(New York)

When you first read that headline, you probably thought it was pretty counterintuitive. Bank stocks saw a big selloff and it is looking ever more likely that we are headed towards a recession—certainly not bullish for bank shares. However, RBC Capital markets argues that bank stocks may actually do well. “The recent sell-off in bank stocks provides an opportunity for investors to buy bank stocks”, says RBC. The reason why is that in periods where the economy slows, but an outright recession is avoided, bank shares outperform. This happened from 1994 to 1998.

FINSUM: This could be a good value play if we avoid a recession, but that seems like a gamble with asymmetric risk to the downside.

(New York)

The professor who first identified yield curve inversions has written an article explaining what the development really means. First identified in 1986, a yield curve inversion is considered the most widely accurate indicator of recession. Since it was first identified and back tested, it has accurately predicted a further 3 out of 3 recessions. This is a point its “discoverer” Campbell Harvey hammers home in his article. He explains that an inversion is usually followed by a recession within 12-18 months. The yield curve has not been inverted since before the Crisis, but just did so on Friday.

FINSUM: One of the important points Harvey makes is that in order for the inversion to really indicate a recession, it needs to remain in place for at least three months. We are only at one day.

(New York)

Midcaps are perhaps the least loved of the market cap grouping. Small caps get a lot of attention, as do large and megacaps, but midcaps are a bit “neither here nor there”. That said, they offer some compelling opportunities, and today we will highlight some of those on the dividend front. Midcaps are generally good dividend payers, with 275 of the S&P MidCap 400 paying dividends. Five stocks to look at include: SABER (SABR), Manpower Group (MAN), Webster Financial (WBS), National Instruments (NATI), and j2Global (JCOM). All the shares pay 2% or more in dividend yield.

FINSUM: Megacaps seem to get the least love because they comprise some of the less exciting companies in the market and at first glance don’t seem to have the growth potential of small caps, or the momentum potential of large caps.

(New York)

There are many in the market who think that real estate, and perhaps particularly commercial real estate, is in for a real headache. The real estate market tends to slump in recessions and there are special fears that the commercial real estate markets looks inflated. However, Barron’s argues the opposite, saying the three fundamental pillars of the CRE market are solid—overbuilding, overheating, over-indebtedness. The article uses a number of points to show that the market is not as overbuilt as many say it is, that price rises have been modest, and that borrowers and lenders have been restrained.

FINSUM: We don’t think it is as simple as just saying CRE looks fine. There are a lot of different areas of CRE. For instance, we are a lot less worried about new warehouses/logistics centers than simple office space.

(Washington)

The Mueller report was finally released this weekend, and the early indications are that there is nothing in it that proves any wrongdoing on the part of President Trump. Attorney General Barr’s summary to Congress, given yesterday, said there was no collusion between Trump and Russia and nothing in the report amounted to enough for a criminal charge of obstruction of justice. Trump called the report a “complete exoneration”.

FINSUM: So this is far from a “put to bed” issue because Barr’s credibility is under attack. Democrats are pledging to press on. However, one of the things we are very happy about in these divisive times is that the Mueller team had the discipline to take a clear position on the case and did not seek to inflate charges that were not really there in an effort to validate their own work.