The yield curve narrowed continuously throughout most of 2018. The spread between 2- and 10-year Treasuries fell to just over 9 basis points in December and sits at 14 now. Where is it headed? The answer is likely towards an inversion. The Fed is releasing its minutes, and once it does, it seems likely the spread will continue to narrow. There are two scenarios that would likely create an inversion. The first is if the Fed minutes show that the central bank may raise rates again soon (sending short term yields higher). The other, and perhaps more likely, scenario is that the Fed expresses some anxiety about a recession (pushing long-term yields lower).
FINSUM: This is interesting because the two most likely scenarios for what the Fed might say/do in the near-term both add up to the same thing—a yield curve inversion.
Along with warehouse growth, data center expansion is one of the hottest areas of commercial real estate. So how to play it? These REITs were hit pretty hard at the end of the year, but they are now making a strong comeback. The big driver at the macro level is demand for cloud services and the growth of AI, both of which increase the need for data center space. Four stocks to look at are Equinix, CoreSite Realty (COR), Iron Mountain (IRM), and InterXion Holding (INXN).
FINSUM: Data centers seem to have some strong growth drivers behind them, and along with warehouses, we think they are strong ideas for REITs.
The recession has loomed over markets for months. However, in recent weeks those worries have faded a bit, especially as the Fed appeared to back off the gas pedal on rate hikes. However, a new survey from Bank of America Merrill Lynch shows that recession is the top fear among investors currently. A third of credit investors surveyed see a recession as their top fear. That is the highest level for a single worry in almost two years. Economic data is expected to continue to weaken, say investors.
FINSUM: The US seems to once again be the last one standing as the whole world starts to slow. Can we hold up yet again?
Tony Mitchell is a well-known fund manager in the tech space. His tech mutual fund has outperformed the market for years. However, it has done so with a very interesting quirk—it has never held Amazon, until now that is. The reason why is that its P/E ratio always seemed to high at between 190 and 400. However, recently, Amazon’s P/E ratio has fallen back to earth. Its current ~80x is not cheap by any measure, except against its own history. The company’s web services division is growing strongly, its advertising business is surging, and it has a good foothold in the gaming industry. This means it could be a good time to pick up Amazon’s stock.
FINSUM: If you believe Amazon is going to continue its growth story, then right now does seem like an ideal time to pick up shares.
Being journalists ourselves, we are always on the lookout for the best content for our readers, including who to read for stock calls. That led us to a site, called TipRanks, which ranks all the equity research analysts on Wall Street. One of the major components of their rankings is their average market return per recommendation. The top ten analysts from returns are: Richard Davis, Cannacord Genuity (42.7% return per recommendation); Ross MacMillan, RBC Capital; Joseph Foresi, Cantor Fitzgerald; Matthew Hedberg, RBC Capital; Glenn Greene, Oppenheimer; Brian Schwartz, Oppenheimer; John Difucci, Jefferies; Brent Bracelin, KeyBanc; Gerard Cassidy, RBC Capital; and Brian Peterson, Raymond James.
FINSUM: This list, and TipRanks in general, is a great way to separate value from noise in all those equity research comments.