TheChek News Flow

News this past week that both Nvidia and Advanced Micro Devices are taking charges in the current quarter because of the latest U.S. rule limiting chip sales to China cast attention on a broader problem: Tech companies, in chip manufacturing and beyond, are at risk as Beijing and Washington square off.

All non-Chinese chip manufacturers face risk in China because the government is seeking to break the country’s dependence on technology from the rest of the world. Until last year, this remained a distant goal, but the transition has begun with Chinese restrictions on its local and central government purchases of new PCs and servers. The collateral damage from that shift, and from the trade war in general, ranges widely from chip makers to software companies and the production of devices such as iPhones.

There are 18 central processing unit chips approved for Chinese governments, and none of them is from Intel or AMD, the two dominant players worldwide. Many of the approved CPU chips have intellectual property from Arm, a U.K. company, which means they could still fall victim to future local restrictions.

Microsoft’s Windows operating system and Oracle’s database software are the at leading edge of the problem for U.S. software companies. Like U.S. CPU chips, the Chinese government is also limiting U.S. software; new PCs and servers purchased by the Chinese government won’t run Windows, but rather a choice of six homegrown options. When Chinese authorities placed restrictions on government purchases of PC and servers last year, they also listed 11 domestic options for databases.

These are long-term issues because shifting the installed base of software, PCs, and servers for the entire country will take time. The transition, beginning with government procurement, will require transforming the Chinese supply chain.

U.S. companies that make chips domestically, such as Texas Instruments and Intel, already see their Chinese sales under threat. Chips made in Taiwan by U.S. companies like Apple , Nvidia, Qualcomm, and AMD and then sent to China will be exempt from the country’s 125% retaliatory tariff. There will be no such relief for chips produced in the U.S.

In fiscal 2024, Intel got 29% of its sales from China. The figure was 19% for Texas Instruments.

For now, smartphones and PCs imported into the U.S. don’t face any of the most recent tariffs, but the Trump administration has signaled that it is going to place a separate set of tariffs on those products in the coming months.

Among Big Tech companies, Apple faces the most significant China risk because both its production and sales to local customers stand to be affected. Though Apple has some assembly in India and Vietnam, it still puts together a large majority of its devices in China. It will have a tough time changing that quickly.

While Chinese manufacturing provides relatively cheap labor, it also offers Apple the scale needed to produce vast numbers of devices. China is also centrally located to take advantage of the entire East Asian tech supply chain.

The only other country that can match China in scale is India, where Apple has begun to move some iPhone production. Estimates for India’s production of iPhones range from 15% to 20% of the total.

Meanwhile, the shine may already be coming off the Apple brand in China, even before the trade war puts the business at greater risk. Sales in China and Taiwan were down 8% in fiscal 2024; they represented 17% of Apple’s total revenue.

Because of its vast scale, India is also Apple’s answer to the sales risks it faces in China. Apple began a full-court press in 2020 with the online Indian Apple Store, followed by retail stores in 2023. CEO Tim Cook frequently calls out Indian sales in earnings calls.

But like Apple’s supply chain, recalibrating its massive sales toward India will also take time.

In terms of exposure to China risk, Amazon.com

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might be No. 2 on the Big Tech worry list; Amazon now faces much higher tariffs on imports than before, led by a tariff of at least 145% on most Chinese goods. Goldman Sachs analyst Eric Sheridan estimates that Chinese goods account for 20% to 40% of Amazon’s first-party merchandise costs. Those expenses are poised to rise significantly in a trade war.

Sheridan didn’t make a comparable forecast for Amazon’s robust third-party business, which accounted for 37% of the company’s retail sales in 2024. That injects uncertainty into the outlook. Amazon knows what is happening in the supply chain for its own inventory, but it may not have the same level of detail for its third-party vendors. That means investors are likely to be left in the dark, as well.

Amazon didn’t immediately respond to a request for comment.

Within Big Tech, the most insulated from China risk are Alphabet and Meta Platforms. Services like Google Search and Facebook don’t operate in China, though the two companies do get some revenue from Chinese companies advertising to customers across the globe.

A trade war could eat into the 11% of 2024 revenue that Meta got from China. Alphabet doesn’t break out Chinese sales, but 16% of 2024 revenue was from the Asia-Pacific region.

The Worst Could Well Be Over for the Stock Market. Moves to Make Now.

In an economic world that is in various stages of integration and disintegration, investors must learn to endure dramatic stock corrections, which now seem to occur every few years.

It is no longer enough simply to pick good stocks and let time compound returns in a mostly benevolent environment. Investors must now have the discipline to endure violent price movements that are exacerbated by the interaction of global stock, bond, commodities, and derivatives markets.

Just consider what has happened since April 2, when President Donald Trump announced his global tariff regime. Stocks experienced historically significant declines and gains in a compressed time.

Anyone who panicked—or heeded the fearmongers—lost lots of money. Granted, the markets were scary, but recent history has repeatedly demonstrated that anyone who fails to anticipate routs and panics should endure the pain of a plummeting portfolio. Sooner or later, markets recover and rally higher.

Sudden declines can make most investors forget that 78% of the stock market’s best days occur during bear markets, or during the first two months of bull markets, according to Hartford Funds. Over the past 30 years, missing the market’s 10 best days reduced returns by half, and missing the best 30 days reduced returns by 83%, the firm says.

This column has long endorsed monetizing the fear of other investors by selling cash-secured put options on blue-chip stocks or buying stocks during declines. The goal is using short-term volatility spikes to buy quality stocks that can be held for three to five years and ideally longer. We call that “time arbitrage.”

Until recently, we were cautious as it was hard to know if negative tariff reactions were a prelude to deeper declines or an overreaction. That’s why we advocated hedging ahead of the April 2 tariff news, then selling call options against stocks to offset stock weakness, and then buying calls to participate in a recovery.

Now the worst of the tariff tantrum seems over as Trump appears to be pursuing nuanced policies. If we’re right, the shift suggests normalized put-selling risks, though implied volatility, a key options premium determinant, remains elevated. That gives sellers of options an edge.

Goldman Sachs derivatives strategists recently told clients that the average one-month implied volatility of an S&P 500 index stock was around 44%, near its high over the past year.

Because tariffs have given Trump the powers of Poseidon over markets, investors should scale into positions. Rather than selling 30 cash-secured puts with the same strike price to buy 3,000 shares, sell 10 puts with different strikes. The strategy requires setting aside enough money to buy the stock at designated strike prices.

Consider Palantir Technologies, a software company that is far below its 52-week high of $125.41 on fears the stock is too hot for the current environment.

With Palantir at $98.40, the May $97.50 put could be sold for about $9.65, the May $95 put for about $8.55, and the May $92.50 put for about $7.45.

Investors keep the premiums if Palantir remains above the strike prices at expiration. If the stock plummets, investors either buy it at the strike prices or adjust positions to avoid assignment. Should that happen, investors can then sell calls to get paid to wait for the stock to recover.

But rather than tap-dancing around the intricacies of strategic investing, just maintain a simple focus on owning quality stocks and monetizing fear. If you are comfortable with puts and calls and volatility, you can get the options market to pay you for being a long-term investor.

That, at least, will be easy to endure.

Intel Is Retooling Its Board. Big Changes Could Come in May.

Intel stock has been beaten so badly in recent years, it has become somewhat insulated from the sharp market downturn in the wake of President Donald Trump’s evolving trade and tariff strategy. During this period, Intel has appointed a new top executive, and in the next month will have a board more focused on management experience in semiconductors.

Under former CEO Pat Gelsinger, whose tenure ran nearly four years through the end of November 2024, Intel stock dove 55%. At the same time, rival chip maker Nvidia had been logging triple-digit annual percentage gains. Apart from the relative underperformance, maybe more humiliating for Intel was that Nvidia replaced it in the Dow Jones Industrial Average in late 2024.

Now Intel investors are seeing some sunshine in the bleakest days for the market. In fact, shares are down less than 2% for the year to date, which doesn’t sound amazing, until you consider that Nvidia stock has dropped 17%, and the S&P 500 is down 9%. It seems that anyone who had planned to sell their Intel stock for the most part already had.

And a high-profile Intel stock buyer recently picked up a large block of shares: New CEO Lip-Bu Tan was obligated to buy $25 million of shares early in his tenure, and he met that obligation in early March. Gelsinger had made it a habit to buy Intel stock dips, but investors may have been more impressed with Tan’s right-off-the-bat stock buy. In fact, because Tan purchased stock directly from Intel, and not from the open market, he is paying Intel more than the company is paying him in the near term.

When Gelsinger resigned Dec. 1, “restoring investor confidence” was one of the main goals laid out by Frank Yeary, Intel’s independent chair, who became interim executive chair during the transition period while the company was seeking a new CEO.

Four days after Gelsinger’s resignation, Yeary announced in a news release two immediate additions to the Intel board: Eric Meurice, former president, CEO and chairman of chipmaking-equipment firm ASML Holding, and Steve Sanghi, chairman and interim CEO of Microchip Technology. Yeary lauded them as “successful CEOs with proven track records of creating shareholder value.” With Tan rejoining Intel’s board—he had stepped down in August 2024 —that swelled Intel’s board to 14 directors.

Yeary, managing member of private investment firm Darwin Capital Advisors LLC, and an Intel director since 2009, didn’t plan on keeping an expanded board. In late March, Intel disclosed in a regulatory filing that Omar Ishrak, Tsu-Jae King Liu, and Risa Lavizzo-Mourey would retire from the board, and not seek reelection at the annual meeting on May 6. Yeary praised the three in the filing as “accomplished leaders and long-standing board members who brought deep experience and expertise into the boardroom.”

But none of three departing directors have top executive experience in semiconductors. Ishrak, Yeary’s predecessor as Intel chair, was chairman and CEO of medical-tech firm Medtronic when he joined Intel’s board in 2017. Liu, the Dean and Roy W. Carlson Professor of Engineering in the College of Engineering at the University of California, Berkeley, joined Intel’s board in 2016; her experience is rooted in academia, research, and engineering. Lavizzo-Mourey, who became an Intel director in 2018, is an expert in health policy and geriatric medicine, and is a former president and CEO of the philanthropic organization Robert Wood Johnson Foundation.

“The Board prioritizes regular refreshment to ensure it has the necessary skills and experience to oversee our business and create long-term shareholder value,” Intel wrote in an emailed statement. “Eric and Steve are highly respected leaders in the semiconductor industry whose deep technical and executive experience make them great additions to the Intel board. We are grateful for the contributions of Omar, Risa, and Tsu-Jae during their years of service.”

Ishrak, Liu, and Lavizzo-Mourey had all joined Intel’s board when chaired by Andy D. Bryant, a former company executive who left Intel’s board himself in May 2020, more than half a year before Gelsinger’s tenure as CEO began.

The Wall Street Journal recently noted that Tan doesn’t have much time to effect change, and turn investor sentiment. He has at least some weeks after the May meeting, which will see a changing of the guard at the board. Intel could announce major strategic changes shortly after.

Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members—so-called insiders—as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.

Judy Ganes of JGanes Consulting follows “soft” commodities, which have seen price spikes due to poor harvests and strong demand.

People who put chocolate and coffee at the top of the food pyramid recently got a shock: Prices for both zoomed higher due to poor global harvests and strong demand, shattering records set way back in the 1970s.

Although prices have since moderated, they remain well above long-term averages, and Judy Ganes, founder and president of JGanes Consulting, doesn’t expect relief soon. Tree-crop production bounces back slowly, she says, and climate change is hurting tropical crops. Tariffs will compound the price pressure on the “soft” commodities that Ganes follows— cocoa, coffee, cotton, sugar, and orange juice.

Ganes, a 40-year veteran of the commodities market, was a senior analyst at Merrill Lynch and Shearson Lehman before launching her own food and agricultural consultancy in 2001. She recently spoke with Barron’s about the outlook for cocoa and coffee, and why Florida orange juice has become a misnomer. An edited version of the conversation follows.

Barron’s: Just what does a commodities consultant do?

Judy Ganes: I still write reports similar to those I wrote when I worked at Shearson and Merrill Lynch, providing market insights and guidance. I tour farms, attend conferences, and teach courses on futures, options, and risk management. In producer countries, I do boots-on-the-ground research, talking to farmers and others in the supply chain to understand their issues. I also study trends in the consumer market, whether in packaging or cafes and grocery stores. It is a constantly changing landscape.

What do commodities tell us about the broader economy?

They are the first stop in the supply chain. Consider cotton: It is the starting point for apparel sales and home goods such as bedding. There’s a long lead time from buying raw cotton to putting finished goods in stores. If demand for cotton slows, it is a signal that upstream demand isn’t good. That tells us something about the outlook for gross domestic product.

I also view things from the opposite direction. The 2008-09 financial crisis began with a downturn in the real estate market. As I saw the Florida housing market slow, I thought this is going to be really bad for cotton prices. If people aren’t moving, they aren’t buying linens or redecorating, and demand will fall.

Almost everyone loves chocolate, so let’s take a look at the cocoa market. Cocoa prices are nearly triple 2023 levels, but off their highs. Why do they remain elevated?

This is the third consecutive year of a production, or supply, deficit, caused mainly by reduced output in West Africa. Inclement weather caused it, but there are other concerns, including a high incidence of swollen-shoot disease in both the Ivory Coast and Ghana [which currently produce about 50% of global supply]. There is no cure for it. The trees have seen declining yields, having reached peak productivity already. The nutrients in the soil are depleted, which also leads to increased risk from disease outbreak.

To meet demand, world supplies have been drawn down to the lowest level since the 1970s. Prices have responded, and are now about three times the all-time high set back then. Cocoa is trading for nearly $8,000 a metric ton on the ICE Futures US exchange. Cocoa has had a hyper bull move, beginning in the second half of 2023, that has reflected panic in the market.

Prices are coming down a bit because there is an expected bounce in production for the next season, but production isn’t going to rebound fully.

Structural issues in the cocoa industry have also exacerbated the problem. What happened?

The industry has backed itself into a corner. Like many other industries, there has been increased reliance on a few suppliers that now account for the majority of world production. There has been a long history [of disease problems in several producing countries] that was ignored in the cocoa industry.

Another distinguishing factor is that the Ivory Coast and Ghana, by far the two largest producers, aren’t free markets. They have old-fashioned cocoa boards. The boards buy up the production from the farmers and sell it to the major international players. They set the farm gate price—what farmers will receive—before the season begins.

Ghana also has illegal gold mining, and with the price of gold soaring, miners are bulldozing cocoa farms. The worst part is, mining operations on the cocoa fields are ruining the water. They are creating a toxic dump. It ruins the lives of the farmers.

Finally, climate change is affecting production. The industry was caught blindsided, but it shouldn’t have been.

How are chocolate manufacturers coping with historically high prices?

The majority of chocolate is consumed around four holiday seasons: Halloween, which has also morphed into back-to-school candy-sales season; Christmas and Hanukkah; Valentine’s Day; and Easter.

Manufacturers have long-term coverage [they hedge price changes via the futures market], and some have commitments to buy physical cocoa at certain prices. Manufacturers were protected from rising prices for most of this past year, but the cost to maintain hedges has become exorbitant as futures prices rise. [Futures trade on margin, a percentage of the contract’s total value that acts as a good-faith deposit ensuring that the trader can meet his obligation. When the price of the underlying commodity becomes volatile or rises, the exchange increases the amount of money needed to maintain hedges.]

Chocolate manufacturers aren’t entering into as many long-term futures contracts now because it is too risky with cocoa prices at higher levels. They are operating a little more hand-to-mouth. They have raised retail prices, as well. This Easter will mark the first holiday when the price of chocolate sold hasn’t been protected by hedging at much lower levels. Manufacturers are resigned to the fact that the base price of cocoa, at least for now, is going to be higher than what they are used to paying, but they will manage.

How so? Is demand for chocolate elastic?

We are seeing a combination of consumer choice and manufacturers’ changes. Manufacturers are reformulating and repackaging products, so buyers are consuming less. You’re being put on a diet. And you are making a conscious decision that instead of buying this bag of chocolates that formerly cost $5.99 and now costs $10.99, you might buy something else.

For a while, manufacturers resisted cutting back on ingredients because they didn’t need to. Now, they may replace cocoa butter with an alternative oil, substitute some of the butter, use compound chocolate, put fewer chips in a cookie, shrink the size of the Easter Bunnies, and so forth. That all happens with high prices.

One by one, most of the large manufacturers are introducing new products that are chocolate-y, but have less chocolate.

Coffee futures traded at all-time highs in February, also surpassing records from the 1970s. Prices have doubled since last June. What pushed them higher?

Like cocoa, world stocks are historically low. High temperatures in Brazil, the biggest arabica producer, have been more prevalent in recent years, and rainfall was below normal yet again last year during a critical development period when the beans form. Global warming is impacting Brazilian production. Vietnam, the largest robusta coffee producer, was affected by drought, but its production is now better. Sales have increased, and prices have recovered some. If there is a renewed weather problem, prices can spin higher on a dime.

Should coffee drinkers brace for a parabolic price rise like the one seen in cocoa?

You can’t ignore the problems, but there are two types of coffee, arabica and robusta. If there are supply problems with the more expensive arabica coffee, roasters will opt for the next-best coffee or switch to using more robusta. Brazil, Vietnam, and Colombia are the top three coffee producers, but the market isn’t as dependent on them as the cocoa market is on the Ivory Coast in Ghana.

Before President Donald Trump’s 90-day tariff pause, imports from some cocoa- and coffee-producing countries were hit with steep tariffs. The U.S. put a 21% tariff on goods from the Ivory Coast, and a 46% tariff on goods from Vietnam, the biggest robusta coffee grower. Brazilian goods have a 10% tariff. How have commodities markets reacted to the tariff news?

Prices have declined to offset the increased tariffs, and to reflect the angst about how demand may be negatively impacted. Already, the countries with the highest tariffs imposed have asked to renegotiate, and are willing to play ball with the Trump administration.

There is a multiplier effect on tariffs. The more the product changes hands in the supply chain, the greater the cost to the final consumer. Cocoa and coffee are shipped “cost insurance and freight,” meaning the shipping cost includes customs clearance and taxes and tariffs. The final price is known as the landed cost. Margins are based on a percentage of the landed cost. Everyone in the supply chain takes a 7% margin to cover their costs and profit.

If you start with a dollar’s worth of coffee, the importer, supplier, and roaster each add their 7%. The roaster also must make up for any loss in volume on the purchase price of green coffee beans. Typically, there is an 18% volume loss after coffee beans are roasted, so the sales price to retailers must also be increased by the volume loss. Given the purchase price of an item, plus shipping, taxes, and profits, the consumer could pay significantly more.

A 46% tariff on coffee from Vietnam would add an extra 76 cents per dollar to the consumer’s cost, based on my calculations.

Orange juice prices have fallen about 50% from recent record levels. What caused the plunge?

Consumer lifestyle changes have been pushing demand lower for years, except for a brief respite during the pandemic. Demand cratered recently as a result of record prices.

After the tariff threats, [former Canadian Prime Minister] Justin Trudeau said Canadians won’t need to drink Florida orange juice. But there is really no such thing as Florida orange juice anymore because we produce so little. Consumption is down, and there is disease proliferation; citrus greening [a bacterial infection] has no cure. Fifteen years ago, Florida produced 242 million 90-pound boxes of oranges. This year, the state is producing 11.5 million. Land that had been planted with citrus is being sold off. Brands manufacture here, but most of the juice comes from Brazil and Mexico.

Conventional investment wisdom suggests a 5% allocation to commodities. The agriculture-focused Invesco Agriculture Commodity Strategy No K-1 exchange-traded fund and the broad-based abrdn Bloomberg All Commodity Strategy K-1 Free ETF are two ways to invest. Any advice for retail investors interested in the commodities you cover?

Funds are one approach because you’re paying a specialist to invest, but you need to do your homework because commodities are more volatile than stocks. Timing is everything. You could have the right idea, but if your timing is off, then it doesn’t matter.

Investing in commodities depends on your risk tolerance. Cotton and sugar currently have more upside than downside and reduced volatility compared to coffee and cocoa.

Thanks, Judy.

From junk bonds to munis to mortgage securities, yields are elevated and prices depressed. Ten funds to consider.

Bonds are beckoning investors again with depressed prices and juicy yields.

Many fixed-income markets have sold off in recent weeks, partly due to fears that the U.S. economy is heading into a recession. As a result, yields on municipal bonds, junk bonds, mortgage securities, and preferred stock are higher today than at the start of 2025.

Investors can now find yields of 8% on junk bonds, 7% on preferred stock, close to 6% on government-agency mortgage securities, and almost 5% on high-grade, long-term municipal bonds. Most U.S. Treasuries yield more than 4%, with 20-year and 30-year bonds yielding nearly 5%. (Bond prices move inversely to yields.)

These yields look particularly attractive with inflation running below 3%. Although President Donald Trump’s tariffs may temporarily lift import prices and inflation, his policies could prove deflationary in the longer term by dampening economic growth. Investors anticipate that the Federal Reserve will react to weaker growth this year by cutting short-term interest rates by 0.75 to one percentage point by year end from the current target range of 4.25% to 4.5%.

One favorable development for the inflation outlook is a recent 10% decline in oil prices, which has left U.S. crude trading at $64 a barrel.

Lately, there has been much debate on Wall Street about the merits of a traditional portfolio with a 60/40 mix of stocks and bonds. Returns have been unimpressive in recent years, with Torsten Sløk, chief economist at Apollo Global Management, noting that a 60/40 mix has returned just 2% annualized since the start of 2022.

But for bond investors, starting yields matter much more than historical returns—and the higher the yield, the better. Current yields are higher today than they have been for most of the past 15 years.

Investors can capture a 6% yield on a mix of taxable bonds, including preferred stock. That could provide a nice complement to stocks, particularly in tax-advantaged accounts such as 401(k)s and individual retirement accounts. Here is a closer look at five fixed-income sectors.

Municipal Bonds

Barron’s evaluated income sectors at the start of 2025 and ranked municipal bonds among the least appealing. That has changed with the market selloff this year.

“Munis have gotten extremely attractive,” says Dan Genter, CEO of Genter Capital Management in Los Angeles. “For taxable investors, it’s pretty much no decision—and you don’t have to be even in the highest tax bracket.”

Most investors buy muni bonds via mutual funds or separately managed accounts, and good managers can often add value relative to big exchange-traded funds such as the $39 billion iShares National Muni Bond (ticker: MUB). Costs matter, and that works in favor of funds like the $77 billion Vanguard Intermediate-Term Tax-Exempt (VWITX).

Craig Brandon, co-head of municipals at Morgan Stanley Investment Management, notes that high-grade single-A- and double-A-rated bonds with 30-year maturities yield close to 5%, comparable to the yield on the 30-year Treasury. “These are some of the highest outright yields we have seen in the market since 2011,” he says.

Genter says a 4% muni yield is equivalent to about 8% on a fully taxable bond for individuals in top tax brackets in states such as New York and California. High muni historical credit quality is another plus, he says.

There are risks with munis, including heavy new issuance, and the possibility that the federal government will scale back the current tax exemption that muni-bond interest enjoys. But some of those risks are captured in current muni yields.

Preferred Stock

The $300 billion market for preferred stock is a favorite of individual investors because of tax-advantaged dividends. Also, preferred is senior to common stock. Most preferred and common dividends are taxed preferentially at a top federal rate of 20%. Corporate-bond interest is taxed at ordinary income-tax rates.

Preferred yields have risen, and prices have fallen, in 2025, with the iShares Preferred & Income Securities ETF (PFF) down about 5%, including dividends. It now yields about 7%.

Many investors favor so-called $25 preferreds that trade like stocks on the New York Stock Exchange. But $1,000 par issues traded over the counter (and available to retail investors) often offer higher yields. Citigroup has offered a series of $1,000 issues in the past year, including a 6.75% issue now trading around 96 (par value is $100), for a yield of more than 7%.

Banks are the largest issuers of preferred, and most $25 bank securities, including the Wells Fargo 4.75% issue, yield more than 6%. Among the highest-yielding preferred is MicroStrategy’s recent 10% issue (STRF), now trading on the Nasdaq around $89 for an 11.25% yield. The high yield reflects the lack of conventional earnings at the big Bitcoin holder, but the company, known as Strategy, has plenty of asset coverage for its preferred, offering security to investors. It has about four times as much Bitcoin as debt and preferred stock.

Mortgage Securities

The mortgage market deserves more attention from retail investors, given its combination of ample yields and high credit quality.

Investors can now get roughly 6% yields on an ETF such as the $2 billion Simplify MBS (MTBA) with minimal credit risk, as it buys Fannie Mae 30-year mortgage securities that are widely viewed as carrying implicit government support.

The Simplify ETF’s current yield is two percentage points higher than the larger, $36 billion iShares MBS ETF (MBB) because it owns securities with higher coupon rates of about 5.5%, compared with an average of about 3% for MBB.

Harley Bassman, the managing partner of Simplify, says investors in the two ETFs face a trade-off. The Simplify ETF has less upside due to the risk that homeowners will pay off the underlying loans if rates fall. The iShares ETF has a lower yield but more upside due to lower prepayment risk.

There is a 1.35 percentage point differential between agency mortgage and Treasury yields, up from 1.25 points at year end. The 10-year Treasury now yields about 4.3%.

Longtime mortgage securities manager Jeffrey Gundlach heads the $30 billion DoubleLine Total Return fund (DBLTX) that invests about half of its assets in agency MBS and the other half in privately issued MBS that carry more credit risk. The fund yields close to 6%,

Junk Bonds

There is a little more “high” in the high-yield market now. The yield gap between junk bonds and U.S. Treasury securities has widened to four percentage points from just under three points at the start of 2025, based on the ICE BoA high-yield index.

There is greater recession and default risk than at year end, due to falling consumer and business confidence and the Trump tariffs. As a result, investors can now get 8% yields in the sector.

The largest junk ETF, the $20 billion iShares Broad USD High Yield Corporate Bond (USHY), tracks the BoA index and yields close to 8% with an annual fee of less than 0.1%.

Closed-end funds such as the BlackRock Corporate High Yield (HYT) are yielding about 10%, partly because of leverage equal to nearly 25% of assets. Closed-end funds often have comparable yields to popular private credit funds that buy junk-equivalent loans to small companies. The BlackRock fund carries less risk and leverage and has a liquid portfolio.

Treasuries

There has been turmoil lately in the normally placid Treasury market, fueled by speculation that foreign investors were registering displeasure with Trump’s economic policies by dumping Treasuries.

Another risk is huge U.S. budget deficits, including $1.3 trillion of red ink in the first six months of the current fiscal year, ending in September.

But Treasuries still offer sleep-at-night security, a potential hedge against a weaker economy, and some tax benefits because interest is exempt from state and local taxes.

The 30-year Treasury yields 4.8%. Shorter-date maturities such as the three-year are close to 4%. ETFs offer a good way to play the sector due to low fees and liquidity. Treasuries trade in an over-the-counter market that can befuddle individual investors.

The largest Treasury ETF is the iShares 20+ Year Treasury Bond (TLT) with a yield of about 4.5%. Vanguard Intermediate-Term Treasury (VGIT) has a rock-bottom fee of 0.03% annually, yields 4%, and has an average maturity of about five years.

Treasury inflation-protected securities, or TIPS, are a good complement to regular Treasuries. TIPS pay a fixed-rate, now 2%-plus for 10- to 30-year securities. They are also indexed to inflation. The inflation “break-even” is relatively low at about 2.25%—meaning that if prices rise by more than 2.25% annually over the life of the bonds, investors will do better with TIPs than regular Treasury bonds.

Big ETFs include iShares TIPS Bond (TIP), with a seven-year average maturity, and iShares 0-5 Year TIPS Bond (STIP), with a two-year average maturity.

Given higher yields throughout the bond market, now is a decent time to consider adding fixed income to portfolios.

The recent trade war TikTok trend offers a glimpse of how sophisticated the counterfeit industry has become in China, while the nation's B2B wholesale marketplace DHGate became the second-most downloaded app in the U.S. Apple app store on Wednesday.

LONDON — China‘s highly sophisticated counterfeit industry has been utilized as a weapon to demystify luxury manufacturing with a recent trend on Western social media platforms dubbed “trade war TikTok.”

Following rounds of price hikes during and after the COVID-19 pandemic, luxury items have become generally unaffordable to the American middle class.

Multiple viral videos circulating on TikTok claim that luxury quality items can also be made in China, and allege that traditional European luxury brands have been milking the American consumer with items that cost nowhere near to make versus what they retail for.

In one of the videos, a Chinese man sat in a leather factory setting and claimed that a Hermès Birkin costs around $450 to make.

It is no secret that some brands work with China-based manufacturers to produce some styles, although most leading players restrict their manufacturing to Europe.

These China collaborators have usually become publicly listed companies over the years, such as Hangzhou’s silk giant Wensli, footwear expert Stella International and the Hong Kong-based Crystal Group, meaning they won’t allow their employees to share what’s being made on the factory floor on social media.

What TikTokers in the West see now is the same content, but in English, that has populated Chinese social media for years.

On Douyin, the Chinese version of TikTok, owned by the same parent company, ByteDance, its livestream feed is filled with dupe sellers promoting items that claimed to be a Max Mara coat, a Burberry check shirt, a Goyard tote, a Vuitton “It” bag and a wide array of Hermès bags, ranging from normal leather options to rare ones like Kelly Doll, Faubourg Birkin and Diamond Himalaya Birkin with fast-fashion level price tags. None of the above-mentioned real producers are made in China.

While the platforms and Chinese authorities have consistently cracked down on the counterfeit sector, the reality remains luxury dupes can be purchased as easily as groceries in China if you know the right keywords to search, such as Yuandanweihuo, meaning surplus from international orders; Zhengqueban, meaning correct version; Yibiyi, meaning exact replica, and Nanyou, a region in Shenzhen that’s become synonymous with quality dupes.

A casual browse on Taobao can easily turn up vendors selling a whole range of in-season Miu Miu counterfeits. The pictures would show a different spelling of Miu Miu, such as “Niu Niu” or “Min Min,” but if you put in a request via customer service, the seller will promise you that the item will come with the correct spelling.

According to Joseph Zhang, the owner of an OEM manufacturer factory that produces for the likes of St. John and Mackintosh, the counterfeit frenzy will only draw awareness to “different grades of luxury goods.”

“A lot of these factories might have produced for big luxury names before, and now they’ve decided to put serious money into a start-up making luxury lookalikes. This might fool the average shopper, but not the experienced luxury consumer,” Zhang said.

“Doing this kind of fashion is like building an iPhone, what makes the difference is the chip, if you know, you know,” he added.

For Zhang, instead of selling the logo-adorned luxury dupes, a more viable business model is to create a white label that models after “quiet luxury” brands such as The Row, or as dupe sellers put it on Aliexpress, The R0w, with a 0, instead of “o” to avoid dispute.

“Quality garment is what China is good at producing, we are also good at blending in with the local culture, not standing out,” he said.

The rise of dupe sellers on TikTok with immersive and entertaining content, linking political affairs and pressing issues with counterfeit goods, shines a light on another side of China that’s remained largely unexplored under the Western mainstream media narrative that Chinese manufacturing, just as its cultural soft power, is taking up global market shares at speed.

As TikTok refugees migrated to Xiaohongshu en masse ahead of a now-paused U.S. ban in January, American shoppers are now looking for places even cheaper than rock-bottom retailers such as Shein, Temu and Aliexpress, amid a potential 245 percent tariff slapped on goods from China, and the ending of de minimis shipments from China and Hong Kong from May 2.

DHGate, a business-to-business cross-border e-commerce wholesale marketplace from China, became the second-most downloaded app in the U.S. Apple App Store on Wednesday. On the site, shoppers from more than 220 countries can buy China-made goods across 26 categories, including apparel, electronics, home and toys, and outdoors.

Named after the city of Dunhuang, where the ancient Silk Road starts, DHGate said it “prioritizes reliability, convenience and efficiency, enabling our esteemed global buyers and sellers to connect and trade seamlessly.”

It said it mostly uses international shipping couriers, such as DHL, UPS and FedEx, and has stringent quality control measures, including supplier selection criteria, dispute resolution mechanisms, and secure and streamlined payment processes, for smooth transactions.

“Our popular business model is ideal for drop shippers looking for trouble-free sourcing options from reliable suppliers, with the items shipped directly to their customers, reducing inventory management efforts and shipping expenses,” DHGate said.

But Zhang thinks DHGate’s shoot to fame is a case of influencer marketing in the U.S., in particular on TikTok.

“Chinese people are very sensitive to trends and hype; they then quickly mobilize influencers and create headline moments like this one. They first did it in China, now they’ve unlocked America,” Zhang said. “Chinese people might not be the best at creating a trend, but we are good at figuring out what people like with data.

“Look at how popular ShowSpeed was in China last week. What does this say? You only need one touch point to ignite fervor, the rest is the supply chain,” said Zhang, referring to the YouTuber with 39 million followers, who showed an unedited version of modern China and interactions with real Chinese people through his livestream in cities including Beijing, Shanghai and Chengdu.

“In this sense, DHGate is not that valuable, it’s just a middleman. If you look at the data, this is only hype; actual sales didn’t even reach that of the Amazon Puffer a few years ago,” Zhang added.

He was referring to the Hixiaohe women’s winter crop vest, which comes in an inclusive size range of XS to XXL and 18 colors. The style first went viral on TikTok and later racked up many five-star reviews since it dropped on Amazon. Buyers of all walks of life said they can’t get enough of this piece because it flatters anyone who throws it on.

In this episode of "From the Newsroom," WWD editors explore the impetus behind the deal as well as its implications.

The $1.4 billion acquisition of Versace marks a significant change in the industry as the Prada Group enters new territory by adding a designer label with a bold and flamboyant brand identity to its portfolio. The path leading to the deal has been complex. Capri Holdings, previously Michael Kors Holdings, initially intended to create a luxury empire through three separate brands: Versace, Jimmy Choo and Michael Kors. The company tried to sell its entire business through a piecemeal strategy after regulatory challenges and internal issues blocked a previous sale attempt by putting Versace and Jimmy Choo on the market during the last year of the previous year.

Prada acquired Versace following intense negotiations during worldwide market instability, which led to its victory in the acquisition process. In this episode of “From the Newsroom,” WWD’s Evan Clark, deputy managing editor, and Luisa Zargani, Milan bureau chief, discuss the impetus behind the deal and how it is helping to reshape the luxury market.