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Today's big stories

Investment manager BlackRock reported better-than-expected earnings
One underappreciated investment could help you profit from the global recovery, Chinese growth, and the green economy all in one go – Read Now
Investors are expecting European companies to report a 26% average drop in earnings last quarter

Vote Of Confidence

What’s Going On Here?

BlackRock reported better-than-expected quarterly earnings on Thursday, as contentious elections and swift vaccines drove investors toward the world’s biggest investment manager.

What Does This Mean?

The more cash BlackRock looks after for its clients, the more money it earns in fees. And since it’s currently got its hands on a record $9 trillion pot, profits were high last quarter – higher than analysts had anticipated.

A lot of the money belonging to retail investors was poured into stocks, even as institutional investors diverted their money away from stocks and into bonds. Those different strategies could be down to diverging opinions on how expensive the assets were, if not diverging priorities: big institutions – like pension funds and insurance companies – probably leaned more toward the lower-but-safer income generated by bonds.

Why Should I Care?

Zooming in: Power play.
Most of the money BlackRock looks after is invested in low-fee exchange-traded funds (ETFs) – which passively track a group of stocks – rather than in higher-fee “actively managed” funds, which involve constant tinkering. ETFs have become so popular, in fact, that the three biggest ETF providers – BlackRock, Vanguard, and State Street – have become the biggest shareholders in almost 90% of US stocks (tweet this). And since they get to vote on the company’s strategy on their clients’ behalf, they have an awful lot of power…

Zooming out: With great power comes great responsibility.
BlackRock mostly uses that dominant shareholder position for good, like when it promised late last year to support more climate change-focused proposals. It even pledged that it would sell most of its shares in fossil fuel producers – a move that was hailed as a victory by environmental activists. But there’s a caveat to being in the ETF business: BlackRock has to invest in a wholesale collection of stocks – like, say, a major index – rather than picking just the environmentally friendly ones. That might be why, despite its pledge, it’s still ended up holding $85 billion in coal investments…

You might also like: How to pick the very best investment fund for you.

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2. Analyst Take

Why Copper’s The New Gold

What’s Going On Here?

Copper’s price has climbed 70% since March last year, and some of the decade’s biggest investment themes could be about to push demand much, much higher.

See, copper is essential to construction, machinery, transportation, and infrastructure – all sectors that should pick up as the vaccine gets economic growth back on track.

And even if the global recovery does stumble, no biggy: China’s economy is already firing on all cylinders again, and the country accounted for half of global copper consumption in 2019.

The metal is key to the green economy too: solar panels use up to six times more copper than fossil fuel plants, while electric vehicles use around four times more than gasoline cars.

And we’ve not even got onto the issues with supply yet…

So yep, there’s a new precious metal on the block: head over to our Insight to find out more about the copper market, and how you can go about bolstering your portfolio with the metal.

Read or listen to the Insight here

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Here We Go Again, Again

What’s Going On Here?

European companies are about to report fourth-quarter earnings bruised yet again by the pandemic, and – wait, we’ve definitely been here before.

What Does This Mean?

Analysts are forecasting a 26% average drop in European companies’ earnings last quarter compared to the same period the year before. That’s a similar fall to the one investors saw in the third quarter, but look on the bright side: it’s not the 50% profit collapse that Europe’s firms suffered in the second quarter of 2020.

Much like in the States, energy companies are expected to see the biggest drop in earnings. But three sectors which could actually be set to do well are metals and mining companies (i.e. “materials”), real estate companies (home prices, after all, are soaring), and utility firms, which tend to make money no matter which way the economy’s heading.

Why Should I Care?

For markets: The future is now.
It’s worth noting that analysts think European companies will start posting higher profits this quarter. And while investors won’t know for sure until those firms’ next earnings updates in a few months’ time, they’ve already pushed the stock market higher in anticipation that those analysts are right. Of course, that does raise the distinct possibility that stocks don’t have much higher to climb from here on out…

The bigger picture: Stop the steal.
While the US stock market outperformed the global stock market by 11% in 2020, it’s the other way round so far this year. That might come as vindication to investment bank Citigroup, which reckons there’s more money to be made outside the States in 2021 than inside the country this year: it’s advising clients to avoid America altogether and buy cheap-looking UK and emerging markets stocks instead.

You might also like: What to look for – and what to ignore – in a company earnings update.

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💬 Quote of the day

“You may be disappointed if you fail, but you are doomed if you don’t try.”

– Beverly Sills (an American operatic soprano)

Tweet this

🎨 This asset class is returning 13.6% annually

According to new research from Citi Private Bank, contemporary art has returned 13.6% a year since 1995, compared to 8.9% for the S&P 500.

Over the same period, contemporary art had a lower loss rate than gold – and almost no correlation to the stock market.

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Until now, that is: Masterworks lets you invest in paintings by artists like Basquiat and Warhol at a fraction of the price.

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🤔 Q&A · RE: Bargain Basements

“Aren’t banks like Nordea guaranteed to lose money on a zero-interest or negative-rate mortgage?”

– Eric from Massachusetts, USA

“You’d think so, Eric, but not quite. Banks make money by lending to their customers at higher interest rates than those on the money they borrow from the central banks. That may seem impossible if they’re offering loans that charge no interest or even negative rates, but keep in mind just how low central banks’ interest rates are right now. In this case, for example, the Danish central bank is charging Nordea a -0.6% interest rate. So by offering even marginally higher rates on their mortgages, Nordea will still make money – and might drum up some extra business for its perceived generosity. And don’t go feeling too sorry for them: let’s not forget the bank also charges its clients fees for arranging the deal.”

🙋 Ask a question

🌏 Finimize Community

💅 From one easy-breezy topic to another

Look, if anything we’ve been too focused on the doom and gloom of the pandemic for a while, so let’s turn our focus to a topic far less contentious: Brexit. Next week, you’ll hear from Sir Xavier Rolet – former CEO of the London Stock Exchange – to cover the need-to-knows for your portfolio, as well as a few lessons from Lehman Brothers’ collapse that he thinks might come in handy. How reassuring.

📈 The Stock Market in a Post-Brexit Economy: 6pm UK Time, January 20th
🤖 The Opportunity for Autonomous Tech: 1pm New York Time, January 27th
🤠 Live Q&A with Finimize CEO & Founder, Max Rofagha: 1.30pm UK Time, January 29th
🚀 Future of Fintech in Latin America: 6pm UK Time, February 2nd

😭 In case you missed it…

Here’s some of our most popular stuff this week…

📈 Stocks: Why stock market returns are going to be anything but average this year.

💥 Economic growth: How to prime your portfolio for the longest boom in history.

🛒 Amazon: Why regulators are coming for Big Tech sooner rather than later.

💡 2020s: The biggest trends of the next ten years.

💪 Carl Icahn: The favorite strategies of one of the best investors out there.

📚 What we're reading

Desktop goose will make you happier (Sam Person)
How to rent a life of luxury (The Baffler)
Age is just a number (Outside Online)

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Today's big stories

Vote Of Confidence

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Why Copper’s The New Gold

🌲 Save the world (and your wallet)

Here We Go Again, Again

What’s Going On Here?

What Does This Mean?

Why Should I Care?

🎨 This asset class is returning 13.6% annually

💅 From one easy-breezy topic to another

😭 In case you missed it…

Older messages

✌️ #startuplife

😭 Intel finally admits defeat

📱 Everyone wants an iPhone

🇺🇸 America gets a reality check

💀 They're coming for you, Amazon

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