The Markets Today: Allianz’s Subran Foresees Stock Gains Despite Rate Cut Delays

Key Points

• Subran sees 2024 stock stability despite rate cut delays.
• Evercore advises caution amid Nvidia-induced market FOMO.
• Meta’s dividend leads to Alphabet payout speculation.
• Diamondback’s $26B deal reshapes US oil industry.
• US’s $42M in Open RAN counters Huawei monopoly.

1. Economist Predicts Stocks Will Withstand Mid-Year Correction, Rate Cut Delays

Ludovic Subran, Chief Economist at Allianz, forecasts that recent stock gains will endure through 2024, despite a potential mid-year market correction and delayed interest rate cuts by central banks. Contrary to investor expectations of an early and significant rate pivot, Subran suggests a smaller, mid-year adjustment. This shift may lead to market volatility but won’t erase gains seen in late 2023 and early 2024. He anticipates a resilient year-end, with equities yielding 5-10% returns amidst broader economic normalization. (CNBC)

2. Evercore Warns Nvidia Rally Spurs Market FOMO, Signals Caution

Evercore ISI’s Julian Emanuel observes Nvidia’s significant rally sparking a market-wide FOMO (Fear of Missing Out), unseen since 2021. He notes clients’ concerns about underinvestment outweighing overexposure fears, echoing dot-com era patterns. Emanuel draws parallels with Y2K, highlighting current AI enthusiasm and recession-avoidance beliefs as momentum drivers. Despite record highs in Dow and Nasdaq, and Nvidia’s 46% yearly gain, Emanuel advises caution, predicting a possible 13% pullback and recommending defensive sectors like consumer staples and health care for investment. (CNBC)

3. Meta Initiates Dividend: Will Alphabet Follow Suit?

Meta Platforms’ inaugural dividend has sparked speculation about Alphabet potentially paying dividends. Alphabet, thriving since its 2004 IPO, has consistently reinvested in growth and acquisitions like YouTube, rather than shareholder dividends. Despite a cooled growth rate and increasing competition in advertising and cloud services, Alphabet’s substantial free cash flow growth and focus on expanding subscription services and AI investments suggest dividends aren’t imminent. Alphabet’s preference for buybacks over dividends, coupled with a strong cash position, indicates a continued focus on internal growth and shareholder value through other means. (The Motley Fool)

4. Diamondback Energy Announces $26 Billion Merger with Endeavor, Expanding US Oil Drilling

Diamondback Energy is set to acquire Endeavor Energy Resources in a $26 billion deal, amid a surge in US oil company mergers targeting prime drilling lands. This move, part of a broader trend spurred by high oil prices post-Russia’s Ukraine invasion, challenges International Energy Agency warnings against new fossil fuel developments. The merger, creating a $50 billion entity, focuses on enhancing output, especially in the prolific Permian oilfield. Endeavor shareholders will receive Diamondback shares and $8 billion cash, owning nearly 40% of the merged company. (The Guardian)

5. US Invests $42 Million in Open RAN to Challenge Global Cellular Network Monopolies

The US government is funding $42 million towards the development of 5G Open RAN (O-RAN), a standard promoting interoperable and cost-effective cellular network components. This investment aims to counter Huawei’s dominance in cellular hardware by enabling a diverse market of third-party equipment. A Dallas testing center will be established to validate O-RAN’s viability, supported by a consortium including major carriers and tech companies. This initiative reflects a broader effort to encourage faster, more flexible network development and diminish reliance on single suppliers. (The Verge)