FRB Chair Powell stated yesterday the economy is in “remarkably good shape.” Led by technologies, equites maintained their early day gains. Tomorrow is the release of the all-inclusive BLS Employment report. Data yesterday indicated that employment remained firm in November while services activity expanded at the slowest pace in 3 months.
At the time of this writing, the market is suggesting a 70% probability of an interest rate cut on December 18 and a pause at the January meeting.
Turning to another topic, at one time, considerable attention was focused upon the voting power of BlackRock, State Street and Vanguard as they can technically control and could vote around 30% of all shares outstanding.
BlackRock was a strong proponent of ESG (Environment, Society and Government) and DEI (Diversity, Equity and Inclusion) writing public letters to support such social compacts for several consecutive years.
They were also the leader of the ESG compact of the three names above, a compact that was instrumental in having the SEC mandate an ESG and DEI ranking in the companies’ respective proxies.
Approximately 18 months ago Vanguard left the compact and about one year ago BlackRock abandoned the effort.
It is widely documented that BlackRock’s investment banking and management fees on ESG and DEI investments were between 200% and 400% higher than traditional portfolio fees.
As widely accepted, DIE and ESG investing did not follow the traditional guideposts of investing, that is economic viability of any projects.
“Trillions” were raised for Green Energy and the like. According to JP Morgan, investments in alternative energy projects have largely proved a losing bet with the S & P 500 Global Clean Energy Index down almost 45% since the beginning of 2023 versus a double-digit gain for the S & P 500.
A question at hand will there be litigation accusing the three companies named above of violating their fiduciary responsibilities, as they charged considerably higher fees on investments that did not necessarily have economic viability?
Will the Trump Administration lead this charge just as the Biden Administration led the charge on ESG and DEI investing?
If so, what will be the outcome? Would it be similar to the outcome of the CDO (collateralized debt origination) and CMO (collateralized mortgage originations) litigation? How will the markets respond?
Enough of the rant, what will happen today? Will most be sidelined until tomorrow’s BLS labor report?
Last night the foreign markets were mixed. London was down 0.04%, Paris up 0.22% and Frankfurt up 0.38%. China was up 0.14%, Japan up 0.30% and Hang Seng down 0.92%.
Futures are flat. The 10-year is off 5/32 to yield 4.20%.
