(Houston)

The oil market is continuing to thrive and the near-term outlook is strong. WTI oil, the US benchmark is currently trading at over $72 per barrel, while Brent, the world’s benchmark is at $80. The commodity is moving higher as markets are worried it will not be easy for producers to easily offset the losses of production in Venezuela and Iran, meaning supply may be constrained. OPEC generally agrees that when oil gets to $80 or above, it crimps demand.

FINSUM: The near term outlook for oil looks strong because of renewed US sanctions on Iran. However, in the longer term, the trade war seems likely to take a toll on emerging market economies, which will send oil demand and prices sagging.

(New York)

Gold has been in the doldrums for a long time (and we mean long). The shiny metal is still down over 35% from its peak in 2011, and it has lost 8% this year. However, Barron’s is arguing that it is time for gold to shine. They argue that since gold is currently very cheap relative to other asset classes and inflation is increasing, the metal is poised to make a comeback. Gold has historically been a good hedge against inflation, which may drive its renewed appeal as inflation rises. The metal is currently trading around $1,200 per ounce.

FINSUM: The problem with this argument is that gold also tends to weaken as rates rise (because it has zero yield). So, how much will that offset any gains?

(New York)

One of the biggest surprises of the summer has been the outperformance of dividend stocks. Despite rates and yields rising, dividend stocks have done very well. With that in mind, here is a list of 7 of the best cheap high dividend yield ETFs: iShares Core High Dividend ETF (HVD, 3.51% yield), SPDR Portfolio S&P 500 High Dividend ETF (SPYD, 3.71%), Invesco Dow Jones Industrial Average Dividend ETF (DJD), Invesco S&P 500 Quality ETF (SPHQ, 1.73%), Vanguard High Dividend Yield ETF (VYM, 2.87%), JPMorgan U.S. Dividend ETF (JDIV, 3.76%), Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF).

FINSUM: All of these funds have very low expense ratios, and varying (but generally high yields). If you are looking for dividend income, these are a good place to start. That said, these are non-hedged, so there a good deal of rate risk.

(Washington)

The special counsel investigation that started as an investigation into the Trump administration’s connections to Russia, but has blossomed into an all-encompassing dragnet, has been quite quiet of late. However, the FT reported today that Trump’s former lawyer Michael Cohen has been cooperating with Mueller and his team, particularly on the topic of Russian interference. According to Cohen’s lawyer, his client has provided “critical information” to the special counsel regarding Russia.

FINSUM: It is hard to know how whether the information he passed along was valuable, but it could be a hint that there is another bombshell about to hit headlines.

(New York)

At the end of August, the IRS closed the door on the numerous high-tax states that were trying to classify their residents’ taxes as charitable gifts so as to make them deductible. That moved slammed the door of options shut for New York and New Jersey residents. However, the IRS didn’t close the door to other workarounds, and Connecticut apparently has a favorable model that specifically applies to pass-through entities. The workaround allows full deduction to the previous tax level for users through an income credit system on taxes paid.

FINSUM: One wonders if the IRS will just move on to shutting these programs down or whether this is a model that other states can build on.

(New York)

The whole market is generally afraid of rising rates. Both in 2015 and 2018, there were significant mini-meltdowns about the prospect of aggressive rate rises. One of the aspects that most worries investors is that higher rates will drive participants out of stocks and into higher-yielding bonds. However, while true in some respects, that narrative is far too simple. Higher rates are a symptom of a healthy and growing economy, which means the business fundamentals driving stocks are getting better, a factor which is likely far more important than incremental changes in rates.

FINSUM: We think there is some wisdom in these words, especially as they perfectly encapsulate what has happened with the market this year.

(New York)

Utilities, telecoms, consumer staples, and REITs, all sectors that should get hurt as rates rise, right? Think again. Dividend stocks are doing well, and telecoms, in particular, look like they have a lot of upside for investors. According to Oppenheimer, the price war in the sector is coming to an end, which means telecoms, which have trailed the market this year, could be in for a good run. Also notable is that the dividend yield spread between AT&T and Verizon is now at its highest ever, with the former at 6% and the latter at 4%.

FINSUM: Favorable bundling and higher per user revenue seem likely. Those drivers, combined with the fact that dividend stocks have a lot of momentum, could mean the sector might strongly outperform the market.

(Houston)

Many investors are simply unfazed by the current trade war erupting between the US and China (just look at share prices for evidence). However, even those who may be bullish on equities need to be worried for oil. While the increasing sanctions on Iran are supportive of prices, a trade war would likely be very bad. The reason why is that increasing tariffs would likely cause an economic downturn in emerging markets, which would then heavily sap oil demand, leading prices lower.

FINSUM: The oil and other commodity markets are demand-driven (and realistic) in a way that stocks aren’t. Watch them for where the economy is actually headed.

(New York)

One would think that with rates and yields rising, and set to continue doing so, dividend focused stock sectors might be suffering. Yet, the opposite is true in the last month, the biggest gainers in the S&P 500 have been the dividend stalwarts—utilities, consumer staples, and telecoms. The driver of the gains seems to be less about the returns provided by dividends, and more about the fact that these are defensive sectors that can protect against a downturn.

FINSUM: This development is a little confusing (but then again so is the whole market), as the defensive characteristics would seem to be somewhat offset by the downside of rising rates’ impact on these sectors.

(New York)

The market has been doing very well lately. Political worries, trade wars, it doesn’t matter, nothing seems to be able to contain the market’s optimism. Despite all this, though, Bank of America says it is all about to come to an end. The bank’s top strategist says that weakening growth, rising rates, and a glut of debt will conspire to weaken stocks. “The Fed is now in the midst of a tightening cycle, ignoring structural deflation, focusing on cyclical inflation … Until this Fed hiking cycle ends we suspect absolute returns from financial assets will remain slim & volatile”. BAML says that weakening bank stocks even in the face of rising rates (which should be good for them) may be a sign of how badly the Fed’s tightening will affect of the overall economy.

FINSUM: This is quite a gloomy and contrarian opinion. We see the argument, but it certainly seems to contradict everything one can observe in the market and economy right now.