Daily Brief - 28 Mar 2024

BlackRock launches innovative income-focused ETFs in Europe

BlackRock, has introduced its first active ETFs for the European market, aiming to offer investors a unique mix of high income. These new products, the iShares World Equity High Income and iShares U.S. Equity High Income Ucits ETFs, are based in Ireland and are now available in Frankfurt and Amsterdam.

With a low total expense ratio of 0.35%, they seek to generate significant income by managing a diverse array of dividend-paying stocks and selling index call options. This move brings together BlackRock’s expertise in active management with the extensive reach of the iShares platform, marking a significant step in providing European investors with more dynamic investment options.

This launch is part of a growing trend, as other asset managers like Ark Invest and BNP Paribas also enter the European active ETF arena.

Fed's Waller advocates for patience on interest rate cuts

Federal Reserve Governor Christopher Waller urged for a cautious approach towards lowering interest rates, stressing the importance of waiting for consistent improvements in inflation data before making any moves.

Despite acknowledging the need for rate reductions within the year, Waller highlighted recent disappointing inflation figures and a strong economy as reasons to delay or minimize the cuts anticipated for 2024. His comments have influenced the treasury market, causing a slight increase in yields as investors adjust their expectations for the Federal Reserve's actions.

Waller's stance reflects a broader debate among Fed officials on the timing and extent of reducing borrowing costs, underlining the delicate balance the Fed seeks to maintain between supporting economic growth and controlling inflation.

JPMorgan strategist warns of potential stock market correction

Dubravko Lakos-Bujas from JPMorgan Chase has issued a caution to investors about the high risk of a sudden market correction due to excessive crowding in top-performing stocks. Despite a strong first quarter and ongoing enthusiasm for AI, the chief global equity strategist suggests that the market is overly optimistic, with few remaining sources of upside surprise.

He draws attention to the potential for rapid de-leveraging by investment funds leading to a momentum unwind, as seen with significant drops in Tesla and Apple shares earlier.

JPMorgan, maintaining a bearish outlook amidst Wall Street's generally positive forecasts, holds the lowest year-end S&P 500 target among major banks, suggesting a substantial potential decline.