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CBO-Monthly Budget Review: February 2022
March 8, 2022--Summary
The federal budget deficit was $475 billion in the first five months of fiscal year 2022, CBO estimates. That amount is less than deficits recorded during the same period in the two prior fiscal years: It is less than half the shortfall recorded for the same months in fiscal year 2021 ($1,047 billion) and three-quarters of the deficit recorded in 2020 ($624 billion), just before the start of the coronavirus pandemic.
From October 2021 through February 2022, revenues were $371 billion (or 26 percent) higher and outlays were $201 billion (or 8 percent) lower than they were during the same period a year ago, CBO estimates.
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Source: CBO (Congressional Budget Office)
Innovator to List Buffer Step-Up Strategy ETFs BSTP and PSTP, New Managed Outcome ETFs Designed to Continuously Lock-in Stock Market Gains, Refresh Buffers Against Loss
March 7, 2022--In upward trending markets, Step-Up Strategy ETFs seek to provide tax-efficient strategies to lock-in SPY gains, reset upside participation and eliminate potential downside before buffer1
In downward markets, Step-Up Strategy ETFs seek to capture potential excess return relative to SPY, benefit from typically higher upside caps during volatility and refresh buffers against loss
Innovator Buffer Step-Up Strategy ETF (BSTP) will actively manage a portfolio of options to seek upside participation to SPY in rising markets and renewed buffers to hedge against SPY losses up to 9% in falling markets
Innovator Power Buffer Step-Up Strategy ETF (PSTP) will actively manage a portfolio of options to seek upside participation to SPY in rising markets and renewed buffers to hedge against SPY losses up to 15% in downward markets
Tax-efficient strategies for taxable accounts, Managed Outcome ETFsTM provide advisors single ticker managed portfolios to streamline Defined Outcome ETFTM investing.
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Source: Innovator Capital Management
Innovative Portfolios Converts Two Actively Managed Mutual Funds to ETFs
March 7, 2022--Innovative Portfolios, LLC, today has announced the conversion of two mutual funds to ETFs. The two ETFs-Dividend Performers Fund (IPDP) and Preferred-Plus Fund (IPPP)-have attractive 3-year track records and performance rankings in their Morningstar categories. The two ETFs are listed on Cboe BZX Exchange.
"As our investors' interests are a top priority, we recognize the benefits in converting our mutual funds to actively managed ETFs," said Dave Gilreath, Managing Director and Chief Investment Officer of Innovative Portfolios. "Exchange-traded funds offer greater transparency, tax efficiency, and lower fees for investors who are looking to add potential for greater income generation."
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Source: Innovative Portfolios
Thematic ETFs tend to launch just before a steep fall in returns
March 7, 2022--Research finds tailored funds have a poor record of returns despite their strategies' appeal
Any investors short selling shares in the most famous 'thematic' ETF - Cathie Wood's flagship Ark Innovation ETF (ARKK)-will have made a killing in recent months.
By mid-February, the exchange traded fund had lost more than half its value since its peak a year earlier. And there were no signs of an end to the sell-off, even though Wood has been insisting the innovation stocks it holds were "way undervalued".
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Source: ft.com
NYSE suspends trading in three Russia-exposed ETFs
March 4, 2022--The New York Stock Exchange Arca halted trading in three Russia-focused exchange traded funds (ETFs) on Friday, following tightening of economic sanctions by Western governments against Russia after its military invasion of Ukraine.
The exchange stopped trading in iShares MSCI Russia ETF, Franklin FTSE Russia ETF and the Direxion Daily Russia Bull 2X Shares due to regulatory concerns, according to its website.
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Source: reuters.com
Congressional Budget Office-H.R. 4616, Adjustable Interest Rate (LIBOR) Act of 2021
March 3, 2022--Summary
H.R. 4616 would establish a process for certain financial contracts that currently reference the London Interbank Offered Rate (LIBOR) to instead reference a replacement benchmark interest rate upon the occurrence of certain events affecting LIBOR.
LIBOR is an index rate (or interest rate based on a basket of similar financial transactions that adjusts as economic conditions change) that is commonly used in setting the interest rate for many adjustable-rate consumer financial products. The United Kingdom regulator that oversees the LIBOR panel has indicated that it will cease publication of the U.S. Dollar LIBOR after June 30, 2023. H.R. 4616 would task the Board of Governors of the Federal Reserve System with identifying replacement rates prior to that date based on the Secured Overnight Financing Rate, an index rate based on the costs of borrowing that is collateralized by U.S. Treasury securities.
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Source: CBO (congressional Budget Office)
Federal Reserve Board-Beige Book
March 2, 2022--Overall Economic Activity
Economic activity has expanded at a modest to moderate pace since mid-January. Many Districts reported that the surge in COVID-19 cases temporarily disrupted business activity as firms faced heighted absenteeism. Some Districts attributed a temporary weakening in demand in the hospitality sector to the rise in cases. Severe winter weather was also cited as disrupting activity.
As a result, consumer spending was generally weaker than in the prior report. Reports on auto sales were mixed. Manufacturing activity continued to grow at a modest pace. All Districts noted that supply chain issues and low inventories continued to restrain growth, particularly in the construction sector. Reports from banking contacts indicated some weakening of financial conditions, although loan demand was generally unchanged. Demand for residential real estate was generally strong, although many Districts reported no change in home sales due to seasonal trends and low inventories. Agriculture reports were somewhat mixed, as some Districts experienced difficult growing conditions while others benefited from higher crop prices. Reports on the energy sector indicated modest growth. Among reporting Districts, the overall economic outlook over the next six months remained stable and generally optimistic, although reports highlighted an elevated degree of uncertainty.
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Source: federalreserve.gov
SEC Proposes Short Sale Disclosure Rule, Order Marking Requirement, and CAT Amendments
February 25, 2022--Agency Also Reopens Comment Period for Proposed Rule 10c-1
The Securities and Exchange Commission today announced that it has voted to propose changes that would provide greater transparency to investors and regulators by increasing the public availability of short sale related data.
New Exchange Act Rule 13f-2 and the corresponding Form SHO would require certain institutional investment managers to report short sale related information to the Commission on a monthly basis. The Commission then would make aggregate data about large short positions, including daily short sale activity data, available to the public for each individual security.
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Source: SEC.gov
Dimensional Adds Three New US Equity ETFs to Growing Offering
February 24, 2022--Dimensional Fund Advisors, a global leader in systematic multifactor investing, expanded its exchange-traded funds (ETFs) offering with today's listing of three new US equity ETFs on the New York Stock Exchange (NYSE). The new ETFs offer broadly diversified exposure to US small cap value and US high profitability 1 equities, as well as US real estate markets.
"We continue to build out Dimensional's ETF suite, which not only offers the benefits of passive strategies-such as broad diversification, low turnover, and transparency-but also provides the advantages of active, flexible portfolio management to continually target higher expected returns over traditional indexes," said Co-CEO and Chief Investment Officer Gerard O’Reilly. "These areas of the market are core to our expertise, as Dimensional has been researching and managing small cap value, high profitability, and real estate strategies for decades."
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Source: Dimensional Fund Advisors
The weakness of average inflation targeting
February 22, 2022--Introducing average over time without defining what this means is counterproductive and current levels of inflation in the US will sooner or later expose this weakness in the Fed's new strategy.
In the 2020 revision of monetary policy strategy, the US Federal Reserve adjusted the pursuit of an inflation rate at 2 percent, to inflation that 'averages 2 percent over time'.
Many worry that using average inflation over time in order to decide on policy for the future is problematic.
The first and obvious issue is the length of the period across which policymakers average out inflation.
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Source: bruegel.org
