Stocks were largely flat on Wednesday morning following mixed earnings from major banks. Goldman Sachs posted much better-than-expected 3Q revenue and earnings, driven by strength in asset management and fixed-income trading. Bank of America posted mixed results, missing on revenue but with EPS slightly above consensus. Wells Fargo posted better-than-expected revenue but fell short on EPS. The Dow rose 0.1%, the S&P 0.1%, and the Nasdaq 0.2%. Crude oil traded near $41 per barrel, while gold rose $17 to $1911 per ounce.

Dividends are supposed to lend stability to a portfolio. However, U.S.-based equity income investors have experienced a high degree of volatility in recent years. In 2018, the U.S. Federal Reserve embarked on an aggressive campaign to raise interest rates, causing Treasury yields to swoop and dive, resulting in a wild ride for supposedly stable U.S. high-income equities. The central bank reversed course in 2019, before moving to the sidelines. In 2020, due to the coronavirus, the Fed is back in action, cutting rates, backstopping numerous financial markets and pledging to do "whatever it takes" and "for as long as necessary." Also due to COVID-19, many U.S. companies have cut back or eliminated their dividends in order to preserve capital during the pandemic. The endless speculation over the timing of the Fed's next moves has created market-timing headaches for equity income investors. They have endured wide swings in prices for rate-sensitive equity classes such as Utilities, REITs and MLPs -- even as generally positive industry fundamentals remained largely intact. In our view, investing in international income stocks is one way to increase diversity of holdings while reducing sensitivity to the Fed's head fakes on rate policy. Investing in overseas stocks carries its own set of risks, such as currency exchange and even the potential for geo-political turmoil. But there are also lots of positives in this asset class for U.S. investors, including a wide selection, robust industry diversification, higher yields and lower valuations. Argus has boosted its global coverage, adding the following BUY-rated international dividend stocks.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

The U.S. economy added back 661,000 jobs in September -- a bit below Street expectations -- as companies continued to bring employees back to work. The unemployment rate dropped from 8.4% in August to 7.9%. Employment rose sharply in Leisure and Hospitality (almost one-half of the month's total gains), Retail Trade, Healthcare and Professional & Business Services. The government workforce was down more than 200,000, largely due to a reduction in local government education. Previously, the Labor Department reported that another 837,000 people filed unemployment claims, and the total of continuous claims was 12.7 million. Those figures indicate that the employment environment, while improving, is still under stress. According to the Labor Department, the economy has added back more than 10 million jobs since April. But the pre-pandemic employment total high in February is still more than 11 million jobs away. We expect the unemployment rate will remain high through 2020 as the U.S. economy slowly recovers. That recovery may depend on additional fiscal stimulus, as well as the recovery in health for the country, as the markets absorb the news that President Trump has tested positive for COVID-19.

In theory, investors can breathe easier heading into the fourth quarter, when markets typically post the strongest returns of the year. We analyzed data collected on S&P 500 performance from 1980-2020. By our calculations, the 4Q has generated average gains of 4.2%, compared to gains of 2.1%, 3.1% and 0.5% for 1Q, 2Q and 3Q, respectively. And the fourth quarter is consistent as well, with a "win percentage" of 80%. That means that 4Q stock returns are positive four years out of five, and compares to winning percentages of 66% in 1Q, 66% in 2Q and 63% in 3Q. To be sure, the 4Q has posted its share of clunkers. In 1987, which included Black Friday, stocks fell 23% during the period; in 2008, they sold off 18%, after the collapse of Lehman Brothers and as the U.S. economy plunged into a deep recession. As recently as 2018, stocks slid 14% in the final quarter as trade wars deepened and the Fed raised rates. This time around, it is not unreasonable to expect volatility, given the pandemic, recession and election. The fourth quarter of election years historically has been in the red. We recommend clients focus on quality companies with clean balance sheets and experienced management teams.

Stocks fell on Tuesday morning, giving back some of Monday's gains as investors awaited the first presidential debate. On the economic front, the Commerce Department said that the U.S. trade deficit in goods rose 3.5% to $82.9 billion in August, reflecting strong imports of consumer goods and slower growth in exports. The increased deficit could weigh on 3Q GDP. Meanwhile, the Conference Board reported that its consumer confidence index rose to 101.8 in September, up from 86.3 in August and well above the Reuters consensus forecast of 89.5. The Dow fell 0.5%, the S&P 0.4%, and the Nasdaq 0.1%. Crude oil traded near $39 per barrel, while gold rose $10 to $1892 per ounce.

Often overlooked amid the market's gyrations, dividend income is an important element of total return. Consider recent results: in 2015, the S&P 500 delivered a total return of 1.4%, including dividends -- but excluding dividends, the market was down 0.7%. Capital gains were a bit easier to achieve in 2016-17, though we note that dividend payments still contributed about 15%-20% of total return for investors. And dividend payments softened the blow in 2018, when most market indices declined as the Federal Reserve hiked rates. Between 1930 and 2012, dividend income accounted for 42% of total return of the S&P 500, according to Morgan Stanley. Not all dividends are created equal, though, and it is important to understand the difference between high-yield stocks and dividend-growth stocks, particularly in a slow-growth or recessionary economic environment.

This is among our most important themes for 2020, and stretches across industries. We think companies that raise their dividends consistently at a double-digit rate are delivering three important signals amid all the recent market volatility: 1) the company's balance sheet is strong enough to pay a dividend; 2) management is focused on providing shareholder returns; and 3) management is confident enough in the near-term outlook to raise the payout aggressively. This third factor is especially important as the pandemic upends the nation's recent record of long-term economic growth. Here are 13 stocks that meet our double-digit dividend test and are on the Argus BUY List. They are also new holdings in our Dividend Growth Separately Managed Account and in the Dividend Growers Total Return Trust, sponsored by SmartTrust.

This edition features Part I of a new series on the world after COVID-19; a deeper look at Chinese banks; an update on oil demand; and notes from GM; AstraZeneca; and new coverage Amundi.

The Dangers of a K-Shaped Recovery

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

Stocks rose on Thursday morning after the Federal Reserve announced a new strategy that will focus on keeping unemployment low and allow for higher inflation - above its 2% target - and lower interest rates over an extended period. The announcement came as first-time unemployment claims of 1.006 million remained above the 1 million mark for the second straight week, and continuing claims topped 14 million. The Dow rose 0.9%, the S&P 0.5%, and the Nasdaq 0.3%. Crude oil fell to $43 per barrel, while gold fell $17 to $1936 per ounce.