Curated news and analysis for wealth advisers and their clients from WSJ reporters and columnists and beyond
Some portfolio managers warn that economic fundamentals broadly haven’t kept pace with unusually high valuations, making asset prices vulnerable to sudden shifts in sentiment, reports WSJ.
Amplifying those concerns, rallies in developed-country shares, emerging-market bonds and commodities appear to have been built on the foundation of easy money and a stable dollar. A change in those conditions could reverberate across markets. Stocks, commodities and emerging markets all plunged in the first weeks of 2016 following the Federal Reserve rate increase last December.
For now, many investors continue putting money to work, reasoning that there are few signs of excess risk-taking echoing the sharp rises in bank leverage and house prices that presaged the 2008 crisis, WSJ adds. While asset prices may appear overextended and volatility too low for comfort, many portfolio managers are loath to sharply raise cash holdings, afraid to miss out on gains.
Below, some of the best analysis and insight from WSJ writers and columnists, and beyond, on investing, the wealth-management business and more.
Working toward a rate hike. Coming off the long Labor Day weekend, U.S. investors return to work with more evidence that economic growth is on the upswing, writes WSJ Ahead of the Tape columnist Steven Russolillo. Friday’s employment report didn’t blow it out of the water, but job gains remained steady with wage growth outpacing inflation. That prompted Goldman Sachs to increase its estimated odds the Federal Reserve will raise interest rates later this month to 55% from 40%.
The question now is whether a decent labor market can translate into sustained overall growth, lending support to a rotation in stock-market leadership seen last month. A reading on service-sector activity, due Tuesday, should provide some comfort to investors.
Friday’s markets. U.S. stocks rose Friday, even as declines by drugmakers cut into the broader market’s advance. The S&P 500 ended the day up 9.12 points, or 0.4%, at 2179.98 and the Dow Jones Industrial Average gained 72.66, or 0.4%, to 18491.96. The Nasdaq Composite edged up 22.69, or 0.4%, to 5249.90.
For the week, the S&P 500 and Dow both rose 0.5%; the Nasdaq rose 0.6%.
PLANNING AND INVESTING
Stocks and bonds break step. This summer, the relationship between bonds and stocks seems to have broken down in the U.S., writes WSJ Streetwise columnist James Mackintosh. Share prices and bond yields moved in the same direction in just 11 of the past 30 trading days, close to the lowest since the start of 2007.
This is far from unprecedented. But since Lehman Brothers failed in 2008, such a swing in the relationship has been unusual and suggests prices are being driven by something other than the balance of hope and fear about the economy.It has tended to coincide with times of deep discontent in markets, notably the 2013 “taper tantrum,” when bond yields briefly surged after Federal Reserve officials signaled they would soon end stimulus, and last year’s brief bubble in German bunds, Mr. Mackintosh adds.
European bond investors head to U.S. Faced with dwindling returns in Europe, some investors are selling their corporate bonds to the European Central Bank and heading across the Atlantic where yields are higher and they aren’t so vulnerable to changes in expectations around central bank buying habits, reports WSJ.
SEC eyes advisers’ social media use. The Securities and Exchange Commissions wants to more closely examine advisers’ social media use, writes InvestmentNews. The SEC said in a recently released final rule that it is adding a section to its so-called Form ADV, which investment advisory firms are required to file with the agency, for advisers to list addresses of their Twitter, Facebook, LinkedIn and other social-media web sites.
“Our staff may use this information to help prepare for examinations of investment advisers and compare information that advisers disseminate across different social media platforms, as well as to identify and monitor new platforms,” the SEC says in the rule.
Try ‘Altercasting’ to persuade people. Trying to nudge someone to do something? Try casting them in a role, psychologists and communication experts tell the WSJ. The persuasion tool, known as altercasting, describes a technique in which one person characterizes another as a certain type of person in order to encourage him or her to behave in a desired manner.
Experts tell the WSJ this works because people typically want to rise to the occasion