Domain

Alternative product providers estimate that only 13% of their managed assets come from the retail channel but expect this to increase to 23% in the next three years, according to The Cerulli Report-U.S. Alternative Investments 2024.

Cerulli estimates that U.S. financial advisors hold $1.4 trillion in alternative investment assets that are not fully liquid and forecasts this total will increase to $2.5 trillion by the end of 2028.

To seize this trillion-dollar opportunity, alternative product providers and asset managers are increasingly partnering through strategic alliances.

53% of asset managers say they currently rely on such partnerships, and half plan to increase this dependency.

“Strategic partnerships allow alternative product providers and asset managers to leverage each other’s strengths to reach new client segments that neither firm could have reached alone,” says Daniil Shapiro, director.

As partnerships proliferate, demand and development for multi-manager products have resurged, simplifying the way all investors, except the wealthiest, access alternative exposures, the consulting firm’s statement adds.

According to the study, multi-manager products can gain traction among a range of investors below the wealth levels of over $20 million (UHNW) and over $5 million (HNW), and allow access for advisors looking to venture into the alternative investment landscape with simplified solutions.

“Investors are looking for easy access solutions to alternatives where a single ticket allows them to access the broader universe of alternatives or multiple exposures within a sub-asset class of alternatives (e.g., different types of private credit). Advisors using such products are likely to help their clients take the first steps in allocating to alternative investments,” Shapiro states.

While alliances offer alternative product providers a legitimate pathway to retail assets, the risks of partnerships must be carefully considered, such as cultural clashes, overestimation of partners’ distribution capabilities, and the brand’s and exposures’ ability to resonate with advisors.

“Distribution synergies between channels should be examined, and future product roadmaps should be considered to ensure product-market fit,” Shapiro concludes.

Fiduciary Trust International Hires Kevin F. Flood in New York

  |   For  |  0 Comentarios

Nuevos codirectores en Barings

Fiduciary Trust International, a global wealth management firm and a wholly owned subsidiary of Franklin Templeton, announces that Kevin F. Flood has joined its New York office as a Senior Relationship Manager.

“Meeting the needs of intricate client relationships, especially those involving high-net-worth and multigenerational dynamics, is a top priority for Fiduciary Trust International,” said Anne Fitzpatrick Donahue, Regional Managing Director for the New York office.

Flood brings over three decades of experience in private wealth management to the team.

Before joining Fiduciary Trust International, he spent more than a decade as a Senior Wealth Advisor at Wilmington Trust, where he led a client relations team overseeing $870 million in assets under management and $1.3 billion in assets under administration.

Previously, he held positions at U.S. Trust/Bank of America and Mutual of America Life Insurance Company.

“Kevin’s track record in private wealth management, tax and estate planning, and his proven ability to manage multigenerational relationships make him the ideal person to meet the needs of our firm’s most sophisticated and complex portfolios. His client-centric approach, exceptional leadership, and commitment to fiduciary excellence will enhance our offerings and drive growth,” added Fitzpatrick Donahue.

The new hire holds a degree in Finance from St. Thomas Aquinas College and has the designations of CFP and Sports & Entertainment Accredited Wealth Management Advisor™. He also holds Life and Health Insurance licenses for New York, New Jersey, and Delaware, as well as Real Estate licenses in New Jersey, the firm’s statement adds.

“Fiduciary Trust International’s commitment to innovation and global reach offers a unique platform for growth and development. I look forward to working with our talented team and leveraging our advanced offerings to address the complex needs of clients, especially those with multigenerational wealth,” said Flood.

Flood obtained Executive Leadership and Performance Certificates from Cornell University and is actively involved in the Financial Planning Association, serving both nationally and at the New York Metropolitan chapters.

He has also received the Wilmington Trust Chairman’s Club Award and the Wilmington Trust President’s Council Award, the statement concludes.

The Disinflationary Process in Latin America Is Not Stable, Warns Julius Baer

  |   For  |  0 Comentarios

The disinflation observed globally after the peaks reached in late 2021 and early 2022 is a reality. However, there are recognized risks from central banks and processes that are not uniform. Latin America, with a history of general price pressures, is currently experiencing a disinflationary process that is not stable, warns Eirini Tsekeridou, Fixed Income Analyst at Julius Baer, in a report for their clients.

According to the specialist, price pressures continue to emerge in the region, generating instability in the disinflationary process. Although it is not a unique problem for Latin America, it is a concerning factor given the region’s history in this area, according to the European investment bank.

Central Banks Will Be Cautious

The Julius Baer expert highlights observations from several representative economies to explain the disinflationary instability in Latin America. For example, in Colombia, inflation rose marginally in June, mainly due to food prices but also due to rental inflation. The figure is still above the central bank’s inflation target range, and it is likely to be cautious in cutting rates in upcoming meetings.

In Chile, inflation also increased year-on-year, primarily due to food prices and an increase in electricity prices. Therefore, Tsekeridou considers it likely that the central bank of the Andean country will maintain a cautious tone in its next monetary policy meeting due to uncertainty about the direct and indirect impact of electricity price increases in the coming months.

The two largest economies in the region are no exception to this unstable disinflationary process. In Brazil, overall inflation increased year-on-year in June, approaching the upper level of the central bank’s target (3% ± 1.5%), although it was lower than expected after the floods in Rio Grande do Sul and currency depreciation. It is expected that the country’s central bank will maintain the Selic policy rate at 10.5% to keep inflation expectations anchored.

In Mexico, overall inflation also increased in June, mainly due to fruits and vegetables, although core inflation continued its decline. The increase could keep the central bank’s tone cautious, although a 25 basis point cut in August is not excluded to avoid an economic slowdown.

Finally, in the beleaguered economy of Argentina, the news is not much different: overall inflation continues to decrease both year-on-year and month-on-month. The slowdown in inflation should continue due to austerity measures and currency devaluation.

Julius Baer warns that, in general, June inflation data for Latin America show that the disinflation process is no longer smooth; it has some bumps. From their perspective, the region’s central banks will mostly maintain a cautious stance in their upcoming meetings and anticipate that expansion cycles will slow down or stop in 2024 to control inflation and keep inflation expectations anchored.

However, the first rate cut by the Fed, expected by the end of this year, should support performance.

Under the outlined scenario, Julius Baer maintains its overweight position in Latin American equities and corporate debt in strong currency.

Nervousness Causes Market Collapse: Was it Really That Bad?

  |   For  |  0 Comentarios

Pixabay CC0 Public Domain

U.S. employment data and the rate hike by the Bank of Japan sparked widespread nervousness worldwide, leading to declines in all major global stock markets. However, the question that arises for analysis is whether the dramatism of the chain sales was premature and whether what is happening this Monday is just a temporary “perfect storm.”

For James Eagle, founder of Eeagli, it was a perfect storm based on inflation fears, less hope for interest rate cuts, concerns about the upcoming U.S. elections, and global tensions, as he posted on LinkedIn. Additionally, the renowned content creator said that if you add to that scenario that some tech stocks have reached all-time highs, you get an ideal recipe for market nervousness.

“All you need now is an excuse to panic. And we got it,” Eagle summarized.

On the other hand, Tiffany Wilding, an economist at PIMCO, reviewed the employment data released last week, with a figure lower than “expected and further proof that the U.S. economy is slowing down,” she said in a statement accessed by Funds Society. However, the unemployment rate rose to 4.25% unrounded, nearly reaching the so-called Sahm rule, which in the past has been a reliable indicator of recession.

According to Wilding, although the main figures were weaker than expected and certainly reflect a slowing economy, there are some exceptions in the details that show it has not yet sunk.

For PIMCO, this consolidates a Fed rate cut in September and increases the risk that the Fed will revise its forecasts to signal a faster pace of cuts in the future. In this regard, the upcoming employment report and the recovery from July’s weakness will be key to setting the tone for the Fed’s September meeting, Wilding concludes.

Meanwhile, Fernando Marengo, Chief Economist at BlackToro Global Wealth Management, told Funds Society that last week’s data shows a soft landing scenario. And this outlook is not the most favorable for stock valuations in the tech sector, which had implied continued sales growth.

Furthermore, Marengo explained that the new macroeconomic data and equity values, which had been rising steadily since the fourth quarter of last year, prompted some of the market to take profits. At the same time, the professional warned about a “flight to quality.”

“Clearly, those who made a big profit are trying to capitalize on that gain in the face of a new scenario of uncertainty: first of slowdown and now of uncertainty, because the drop in asset prices clearly has an impact on families, there is a loss of wealth in the drop in assets,” he summarized, noting that a recession cannot be ruled out and that increases nervousness in the markets.

However, he also believes that these soft landing levels are not worrisome either.

“The Fed is fulfilling its dual mandate, full employment with price control. This would not justify a cut in monetary policy rates. Now, if the capital market crisis deepens and this starts to have an impact on the balance sheet of some sector of the economy, it will surely be necessary for the Fed to take action. Otherwise, we will have to wait for the September session,” he insisted.

BlackToro has been recommending for “some time” to reduce risk exposure and primarily invest in fixed income. Marengo explained that the strategy is “to make rates on the short end of the curve and extend duration on the treasury bond curve.”

“Since May, we started rotating our portfolio, we started moving out of the more aggressive stocks and moving into more defensive sectors. We moved out of tech and went into more value, much more defensive companies. Therefore, our portfolios are capitalizing on our strategies that we had been seeing from our teams,” he added.

The executive argued that it will always depend on the profile of each investor, but he maintained that it is not a time to take risks and wait “until uncertainty and volatility decrease.”

In another opinion, Santiago Ulloa, Managing Partner of We Family Offices, also thought that the market reaction was “exaggerated, accelerated by systematic trading as stop losses were surpassed.”

However, for Ulloa, based in Miami, the Fed will have to accelerate and increase rate cuts compared to what was thought a few months ago.

Regarding investment recommendations at this time, Ulloa told Funds Society that it depends a lot on their current asset diversification.

“I think any move has to be prudent, but for those who are not in the stock market and want to be, it could be a good time to start buying gradually. In any case, volatility will continue, and one must look at the long-term strategy for each person,” he concluded.

Triple Event: Data Will Guide the Decisions of the Fed, BoE, and BoJ

  |   For  |  0 Comentarios

On Wednesday and Thursday, there will be a triple event for central banks: the US Federal Reserve (Fed), the Bank of England (BoE), and the Bank of Japan (BoJ) will hold their respective monetary policy meetings. Each institution faces its own challenges and has its messages for the market. However, they all have one thing in common: dependence on the evolution of macro data, particularly inflation.

In the case of the Fed, everything indicates that it will maintain interest rates in this upcoming meeting, which will be interpreted as preparing for a possible first cut in September. However, things are not as clear for the Bank of England (BoE), where the sentiment for a possible cut is only 50%, despite what the data suggests. Lastly, experts explain that this BoJ meeting is important because it will provide more details on the plan to reduce the asset purchase program (QT), the next step to normalize monetary policy. The main conclusion is that there will be no rate hike, as it will be a gradual process to give the market time to digest the bonds and avoid a spike in yields.

The Fed in the US

According to Christiaan Tuntono, senior economist for Asia Pacific at Allianz Global Investors, the prospect of a rate cut in the US and the rebound in demand for semiconductors and electronics, in general, are currently very favorable factors for part of the Asian economy and many local equity markets. “In this sense, we expect the Federal Reserve to keep interest rates unchanged next week but to acknowledge the improvement in US inflation, which could open the door to a rate cut by the end of the summer,” Tuntono points out.

Regarding the importance of data, Pramod Atluri, manager at Capital Group, highlights that “the US economy has largely adapted to this new interest rate environment, and I expect growth to remain above 2% in 2024.” In his opinion, this resilience shown by the US economy has led investors to adjust their expectations regarding interest rates. Although Atluri believes that the arguments for future rate cuts are no longer as evident, the central bank seems inclined towards cuts.

In this regard, the views and analysis from international managers coincide with Tuntono Atluri’s assessment. There is also a consensus in interpreting the latest macro data from the country. “Although the labor market shows clear signs of normalization and recent consumer inflation data has been relatively positive, the central bank has been encouraged by macroeconomic data several times over the past 18 months, only to later discover that the economy continued to operate at an excessive pace. Therefore, it is likely that the Fed will argue that it is prudent to observe the next six weeks of data to clearly validate the need for policy easing,” says Erik Weisman, chief economist at MFS Investment Management.

However, in his opinion, more important than what the Fed does in the next month and a half is how the market will gauge the subsequent pace of rate cuts and the eventual landing zone. “The magical soft landing of 1995 was achieved with only 75 basis points of rate cuts, and some argue that we will see a repeat of that episode in the next six months or so. However, the market expects the Fed to cut between 175 and 200 basis points before the first quarter of 2026,” estimates Weisman.

Regarding when the Fed’s first rate cut will be, managers’ analyses also point to the same timeline: September. “We believe that this week’s data, especially the 0.18% month-over-month core PCE and the signs of cooling shelter inflation, continue to reinforce our view that the first cut will occur in September. We expect a moderate hold at the Fed meeting, with Powell indicating during the press conference that a first cut is likely to happen quite soon if data continues to evolve as expected,” says Greg Wilensky, director of US Fixed Income and Portfolio Manager at Janus Henderson.

“The lower inflation rates of the past three months should pave the way for a rate cut in September. This is likely to be reflected in the meeting’s conclusions, as the Committee is expected to ensure that confidence in inflation evolving sustainably towards 2% has strengthened and emphasize that the risks to employment and inflation objectives are now balanced. Powell is likely to use his speech at Jackson Hole next month to outline the framework for the easing cycle and remind investors that the Fed will likely lower rates gradually once it begins,” adds Raphael Olszyna-Marzys, international economist at J. Safra Sarasin Sustainable AM.

For his part, Brendan Murphy, head of North American Fixed Income at Insight Investment (part of BNY Investments), expects the committee’s official statement to include some modest changes, reflecting how their key inflation metrics are now close to the target and the labor market shows signs of slowing down. “The central bank may be concerned about a potential sudden deterioration in the labor market at some point, so we expect most members to prefer acting soon to ensure a soft landing for the economy. Chairman Powell could also use next month’s Jackson Hole Symposium to set expectations for the rate-cutting cycle,” comments Murphy.

Looking at the United Kingdom

A completely different case from the US is the Bank of England (BoE). According to Katrin Loehken, economist for the UK and Japan at DWS, the outcome of the BoE’s upcoming meeting on Thursday is not clear at all. “The market expects a rate cut with just over 50% probability, and we also anticipate a reduction in the official rate from 5.25% to 5%. However, uncertainty is high because there are good arguments for both sides,” says Loehken.

In this sense, she explains that if most members of the Monetary Policy Committee (MPC) place more emphasis on a prudent and data-dependent assessment of the current situation, the negative surprise in service price inflation in July would be an argument against a rate cut, as would the slow decline in wage dynamics. “With a wait-and-see attitude, nothing wrong would be done in that case. Chief Economist Pill seems to be in the waiting camp after his last speech,” she clarifies.

On the other hand, the DWS economist highlights that updated growth and inflation forecasts should show that the economy is still growing moderately and that inflation is likely to fall below the 2% target in the medium term. Additionally, the current weakening of the labor market also raises the question of how restrictive the central bank should remain.

“In our view, these arguments are more favorable to a first rate cut and are also consistent with the central bank’s generally pessimistic rhetoric. The assessment of voting behavior is further complicated by the new composition of the Monetary Policy Committee. Therefore, only a narrow majority should vote in favor of the expected rate cut,” comments Loehken.

However, Johnathan Owen, manager at TwentyFour AM (Boutique of Vontobel), believes that the BoE may delay this rate cut. “The latest UK inflation figures will bring some relief to consumers, but behind the headline figure, Bank of England policymakers face a more complex picture that suggests rate cuts could still be far off. The latest data showed that the Consumer Price Index (CPI) inflation fell exactly to 2% in May, in line with market expectations and marking a return to the BoE’s 2% target for the first time since July 2021,” argues Owen.

According to him, before Wednesday’s CPI data, markets had largely ruled out any chance of the Bank of England cutting rates in June, although the probability of a cut in August was at 44%. “Despite the Bank of England achieving its headline inflation target of 2%, the rigidity of services inflation, driven by strong wage growth and resilient demand in certain sectors, makes a rate cut in August increasingly unlikely, in our opinion,” defends the expert from TwentyFour AM.

Lastly, Peder Beck-Friis, economist at PIMCO, maintains his outlook and points out that the BoE will make two rate cuts in 2024. “Core inflation is likely to decline as the effects of the pandemic fade, monetary policy remains restrictive, and the labor market rebalances. Rachel Reeves’ comments yesterday show that the new government is firmly committed to fiscal discipline, reducing the upside risks to inflation in the coming years,” explains Beck-Friis.

Japan and Its Historic Monetary Policy

Finally, according to analysts at Banca March, in Japan, investors are betting on a rate hike at the July meeting, especially after the long silence from Governor Ueda—he will arrive at the meeting with more than 40 days without public interventions—and in light of the recent appreciation of the yen (5% higher against the dollar).

Not only is a rate hike expected, but a reduction in its monthly bond purchases could help strengthen the yen even further. “The possibility of a BoJ rate hike could lead to higher yields on Japanese bonds. However, they could see some volatility in case of a surprise. These actions would represent a significant shift in Japan’s monetary policy, affecting bond yields. Yields fell today and could remain under pressure before the BoJ meeting, although they remain near their highs. Additionally, the risks of escalating geopolitical tensions in the Middle East and elsewhere could drive flows into safe-haven assets, benefiting the yen,” explains Bas Kooijman, CEO and manager at DHF Capital S.A.

According to Magdalene Teo, Asian fixed income analyst at Julius Baer, it is still possible for the BoJ to maintain a hawkish stance by setting the stage to reduce bond purchases with a clear and bold plan to raise interest rates. “In any case, the big decision this week will come from Japan. Any communication error could be costly for the BoJ. The AUD and most Asian currencies, except MYR, IDR, and KRW, depreciated against the USD yesterday,” concludes Teo.

BNY Investments Launches a New Global Aggregate Fixed Income Fund

  |   For  |  0 Comentarios

BNY Investments has announced the launch of the BNY Mellon Global Aggregate Bond Fund, a vehicle managed by Insight Investment (Insight), a global manager with $838.1 million in assets under management, of which $252.6 million is in fixed income.

According to the asset manager, the fund launches with an initial capital of approximately $150 million and will primarily invest in government debt securities and investment-grade credit from around the world. The strategy is co-managed by the Global Credit, Global Rates, and Macro Research teams. These three teams are part of Insight’s Fixed Income Group (FIG), composed of 166 investment professionals worldwide. Specifically, the vehicle will be led by Adam Whiteley, Head of Global Credit, and Harvey Bradley, Senior Portfolio Manager, in coordination with Portfolio Manager Nathaniel Hyde.

“Our approach focuses on selecting the best ideas from a set of global fixed income opportunities to build a truly diversified portfolio. While we prioritize investment-grade debt, we can invest in high yield and emerging market fixed income. When building the portfolio, the team combines Insight’s top-down macroeconomic analysis with bottom-up security selection to identify opportunities that offer attractive risk-adjusted returns regardless of market conditions,” explained Peter Bentley, Co-Head of Fixed Income at Insight.

Sasha Evers, Head of Europe ex-UK at BNY Investments, added: “We are in an ideal moment for fixed income because yields are at levels we haven’t seen since before the global financial crisis. This new fund is managed the same way as the global aggregate fixed income strategy launched by Insight in 2015, which has assets of €9.2 billion.”

The fund is part of BNY Mellon Global Funds, plc (BNY MGF), the range of products domiciled in Ireland, and is registered in Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, Netherlands, Norway, Singapore, Spain, Sweden, and the United Kingdom.

More Than a Third of Americans Use AI to Manage Their Finances

  |   For  |  0 Comentarios

Artificial Intelligence (AI) is revolutionizing the way Americans learn, work, and communicate, and investment management is no exception. According to a survey by BMO Financial Group, more than a third of Americans (37%) use this new technology to manage their finances.

Among the 37% of Americans using AI to help manage their finances, the most common uses include learning more about personal finance topics (49%), creating and/or updating household budgets (48%), identifying new investment strategies (47%), accumulating savings (47%), and creating and/or updating their financial plans (46%).

However, 64% state that AI cannot understand how emotions influence financial planning, the statement explains.

“AI offers great potential in how we manage our finances, providing real-time insights and analysis. However, money management is more than analytical; it is a deeply personal relationship shaped by emotions, experiences, and unique life circumstances,” said Paul Dilda, Head, U.S. Consumer Strategy, BMO.

The survey highlights how AI continues to change the way Americans learn, work, and communicate. For example, 59% use AI to ask questions about topics of interest, and 40% use the technology for data analysis.

Additionally, more than half believe that AI can help people make more informed financial decisions (53%) and make financial planning more accessible for everyone (52%).

On the other hand, 39% use AI to draft business, travel, exercise, and meal plans and/or manage their schedules and content creation, with more than 40% of Americans using the technology.

Optimistic Perspectives

Among Americans who do not use AI for their finances, nearly a third are considering using the technology to learn more about personal finance topics (32%), increase their savings (31%), find new investment strategies (29%), create and/or update their household budgets (29%) and financial plans (27%), and/or for retirement planning (27%).

As Generation Z begins to navigate life changes, the majority leverage AI to plan upcoming financial milestones more than any other generation. Therefore, they are the most likely to use AI to ask questions about topics of interest (82%), draft written content (75%), create business, travel, exercise, and/or meal plans (67%), and manage their finances and investments (61%).

In the past six months, 22% of Generation Z needed to make a major purchase, such as a car or a house, 18% attended college or graduate school, 15% changed jobs, and 13% started a business. However, 85% of Generation Z say that concern about their overall financial situation is the main source of financial anxiety, followed by fear of unknown expenses (80%), housing costs (79%), and keeping up with monthly bills (76%).

58% of Generation Z believe that AI can help people make more informed financial decisions, and 55% trust that AI tools can help them make real financial progress.

Political Uncertainty, Inflation, and Central Banks Will Shape the Exchange Rate Between the Euro and the Dollar

  |   For  |  0 Comentarios

The political uncertainty following recent European elections and ahead of the U.S. elections in November this year is a key factor in evaluating the future of the euro-dollar exchange rate. Additionally, this situation is compounded by the evolution of inflation in both economies, which is decreasing at a slower pace than expected, and the decisions that the ECB and the Fed will make regarding the pace of interest rate cuts.

To provide an approximate forecast of how the euro-dollar relationship will evolve, we have gathered analysis from various experts. For example, Claudio Wewel, currency strategist at J. Safra Sarasin Sustainable AM, considers it unlikely that the euro will rebound, as manufacturing momentum is slowing, although the currency should rise once the Fed starts cutting rates.

“Since the beginning of the year, the euro has had a mediocre performance. So far this year, it has fallen by around 3% against the U.S. dollar, while it has recorded a 1% rise in trade-weighted terms. Notably, the euro’s fluctuation band has been narrowing in recent years, and since January, the euro-dollar ratio has remained between 1.06 and 1.10,” Wewel points out.

According to his view, the duration of the current episode of “prolonged rise” will depend on the data. In this regard, he notes that the latest U.S. macroeconomic data have been weaker than expected, suggesting a moderation of the U.S.’s superior cyclical performance. However, he sees it as unlikely that the cyclical euro will benefit from the weakening economic activity in the U.S., given that the main economies of the eurozone have seen disappointing manufacturing PMIs in June.

“In this relative cyclical context, the ECB should be able to cut its policy more than the Federal Reserve this year. Along with the greater rigidity of U.S. inflation, the Fed’s less deep rate cut path than the market expected also reflects the increased odds of Donald Trump’s victory in the 2024 U.S. presidential election, which markets have started to consider as the base case. In our opinion, Trump’s policy mix would likely be more inflationary than a continuation of Biden’s policies, implying that in 2025 the Fed would implement fewer rate cuts in this case,” adds the expert from J. Safra Sarasin Sustainable AM.

From Ebury, they point out that market nervousness and uncertainty will benefit safe-haven currencies. The fintech predicts a slight appreciation of the euro-dollar pair in the coming months, which will largely result from “some convergence in economic outcomes across the Atlantic in 2024, as the U.S. economy slows after an impressive year, while the eurozone accelerates from a very low base.” Ebury analysts believe this circumstance “will push the pair back towards the 1.10 level by the end of the year, with further appreciation towards the 1.14 level in 2025.”

However, they warn that the outcome of the November presidential elections in the U.S. could pose a risk to this view. “A Donald Trump electoral victory, which markets currently assign about a 50% probability, could be bearish for EUR/USD if the former president doubles down on the protectionist policies that characterized his previous tenure in the White House,” they explain.

Parity: An Omen of Bad Luck?

Finally, according to Bank of America, parity between the two currencies is “rare” and “has not lasted long,” and they believe that for it to happen again, “everything would have to go wrong and stay that way.” According to their analysts, the probability of the euro/dollar reaching parity or less using quarterly data is zero.

“The verdict is still out on whether the euro/dollar will stay at its post-2014 lows or recover to its previous highs. Much depends on the balance between unsustainable debt and U.S. exceptionalism, and to what extent Europe unites to tackle its severe challenges stemming from geopolitics and energy dependency. A potential trade war after the U.S. elections could further weaken the euro. However, for us, parity remains only an outcome in extreme risk scenarios, and even then, we wouldn’t expect it to last long,” explains the entity in one of its latest reports.

Drawing on historical perspective, BofA indicates that the euro/dollar fell below parity only in exceptional circumstances that did not last long. Specifically, it did so only during the periods of 2000-2002 and from August to October 2022. “The first period, which was the longest, occurred during the dot-com bubble in the United States and its burst. The second period was during a perfect storm of negative shocks for Europe, with the war in Ukraine triggering a severe deterioration in its terms of trade through an energy shock, and with divergent monetary policies as the Fed was raising rates while the ECB denied inflation, delaying its policy tightening. However, the euro/dollar was above parity in November 2022, as these shocks began to diminish and the ECB started catching up with the Fed,” they point out.

Their analysis shows that the euro/dollar weakened but stayed above parity during other severe shocks. For example, it was well above parity during the global financial crisis and the eurozone crisis. It weakened substantially but also remained above parity during the ECB’s negative policy rate period after 2014. “Similarly, it stayed well above parity and without a clear trend during Trump’s first term in the United States: the euro/dollar initially strengthened and then weakened. It also remained well above parity during the pandemic,” concludes BofA in its report.

Asian Markets: Is It Time to Seek Yield as Well as Growth?

  |   For  |  0 Comentarios

In the current yield-seeking environment, the American asset manager Matthews Asia suggests that the Asian continent should be considered a source of dividend yield as well as a market for exposure to Asian growth. This is the value proposition of the strategy followed by the Asia Dividend fund, which is registered in Luxembourg and follows the UCITS format.

In 2011, the global amount of dividends distributed by listed companies in Asia reached $254 billion. This figure exceeds the pool of dividends distributed by S&P 500 companies in the same year by more than $10 billion. The dividend yield of the MSCI AC Asia Pacific Index also surpasses that of the S&P 500 (2.8% versus 2.3% for the S&P 500). Additionally, the growth in total dividends distributed in Asia has an annualized rate of 16% for the period 2002-2011, more than double the 7% rate for the S&P 500.

The strategy operates within a universe of companies with yields ranging from 1.5% to 5% and dividend growth between 5% and 15%.

Kenneth Lowe, CFA, Portfolio Manager at Matthews Asia, explains to Funds Society that in addition to having more dividends that grow faster, “in every sector we find established companies with good but stable dividend yields, such as a mature telecom in Hong Kong or Singapore, and companies with intense dividend growth, although their current dividend yield is lower, like new operators in Indonesia.” According to Lowe, this diversity helps avoid concentration by both country and sector.

The Matthews Asia Dividend Fund strategy combines dividend yield and growth of the dividend pool, managing a universe of companies with yields ranging from 1.5% to 5% and dividend growth between 5% and 15%. “Since we incorporate dividend growth as a key factor in selecting stocks for the fund, we do not neglect the growth aspect of investing in Asian equities,” says Kenneth Lowe.

According to this expert, companies that distribute good dividends tend to have more aligned interests between shareholders and management, and also tend to better meet corporate governance requirements because “it is more difficult to hide accounting or business problems if you have to distribute a good dividend year after year,” Lowe points out. Finally, the manager comments that it is as important to identify companies with the highest growth in Asia as those whose growth is both stable and sustainable.

Currently, the strategy maintains its position in defensive and cyclical consumer companies, as well as in the telecommunications sector to benefit from the growth of domestic consumption in Asia, focusing mainly on companies that provide stability in dividend distribution. Recently, some more cyclical positions have been added due to their attractive valuation in both absolute terms and relative to companies with more predictable earnings growth.

As future risks, the manager highlights macroeconomic factors, both in Europe and the U.S. due to their fiscal problems and the possibility of a permanent slowdown in China’s growth. Despite this, Matthews Asia notes that Asian companies maintain the positive differential in dividend yield compared to American companies and remain well positioned to grow their dividends.

Matthews Asia has just over $5 billion under management in the Asian dividend yield strategy, which was launched in 2005 in the U.S. and had its UCITS format counterpart, the Luxembourg-based Asia Dividend fund, launched in April 2010. The UCITS strategy has $376 million in assets under management (as of February 28, 2013).