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 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
Disclaimer
Past performance does not guarantee future returns, and individual returns are not guaranteed or warranted.
This Document is intended solely for accredited investors, sophisticated investors, professional investors, or otherwise qualified investors, as may be required by law or otherwise, and it is not intended for, and should not be used by, persons who do not meet the relevant requirements. The content provided herein is for informational purposes only and is general in nature and not targeted to any specific objective or financial need. The views and opinions expressed in this Document have been prepared by third parties and do not necessarily reflect the views and opinions of EquitiesFirst. EquitiesFirst has not independently examined or verified the information provided herein, and no representation is made that it is accurate or complete. Opinions and information herein are subject to change without notice. The content provided does not constitute an offer to sell (or solicitation of an offer to purchase) any securities, investments, or any financial products (“Offer”). Any such Offer shall only be made through a relevant offering or other documentation which sets forth its material terms and conditions. Nothing contained in this Document shall constitute a recommendation, solicitation, invitation, inducement, promotion, or offer for the purchase or sale of any investment product by First Holdings, LLC or its subsidiaries (collectively, “EquitiesFirst”), nor shall this Document be construed in any way as investment, legal, or tax advice, or as a recommendation, reference, or endorsement by EquitiesFirst. You should seek independent financial advice prior to making an investment decision about a financial product.
This Document contains the intellectual property of EquitiesFirst in the United States and other countries, including, without limitation, their respective logos and other registered and unregistered trademarks and service marks. EquitiesFirst reserves all rights in and to their intellectual property contained in this Document. The Document should not be distributed, published, reproduced or otherwise made available in whole or in part by recipients to any other person and, in particular, should not be distributed to persons in any country where such distribution may lead to a breach of any legal or regulatory requirement.
EquitiesFirst make no representation or warranty with respect to this Document and expressly disclaim any implied warranty under law. You acknowledge that EquitiesFirst is not liable under any circumstances for any direct, indirect, special, consequential, incidental, or punitive damages whatsoever, including, without limitation, any lost profits or lost opportunity, even if EquitiesFirst has been advised of the possibility of such damages.
EquitiesFirst makes the following further statements that may be applicable in the stated jurisdiction:
Australia: Equities First Holdings (Australia) Pty Ltd (ACN: 142 644 399) holds an Australian Financial Services Licence (AFSL Number: 387079). All rights reserved.
The information contained on this Document is intended for persons located in Australia only and classified as a Wholesale Client only as defined in Section 761G of the Corporations Act 2001. The distribution of information to persons outside this criteria may be restricted by law and persons who come into possession of it should seek advice and observe any such restriction.
The material contained in this Document is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.
The information contained in this Document is intended to be general in nature and is not personal financial product advice. Any advice contained in the Document is general advice only and has been prepared without considering your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product.
Dubai: Equities First Holdings Hong Kong Ltd (DIFC Representative Office) at Gate Precinct Building 4, 6th Floor, Office 7, Dubai International Financial Centre (commercial license number CL7354) is regulated by the Dubai Financial Services Authority (“DFSA”) as a Representative Office (DFSA Firm Reference No.: F008752). All rights reserved.
The information contained in this document is intended to be general in nature, and, to the extent that it is perceived as advice, any advice contained in this document is general advice only and has been prepared without considering your objectives, financial situation, suitability of the financial products or your needs.
The material contained in this document is for information purposes only and should not be construed as financial advice, including an offer or solicitation or recommendation to buy or sell financial products. The information contained in this document is intended to be general in nature and any advice contained in this document is general advice only and has been prepared without considering your objectives, financial situation, suitability of the financial products or your needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. If you do not understand the contents of this document, you should consult an authorised financial adviser.
This document relates to a financial product which is not subject to any form of regulation or approval by the DFSA. The DFSA has no responsibility for reviewing or verifying any documents in connection with this financial product. Accordingly, the DFSA has not approved this document or any other associated documents nor taken any steps to verify the information set out in this document, and has no responsibility for it.
Hong Kong: Equities First Holdings Hong Kong Limited is licensed under the Money Lenders Ordinance (Money Lender’s Licence No. 1659/2024) and to carry on the business of dealing in securities (Type 1 licence) under the Securities and Futures Ordinance (“SFO”) (CE No. BFJ407). This Document has not been reviewed by the Hong Kong Securities and Futures Commission. It is not intended as an offer to sell securities or a solicitation to buy any product managed or provided by Equities First Holdings Hong Kong Limited and is only intended for persons who qualify as Professional Investors under the SFO. This document is not directed to individuals or organizations for whom such offers or invitations would be unlawful or prohibited.
Korea: The foregoing is intended solely for sophisticated investors, professional investors or otherwise qualified investors who have sufficient knowledge and experience in entering into securities financing transactions. It is not intended for, and should not be used by, persons who do not meet those criteria.
United Kingdom: Equities First (London) Limited is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”). In the UK, this Document is only being distributed and made available to persons of the kind described in Article 19(5) (investment professionals) and Article 49(2) (high net worth companies, unincorporated associations etc.) of Part IV of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (‘’FPO’’) and any investment activity to which this presentation relates is only available to, and will only be engaged in with, such persons. Persons who do not have professional experience in matters relating to investment or who are not persons to whom Article 49 of the FPO applies should not rely on this document. This Document is only prepared for and available to persons who qualify as Professional Investors under the Markets in Financial Instruments Directive.
