The week in investor relations: ExxonMobil faces climate disclosure lawsuit, fears rise over low liquidity and Goldman predicts final rate cut for time being
– ExxonMobil will face a trial over whether it misled investors about the costs of climate change regulation, reports the BBC. New York state prosecutors say the oil and gas giant maintained two sets of figures about the potential impact of new regulation, and only disclosed the more favorable figures to the market. The company says it didn’t mislead investors, that it provided the market with sufficient information and the charges are politically motivated.
– Low trading volumes could lead to sharper falls during the next market sell-off, according to Marketwatch. Trading volumes in the S&P 500 have dropped close to a 10-year low, suggesting dwindling appetite for the current bull market among investors, notes the article. ‘The numbers are astonishing,’ comments Tim Quast, president of ModernIR, a market structure specialist, in the story. ‘One potential risk is that there will be a lack of buyers during times of stress and the absence of liquidity will lead to fire sales.’
– The Federal Reserve is highly likely to cut interest rates next week but will also signal that it plans no further monetary easing for the time being, predicts a report by Goldman Sachs, reports CNBC. The next meeting of the Federal Open Market Committee, which sets US interest rates, will take place on October 29-30. ‘Strong signaling from Fed leadership indicates that the modest trade war de-escalation since September has not deterred it from completing a 75 basis-point, 1990s-style mid-cycle adjustment,’ says Goldman economist Spencer Hill in a note, according to CNBC.
– Hedge funds and mutual funds are investing in the same US stocks, a situation that could result in crowded trades and sharp losses, reports the Financial Times (paywall). Of the top 50 stocks held with overweight positions, either by hedge funds or mutual funds, 12 percent are owned by both groups of investors, explains the article, citing data from Bank of America Merrill Lynch (BofAML). ‘We have seen convergence of strategies that has led to a narrower and narrower cohort of stocks outperforming the market,’ says Savita Subramanian, head of US equity and quantitative strategy at BofAML, in the article.
– Twitter saw its shares fall 20 percent this week after disappointing the market with lower-than-expected revenue and profit figures, reports Reuters. The company suffered from surprisingly low demand during the summer months and also experienced technical issues that hurt its advertising platform. Reuters quotes Craig Huber of Huber Research Partners as saying: ‘Not expecting a quick rebound in Twitter’s financials for at least a few quarters, as shortfall likely will carry into 2020.’
– Fidelity Investments has become the latest institution to stop working with fund management firm Fisher Investments following allegations of sexist comments made by founder Kenneth Fisher, reports Reuters. The total size of assets pulled from the firm now stands at around $1.8 bn, with others also placing their relationship with Fisher Investments under review. Reuters quotes a memo to Fisher Investment employees, which it received from a spokesperson, in which Fisher says: ‘It pains me to know that my comments have caused you grief, concern and indignation. I sincerely apologize.’