Americas ETP News
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U.S. Business Debt Soars by Record on Bond Issuance, Loans
June 11, 2020--U.S. nonfinancial business debt soared in the first quarter by the most on record as loans and corporate bond issuance jumped, underscoring companies’ preparations to deal with the coronavirus fallout.
Firms boosted debt at an annualized 18.8% in the first quarter to a total outstanding $16.8 trillion, which surpassed the level of household debt, according to a Federal Reserve report out Thursday.
At the same time, household net worth fell the most on record, dropping to $110.8 trillion from $117.3 trillion in the prior period, as stock prices collapsed in February and March amid fears of the coronavirus.
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Source: bnnbloomberg.ca
Federal Reserve issues FOMC statement
June 10, 2020--The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation.
Financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.
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Source: federalreserve.gov
U.S. May deficit nearly doubles to $399 billion
June 10, 2020--The U.S. federal budget deficit in May nearly doubled to $399 billion from a year earlier amid continued strong spending on coronavirus relief programs and a 25% drop in receipts, the Treasury Department said on Wednesday.
The May deficit brought the year-to-date fiscal deficit to $1.88 trillion, already eclipsing the previous full-year record of $1.4 trillion in 2009, with some analysts predicting a gap as high as $3.8 trillion for the fiscal year to Sept. 30.
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Source: reuters.com
Dovish Powell Sees Fed Keeping Foot on Gas Until Jobs Come Back
June 10, 2020--Fed maintains Treasuries, MBS buying at least at $120b a month
Says virus continues to pose considerable risks to the economy
Federal Reserve Chairman Jerome Powell sent a powerful message Wednesday that the central bank will keep pumping stimulus into the U.S. economy until its traumatized labor market has healed from the harm of the coronavirus pandemic.
"We're not even thinking about thinking about raising rates," he told a video press conference after the Federal Open Market Committee held its key interest rate near zero and almost all officials forecast keeping it there through 2022.
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Source: bloomberg.com
Bakkt, Galaxy Digital to Offer Bitcoin Trading, Custody Solution for Institutions
June 10, 2020--Two New York-based crypto companies hope to scoop up growing institutional demand for physical bitcoin.
Announced Wednesday, Galaxy Digital's trading arm and regulated bitcoin futures provider Bakkt said the service will offer asset managers and other institutional investors a "white glove" trading and custody solution.
As part of the collaboration, Galaxy will provide all the trading services and functionalities, leveraging its existing plugins to 30 different exchange venues. Meanwhile, Bakkt will offer custody services through its Bakkt Warehouse, which it currently uses to facilitate physically settled bitcoin contracts.
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Source: coindesk.com
Stock Pickers Underperformed During Coronavirus Market Turmoil
June 10, 2020--In the early months of 2020, most U.S. large-cap stock-picking funds lagged behind the S&P 500
Most U.S. large-cap stock-picking funds underperformed the benchmark S&P 500 during the tumultuous early months of 2020, according to new data from S&P Dow Jones Indices.
As fears of the coronavirus pandemic and related economic damage rippled through the markets, the S&P 500 tumbled 34% from its February high to its March low. But by the end of April, the index had shot back up 30% and posted its best one-month percentage gain since January 1987.
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Source: wsj.com
A first-of-its-kind racial empowerment ETF is 'flying under the radar.' Maybe it shouldn’t.
June 9, 2020--Wall Street doesn't do a great job at offering up socially responsible products and services, says the manager of this nonprofit ETF.
Consider an exchange-traded fund that's small, with only $4 million in assets after nearly two years in existence, and charging a high management fee -76 basis points-that enables investors to access a feel-good strategy that's very of-the-moment.
If that sounds iffy, think again. The fund, the Impact Shares NAACP Minority Empowerment ETF NACP, is the only financial product that explicitly addresses issues of racial inequality, doing so with the backing of one of America’s oldest and most prestigious civil rights groups.
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Source: marketwatch.com
Once bitten, not shy: Investors again seek margin loans as stocks rally
June 9, 2020--Global banks are seeing renewed appetite from wealth management clients to borrow money to buy stocks as markets rebound, bankers said, which comes just months after the strategy burned some investors.
Low interest rates as central banks support the global economy and the rapid rebound from the lows in March are leading investors to turn to margin accounts, where they borrow money from the brokerage to buy assets, in order to boost profits, several bankers familiar with the matter said.
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Source: Reuters
Delisting Chinese Firms: A Cure Likely Worse than the Disease
June 9, 2020-In May, the Senate unanimously passed a bill-the Holding Foreign Companies Accountable Act-designed to improve financial reporting by China-based firms trading on U.S. exchanges. Fraud at these firms-including most recently Luckin Coffee-has cost American investors tens of billions of dollars over the last decade. The bill thus targets a real problem. Unfortunately, its remedy is likely to hurt-not help- the American shareholders of these firms.
To reduce fraud, the Sarbanes-Oxley Act of 2002 requires audits of every U.S.-traded firm to be inspected by the Public Company Accounting Oversight Board. But U.S.-traded firms based in China, whose market capitalizations collectively exceed $1 trillion, refuse to comply. They and Beijing say PCAOB inspection of China-based audit records would violate state-secrecy laws. Why hide these records from the PCAOB? Inspections would likely turn up improper payments to officials, putting them at risk and embarrassing the Chinese Communist Party.
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Source: corpgov.law.harvard.edu
Collapsing rates leave investors dangerously exposed to equity risk
June 8, 2020--The classic portfolio-60% stocks, 40% government bonds-no longer makes sense
Covid-19 has brought us to a historic turning point in financial markets. A fundamental investment strategy that has protected institutional and retail investors alike for decades-balancing equity risk by holding high-quality government bonds-has finally run its course.
When the Fed lowered short-term rates to zero in response to the pandemic, the last shoe dropped.The implications of this change are huge. For one thing, millions of retail investors have been left largely defenceless, lacking a tried and tested means of diversifying the inevitable risk of holding equities.
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Source: FT.com
