(New York)

Are you looking for a good dividend stock? Well, we have one for you. How about a stock that has risen 27% this year yet still has a 4% dividend yield and a very solid business? If that sounds good, take a look at Prudential Financial. The company is an asset manager and insurance provider, and has solid growth and financials and seeks to be financially prudent. “We believe in a very consistent and regular dividend that will be aligned with our earnings growth, says the CFO. The company has expected earnings growth of 8% this year.

FINSUM: Prudential is a pretty sleepy name, but there is nothing boring about a 4% dividend combined with earnings growth and market-beating price appreciation.

(Houston)

We know, we know, you don’t want to hear about oil. No one seems interested in the all-important commodity at the moment, but that is exactly why you might want to pay attention. Oil stocks have had a terrible decade—down 10% while the S&P 500 rose almost 300%, hence the derision they face from investors. Prices are so low that oil now composes just 4.5% of the S&P 500, very near to the lowest ever (in 1999). The big question investors need to be asking themselves is “is this peak pessimism”?

FINSUM: We think oil stocks offer some value right now, but what will be the catalyst to make them rise? A big economic boom seems unlikely at present. Oil missed this cycle and it is still oversupplied. We would stay away.

(Washington)

Jerome Powell’s performance could not have been much better. He gave exactly what the people wanted—dovishness. In fact, if anything, he was almost comically dovish, disregarding the very strong jobs performance last month. No matter though, investors are pleased as it now looks nearly 100% likely the Fed will cut rates later this month, and seems as though they will stay on a cutting path for some time. The Fed’s shift in policy appears to affirm that they are currently considering the condition of the global economy as a major threat to the US.

FINSUM: The Fed is in a pretty easy spot if you think about it. Inflation is very low, markets want cuts, and the global economy is looking weak. Simple solution with no real downside—cut rates.

(New York)

There is a big new risk to stocks to worry about, says Goldman Sachs. Actually, it is a not a new risk, it is an old one that investors have not been thinking about. The risk? Pay. The bank says that rising pay pressure from workers could hurt companies at all levels and eat into margins. The labor market is incredibly tight, which puts upward pressure on pay and downward pressure on corporate margins. Wage growth is already at its highest rate since 2007, and companies may feel the sting. According to Goldman, “While S&P 500 profit margins are at historical highs, survey data indicates a record level of corporate concern regarding labor costs”.

FINSUM: Many analysts have been predicting an earnings recession and this is one of the factors that could exacerbate it.

(New York)

Investors likely already know that low cost index funds tend to greatly outperform high fee actively managed funds (to the tune of 1.5% or more annually). That comes as no surprise. However, what was surprising to us is that in fixed income, the tables are greatly turned. While passive funds do have a slight edge over active ones on average (0.18% per year), in many cases high fee actively managed fixed income funds outperform passive ones. This holds true over long time periods, including ten-year horizons.

FINSUM: This is an interesting finding and one that makes intuitive sense. The bond market is vast, hard to access, and full of intricacies. That kind of environment lends itself to specialism in a way that large cap equities does not, and the performance metrics show it.