🎙️ Back to the Future

🛒 Could online shopping be saving brick-and-mortar stores?  

Retailers like Target are integrating their properties with the online shopping experience. Shoppers browse in person to see, touch, or try on items, and then they order them online.

Retailers are also “increasingly relying on their shops as fulfillment hubs, shipping items ordered online from store stockrooms in addition to warehouses,” reports The Wall Street Journal.

Get this: Nearly 42% of e-commerce orders last year involved stores, up from about 27% in 2015.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• Fixed income lives up to its name

• How to pay for the green transition

This, and more, in just 5 minutes to read.

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In The News

💸 Treasuries Mint Cash Like Never Before

Could fixed income be back in vogue?

The resurgence of fixed-income assets, particularly U.S. Treasuries, is happening amid rising interest rates and a shift in market dynamics. 

What’s happening?

• Benchmark rates in the U.S. have surged from 0% to over 5% in two years, leading to a return to Treasuries' traditional role as reliable income sources. Hence, “income” in “fixed income.”
  

• Investors received nearly $900 billion in annual interest from U.S. government debt last year, double the average of the previous decade. Over 90% of Treasuries carry coupons of 4% or more.
  

• Stalled progress toward the Fed's 2% inflation target and a resilient economy have delayed rate-cut expectations, prompting investors to seek safe assets like Treasuries.

$2 million per minute! Interest payments to individuals are projected to more than double this year, reaching $327 billion. The Treasury Department paid out $2 million per minute in interest in March alone.

The reset in yields has attracted investors, leading to record inflows into money-market funds and bond funds and a surge in direct sales of Treasuries to individuals.

• Bond funds attracted $300 billion in 2023 and $191 billion in 2024.
  

• According to Bloomberg, bonds are now considered to have "tremendous value" compared to stocks.
  

• Guggenheim’s CIO (chief investment officer) remarked, "With the help of our friends at the Fed, they did put the income back in fixed income. And fixed-income investors, we get to reap the benefits of higher yield. That’s a good thing."

Why it matters:

Concerns about inflation and the massive US deficit are expected to keep yields from falling significantly, ensuring continued demand for fixed-income assets.

Investment officers across Wall Street say they’re getting a jump in inquiries for fixed income among high-net-worth clients. 

Back to the future: One CIO observed, "We’re seeing far more inquiries for fixed income than we’ve seen in the last almost 15 years. Investors ask themselves, ‘Why am I making it so complicated when I can get 6%, 7%, 8% from bonds? So it’s opening up a whole new buyer base.’"

• Added another money manager: "It seems like going back to the future — a little bit back to some normal times. It’s quite a big turnaround."

Read more

More Headlines

🏠 Renters’ hopes of being able to buy a home fall to record-low

💰 Social Security expected to run short on funds in 2035

💊 How generative AI could design new drugs all on its own

☕ Howard Schultz: Starbucks needs to revamp its American business

💼 More U.S. women are employed than ever before

💪 Equinox launches $40,000-per-year longevity membership

⚡ The $9 Trillion Question: How to Pay for Green

Most countries want to support the green transition. The problem is how to foot the enormous bill. 

It’s a monumental challenge: financing the transition to a green economy and meeting world climate goals. 

A lot of trillions: The International Renewable Energy Association underscored the magnitude of the challenge. It estimates the annual need for 1,000 gigawatts of renewable power capacity until 2030. To limit global temperature increases as per the Paris Agreement, global climate finance must surge to $9 trillion annually by 2030 — a massive increase from the current $1.3 trillion.

• Governments worldwide are exploring various financing mechanisms to raise funds, from corporate taxes to tourism levies. The IRA, among other measures, aims to raise $300 billion over a decade through corporate taxes.
  
  

• This is all under a microscope ahead of the upcoming “COP29,” the “finance COP,” where discussions will revolve around setting global climate finance goals. The private sector needs to carry economies forward, but governments are also urged to allocate funds, especially for critical infrastructure.

Getting creative: Countries have implemented carbon pricing mechanisms. Ireland earmarked carbon tax revenues for climate-related investments. Other proposals include windfall taxes on oil and gas companies and tourism levies, exemplified by Hawaii's proposed hotel check-in fee: “The Green Fee,” if passed, is expected to generate revenue (up to $600 million annually) and regulate tourism.

Efforts to eliminate fossil fuel subsidies are gaining traction, and countries like the Netherlands are leading the charge.

A dose of optimism: It’s not all gloomy headlines about hurricanes, heat waves, droughts, and floods. There's optimism that the transition to a green economy is achievable with smart regulation and public-private partnerships. 

• Chile's hydrogen strategy and the EU's REPowerEU initiative are examples of effective collaboration between the public and private sectors.
  

• Amid a drought emergency right now, Barcelona has earmarked ~$100 million from its tourist tax to install heat pumps and solar panels in state-owned schools.
  

• Sovereign green bonds? Developing countries like India, Fiji, and Egypt are issuing sovereign green bonds to finance green projects, signaling a trend in leveraging financial markets for climate action.

Why it matters:

John Kerry, the former U.S. secretary of state, emphasized the urgency, stating, "We don’t have the money."

• “We all struggle with finding the best ways to go through the green transition,” said one Denmark climate policy lead. “We are dealing with a very complex challenge.”

Range of levers: Over the next decade, the U.S. plans to raise $300 billion through corporate taxes and other measures to support the green transition.

One sustainable finance consultant told the FT that governments must ensure a “wide range of levers” to afford the enormous costs ahead.

Got any ideas, anyone?

Watch more

Recommended Reading: Carbon Finance

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