Finance

Almost everywhere, government-bond yields are rising fast. Those on ten-year American Treasury bonds are almost 5%. German bunds now offer 2.6%, up from close to 2% in December. Japanese bond yields are climbing. Things are particularly extreme in Britain, where gilt yields recently reached almost 5%, their highest since 2008 (see chart 1). Rising yields are bad news for governments, which must pay more to service debts. They are also painful for all sorts of other borrowers, including many mortgage-holders, whose bills ultimately depend on governments’ borrowing costs. More

An exchange-traded fund provider is helping investors make more bets on Wall Street’s most profitable momentum trades.
GraniteShares, which debuted its first installment of single-stock ETFs in 2022, now manages 20 of them. It includes the GraniteShares YieldBoost TSLA ETF (TSYY), which launched last month. The fund gives investors exposure to Tesla.

“This is about more and more people taking charge of their own finances,” GraniteShares CEO William Rhind told CNBC’s “ETF Edge” this week. “They want to be able to actively manage that and maybe try and outperform… That’s where we see things like leverage, single stocks really playing.”
He calls demand “a worldwide phenomenon” because it’s not just an opportunity for U.S. investors.
“We have investors all around the world that are looking to the U.S. ETF market first because that’s the biggest source of liquidity,” added Rhind. “They’re looking to the names that they know and love – the Teslas of the world [and] the Nvidias of the world. They’re only available here in the U.S., and that’s why people come here to trade them.”
But the firm acknowledges the strategy isn’t suited for everyone.
GraniteShares includes a disclosure in bold on its website: “An investment in these ETFs involve significant risks.”
As of Friday’s close, Tesla stock is nearly $100, or about 19%, off its all-time high – hit on Dec. 18.

Disclaimer More

Bitcoin was the top-performing asset class in 2024, rising about 125%. By comparison, the S&P 500 grew 23%.
However, investors should only own a small share of crypto due to its volatility — generally no more than 5% of total holdings, experts said.
Some think crypto doesn’t have a place in investment portfolios.
Investors should plan to hold bitcoin for the long term and dollar-cost average into it.

A bitcoin ATM in Miami. 
Joe Raedle | Getty Images News | Getty Images

Bitcoin prices soared in 2024. But you may want to tread with caution before euphoria leads you on a hasty buying spree.
Bitcoin and other crypto should generally account for just a sliver of investor portfolios — generally no more than 5% — due to its extreme volatility, according to financial experts.

Some investors may be wise to stay away from it altogether, they said.
“You’re not going to have the same size allocation in bitcoin as you would Nasdaq or the S&P 500,” said Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management, based in Washington, D.C.
“Whenever you have a real volatile asset class, you need less of it in the portfolio to have the same impact” as traditional assets like stocks and bonds, said Johnson, a member of the CNBC Financial Advisor Council.

Why bitcoin prices increased in 2024

Bitcoin, the largest cryptocurrency, was the top-performing investment of 2024, by a long shot. Prices surged about 125%, ending the year around $94,000 after starting in the $40,000 range.
By comparison, the S&P 500, a U.S. stock index, rose 23%. The Nasdaq, a tech-heavy stock index, grew 29%.

Prices popped after Donald Trump’s U.S. presidential election win. His administration is expected to embrace deregulatory policies that would spur crypto demand.

A cartoon image of President-elect Donald Trump holding a bitcoin token in Hong Kong, China, on Dec. 5, 2024, to mark the cryptocurrency reaching over $100,000. 
Justin Chin/Bloomberg via Getty Images

Last year, the Securities and Exchange Commission also — for the first time — approved exchange-traded funds that invest directly in bitcoin and ether, the second-largest cryptocurrency, making crypto easier for retail investors to buy.
But experts cautioned that lofty profits may belie an underlying danger.
“With high returns come high risk, and crypto is no exception,” Amy Arnott, a portfolio strategist for Morningstar Research Services, wrote in June.
Bitcoin has been nearly five times as volatile as U.S. stocks since September 2015, and ether has been nearly 10 times as volatile, Arnott wrote.
“A portfolio weighting of 5% or less seems prudent, and many investors may want to skip cryptocurrency altogether,” she said.

1% to 2% is ‘reasonable’ for bitcoin, BlackRock says

Bitcoin lost 64% and 74% of its value in 2022 and 2018, respectively.
Mathematically, investors need a 100% return to recover from a 50% loss.
So far, crypto returns have been high enough to offset its additional risk — but it’s not a given that pattern will continue, Arnott said.

You’re not going to have the same size allocation in bitcoin as you would Nasdaq or the S&P 500.

Ivory Johnson
CFP, founder of Delancey Wealth Management

There are a few reasons for this: Crypto has become less valuable as a portfolio diversifier as it’s gotten more mainstream, Arnott wrote. Its popularity among speculative buyers also “makes it prone to pricing bubbles that will eventually burst,” she added.
BlackRock, a money manager, thinks there’s a case for owning bitcoin in a diversified portfolio, for investors who are comfortable with the “risk of potentially rapid price plunges” and who believe it will become more widely adopted, experts at the BlackRock Investment Institute wrote in early December.
(BlackRock offers a bitcoin ETF, the iShares Bitcoin Trust, IBIT.)
More from Personal Finance:Why to tweak your investments after lofty stock returnsHow to make the most of crypto in 401(k) plansTarget-date funds don’t work for everyone
A 1% to 2% allocation to bitcoin is a “reasonable range,” BlackRock experts wrote.
Going beyond would “sharply increase” bitcoin’s share of a portfolio’s total risk, they said.
For example, a 2% bitcoin allocation accounts for roughly 5% of the risk of a traditional 60/40 portfolio, BlackRock estimated. But a 4% allocation swells that figure to 14% of total portfolio risk, it said.

More ‘speculation’ than investment?

By comparison, Vanguard, another asset manager, doesn’t currently have plans to launch a crypto ETF or offer one on its brokerage platform, officials said.
“In Vanguard’s view, crypto is more of a speculation than an investment,” Janel Jackson, Vanguard’s former global head of ETF Capital Markets and Broker & Index Relations, wrote in January 2024.

Stock investors own shares of companies that produce goods or services, and many investors get dividends; bond investors receive regular interest payments; and commodities are real assets that meet consumption needs, Jackson wrote.
“While crypto has been classified as a commodity, it’s an immature asset class that has little history, no inherent economic value, no cash flow, and can create havoc within a portfolio,” wrote Jackson, now an executive in the firm’s Financial Advisor Services unit.

Dollar-cost average and hold for the long term

Ultimately, one’s total crypto allocation is a function of an investor’s appetite for and ability to take risk, according to financial advisors.
“Younger, more aggressive investors might allocate more [crypto] to their portfolios,” said Douglas Boneparth, a CFP based in New York and member of CNBC’s Advisor Council.
Investors generally hold about 5% of their classic 80/20 or 60/40 portfolio in crypto, said Boneparth, president and founder of Bone Fide Wealth.

“I think it could be a good idea to have some exposure to bitcoin in your portfolio, but it’s not for everyone and it will remain volatile,” Boneparth said. “As far as other cryptocurrencies are concerned, it’s difficult to pinpoint which ones are poised to be a good long-term investment. That’s not to say there won’t be winners.”
Investors who want to buy into crypto should consider using a dollar-cost-averaging strategy, said Johnson, of Delancey Wealth Management.
 “I buy 1% at a time until I get to my target risk,” Johnson said. “And that way I’m not putting 3%, 4%, 5% at one time and then something happens where it drops precipitously.”
It’d also be prudent for investors interested in crypto to buy and hold it for the long term, as they would with other financial assets, Johnson said.
Morningstar suggests holding cryptocurrency for at least 10 years, Arnott wrote. More

The fires that are burning through southern California may be shocking, but they are not surprising. Anyone who lived in the Hollywood Hills was aware of the danger. And for anyone who forgot, their annual insurance renewal provided a reminder at considerable expense. Such moments occasionally dampened the mood in the City of Angels. Now the promised catastrophe has arrived. More

In this aerial view taken from a helicopter, burned homes are seen from above during the Palisades fire near the Pacific Palisades neighborhood of Los Angeles, California on January 9, 2025. 
Josh Edelson | Afp | Getty Images

Insurers exposed to the California homeowners’ market sold off sharply Friday as the devastation caused by the Los Angeles wildfires spread.
Shares of Allstate dropped 6%, while Chubb and Travelers both declined more than 3%. These three stocks were among the biggest losers in the S&P 500 on Friday. AIG and Progressive dipped over 1%.

Allstate, Chubb and Travelers are the most exposed carriers to insured losses in the wildfires, according to JPMorgan. The Wall Street firm noted that Chubb could have a particularly high exposure due to its high-net-worth focus in the region.

Shares of insurers drop Friday

The destructive fires this week could become the most costly in California history. The insured losses from this week’s fires may exceed $20 billion, and the estimate could be even higher if fires spread, JPMorgan estimated Thursday. Those losses would far surpass the $12.5 billion in insured damages from the 2018 Camp Fire, which was the costliest blaze in the nation’s history, according to data from Aon.
Moody’s Ratings expected insured losses to run well into billions of dollars given the area’s high values of homes and businesses in the affected areas.

A man walks his bike among the ruins left behind by the Palisades Fire in the Pacific Palisades neighborhood of Los Angeles, Wednesday, Jan. 8, 2025.
Damian Dovarganes | AP

The Palisades Fire is the largest of the five blazes. It has burned more than 17,000 acres, destroying more than 1,000 structures, according to California authorities. Pacific Palisades is an affluent area where the median home price is more than $3 million, according to JPMorgan.
Insurance companies have asked Southern California Edison to preserve evidence related to the devastating wildfires that have swept Los Angeles, according to a company filing to regulators.

Certain reinsurers were also affected. Arch Capital Group and RenaissanceRe Holdings declined 2% and 1.5% on Friday, respectively. JPMorgan believes that rising loss estimates increase the likelihood of reinsurance attachments at various insurers being breached.
— CNBC’s Spencer Kimball contributed reporting.

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Federal Reserve Governor Michelle Bowman said Thursday she supported the recent interest rate cuts but said the December reduction should be the “final step” in the easing process.
Even with the full percentage points of cuts from September through December, there are still “upside risks to inflation,” she added.
Other Fed speakers this week provided views contrary to that of Bowman, who is generally regarded as one of the committee’s more hawkish members.

Michelle Bowman, governor of the U.S. Federal Reserve, speaks during the Exchequer Club meeting in Washington, D.C., on Feb. 21, 2024.
Kent Nishimura | Bloomberg | Getty Images

Federal Reserve Governor Michelle Bowman said Thursday she supported the recent interest rate cuts but doesn’t see the need to go any further.
In a speech to bankers in California that was part monetary policy, part regulation, Bowman said concerns she has that inflation has held “uncomfortably above” the Fed’s 2% goal lead her to believe that the quarter percentage point reduction in December should be the last one for the current cycle.

“I supported the December policy action because, in my view, it represented the [Federal Open Market Committee’s] final step in the policy recalibration phase,” the central banker said in prepared remarks. Bowman added that the current policy rate is near what she thinks of as “neutral” that neither supports nor restrains growth.
Despite the progress that has been made, there are “upside risks to inflation,” Bowman added. The Fed’s preferred inflation gauge showed a rate of 2.4% in November but was at 2.8% when excluding food and energy, a core measure that officials see as a better long-run indicator.
“The rate of inflation declined significantly in 2023, but this progress appears to have stalled last year with core inflation still uncomfortably above the Committee’s 2 percent goal,” Bowman added.
The remarks come the day after the FOMC released minutes from the Dec. 17-18 meeting that showed other members also were concerned with how inflation is running, though most expressed confidence it will drift back toward the 2% goal, eventually getting there in 2027. The Fed sliced a full percentage point off its key borrowing rate from September through December.
In fact, other Fed speakers this week provided views contrary to that of Bowman, who is generally regarded as one of the committee’s more hawkish members, meaning she prefers a more aggressive approach to controlling inflation that includes higher interest rates.

In a speech delivered Wednesday in Paris, Governor Christopher Waller had a more optimistic take on inflation, saying that imputed, or estimated, prices that feed into inflation data are keeping rates high, while observed prices are showing moderation. He expects “further reductions will be appropriate” to the Fed’s main policy rate, which currently sits in a range between 4.25%-4.5%.
Earlier Thursday, regional Presidents Susan Collins of Boston and Patrick Harker of Philadelphia both expressed confidence the Fed will be able to lower rates this year, if it a slower pace than previously thought. The FOMC at the December meeting priced in the equivalent of two quarter-point cuts this year, as opposed to the four expected at the September meeting.
Still, as a governor Bowman is a permanent voter on the FOMC and will get a say this year on policy. She is also considered one of the favorites to be named the vice chair of supervision for the banking industry after President-elect Donald Trump takes office later this month.
Speaking of the incoming administration, Bowman advised her colleagues to refrain from “prejudging” what Trump might do on issues such as tariffs and immigration. The December minutes indicated concerns from officials over what the initiatives could mean for the economy.
At the same time, Bowman expressed concern about loosening policy too much. She cited strong stock market gains and rising Treasury yields as indications that interest rates were restraining economic activity and tamping down inflation.
“In light of these considerations, I continue to prefer a cautious and gradual approach to adjusting policy,” she said.

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Europe’s divisions were once simple. Fiscal policy and sunshine? That was a north-south carve-up: grey, abstemious north; sparkling, spendthrift south. Migration and wealth? Newcomers were mostly tolerated in the rich west and despised in the poor east. Only the wine-beer-vodka spectrum, which produced a twice-diagonal split, was more complex. When crisis struck, these familiar dividing lines helped. Predictable splits are easier to manage. More

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