“What lies ahead for the stock market?”
That’s the burning question on the minds of every market and economic expert out there, and it’s undoubtedly a challenging one.
Inflation has moderated to a reasonable 3% annually, and the job market is showing signs of strength. Stocks are surging, indicating that investors have factored in the risk of a potential recession. However, this leads to a problem highlighted by B. Riley’s chief investment strategist, Paul Dietrich. He points out that the latest earnings figures are lagging far behind the surging positive sentiment. This discrepancy between market optimism and lukewarm earnings could spell trouble for investors.
“It doesn’t take a stock market historian to know that something terrible will happen when the stock market surges and the S&P 500 companies’ earnings decline -6.8% in Q2 2023,” Dietrich opined. “According to FactSet, the quarter will mark the most significant earnings decline reported by the index since Q2 2020 when the Covid pandemic closed down the country. This was the third consecutive straight quarter of year-over-year earnings declines. That is officially an ‘earnings recession.’”
As Dietrich sees it, the decline is real and its only a matter of time before it impacts sentiment and investing activity.
A cautious approach would naturally pull investors toward dividend stocks, the classic defensive play. Dividends offer a steady, passive income stream, providing investors with a degree of protection – and usable cash – for an uncertain market environment.
Following this cue, B. Riley’s 5-star analyst, Bryce Rowe, is going bullish on two dividend stocks in particular. These dividend payers offer high yields of 9% or more and present compelling investment theses. Let’s take a closer look.
Blue Owl Capital Corporation (OBDC)
First up is Blue Owl Capital, a business development corporation operating under the umbrella of the larger Blue Owl Capital asset manager. Formed in the first half of 2021 through a SPAC merger between Owl Rock and Dyal Capital with Altimar Acquisition,…