WrapManager's Wealth Management Blog

Should China's Currency Worry Markets? A slide in the Chinese yuan is sparking fears of a sharper devaluation that could rattle global markets. Are the worries justified? We see the yuan depreciating moderately in response to slower growth, financial deleveraging and escalating trade tensions. We expect China to rely mostly on fiscal and monetary tools, rather than the currency, to manage any growth slowdown in the second half. The Chinese currency posted its biggest monthly fall against the U.S. dollar on record in June - just as the trade tussle between China and the U.S. heated up. The yuan has slid 4% so far this year, with the fall accelerating since mid-June when U.S. President Donald Trump announced a 25% tariff on $50 billion of Chinese imports. See the blue line in the chart above. We do not see China resorting to a 2015-style devaluation to cushion the blow. Back then, a lack of market confidence in China’s policy framework contributed to capital flight (see the green bars), spooking global markets. Today, China has stricter capital controls in place – and improved coordination between policymakers. We believe this should give the government confidence to allow the yuan to gradually slide lower. [+] Read More

Oftentimes when it comes to investing, there are habits/tasks we know we should do, and habits/tasks that we’d maybe prefer to do. Saving 20% of every paycheck and keeping cool during volatile markets are examples of things we should do. Splurging on a trip to Europe and selling stocks to “wait out” the downside volatility might be examples of things we’d prefer to do. For many savers and investors, there is a constant tension between these two, even though we know that the clearest path to long-term success is saving more, spending less, and investing prudently. Much like losing weight, the formula for success is fundamentally simple – but the execution and follow-through can be painstakingly hard. The fundamental question, then, is: what can we do to shift our behavior? What can we do to form better, lasting habits that lead to long-term financial success? [+] Read More

Determining Priorities When Saving for Retirement and Paying Off Student Debt Consider this Scenario: Your friend Stanley has recently completed college and has just started a new job. Stanley has $40,000 in student loans to pay off at an interest rate of 7%. Stanley’s starting salary at his new job is $50,000 per year. Additionally, his employer offers a 401(k) match of 2% of salary. Stanley understands the importance of saving for retirement and would like to save as much as possible toward his future. Stanley also understands that he is $40,000 in debt and he would like to pay off his student loans as quickly as possible. He isn’t certain how he should prioritize his budget though, and he’s heard a lot of conflicting advice. When he asks you, what would you recommend: Should he focus on paying off his student debt before investing for his retirement? Or should he save as much as he can toward retirement before paying off his student loan debt? What is the probably the best way to prioritize investing versus paying off student loan debt? [+] Read More

Volatility Softening; Rate Hikes The second quarter of 2018 saw a marked decline in volatility from the first quarter. The prevailing feeling in the US equity markets was decidedly more positive. On the whole, the economic picture in the United States improved from the first quarter. Inflation is nearing the Fed’s target of 2% for the Core Personal Consumption Expenditures reading. The manufacturing PMI readings in the U.S. show that the sector continues to expand. The labor market also remains very tight but wage growth remains below 3%. The unemployment rate fell to 3.8% in May, the lowest level in 18 years and the non-farm payrolls have averaged a gain of 207,000 jobs so far this year. On the back of this strong data, estimates for second quarter GDP range from 3-5%, up strongly from the 2.2% estimated for the first quarter. The data is indicating that first quarter was likely more of an anomaly than a trend. The Federal Open Market Committee raised rates for a 7th time in June and conveyed a more hawkish view which indicates that 2 more rate hikes are likely in store for the rest of 2018. [+] Read More

For readers who are unfamiliar with – and maybe curious about – the concept of ESG (Environmental, Social, and Governance) investing, look no further. In this post, we’ll answer basic questions about what ESG investing is, how it came about, the pros and cons, and why it may or may not be right for you. [+] Read More

J.P. Morgan Releases the 3Q 2018 Guide to the Markets JP Morgan's Guide to the Markets for the third quarter of 2018 is now available for review. Comprised of 64 in-depth pages of charts that examine a variety of financial and economic topics, the guide illustrates: Sources of earnings per share growth Economic growth and the composition of GDP Fixed income yields and returns Global economic and earnings growth Global commercial real estate, and Local investing and global opportunities [+] Read More

How important are jobs and the unemployment numbers to financial markets? So important that strict rules were put in place over 30 years ago in an effort to prevent the numbers from being prematurely released to the public. Generally speaking, the only people with access to the numbers – before their official release – are the staff of the agency issuing the data, and the President of the United States and his executive team. Since the jobs numbers are considered “market-moving data,” it makes sense that the data should be treated, in a sense, like insider information. Here’s how it works: The Bureau of Labor Statistics (BLS) releases its monthly employment report on the first Friday of the month, at 8:30 AM. But the night before, the president and several senior administration officials — including the Treasury secretary and the chairman of the Council of Economic Advisers — are briefed on the numbers. By rule, no one can discuss the numbers at all before the official release at 8:30 AM. In fact, the data is considered so sensitive that staffers are supposed to wait until a full hour after the release to make any public comments about it. [+] Read More

When you’re validating a money manager recommendation, chances are high that you’re looking for information regarding the managers performance against its own benchmark over time. While it’s up to the manager to provide this information to a third-party reporting database, many managers elect to do so, in part because it helps with transparency of their product and allows users to review the fundamentals of their strategy and to compare results alongside the appropriate chosen benchmark. Of the money managers that choose to report their performance, they typically report the investment performance of their products to institutional databases such as Morningstar, eVestment, and Informa Investment Solutions, among others. Subscribers to these databases can then compare the reported performance of thousands of different investment products and use custom filters and searches to narrow down a potential search for a product that best fits what they are looking for. By comparing managers who report to a database like this, a researcher may be able to whittle a universe of hundreds or even thousands of products down to just a handful of strategies that meet the investor’s specific criteria. But what if an investment manager doesn’t report the performance of their products to a database? [+] Read More

Planning for Retirement? Don't Overlook These Milestones With millions of Americans owning tax-advantaged retirement accounts, totaling $28 trillion in assets, in many types of accounts—such as a 401(k), 403(b), 457, and an IRA (Roth, traditional, SIMPLE, SEP, SAR SEP, rollover, inherited, etc.), each with their own rules—it’s little surprise that slip-ups and or oversights occur all too frequently. Misunderstanding or outright ignoring a number of key dates, for example, can be costly—in terms of financial penalties and/or lawyers and accountant fees, not to mention considerable time to amend the errors. [+] Read More