Brief: The Federal Reserve announced Wednesday it soon will begin reducing the pace of its monthly bond purchases, the first step towards pulling back on the massive amount of help it had been providing markets and the economy. Tapering of bond purchases will start “later this month,” the policymaking Federal Open Market Committee said in its post-meeting statement. The process will see reductions of $15 billion each month -- $10 billion in Treasurys and $5 billion in mortgage-backed securities – from the current $120 billion a month that the Fed is buying. The committee said the move came “in light of the substantial further progress the economy has made toward the Committee’s goals since last December.” The statement, approved unanimously, stressed that the Fed is not on a preset course and will make adjustments to the process if necessary. “The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook,” the committee said.
Brief: The hedge fund traders watched as a nightmare scenario played out in the world’s bond markets. From Australia to the U.K. to the U.S., government bond yields abruptly moved against them last week amid growing speculation that central banks will accelerate plans for raising interest rates in the face of persistent inflation. The losses piled up -- and for a few became so big that the firms halted some trading to contain the damage. Balyasny Asset Management, BlueCrest Capital Management and ExodusPoint Capital Management each curtailed the betting of two to four traders after they hit maximum loss levels, according to people with knowledge of the matter, who asked not to be identified because the information is private. That step stopped traders from changing their positions, an extraordinary risk-management move used so firms can reassess trades or unwind them. ExodusPoint lost about $400 million last month, leaving it down 2% in October, people said. The fund is still up 2.8% year-to-date.
Brief: The S&P 500 just capped its best year ever following a U.S. presidential election, surging 37% since Joe Biden won the vote. The benchmark index gained more in the past year since the 2020 election than any other modern president has seen in their first year in office. But the advance has more to do with the “everything rally” following the vaccine rollout than any specific policy decision, Charles Schwab UK Managing Director Richard Flynn said in a note. “While presidents are always quick to take credit for strong performance and quick to blame their predecessor for poor performance, it is likely that they are responsible for neither,” Flynn wrote. The gains come as the results of Tuesday’s elections offered a warning shot to Biden and the Democrats after Republicans won in key races. While the stock market has rallied to all-time highs, the nation’s mood has been less bullish amid rising prices and mixed economic reports. The last time the S&P 500 recorded a post-election day annual gain above 30% was after Bill Clinton’s re-election in 1996. The index gained 21% during Donald Trump’s first year.
Brief: The rate of expansion in the U.S. services sector, where most Americans work, hit a record high in October as demand remained strong even as supply chain problems persisted. The Institute for Supply Management reported Wednesday that its monthly survey of service industries — which includes restaurants and bars, trucking companies, hotels and many other businesses — jumped to a reading of 66.7 from September’s reading of 61.9. Although business activity, new orders, supplier deliveries and backlog of orders all surpassed previous records, sticky issues that have plagued almost every kind of economic activity since infections began to ease in the U.S. continued: labor shortages, supply chain bottlenecks and higher prices. “The broad picture painted by this report is that the economy is overheating,” said Stephen Stanley, chief economist for Amherst Pierpont Securities. “Demand is overwhelmingly strong at the same time that supply is constrained. Still, I am not sure that even a fully-functioning supply side, with more labor and a resolution of snags would be able to handle the pace of demand right now.”
Brief: Private market investments reign supreme with a sharp increase in interest in this area over the past five years to top position of importance, according to Global wealth manager Julius Baer's just published 2nd Annual Family Barometer 2021 which highlights the top priorities for UHNW families right now. The survey covered more than 800 wealth management industry experts who work with and advise UHNW clients and their families. However, it is sustainable and impact investing and ESG-related topics which have grown the most (17%) in terms of importance over the past five years when it comes to investing… Against the backdrop of Covid-19, health has replaced regulatory aspects as the third most important topic when it comes to topics ‘beyond investments' for families, with 19% of respondents citing it as the most important topic for their clients. Guy Simonius, head of family office service at Julius Baer, said: "Perhaps now is the right time to think about starting a meaningful dialogue with your family and your chosen experts. Experience shows that doing so can bring greater peace of mind and contentment, and can also help to mitigate conflict and bring a family closer together.