Today's big stories

JPMorgan warned investors to be pickier for the rest of the year
Gold’s price has risen 15% this year, but our analysts explain why it could have another 15% to go – Read Now
American Airlines plans to raise over $3 billion of fresh funding to stay in the skies

1/3

Pick And Choose

What’s Going On Here?

According to investment bank JPMorgan, investors should be more choosy about where they put their money for the rest of 2020.

What Does This Mean?

If, at the height of March’s stock market selloff, you’d bought a simple exchange-traded fund invested in major US companies, you’d now be sitting on a 30%-plus return. Like similar (if smaller) bouncebacks elsewhere, that’s largely thanks to central banks and governments spending record amounts of money to prop businesses up.

But JPMorgan doesn’t think everyone’s share price will remain elevated. Eventually, cracks in weaker companies will show and stronger ones will begin to pull away. It may therefore be worthwhile adjusting your portfolio to focus on those investments likely to remain resilient – while reducing exposure to stock markets in the round (tweet this).

Why Should I Care?

Zooming out: Correlation implies frustration.
Investors often look at “correlation”: a measure of how closely certain investments move in sync. During dramatic economic downturns (and upswings), stock correlations tend to rise, making individual picks harder. After all, there’s not much to choose between stocks when a falling or rising tide lowers or lifts all boats at once. JPMorgan says correlations typically return to normal levels within a few months, however – which should make differentiation between stocks based on their fundamental characteristics easier. That could facilitate many happy returns not just for detail-oriented stock investors, but for bond, currency, and commodity investors too.

For markets: JPMorgan’s remix.
For the months ahead, JPMorgan recommends looking at “investment grade” debt, which is less likely to default, and especially bonds in developed markets. Its analysts also suggest buying stocks in the tech, communications, and healthcare sectors – likely to be coronavirus “endgame winners”. And in currencies, JPMorgan advocates selling the US dollar and buying the Japanese yen, Swedish krona, and certain emerging-market currencies like the Russian ruble and Mexican peso.

Take action: Put JPMorgan’s stock-picking advice into practice.

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2/3 Premium

Double Bubble

As the coronavirus pandemic enters a “new and dangerous phase”, the price of safe haven gold is approaching its highest since 2012 – but one big investment bank thinks the economic response will soon see the yellow metal swell to its most expensive ever.

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3/3

Aerial Refueling

What’s Going On Here?

Ladies and gentlemen, the captain has switched on the dollar sign: on Sunday, American Airlines announced plans to bring on board $3.5 billion of additional funding.

What Does This Mean?

American intends to sell $750 million worth of new shares and the same amount of “convertible bonds”, as well as issuing another $1.5 billion of regular bonds and taking out a $500 million loan. The back of the couch has already been thoroughly searched.

Convertible bonds have the potential to become shares in the company that issues them. As well as regular interest payments, they’ll offer investors a potentially attractive opportunity to own American’s stock if it performs well: conversion is typically dependent on the stock price reaching a set higher level. In return, American will likely get away with paying a lower interest rate than it would on traditional bonds – and, since there’s no guarantee the bonds will convert, will perhaps dilute the value of its stock by less than if it sold even more new shares. Nevertheless, American’s share price dipped 7% on Monday.

Why Should I Care?

For markets: Taxiing to the runway.
The fresh fuel injection should help American Airlines survive the protracted downturn in air travel: it’s expecting second-quarter revenue to be 90% lower than this time last year. And it’s not alone: Delta Air Lines said last week that it’s currently running at 15% capacity and doesn’t expect to stop losing money until next spring. Fellow carrier United’s reportedly planning to sell $5 billion of debt this week – and coronavirus-hit companies from Hilton to PepsiCo are hoarding cash like it’s going out of style.

Zooming out: Thrust versus drag.
Even with extensive state sympathy, airlines don’t have it easy: across the Atlantic, the German government last month agreed a $10 billion rescue package with flag carrier Lufthansa in return for a 20% stake – but the airline’s current largest investor is threatening to vote it down. Lufthansa’s stock fell 3% on Monday as the risk of missing out on much-needed cash loomed large.

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💬 Quote of the day

“No one can make you feel inferior without your consent.”

– Eleanor Roosevelt (an American political figure, diplomat, and activist)

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🌴 Finimize Community

🎉 Have a great week with Finimize events

Today, Community host Egis is speaking to energy experts about what’s currently driving energy markets. On Thursday, join an in-depth discussion about sustainable investing with BlackRock’s US Head of Sustainable Investing. Grab yourself a ticket before they’re all gone.

🇭🇺 Hungary: What’s Next For The Energy Market? – 6pm CET, June 23rd
🇺🇸 USA: Making Sense of Sustainable Investing – 10am PT, June 25th
🌍 Global: Finimize Live AMA – 1.30pm UK Time, June 30th
🇬🇧 UK: Estonia’s Startup Ecosystem – 5pm UK Time, July 1st

⚡️ LIGHTNING INSIGHTS

🏡 Opportunity knocks…

Recessions have historically been a good time to buy real estate – and with coronavirus driving the global economy into its deepest downturn ever, there’s no better time to get clued up on going about it. Our US and UK Packs dive into:

What you stand to gain from investing in real estate
The pros and cons of buying physical property
Public real estate investment trusts versus private property funds
How new fintech platforms make it easier for anyone to get involved
Four key questions to answer before you make any real estate investments

American Finimizers, our US Property Pack explores your real estate market; British Finimizers, our UK Property Pack is just for you. Check it out.

📚 What we're reading

Climbing Mount Everest to solve a great mystery (National Geographic)
You too can paint like Van Gogh (IFLScience)
Can racism be diagnosed? (Literary Hub)

Finimize - 🕚 JPMorgan: stocks’ party will stop

Today's big stories

Pick And Choose

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Double Bubble

🚀 The lowdown on low fees

Aerial Refueling

What’s Going On Here?

What Does This Mean?

Why Should I Care?

💰 Pay less, keep more

🎉 Have a great week with Finimize events

🏡 Opportunity knocks…

Older messages

🆘 Missing: 2 billion dollars

🤕 Hertz to be a retail investor

📈 Stocks are a rip-off, say investors

🇯🇵 Japan’s IPO frenzy

😎 Morgan Stanley: ignore the recession

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