Eq: Large Cap

(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.

(New York)

While the SEC seems to have largely shrank from the limelight surrounding its investigation of Tesla, there is news on that front, and in a big way. The DOJ is now investigating Tesla, and specifically, it has launched a criminal investigation into Elon Musk’s now infamous tweet about taking the company private. The investigation sits alongside a civil inquiry by the SEC. Tesla said it had received a “voluntary request” for documents but that there was no “subpoena, a request for testimony, or any other formal process”.

FINSUM: Hard to see where this may go, but we imagine it could turn into a big headache (and distraction) for Musk and the company, as well as its shareholders.

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