Jacobo Taurel

LIBOR has long been one of the most widely used reference rates for short-term lending. Some industry estimates put the credit tied to it, from mortgages to bonds, at around US$350 trillion. However, regulators decided to phase LIBOR out from the end of 2021. One reason was the 2012 manipulation scandal involving several global banks. In addition, markets have changed since LIBOR began. As a result, alternative reference rates (ARRs) have become the new standard. Below, we explain what the end of LIBOR means for bond investors.

How alternative reference rates differ from LIBOR

Alternative reference rates are near risk-free overnight rates. They aim to reflect market liquidity more accurately than LIBOR did. The main ones are SONIA (GBP), SOFR (USD), €STR (EUR), SARON (CHF) and TONA (JPY). Central banks administer most of them. In contrast, SIX Swiss Exchange administers SARON.

LIBOR reflected the credit risk of the banks that submitted it. In addition, ARRs draw on actual daily transactions rather than bank submissions.

Because ARRs carry little bank credit risk, they typically sit below LIBOR. Therefore, many contracts add a spread adjustment to bridge the gap. Of course, no fixed adjustment can match LIBOR exactly in every market.

What the end of LIBOR means for bond investors

In our view, many bondholders may see a modest impact. Issuers generally seek to narrow the gap between LIBOR and the new rates. Even so, coupon income, pricing or liquidity may still change. However, no single procedure applies, because each contract has its own features. As a result, its terms and conditions largely determine how the transition works.

Bonds that lack fallback language

Some corporate bonds have no fallback rate language. In those cases, issuers may need to call a holders’ meeting to amend the floating rate clauses. Instead, some may call the bond, which can leave holders facing reinvestment risk. Meanwhile, in the US, the LIBOR Act of 2022 set a default replacement for certain contracts without workable fallbacks.

Where fallback language exists

Other bonds include this language in their prospectus. For these, the issuer usually only needs to notify holders of the new reference rate. The most common fallbacks are an ARR or a fixed coupon based on the last LIBOR rate used. Consequently, a fixed coupon may no longer track market conditions.

Key transition dates

ICE Benchmark Administration (IBA) administers LIBOR. In late 2020, it consulted on keeping certain US dollar settings until June 30, 2023. By some estimates, around 60% of LIBOR contracts used dollars. The consultation closed on January 25, 2021. Next, the UK Financial Conduct Authority confirmed the end dates below in March 2021.

First, these settings ended on a representative basis after December 31, 2021:

• EUR LIBOR (overnight, one week, 1, 2, 3, 6 and 12 months)
• CHF LIBOR (spot next, one week, 1, 2, 3, 6 and 12 months)
• JPY LIBOR (spot next, one week, 1, 2, 3, 6 and 12 months)
• GBP LIBOR (overnight, one week, 1, 2, 3, 6 and 12 months)
• USD LIBOR, one week and 2 months

In contrast, EURIBOR is a separate benchmark and continues after reforms.

Finally, the remaining USD LIBOR settings ended after June 30, 2023:

• USD LIBOR, overnight, 1, 3, 6 and 12 months

Temporary ‘synthetic’ versions of some tenors covered certain legacy contracts for a time and have since ended.

Our approach

In practice, our investment committee works with custodians to monitor issuer notices on reference rate changes. If you have questions about what the end of LIBOR means for bond investors like you, please speak with your advisor.

This article is for educational purposes only and is not investment advice or a recommendation. Outcomes can vary by bond.

Earlier this month, G7 finance ministers agreed to push for a global minimum corporate tax of 15%. If governments formalize it, the deal could underpin a global treaty with other major economies. This article explains how a 15 percent global minimum corporate tax would work, based on public statements to date. It is not tax or investment advice.

Why a global minimum corporate tax?

The stated goal is to end what US Treasury Secretary Janet Yellen described as a 30-year race for corporate tax relief. In practice, major economies want to discourage multinational companies from cutting their tax bills by shifting profits to low-tax jurisdictions. For example, some jurisdictions tax income from patents, software, and royalties at very low rates, sometimes near zero. However, supporters and critics still debate how much revenue a minimum tax would actually recover.

How a 15 percent global minimum corporate tax would work

Under the proposal, the minimum tax would apply to profits that multinationals earn abroad. Each country would remain free to set its own local corporate tax rate. However, if foreign profits face a rate below the minimum, the home country may collect a top-up tax. As a result, the combined rate could rise to the global minimum.

Last month, the OECD said governments had broadly agreed on the design of the framework but not on the rate. Meanwhile, the G7 talks gained momentum around a 15% level. Nevertheless, some tax experts say agreeing on the rate may be the hardest part of the process.

In addition, negotiators still need to settle other items. For instance, they must decide how the tax would treat investment funds and real estate investment trusts (REITs).

A simple hypothetical illustration

Consider a hypothetical example to see the mechanism. Suppose a multinational books foreign profits in a jurisdiction that taxes them at 5%. That rate sits 10 percentage points below the proposed 15% minimum. As a result, the home country could collect a top-up tax on those profits. The combined rate would then reach roughly 15%, although the final rules could change the exact calculation.

In other words, the minimum would not force any country to raise its own rate. Instead, it would reduce the benefit of reporting profits where rates are lowest. Of course, the real effect would depend on details that negotiators have not yet published.

What is next?

Next month’s G20 meeting may show how much support the agreement has among other major economies.

First, governments must still set the metrics that determine how the tax applies and which multinationals it covers. Next, the G7 statement left one question open. It did not specify how the deal would treat digital services taxes on large technology companies.

Where low-tax jurisdictions fit

In our view, adopting this agreement could significantly affect low-tax jurisdictions, including some that critics call tax havens. Ireland, for example, has seen significant economic growth, partly from investment by multinational companies. Therefore, we believe some of these jurisdictions may not support the agreement in its current form. However, positions may shift as talks continue. Finally, any account of how a 15 percent global minimum corporate tax would work remains provisional for now.

Key signals to watch

Readers following the talks may want to track a few signals. First, watch whether the G20 backs the 15% level next month. Next, look for detail on which multinationals the rules would cover and how the metrics would work. In addition, note any decision on investment funds and REITs. Readers should also watch for any decision on digital services taxes. Finally, watch how low-tax jurisdictions respond, because their support could shape any global treaty.

For now, the framework remains a proposal rather than law. Therefore, companies and investors should treat any estimate of its impact with caution.

It is natural to question the idea of a bitcoin ETF, since investors can buy and sell bitcoin directly. However, in October 2021 ProShares listed the ProShares Bitcoin Strategy ETF under the ticker BITO. It was the first US ETF built around bitcoin futures. According to press reports at the time, BITO drew one of the strongest first-day debuts of any ETF. At the time of original writing, the fund reportedly held about US$1.2 billion in assets, and current figures may differ. Below, we explain why a bitcoin futures ETF costs more than owning bitcoin. In our view, its appeal may partly reflect the familiarity of a registered, exchange-listed fund.

The custody problem

Custody is a serious topic with bitcoin, because owners typically hold it in a digital wallet secured by private keys. For example, if an owner loses the keys or password, the owner may be unable to recover the assets. Many investors have reported losses from forgotten credentials, hacks, or fraud. Specialized custodians do exist; however, they add fees and carry their own counterparty risks.

ProShares built BITO to avoid holding bitcoin directly. Instead, the fund buys bitcoin futures on the CME. Each contract is an agreement to trade bitcoin at a set price on a future date. In practice, traders keep futures prices close to bitcoin through arbitrage. For instance, when futures trade at a premium, a trader may buy bitcoin and sell futures to capture the gap. Of course, this structure does not remove risk. Futures can diverge from the spot price, and the fund still carries bitcoin’s high volatility.

Why a bitcoin futures ETF costs more than owning bitcoin

The first cost is visible. According to the fund’s prospectus at launch, BITO charges an annual expense ratio of 0.95%. Investors should check current fund documents for updated figures. In addition, a larger cost often comes from rolling futures, known as the roll cost.

Where the roll cost comes from

Futures contracts expire, so the fund must sell expiring contracts and buy later ones. When later contracts cost more than expiring ones, the fund sells low and buys high. Traders call this condition contango. As a result, each new contract tends to drift down toward the spot price as it nears expiration. That drift can erode returns over time. In contrast, when later contracts trade below spot, rolling can add to returns. Some market analyses estimated a gap of up to about 5 percentage points per year versus spot bitcoin. That figure is illustrative and covers certain periods since CME bitcoin futures launched in late 2017. Actual results vary with market conditions, and past performance does not guarantee future results.

Taken together, the expense ratio and the roll cost can help explain why a bitcoin futures ETF costs more than owning bitcoin directly. Therefore, investors comparing the two may want to look beyond the headline fee. For example, they can review the fund’s reported performance against spot bitcoin over several periods. In other words, the full cost shows up in tracking results, not only in the expense ratio.

What could change

Several crypto firms offer institutional custody solutions for bitcoin. Meanwhile, some of them asked the US Securities and Exchange Commission to approve an ETF that holds bitcoin directly. Such a fund could avoid the roll cost and may lower the cost of bitcoin exposure. Since this article first appeared, the SEC approved several spot bitcoin exchange-traded products in January 2024. However, spot funds still charge fees and carry custody, security, and volatility risks. In our opinion, adoption of any structure depends on whether investors trust it.

Finally, this article is for educational purposes only and is not a recommendation to buy or sell any security or cryptocurrency. Investors should consider their own goals and consult a financial professional.

Understanding what non fungible tokens are and how they work

Non-fungible tokens, or NFTs, are crypto assets in which each token is unique. This guide explains what non fungible tokens are and how they work. In practice, developers create NFTs on a blockchain, where each token carries its own identification code and metadata. For example, an NFT may represent music, a video, a game item or a digital card. Buyers typically trade them using cryptocurrencies.

Most cryptocurrencies, like physical money, are fungible. In other words, you can swap one unit for another of equal value. NFTs, in contrast, each carry a unique digital signature. As a result, the owner can use that record to help verify ownership. However, owning an NFT does not automatically grant copyright in the underlying item.

How minting and transfers work

People often call the process of creating an NFT minting. First, a creator uploads a file or links to an item, and a smart contract records a new token on the blockchain. Next, the token lands in the creator’s digital wallet, which holds the keys that control it. In many cases, the file itself sits off-chain, and the token stores only a link to it.

When someone buys the token, the network records the transfer publicly. As a result, anyone can trace its history from wallet to wallet. Most networks also charge a transaction fee, which people often call a gas fee. These fees can rise when the network is busy. Some smart contracts also pay the original creator a royalty on resales, although marketplaces do not always enforce it.

Common uses for NFTs

NFTs can represent digital items and, in some cases, physical assets such as artwork or real estate. Supporters argue this may make trading more efficient and help reduce fraud. However, many uses remain early-stage, and legal treatment varies by jurisdiction. Christie’s reported that a Beeple digital collage sold for about $69.3 million at its March 2021 auction. Of course, one sale says little about typical NFT values.

Markets linked to NFTs

Much of today’s NFT market focuses on collectibles such as digital artwork and sports cards. One often cited platform is NBA Top Shot, where fans collect tokenized NBA highlights. Beyond collectibles, some games use NFTs for in-game items that players can trade. Meanwhile, prices can swing sharply, and some tokens may be hard to resell.

Potential benefits and limitations

In our view, the clearest potential benefit of NFTs is market efficiency. For instance, artists can sell work on a blockchain marketplace and reach audiences more directly. Marketplaces still charge fees and control listings, however. Therefore, NFTs may shift intermediaries rather than remove them.

Security and risk considerations

Some published research suggests blockchains are difficult, though not impossible, to hack because many computers share their records. Owners can still lose NFTs through phishing, stolen wallet keys or marketplace breaches. In addition, NFTs carry no deposit insurance, and their value can fall to zero. Finally, knowing what non fungible tokens are and how they work can help you ask better questions.

Questions to ask before you buy

Before you buy, it helps to slow down and check a few basics. First, confirm who created the token and whether the listing comes from an official account. Next, read what rights the seller actually offers, since terms differ between projects. In addition, find out where the underlying file lives and what happens if that link breaks. Finally, consider fees, taxes and how easily you could resell the token later. Above all, treat any purchase as high risk, because NFT prices can be volatile.

This article is educational only and is not investment, legal or tax advice or a recommendation.

This article offers a guide to NFTs and digital ownership for investors. Non-fungible tokens, or NFTs, introduced a new model for crypto assets by making each token unique. Developers create them on a blockchain, with identification codes and metadata that tell them apart. An NFT can represent a digital or physical item, such as music, a video or a game item. In practice, buyers typically trade them using cryptocurrencies.

Cryptocurrencies, like physical money, are fungible: holders can swap one unit for another of equal value. NFTs, in contrast, are not interchangeable. For example, each carries a unique digital signature that lets the holder verify ownership. However, owning the token does not automatically grant copyright or title to the underlying item.

Where NFTs show up

Some projects use NFTs to represent real-world items, such as art or real estate. Supporters argue this can make trading more efficient and may reduce certain types of fraud. However, tokenized assets still depend on legal agreements, and counterfeit listings remain a known risk. For instance, Christie’s reported that a digital collage by Beeple sold for $69.3 million in March 2021. That sale was an outlier, and many NFTs sell for far less or may never find a buyer.

Current NFT markets

Much of the NFT market centers on collectibles, such as digital art and sports cards. In our view, NBA Top Shot, which sells tokenized NBA highlights, is among the most visible platforms. Meanwhile, NFT prices and trading volumes have been volatile.

Potential benefits and limits

Proponents often cite market efficiency as a potential benefit. For example, an artist can sell a digital work on a blockchain and reach buyers more directly, with fewer intermediaries. However, marketplaces typically charge fees, and buyers pay network transaction costs. In addition, NFTs can be illiquid, so selling at a desired price may prove difficult.

How to evaluate an NFT before buying

A careful review can help you avoid common mistakes. This part of a guide to NFTs and digital ownership for investors walks through the basic checks. First, confirm who created the token and whether the marketplace verifies the creator’s account. Next, read the terms that come with the NFT. These terms explain which rights, if any, the buyer receives beyond the token itself. In addition, check where the underlying file lives. Some projects store media on a separate server, and the link may break if that server goes offline. Finally, add up the full cost of the purchase, including marketplace fees and network transaction costs.

Protecting your wallet and tokens

Security habits matter as much as research. For example, a hardware wallet keeps private keys offline, which can lower the risk of remote theft. Never share a seed phrase, since legitimate platforms generally do not ask for it. Meanwhile, scammers often send fake links through social media and direct messages. Therefore, type marketplace addresses yourself instead of clicking unknown links. Above all, treat any offer that seems too good to be true with suspicion.

Setting realistic expectations

Price history in this market can mislead new buyers. Most importantly, a few headline sales do not reflect the typical outcome. Some investors choose to limit NFTs to a small share of their portfolio for this reason. As a result, a sharp drop in value would not threaten their broader financial goals. It also helps to set a budget before browsing listings. Next, keep records of every purchase for tax purposes.

Risks to weigh: a guide to NFTs and digital ownership for investors

Some commentators argue that blockchains resist tampering because many computers share the ledger. Of course, that design makes attacks difficult, not impossible. Instead, many losses stem from flawed smart contracts, phishing and stolen wallet keys. In other words, a secure network does not protect an NFT’s market value.

Finally, this article is educational and is not investment advice. NFTs are speculative, and investors could lose their entire investment.

On Thursday, April 28, the Colony Theater in Miami hosted an evening in honor of Espacio Anna Frank (Anne Frank Space). In other words, Activest sponsors Espacio Anna Frank benefit at the Colony Theater, and our team was proud to take part. The program included a play called The Cuban Vote. In addition, the play is a romantic comedy based on Shakespeare’s The Taming of the Shrew.

An evening of theater may seem like an unusual way to support education. However, stories on a stage can open conversations that a lecture sometimes cannot. A comedy, for instance, invites people to laugh together first and to reflect afterward. That shared experience fits the spirit of the organization the benefit supported. It also reminds us that serious ideas can reach people through joy as well as through study.

What Espacio Anna Frank does

The organization works to promote mutual respect. It focuses particularly on individuals and groups whose customs, origins, religions and ideas differ from those of the majority. For example, it develops educational and cultural activities. According to the organization, these activities aim to build knowledge that helps counter prejudice and stereotypes. They also address the consequences of those attitudes: hatred and discrimination against religious, cultural, ethnic or sexual minorities. Meanwhile, its current areas of focus are Culture, Education, Youth and Museum.

How culture and education work together

Each of these areas approaches the same goal from a different angle. Cultural programs, for example, can bring people from different backgrounds into the same room. Educational work, in contrast, gives young people tools to question stereotypes on their own. In practice, the two efforts can reinforce each other. A person who meets others through culture may find it easier to accept what education teaches about respect.

The story behind the name

Anne Frank was one of roughly one and a half million Jewish children the Nazis killed. That figure reflects widely cited historical estimates. Despite her short life, she left behind a diary written as letters to an imaginary friend. Many readers see it as an anthem to hope and to faith in the possibility of a better world. As a result, her story invites two questions:

• What can we do to help our society overcome prejudice and discrimination?
• Can we start with ourselves and our closest environment in order to overcome intolerance?

These concerns are the challenges that Espacio Anna Frank continually puts in front of its audiences. Of course, you can learn more about the organization at espacioannafrank.org.

Turning questions into action

Neither question has a simple answer. Instead, both ask each of us to look honestly at our own habits and assumptions. First, we can notice when a stereotype shapes the way we see someone. Next, we can choose curiosity over judgment in everyday conversations. Finally, we can support groups that make this kind of reflection part of their daily work.

Why Activest sponsors Espacio Anna Frank benefit at the Colony Theater

At Activest, we feel privileged to help families and institutions around the world with their investments. That work, in turn, allows us to contribute to the development of organizations such as Espacio Anna Frank. Most importantly, we view this support as part of a broader purpose. Hebrew calls this purpose Tikun Olam, or repairing the world, so that the future can be a better one. Therefore, we see sponsorship as one small way to act on that idea.

When people read that Activest sponsors Espacio Anna Frank benefit at the Colony Theater, we hope they see more than a single night out. Instead, the sponsorship reflects values we try to bring to our daily work with clients. Trust, respect and a long-term view matter in investing. Above all, they also matter in the way communities live together. We thank everyone who joined us for the evening.

Finally, please note that this post is for informational purposes only. It does not constitute investment advice or an endorsement of any organization’s services.

Activest uses a tax harvesting strategy that seeks to reduce clients’ tax burden when market volatility creates portfolio losses. This article explains how tax harvesting turns market losses into tax savings. Our goal is to stay invested so portfolios can participate in a possible recovery. However, results depend on each client’s tax situation, and the strategy cannot guarantee savings.

The arithmetic behind the strategy

In accounting terms, the goal is for the following formula to produce a net loss:

Net gain or net loss = (long-term capital gains minus long-term capital losses) + (short-term capital gains minus short-term capital losses)

In other words, the firm sells positions at a loss to offset gains realized during the year. As a result, the client may owe less tax on those gains, whether from sales or fund distributions. Keep in mind that harvesting generally defers taxes rather than eliminating them. The replacement position usually carries a lower cost basis, which can mean a larger taxable gain later.

In addition, net capital losses can offset up to $3,000 of ordinary income per year. The limit is $1,500 for married taxpayers filing separately, per IRS Topic No. 409. These limits may change, so confirm current figures with a tax professional.

What happens when losses exceed gains

Unused losses can carry forward to future tax years. For example, suppose a hypothetical investor realizes $20,000 of losses and $12,000 of gains. Next, up to $3,000 of the $8,000 net loss may offset ordinary income that year. The remaining $5,000 can carry forward to offset gains or income in later years. In contrast, tax on net realized gains is generally due for the year they occur. This illustration is hypothetical and reflects no actual client.

When harvesting may make sense

Harvesting tends to be most relevant during market declines, when some holdings trade below their purchase price. For example, a position bought near a market peak may show a loss months later. Its long-term outlook, however, may not have changed at all. In that case, the firm may sell the position and buy a similar investment to maintain market exposure. Meanwhile, the client remains invested and can still benefit if prices recover.

Timing also matters. In practice, investors can look for unrealized losses throughout the year rather than only in December. First, weigh the potential tax benefit against trading costs. Next, confirm that the trade still fits the account’s investment objectives. Finally, check whether a suitable replacement exists that is not substantially identical to the original. Of course, a loss that looks attractive today may shrink or disappear if the market rebounds before the trade occurs.

Rules that govern how tax harvesting turns market losses into tax savings

Taxes should not drive the portfolio. Instead, the firm aims to keep each account aligned with its specific investment objectives. Above all, clients should coordinate this strategy with their accountants and other advisers. Trade-offs include transaction costs and possible performance differences, and harvesting offers little benefit in IRAs and other tax-advantaged accounts.

Advisers must also consider IRS rules, most importantly the wash sale rule. It exists to discourage selling assets at a loss simply to claim a tax benefit. Buying a substantially identical security within 30 days before or after a loss sale triggers it. Consequently, the IRS disallows the loss for now and adds it to the new position’s cost basis.

For instance, an investor might sell a fund that tracks the S&P 500. Next, the investor could buy a Dow Jones Industrial Average fund, which often moves similarly but holds different stocks. However, the replacement may perform differently from the original. In addition, the IRS has not precisely defined “substantially identical.” Therefore, understanding how tax harvesting turns market losses into tax savings means reviewing each trade with a tax professional. This example is illustrative only and is not a recommendation to buy or sell any security.

Using market volatility to lower a client tax bill means selling positions that have fallen in value to realize losses. Those losses can then offset realized gains, a practice known as tax-loss harvesting. In practice, the aim is to stay invested so a portfolio can participate in any recovery. However, results depend on each client’s tax situation, and the strategy does not guarantee a lower tax bill.

Using market volatility to lower a client tax bill: the formula

In accounting terms, the goal is a net loss in this calculation.

Net gain or net loss = (long-term capital gains minus long-term capital losses) + (short-term capital gains minus short-term capital losses).

In other words, realized losses can offset gains realized during the same year. As a result, the tax owed on those gains may shrink or disappear. Those gains may come from sales or, for example, mutual fund distributions.

If losses exceed gains, a taxpayer may deduct up to $3,000 of net capital loss per year against ordinary income. The limit is $1,500 for married taxpayers filing separately (IRS Tax Topic 409). In addition, the limit applies per tax return, not per portfolio.

How carryover losses work

If net losses exceed the annual limit, the unused amount generally carries forward. They can offset future gains and, within the annual limit, ordinary income. In contrast, tax on net realized gains is generally due for that same tax year.

Here is a hypothetical illustration. Suppose an investor realizes $10,000 of gains and harvests $18,000 of losses in one year. First, the losses erase the $10,000 gain. Next, $3,000 may offset ordinary income. Finally, the remaining $5,000 may carry forward. Results vary by filing status.

When to look for harvesting opportunities

Volatile markets can push some positions below their purchase price, even in a year when the overall portfolio gains. Therefore, many advisers review client accounts for losses throughout the year rather than waiting for December. A sharp decline in one sector, for instance, may create a loss worth harvesting while other holdings stay profitable.

Meanwhile, the character of each loss matters. Short-term losses generally offset short-term gains first, and long-term losses generally offset long-term gains first. Short-term gains typically face higher tax rates than long-term gains. As a result, harvesting short-term losses can carry extra value for some clients. Of course, the adviser should also weigh the client’s income, filing status, and expected future gains before acting.

What the strategy must not do

Using market volatility to lower a client tax bill should not damage the portfolio. Instead, the portfolio should stay aligned with its investment objectives. For instance, harvesting often defers taxes rather than eliminating them, because the replacement position starts with a lower cost basis. Trading costs and tracking differences can also reduce the benefit.

Most importantly, advisers should coordinate this strategy with the client’s accountant and any other investment advisers. This article is general education, not tax, legal, or investment advice.

Where the wash sale rule fits

Above all, advisers must consider the wash sale rule before making portfolio changes. A wash sale generally occurs when an investor sells a security at a loss. The rule applies if the investor buys a substantially identical security within 30 days before or after. An IRA or spouse’s purchase can also trigger it. As a result, the investor cannot claim the loss that year.

For example, an adviser could hypothetically sell a fund tracking the S&P 500. The adviser could then buy a fund tracking the Dow Jones Industrial Average. The indexes often move similarly, but the Dow holds only 30 stocks, so returns can diverge. However, the IRS has not precisely defined “substantially identical,” so any swap carries risk. Therefore, advisers should confirm any swap with a tax professional.

We share this article to help you learn how to spot social engineering and protect your accounts. A few figures from a third-party source show the scale of the problem. However, Activest has not independently verified them, and some date from 2020 and 2021.

• Attackers reportedly hack about 30,000 websites worldwide each day.
• Roughly 64% of companies worldwide have experienced at least one form of cyber attack.
• March 2021 alone saw about 20 million breached records.
• Meanwhile, ransomware cases grew by about 150% in 2020.
• Email delivers around 94% of all malware.
• On average, a new attack occurs somewhere on the web every 39 seconds.
• Security tools block an average of around 24,000 malicious mobile apps daily.

Source: techjury.net

Where social engineering fits

Increasingly, attackers pair social engineering with technical cyber attacks to obtain information from the victim. In other words, social engineering is the practice of manipulating and deceiving someone to gain control of private information. For example, an attacker may use the phone, email or direct contact. The goal is to gain illegal access to sensitive details such as usernames, passwords and account information.

How to spot social engineering and protect your accounts

Start with email. The same source ties most malware to email, including viruses and other malicious programs. Therefore, treat any email that asks you to change account credentials or transfer funds as a warning sign. Do not answer it, click its links or reply with any information. Instead, contact the sender through a phone number you already know is genuine.

Common tactics to watch for

Social engineering usually relies on pressure rather than technical skill. First, an attacker may create a sense of urgency. The message may claim that an account will close or a payment will fail unless you act at once. Next, the message may appear to come from someone you trust, such as a colleague, a bank or a service provider. In addition, the sender may ask you to keep the request private or to skip your usual checks.

Look closely at the details. For instance, a display name can look familiar while the actual email address contains small misspellings. Links may also point to a website that imitates a real login page. As a result, a quick glance is often not enough to judge whether a message is safe.

Phone calls, texts and direct contact

Email is not the only channel. Callers may pose as support staff and ask you to read out a code that your bank or app sent to your phone. Meanwhile, text messages can carry links that lead to fake sites or harmful apps. In person, someone may simply ask for help getting into a building or borrowing a device. In each case, the safest response is to pause and verify the request independently.

Everyday steps that reduce your risk

Learning how to spot social engineering and protect your accounts works best when you pair awareness with simple habits. Consider the following steps:

• First, use a unique, strong password for each important account.
• Next, turn on multi-factor authentication wherever it is available.
• In addition, keep your devices and apps updated with the latest security patches.
• Review your account statements regularly for activity you do not recognize.
• Finally, never share one-time codes, passwords or PINs with anyone who contacts you.

Above all, give yourself permission to slow down. A legitimate organization will understand if you hang up and call back on a verified number. In practice, that short delay is often enough to stop a scam before it causes harm.

Of course, no single habit can stop every attack, and criminals may also use calls or texts. As a matter of policy, Activest does not ask clients to change accounts or make transfers by email. Most importantly, if you suspect unusual activity, please contact our office right away.

This article explains the three kinds of bear markets and how they recover. At the time of writing, the broad market had fallen roughly 21% from its peak this year. In our view, several forces drove the decline. First, the Federal Reserve adopted a hawkish monetary policy. In addition, inflation ran high as supply chains faltered and Russia invaded Ukraine.

A bear market typically means a fall of more than 20% from a peak. Given how sharply macro expectations shifted, we do not find a decline of this size very surprising. For example, twelve months ago the market expected no rate hikes this year and only a couple by the end of 2023. At the same time, growth expectations were rising with the post-pandemic recovery. Meanwhile, few investors foresaw the war between Russia and Ukraine.

Understanding the three kinds of bear markets and how they recover

Investors often view market declines as binary: you are either in a bear market or you are not. In practice, however, bear markets differ depending on their drivers. Analysts commonly group them into three broad types.

• Structural bear market. This type usually stems from structural imbalances or financial bubbles. For example, during the 2007 financial crisis the market fell 57% and took 49 months to recover.
• Event driven bear market. In contrast, this kind stems from specific, infrequent events that typically do not lead to a domestic recession. Examples include wars, emerging market crises and pandemics. The 34% drop between February and March 2020 is the latest example.
• Cyclical bear market. Finally, this type typically follows shifts in the economic cycle, a rising interest rate curve and higher inflation. The last one ran from July to October 1990, when the market fell 20% and took about four months to recover. The invasion of Ukraine has influenced the current correction. However, in our opinion it most closely resembles a cyclical bear market, and this view could prove wrong.

Why does the type matter? The driver of a decline often shapes how deep it runs and how long recovery takes. For instance, structural declines may take longer because imbalances need time to unwind. In contrast, event driven and cyclical declines have often been shorter, as the examples above show. Of course, no classification is perfect, and a single bear market can share features of more than one type.

What history says about the recovery

We understand that bear markets can feel unsettling. Historically, returns following declines close to 20% have averaged around 19%, 36% and 72% after one, three and five years, respectively. However, these are historical averages, and past performance does not guarantee future results. Individual periods varied widely, and some recoveries took far longer. In other words, studying the three kinds of bear markets and how they recover offers context, not a forecast.

Keeping perspective during volatility

In our view, staying focused on the plan you built at portfolio construction may help you participate in a recovery after intense volatility. Of course, a plan cannot remove risk, and markets may fall further first. We are not suggesting that short-term volatility has ended. Instead, we aim to show how long-term positioning can help investors pursue their goals. This article is educational and is not an individual recommendation. Therefore, please speak with your advisor about your own situation.

It can also help to review a few practical questions with your advisor. First, does your time horizon still match your goals? Next, does your current mix of investments still reflect your tolerance for risk? In addition, do you hold enough cash for near-term needs, so you are less likely to sell during a downturn? Finally, would rebalancing bring your portfolio back toward its target allocation?

Source for bear market and recovery history: Goldman Sachs. Figures are historical and illustrative only. Indexes are unmanaged, and investors cannot invest directly in them.