Uncertain times call for progressive capital solutions

Federal Reserve Chair Jerome Powell stressed that he would be “proceeding carefully” on future interest rate decisions, signalling to the market that the central bank had shifted to a dovish stance. This suggests a potential end to the hiking cycle that has burdened financial markets since March last year.^[1]

However, Powell refrained from completely dismissing the possibility of future rate increases, cautioning that the Fed “was not confident yet” that its monetary policy was sufficiently restrictive to bring inflation back to the 2% target.^[2] Investors have previously anticipated the end of the Fed’s rate rise cycle in the past, and the potential for rates to rise even further remains in the event of an unexpected surge in inflation.

In this era marked by macroeconomic and geopolitical uncertainty, investors seek flexible funding solutions such as securities-backed financing from EquitiesFirst to navigate volatile markets.

The global economy and multiple risk factors

Beyond inflation, a myriad of factors looms over the global economy in the coming year. Extreme weather events can disrupt supply chains, underscoring the vulnerabilities of an interconnected world. Meanwhile, the rise of artificial intelligence poses threats to elections and erodes trust in political institutions.^[3]

Adding to the complexity are geopolitical risks, such as tensions between China and Taiwan, Russia’s actions in Ukraine and the potential escalation of the Israel-Hamas conflict, which all have the potential to spiral into high-impact events. Although the likelihood of these risks materializing remains low, their consequences would unquestionably reverberate across markets and amplify the prevailing uncertainty.

Such challenges have been reflected in the increased turbulence in markets. Metrics such as the Vix index, measuring expected volatility, have consistently shown higher levels since 2020 compared to the previous decade.^[4] Similarly, the World Uncertainty Index, which measures the frequency of the word “uncertain” in analysts’ reports, has witnessed a significant increase since 2021.^[5]

These conditions have led to a reversal of much of this year’s stock gains, with Morgan Stanley’s Michael Wilson describing the first half as more of a bear market rally.^[6] In times of volatility and uncertainty such as these, investors have historically achieved better results by adopting a long-term perspective and holding onto their positions, rather than attempting to time the market.^[7]

A timely funding solution

Amidst an environment of high interest rates and banks’ reluctance to lend, accessing funding has become an expensive and difficult proposition. In this challenging landscape, EquitiesFirst’s securities-backed financing offers a timely and compelling funding solution. The progressive approach enables investors to leverage stocks or crypto as collateral and obtain much-needed liquidity while mitigating risks for lenders. Importantly, investors retain the potential for long-term appreciation in the underlying securities and benefit from any dividends at the end of the term. This provides a strategic advantage for investors, allowing them to weather short-term storms while positioning themselves for sustained growth.

Flexibility and growth with securities-backed financing

Securities-backed financing offers the much-needed flexibility required in a volatile market, providing investors with the liquidity necessary to make swift and decisive moves to diversify their portfolios, secure necessary funding for businesses, and seize growth opportunities.

Investors seeking to capitalize on the potential gains from their long-term equity investments in the face of economic uncertainty can leverage EquitiesFirst’s financing solution. This approach allows them to access and deploy liquidity as required, preserving the potential for market appreciation. Furthermore, investors can find reassurance in the contractual commitment from EquitiesFirst, ensuring that their assets will not encounter the risk of short selling. Additionally, the capital obtained through securities-backed financing is non-recourse, meaning the investor’s liability is strictly limited to the securities used in the transaction, and the capital can be used with flexibility.

[1] https://www.ft.com/content/3dd4ed1c-3586-4ac7-81f9-16fa1daa7dc9

[2] https://www.ft.com/content/3dd4ed1c-3586-4ac7-81f9-16fa1daa7dc9

[3] https://www.eiu.com/n/risk-outlook-2024-continued-high-interest-rates-could-lead-to-global-recession/

[4] https://www.cboe.com/tradable_products/vix/vix_historical_data/

[5] https://www.ft.com/content/9152bc6f-1b8e-4edc-a071-9b274d8bbe45

[6] https://www.bloomberg.com/news/articles/2023-11-06/morgan-stanley-s-wilson-warns-stock-gains-are-bear-market-rally

[7] https://www.fidelity.com.hk/en/start-investing/learn-about-investing/what-is-volatility/volatile-times

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