Real Estate Trends Vary Across Texas Market

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Though the overall median price of homes sold in Texas in the third quarter of 2023 decreased 1.5% compared to the same period one year ago, more Texas metro areas saw median price increases than decreases, according to the 2023-Q3 Quarterly Housing Report released by Texas Realtors. In Q3 2023, active listings, days homes spent on the market, and months of inventory all saw increases from the same period in 2022.

“We are continuing to see the housing market progress toward more balance between buyers and sellers,” said Marcus Phipps, 2023 Chairman of Texas Realtors. “An increase in the supply of homes and the average number of days homes stay on the market means that buyers in many areas may have more choices and a little more time to make decision. However, these trends vary by metro and even by neighborhood, so it’s smart to discuss market conditions in your area with your Realtor.”

The median sales price of Texas homes in Q3 2023 decreased to $340,000 from $345,000 in the same period last year. Approximately half of the homes sold in the third quarter were in the $200,000 – $399,999 price range. At the lowest and highest ends of the price distribution, 13% of homes were sold for under $200,000, while 4% sold for at least $1 million.

Texas homes spent an average of 48 days on the market in Q3 2023, 17 days longer than in the same quarter last year. Taking the number of days to close into consideration, on average it took 11 days longer to sell a property in Q3 2023 than in the same quarter last year.

Months of inventory, or how long it would take to sell the existing number of homes on the market at the current pace of sales, stood at 3.7 months in the third quarter of 2023, which was an increase from 2.7 months in the same period last year. A balanced market is estimated at 6 to 6.5 months of inventory, according to the Texas Real Estate Research Center.

Active listings increased 15.2% in the third quarter of 2023 compared to the same period in 2022.

Nearly Half of Investors Believe the 2024 Election Will Have a Bigger Impact on Portfolios Than Market Performance

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As the political noise leading up to national elections in 2024 begins its long crescendo, many American investors are nervously considering implications for their investment portfolios.

Regardless of political affiliation, nearly half (45%) of investors believe the results of the 2024 U.S. federal elections will have a bigger impact on their retirement plans and portfolios than market performance, according to Nationwide’s ninth annual Advisor Authority survey, powered by the Nationwide Retirement Institute.

In addition to general pessimism regarding the election’s impact on retirement prospects, investors fear the impact of new policy and opposing party rule on the U.S. economy. Nearly one in three (32%) investors believe the economy will plunge into a recession within 12 months if the political party with which they least align gains more power in the 2024 federal elections.

Roughly the same percentage (31%) believe the party they least align with gaining more power in office will negatively impact their future finances, and 31% believe their taxes will increase within 12 months.

“As we get closer to the 2024 election, we’re going to see more messaging and campaign ads that portray worst case scenarios, creating anxiety in investors that can lead to short-sighted, emotional decisions,” said Eric Henderson, President of Nationwide Annuity. “It’s important for investors to not get caught up in the ‘what ifs,’ and instead focus on what they can control. A proactive step would be having a conversation with their advisor or financial professional and establishing a long-term plan – or revisiting the plan they already have in place – to ensure it remains aligned with their goals regardless of which party takes control in Washington.”

Recession fears are strong across party lines

Some issues are viewed differently across party lines. More than half (57%) of investors who identify as Democrats say market performance will have a bigger impact on their retirement plans and portfolios than the results of the 2024 election, compared to 47% of investors who identify as Republicans.

However, Republicans tend to brace for election results more than their Democrat counterparts. More than two thirds (68%) of Republican investors believe the outcome of a presidential election will have a direct, immediate and lasting impact on the performance of the stock market, compared to 57% of Democratic investors. Independent investors are the least concerned with election results; fewer than half (40%) feel the results of next year’s election will have a bigger impact on their retirement plans and portfolios than market volatility – the lowest of the three primary political demographic groups.

“While it’s natural to feel the party you support will deliver the best economic outcome, history tells us that these instincts can be blown out of proportion,” said Mark Hackett, Chief of Investment Research for Nationwide. “Remember that election results in either party’s favor have historically had little impact on future investment returns. That’s why it’s important to apply a strong filter to election news coverage to maintain an objective understanding of the events shaping our world. It’s best to stay focused on the fundamental drivers of investment performance (e.g., company earnings, revenue growth, profit margins, etc.) and leading indicators of economic conditions.”

Older investors are more fearful

The general fear of a recession is magnified for those closest to retirement ahead of next year’s election, as any wrong decision could have a lasting impact on how they live through retirement. Pre-retiree investors (defined as non-retired investors aged 55-65) are more concerned about an impending economic recession (50%) than investors overall (41%). Pre-retirees and those already in retirement are more concerned about inflation than investors overall (66%, 66% vs. 61%, respectively).

As a result, pre-retirees are planning to be more conservative with their assets than other investors – perhaps because they don’t have the time to recoup losses. One third (33%) of pre-retiree investors are managing their investments more conservatively in anticipation of next year’s election, compared to just 31% of all non-retired investors. In addition, just 12% of pre-retirees and 4% of retired investors plan to invest more aggressively in anticipation of next year’s election.

Economic fears spur changes to spending

As campaigning and political punditry ramp up, economic factors are still top of mind for those saving for retirement.

Overall, investors who are not retired see inflation (47%), an increased cost of living (42%), and a potential recession (31%) as the greatest long-term challenges to their retirement portfolios. To compensate, they are changing their spending and investing habits, including making adjustments to cut spending and ensure a timely retirement.

To save more for retirement in the current environment, one third (33%) of investors are avoiding unnecessary expenses, such as vacations, jewelry, and shopping sprees over the next 12 months. A quarter (25%) of non-retired investors also say they will need to work longer to save money for retirement in case Social Security runs out of money, a hard reality that is projected in 10 years, according to the most recent Social Security Trustees Report.

Despite pulling back spending and adjusting investments as political pressures and economic turbulence collide, investors are entering election season on a cautiously optimistic note. Recession fears remain elevated but are down slightly from last year – four in five (80%) investors are now concerned about a U.S. recession in the next 12 months, compared to 85% in 2022. Four in ten (40%) of all investors and 32% of pre-retirees describe their financial outlook for the next 12 months as “optimistic.”

Advisors empathize with investor concerns

Financial advisors understand the fears that can stem from changes in Washington and can help investors navigate through it. Like investors, financial advisors view inflation (46%) as the most immediate challenge to their clients’ retirement portfolios. However, they are not immune to a partisan bias; 38% believe the stock market will be volatile for the 12 months following the election if the party they least align with gains more power after next year’s federal elections.

In the face of volatility spurred on by partisan noise and a potential exchange of power in Washington, advisors still maintain a more balanced, nuanced view of the election than their clients, in part because many have designed long-term strategies to protect them against volatility. Despite election jitters, most advisors (56%) believe staying the course – i.e., not changing their clients’ investment strategies – is the best course of action in an election year.

With this approach in mind, advisors are recommending and implementing their strategies accordingly. Almost all (96%) currently have a strategy in place to help their clients protect their assets against market risk, an increase from 92% in the last 12 months.

Annuities (80% vs. 78%), diversification and noncorrelated assets (72% vs. 57%), and liquid alternatives such as mutual funds or ETFs (54% vs. 31%) all saw at least a slight increase as solutions used by advisors to help their clients protect their assets against market risk in the last year.

“While elections are important, and it’s good to be engaged in our democratic process, making emotional decisions based on what you think will happen runs the risk of derailing your retirement goals,” said Henderson. “Advisors and financial professionals should seize the opportunity to engage with their clients to reinforce the importance of sticking to their long-term plan. Another way to address client anxiety is to help them understand the value of protection solutions, like annuities, that guarantee income in retirement and guard against market volatility – regardless of who ends up winning the election.”

Independent and Hybrid RIA Channels Lead in Advisor Headcount Growth

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While established industry giants in the wirehouse channel make up four of the top-five broker/dealer (B/D) firms when ranked by assets under management (AUM), financial advisors continue their move toward independence, seeking greater flexibility to run their practices as they see fit, according to the latest Cerulli Edge—U.S. Advisor Edition.

Independent and hybrid registered investment advisors (RIAs) experienced the largest year-over-year advisor headcount growth rate, a trend that holds true over five- and 10-year periods. The promise of independence is alluring to advisors and continues to draw movement from the B/D to the RIA channels.

According to Cerulli, the number of independent RIA firms has grown at a compound annual growth rate (CAGR) of 2.4% over the last decade, while the number of advisors operating at independent RIAs has grown at a CAGR of 5.2% over the same period.

While Cerulli projects industry financial advisor headcount will remain relatively flat over the next five years, among all channels, independent and hybrid RIAs are projected to gain the most in advisor headcount marketshare. By 2027, Cerulli projects the channels will control nearly one-third (31.2%) of intermediary asset marketshare, continuing the trend of advisors and assets moving to these channels.

“Although the wirehouse channel dominates industry assets and average advisor productivity, the flexibility and higher payout percentages of independence is appealing to many advisors,” says Andrew Blake, associate director. “B/Ds will need to continue to leverage the benefits of working under corporate scale, which include access to technology, training, and client resources, to highlight the alluring aspects of affiliation with a major B/D. Otherwise, they risk seeing channel migration trends continue.”

U.S. Housing Recovery Offers Sustainable Opportunity

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The U.S. housing market appears headed for a recovery after years of volatility, as the compounding pressures of high interest rates, steep prices and scarce supply are expected to ease. New-home construction is forecast to rise 2% in 2024, while the home-improvement market should grow in 2024 and 2025 after a challenging 2023.

Morgan Stanley Research is anticipating structural changes in affordability, supply and financing in the next housing cycle. This could provide particular opportunity for sustainable investing in the housing market as demand for green home construction and renovation is expected to coincide with the U.S. housing market recovery, says equity strategist Michelle Weaver.

“Environmentally conscious consumers, government financial incentives and—in some cases—the declining cost of clean technologies should all drive growth in sustainable housing investing as the broader housing market picks up steam,” says Weaver.

Incentives to Go Green

The U.S. government is expected to continue playing a significant role in supporting environmentally friendly solutions and technologies, and developing local supply chains as the transition to greener homes gathers pace. For instance, the Inflation Reduction Act and the Infrastructure Investment and Jobs Act included various tax credits, loans and grants to improve the energy efficiency and climate resiliency of residential buildings.

“These incentives don’t just benefit builders, developers and homeowners, they also bode well for shareholders of companies that manufacture and/or install energy-efficient and smart equipment, green building materials and clean technology for the home, as they boost demand by improving the economics of the green products,” says Laura Sanchez, head of sustainability equity research for the Americas.

Room for Improvement

Homeowners may also see a cost benefit from investment in green projects—but they need to be selective. Some projects pay off in the short to medium term, while others come with higher financial costs that may be difficult to recoup.

The shift to clean technologies used in onsite power generation, such as solar panels, stationary batteries and electric vehicle chargers, should bring down homeowners’ energy prices right away—especially in states such as California, where utility costs are high and rising.

Contracts with solar power companies, for instance, can yield savings immediately, since homeowners lease solar panels without any upfront costs and pay a monthly bill that typically works out to be cheaper than traditional utilities. These cost savings should help bolster the solar market, which Morgan Stanley Research analysts predict to grow from around $20 billion in 2024 to more than $30 billion by 2035.

Even products that involve an upfront cost can yield savings over the life of the investment. For example, the initial cost of insulating a home can pay for itself in a few years because of lower utility bills. The EPA estimates that homeowners can save an average of 15% on heating and cooling costs, or an average of 11% on total energy costs, by sealing and insulating their homes.

The drive for greener building standards can raise the cost of homes, putting them out of reach for large parts of the population. Already, increases in house prices and mortgage rates, combined with supply constraints, have meant affordability is at its worst levels since the 2007-08 global financial crisis. This environment disproportionately affects people based on race and ethnicity, age, socioeconomic status and other factors.

“So far, equity investment opportunities around the construction of social housing remains hard to find, but we think concerns about housing affordability should ultimately spur the government to implement policy aimed at supporting supply,” Sanchez says.

BNY Mellon Launches its New Platform Universal FX

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BNY Mellon announced the launch of Universal FX, a new foreign exchange (FX) platform that meets client needs to manage execution across their entire portfolio and access market-leading price transparency.

Universal FX supports BNY Mellon clients across all market segments, such as investment managers, corporates, hedge funds and wealth managers, as well as helping them navigate the industry transition to T+1 settlement.

The investment management industry often manages portfolios across several providers resulting in an inconsistent FX execution experience. Through Universal FX, clients can now manage their whole portfolio, irrespective of where they custody, prime broker or settle trades.

The solution provides access to Developed Market and Emerging Market currency execution, enhancing the FX experience for clients globally.

“Clients often have fragmented portfolios, causing friction, lack of transparency and inconsistency while accessing services across pricing, execution and post-trade,” said Jason Vitale, Head of Global Markets Trading, BNY Mellon. “With the launch of Universal FX and our existing OneFX product suite, our clients can now control and customize their portfolio in one place – gaining 360-degree insight, providing a seamless experience across the entire execution process. This also comes at a unique moment as clients seek streamlined solutions to adjust to the T+1 settlement cycle.”

This new offering builds on BNY Mellon’s OneFX suite of innovative solutions and banking capabilities for all FX trading, FX hedging and cross-border payment activities. OneFX is designed to seamlessly connect the entire FX spectrum, ensuring clients around the world have access to the latest new features and functionalities from BNY Mellon as they become available.

More than 50% of asset managers continue to bet on the 60/40 model

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Did the year 2022 destroy the relevance of the 60/40 model? Are portfolio managers willing to implement other options? What alternatives are available in the market for asset managers to facilitate portfolio diversification? According to FlexFunds, a leading company in the design and launch of investment vehicles (ETPs), uncertainty becomes the playing field, and adaptation becomes imperative.

FlexFunds, has taken the initiative to prepare the 1st Report of the Asset Securitization Sector: a study of the main trends of these financial instruments to raise capital in international markets. This report reveals that despite poor results in the last year, more than half of the surveyed asset managers continue to bet on the 60/40 portfolio diversification model (request this full report by sending an email to info@flexfunds.com).

The 60/40 portfolio management model is an asset allocation strategy that involves a 60% weighting of the portfolio in equities and a 40% in fixed-income assets. This approach is commonly used by portfolio managers as a way to diversify risk and ensure a certain level of return in an investment portfolio.

The year 2022 marked a dark milestone for 60/40 portfolios, worsening even the negative returns experienced during the economic crises of 2001 and 2008. Traditional recipes failed, and both the fixed-income and equity markets suffered significant losses. The war in Ukraine and the rapid rise in interest rates in the U.S. and the eurozone created a very complex scenario where the orthodoxy of the price relationship between stocks and bonds was not met.

To the question, “Do you think the 60/40 portfolio composition model worked in the last 12 months?” more than 68% of asset managers and investment experts answered that the 60/40 model did not work, while 15.4% believe it did. However, 16.5% of the sample does not have a clear opinion on the matter. It is worth noting that among those who believe it did not work, almost 75% think it was due to the rise in interest rates, while nearly 10% argue that it was due to the decrease in equities.

Amid the uncertainty, portfolio management becomes a delicate art. Diversification, a cornerstone, was challenged by the lack of correlation between fixed income and equities. Traditional strategies, such as the 60/40 model, faltered, revealing their vulnerability to the changing economic and financial paradigm.

However, despite the majority of respondents agreeing that the 60/40 model did not work, when asked, “Do you think the 60/40 model will remain relevant?” 59% of asset managers and investment experts believe that this strategy will continue to be relevant. This fact highlights two aspects: first, its future application will depend on how the markets and economic conditions evolve, and second, perhaps paradoxically, it contradicts the earlier assertion that most respondents believe it did not work in 2022, yet now there is a majority opinion that it will remain a relevant strategy.

The global trend in portfolio diversification with new asset classes such as real estate, crypto assets, and private equity offers divergent alternatives to the classic 60/40 model in the international market. FlexFunds, through its asset securitization program, provides investment managers with the flexibility to design a portfolio with multiple asset classes and repackage it for distribution through Euroclear to private banking platforms.

How should asset managers adapt? What investment vehicles do investment advisors prefer to diversify their portfolios? What are the industry’s biggest challenges for clients and capital acquisition? Discover all of these key trends and more in the 1st Report of the Asset Securitization Sector by FlexFunds, which gathers the opinions of more than 80 asset managers and investment experts from 15 countries in Latin America, the U.S., and Europe.

Request it by sending an email to: info@flexfunds.com

Adepa Chooses BlackRock’s eFront to Enhance its Private Assets Offer to Clients

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Adepa, the Luxembourg-based Alternative Investment Fund Manager (AIFM) and Fund Administrator, has selected eFront, a BlackRock technology solution dedicated to private markets.

This has allowed Adepa to strengthen the tailored services it provides to clients across private equity, private debt, infrastructure and real estate.

Following a competitive search process, Adepa chose the eFront platform for its client-service led approach and market leading alternative investment and data analytics capabilities. eFront solutions are available across Adepa’s entire business, including the Alternative Investment Fund Manager (AIFM) services, as well as Fund Administration and Transfer Agency.

Esteban Nogueyra, Head of Fund Administration at Adepa, said: “We are delighted to have partnered with BlackRock to implement its eFront technology, enhancing our Fund Administration and Investor Services solutions for leading alternative asset managers globally. By integrating eFront in our technology platform, we will provide a one-stop-shop combining the advantages of our back-office capabilities and leading alternative fund services expertise in Europe and Latin America, supporting our international expansion, and allowing our clients to focus on their core business.”

According to BlackRock’s 2023 Global Investment Outlook, investors will need to make more frequent changes to portfolios to adjust to a new investment regime characterized by greater volatility. The eFront platform provides clients with the data and analytics needed to inform investment decisions across all private capital asset classes.

“We’re incredibly proud to be working with Adepa, an industry leader dedicated to giving clients deeper portfolio insights that lead to unique, and meaningful, investment outcomes,” said Melissa Ferraz, Global Head of Aladdin Alternatives.

Miami Fintech Club Launches with Inaugural Networking Event Featuring Keynote by Fintech Leader Hanoi Morillo

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The Miami Fintech Club announced its official launch and inaugural networking event on Thursday, November 2nd, 2023 featuring a keynote presentation by globally renowned fintech leader Hanoi Morillo.

As an esteemed investor, executive, speaker, and author, Morillo will share her invaluable insights on driving innovation, growth, and digital transformation within the financial services industry during this special event marking the club’s debut.

Attendees will have the opportunity to gain perspective on exponential technologies, diversity in business, and strategies for achieving digital transformation from this highly respected thought leader, the press release said.

Founded by Scalto and Transcard, the club will be focused on connecting the area’s innovative fintech talent and enabling valuable networking.  The Miami Fintech Club provides a dynamic forum for leaders to exchange ideas, forge connections, and advance Miami’s status as a hub for financial services technology and innovation.

The inaugural Miami Fintech Club event will take place at 6:00 PM at PwC Miami Office and is exclusively for South Florida-based fintech entrepreneurs, venture capitalists, and others actively engaged in the region’s thriving fintech ecosystem.

For information about membership and attendance requirements for this launch event, visit the following link. 

Insigneo Welcomes Verónica López-López as Managing Director

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Insigneo announced the appointment of Verónica López-López as Managing Director in Miami.

Before joining Insigneo, López-López served as Executive Director at Morgan Stanley for 14 years, where she cultivated her expertise in wealth management and client relationship building.

López-López brings a wealth of experience and a distinguished career to her new role as a Managing Director at Insigneo. With a professional journey that spans over three decades, she has gathered vast knowledge of the financial industry.

Her financial career commenced in 1988 at The Bank of Tokyo Mitsubishi (MUFG) in Japan. Subsequently, she ventured into the Japanese Chamber of Trade and Investments in Venezuela. Her international experience includes working in Corporate Finance as well as serving in private banking and wealth management divisions at Citibank, Merrill Lynch International, and UBS International, across cities such as Miami, New York, and Caracas.

“Veronica’s expertise in providing wealth management services to high-net-worth individuals, families, and corporations is extremely well-rounded,” said Jose Salazar, Market Head for Insigneo. “Her years of experience combined with her intellectual and social capital have allowed her to build close and enduring relationships with her clients, making informed decisions jointly with them. We are very excited to have someone of Veronica’s caliber as part of the Insigneo team of Financial Advisors.”

“I am thrilled to embark on this exciting journey with Insigneo alongside a new team and associates. I look forward to contributing my knowledge and experience to provide our clients with exceptional financial advisory services, leveraging my deep-rooted relationships with clients to help them make informed decisions about their financial futures with the open and flexible architecture of Insigneo and their world-class custodians,” expressed Verónica López-López, Managing Director at Insigneo.

Lopez-Lopez’s appointment comes amid the departure of many financial advisors from Morgan Stanley after the wirehouse announced significant changes for accounts in several Latin American countries.

Among the firms that have added more advisors are Bolton, Insigneo, Raymond James and UBS.

Pictet Asset Management: Caution Prevails

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Photo courtesyLuca Paolini, Chief Strategist of Pictet Asset Management

In the face of economic uncertainty and stubborn inflation, we continue to favour bonds over equities.

Asset allocation: looming economic slowdown casts shadow over stocks

The outlook for most major developed economies remains uncertain.

Economic growth in the US is likely to turn anaemic and stay below its long-term trend, while Europe is not expected to recover anytime soon.

We expect earnings growth of US companies to contract more than 2 per cent next year, in stark contrast to the estimates of analysts who forecast growth of as much as 10 per cent.

Also concerning is that developed central banks are poised to withdraw more liquidity from the financial system at a time when inflationary pressure is building once more.

With economic conditions unfavourable in much of the developed world, we retain a neutral stance on equities and an overweight on bonds; we are also underweight cash.

Fig 1. Monthly asset allocation grid
October 2023

Source: Pictet Asset Management

Our business cycle analysis indicates the US economy is in a delicate state.

Industry surveys point to a drop in services consumption, which represents 70 per cent of economic activity in the country, while non-residential investment is also likely to fall because of high interest rates and a tight labour market.

All of this should weigh on the world economy, which we expect to grow just 0.5 per cent year on year next year, well below its pre-pandemic trend. Europe also remains weak as the economy feels the chill from tightening monetary policy and our leading indicator and consumer confidence are weakening.

In contrast, Japan is going from strength to strength.

We expect the world’s third largest economy to grow at 1.5 per cent next year, above potential and driven by strong exports. We expect higher private consumption in the coming months, and a sustained pick up in wage growth should prompt the Bank of Japan (BoJ) to end its negative interest rate policy.

China is showing early signs of an economic recovery. Consumption appears to have stabilised in the short term, leaving plenty of scope for improvement given retail sales remain 16 per cent below trend at a time when household deposits are 20 per cent above trend.

A recovery in the property sector is a missing piece of puzzle that would bolster consumer confidence.

Growth in the rest of the emerging world is likely to accelerate into next year, comfortably outpacing that of developed peers.

Our liquidity indicators support our neutral stance on equities.

Developed market central banks, apart from Japan, continue to withdraw liquidity from the financial system, even as they approach the end of their interest rate hike campaigns.

Liquidity conditions are likely to remain tight as inflation could well prove stickier than previously thought – not least because of a spike in oil and food prices.

In the US, a pick-up in government bond issuance expected in the coming months should also add to the liquidity squeeze.

Liquidity remains ample in Japan, however, as monetary policy there is accommodative, underpinning the flow of money and credit.

The beginning of an interest rate cut cycle in some parts of emerging markets should be positive for liquidity conditions there. Our valuation score supports our preference for bonds over equities.

The US equity risk premium – or extra return investors get over risk-free rate — has fallen to 3.4 per cent, the lowest in more than 20 years (see Fig. 2).

Fig. 2 – US stocks still too risky
12-month earnings yield minus 10-year local government bond yield in percentage points

Source: Refinitiv, data covering period 26.09.2003 – 26.09.2023

On comparison, offering a 10-year yield of more than 4.5 per cent, US bonds look particularly attractive.

Our technical indicators support our neutral stance on equities.

Investor sentiment and positioning indicators show that equities are falling out of favour, but they are not quite depressed enough to give us a contrarian buy signal.

Piece of opinion written by Luca Paolini, Pictet Asset Management’s Chief Strategist.

Discover Pictet Asset Management’s macro and asset allocation views here.