(This story is for CNBC Pro subscribers only.)
After a wild 2020 that produced many unexpected winners, investors are looking ahead to what will be the best performer in 2021.
As a part of CNBC’s Quarterly Report, we asked more than 100 chief investor officers, portfolio managers and CNBC contributors who manage money to pick a winner from Tesla, Amazon, Apple, bitcoin and Exxon Mobil. The survey was conducted from Dec. 14 to Dec. 23.
Opinion | Consumers should know investment performance and costs – TheSpec.com
This is the time of year when most Canadians receive their financial reports.
Everybody is concerned about the shape of their finances. A retired family asks their adviser: “Will we have enough income to live on?” A charitable foundation CEO asks her Treasurer: “Warn me before our cash flow turns negative.” Both want the same thing — the bottom line.
For a long time, clients of dealers and managers received statements showing the current value of their investments compared with the previous month.
But those snapshots didn’t show if the overall portfolio made any progress from year to year. Even for the do-it-yourself investor, yearly comparisons are too important to be scribbled on the back of an envelope.
Fortunately, things are changing for the better.
The Canadian Securities Administrators believe investors should know how their investments performed over time. They also think it’s important to know the cost of fees and services that affected that performance. So, all advisers now must provide two performance and costs summaries, each year.
The investment performance report presents the annual percentage return for the first year and at Dec. 31 for the last three, five and 10 years when an account was open. That way each client can see how the portfolio performed over several years.
A special advantage is the way performance is calculated after all withdrawals and contributions. It’s too easy to forget the withdrawal covering 20 per cent of a dental bill that the insurance plan didn’t reimburse, or the deposit of a Christmas cheque from Nana.
This will also help to compare the portfolio’s progress with an index representing similar securities. We usually see various indexes on TV or smartphone or newspaper, but without such comparison we can’t determine whether our investments are keeping pace.
Much more importantly, it reveals if that progress matches what we want to achieve. That’s the objective clients must specify at the beginning, in the information form that authorizes the adviser. The performance report shows if the adviser’s guidance met our objectives.
Some people let the bull market roll on until the panic last March. Then they sold. When the market rallied sharply, they climbed aboard again. Sounds like a crapshoot? In-and-outers will now be able to see how costly the commissions were and how much they eroded the net results.
A previous article reported that computers, algorithms and passive managers are responsible for 60 per cent of transaction volumes. Trading is idealized in TV commercials. Shallow acquaintances boast of their trading successes; smart friends don’t go there. Consistent trading gains are rare and involve costs. During the COVID-19 panic, investors sold and repurchased funds in seismic proportions. Advisers seemed absent, while commissions shaved their clients’ net returns.
That’s why investors look for a reliable measure that summarizes costs, and does it simply too — their net results.
The cost of advice report is just as important as the performance report. Advisers are required to disclose the total of all fees and commissions charged to your account.
The Investor Office of the Ontario Securities Commission states in their Investment Performance and the Cost of Advice report: “No matter what type of investment you buy or advice you receive, you will be charged fees.”
For investment fund accounts, there are operating charges, transaction charges, third-party payments and trailing commissions. For managed portfolios, there are management fees.
The last 10-year data show investors made large purchases of mutual funds and ETFs each January-February (probably for deductible RRSP contributions) and almost as large March-April reductions. Commissions minimized investors’ returns. Who benefited more, clients or advisers?
The purpose of these regulatory requirements for fund dealers and portfolio managers is to ensure transparency in their communications with clients. With tens of thousands of advisers across Canada, the regulators leave it to investors to become informed and to take the initiative to pursue any questions.
As technology opens up the seamy side, cybersecurity threats are an emerging risk. The regulators try to protect investors from unfair, improper or outright fraudulent advisory practices.
How advisers cope with fraud to preserve client confidence will be another chapter in the story, as they prepare for more stock market turbulence.
A future report will analyze whether the foregoing reports measure the client’s or the adviser’s performance.
China Passes U.S. As No. 1 Destination For Foreign Investment As Coronavirus Upends Global Economy – Forbes
As the world struggled to contain the coronavirus crisis, foreign direct investment in the United States plummeted 49% in 2020 while investment in China rose 4%, making China the largest recipient of foreign inflows for the first time, according to a report released Sunday by the United Nations Conference on Trade and Development.
China pulled in $163 billion in new investments from foreign businesses in 2020 while the U.S. fell into second place with $134 billion.
The U.S. and China had broadly different responses to the pandemic, with China’s government instituting strict, large-scale lockdown measures in early 2020 while the United States’ response was far less centralized and far less effective in curbing the spread of the virus.
That prompted a major shift in the global economy—while the United States and other Western countries struggled to contain the pandemic, China went back to work, manufacturing picked up, and as a result China was the only major economy to report economic expansion in 2020.
While the momentum of FDI has been shifting towards China for several years, the total stock of foreign investment is still larger in the United States, the Wall Street Journal notes.
FDI in India rose 13% in 2020, while FDI in the European Union fell by two-thirds.
The U.N. expects foreign investment overall to remain weak in 2021.
42%. That’s how much foreign direct investment fell across the globe in 2020, from $1.5 trillion in 2019 to $859 billion in 2020. Most of that decline occurred in developed countries, the U.N. said.
Despite increasingly frosty relations between the U.S. and China, western firms are continuing to pour their resources into the rapidly growing economy there. Last month, Goldman Sachs took full ownership of its Chinese joint venture partner. JPMorgan did the same in November. Tesla is ramping up production in China and early last year, PepsiCo spent $705 million to buy a Chinese snack brand.
“U.S. and other foreign firms will continue to invest in China as it remains one of the most resilient economies during the global pandemic and as future growth potential there remains stronger than most other major economies,” Rhodium Group analyst Adam Lysenko told Bloomberg last month.
China Overtakes U.S. as World’s Leading Destination for Foreign Direct Investment (Wall Street Journal)
Post-pandemic investment idea with a better chance of success
Want a post-pandemic recovery trade that stands a much better chance of success than theme parks, restaurants and air travel? Try clothing.
The apparel stocks, both on the retail and production side, are on a bona fide uptrend, and for good reason. We can debate the extent to which we all go back to work at the office full-time. We can debate whether we will travel by air or eat out as much as we did before. We can decide whether we will go the movies or stay home and watch Netflix on the fancy video systems we bought this past year. We can ponder whether we need to renew our gym memberships now that we have Peloton bikes in the basement.
But there is no doubt that once we’re all vaccinated, we will be heading out and about. The era of only doing video calls while wearing sweatpants may not end totally, but will surely subside.
And here is the issue: As we go back out and engage socially or professionally, we are going to need new clothes. While we cut back dramatically on services (mostly because they weren’t available to us), in the past year we did buy more cars (up 10 per cent), sporting goods (up 15 per cent), pharma products (up 6 per cent), furniture (up 3 per cent), groceries (up 9 per cent) and building materials (up 17 per cent). The one merchandise item that declined was clothing – sales slumped 16 per cent over the past year to a level that is lower today than it was in June, 2011 (these are from U.S. retail sales numbers, but the trends in Canada are similar).
So we need new apparel for two reasons. The first is that this is an area of spending that has been totally neglected. The second is that we can’t fit into our existing wardrobes (see that 9 per cent growth in the grocery bill). We ate too much during lockdown and exercised a lot less. And so we have a situation where, according to a recent survey commissioned by Boston-based biotechnology company Gelesis, more than 70 million Americans gained weight during the pandemic. (And don’t think our lazy habits are going to change that quickly – in a year with limited entertainment or social options, only 17 per cent of respondents said they would be willing to give up their favourite TV or streaming service.) Rates of drinking have increased as well, and smoking has gone up for the first time in years. So many things have changed – and while we spent so much money sprucing up our homes, we gave short shrift to our own appearance.
Another survey from Weight Watchers, showing that 36 per cent of respondents said they had gained weight during this past year, means the number is likely actually closer to 100 million. So there is no way many of us are going to fit into our old clothes postpandemic. The shopping that will result isn’t just about replacing items owing to natural wear and tear or rushing to buy the latest fashions, as we normally might. It’s about replacing the whole darn wardrobe – and that means spending on clothing is going to be the one area of the reopening and recovery trade that we can rely on.
And this is also not a case of buying into a part of the retail sector that needs to find a bottom – rather, it is about buying into an existing tailwind that very likely has further to go. In fact, I can easily see a situation, once we attain the holy grail of herd immunity, where clothing sales soar between 20 per cent and 30 per cent.
David Rosenberg is founder of Rosenberg Research, and author of the daily economic report Breakfast with Dave.
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Source:- The Globe and Mail
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