An interesting point about infrastructure investing raised by Dan Primack of Axios:

The average level of return that infrastructure investment funds have sought was about 10.6 percent in 2016, down from 14 percent in 2004, according to a report by PricewaterhouseCoopers and the Global Infrastructure Investor Association. Infrastructure in general is regarded as a lower-return asset class with fairly consistent cash flows.

While the Blackstone Group is raising $40 billion for its own infrastructure fund (half of which is coming from Saudi Arabia), it’s hard to see private investors filling in the $1.3 trillion required to fulfill the Trump administration’s vision.

To break it down numerically:

• PwC and the G.I.A.A. note that roughly $200 billion had been raised by infrastructure investors since 2006.

Roughly $1.7 trillion was invested worldwide between January 2010 and September 2016.

— Michael de la Merced

What investors are watching to guess the markets’ direction

The recent, complacency-shaking declines in stock prices will have forced investors to take more seriously the yardsticks used to assess whether stocks are worth buying. None of the metrics on their own reliably can predict the direction of stocks, but when markets are freaking out and much is a blur, well-chosen indicators can steady the nerves and clarify the mind.

The most important indicator right now

It’s the 10-year Treasury note’s yield, which moves in the opposite direction to its price. A higher yield reflects greater inflation fears among investors — and a higher likelihood of that interest rates are going up.

Stock investors fear higher interest rates for two main reasons:

• Most immediately, they make stock valuations look less attractive

• In the longer term, they can eventually slow economic growth.

The yield on the 10-year Treasury note has retreated to 2.83 percent Monday, while United States stocks are trading higher. The Dow Jones industrial average, the S.&P. 500 and the Nasdaq Composite are all up more than 0.5 percent.

Adding to the fun

The government inflation figures come out on Wednesday.

The valuation question

The recent volatility in the stock market has stirred up the valuation debate. Put more directly, did the declines take stock prices down to level where they no longer look expensive?

There are many ways to tackle that question. But for no particular reason, let’s look at the Rule of 20 today. This yardstick subtracts the inflation rate from the number 20 and compares that answer with the price-to-earnings ratio of the S.&P. 500. Stocks are theoretically overvalued if the price-to-earnings ratio is higher.

Right now, the S.&P. 500 price-to-earnings ratio is 21.1 times, 3.2 above the 17.9 that you get from subtracting the inflation rate from 20. That suggests stocks could have further to fall.

Still, history shows why that might not be the case. In 1997, the rule of 20 gave roughly the same answer as we have now, but stocks kept zooming higher. (Of course, that bull run did not end well. By 2001, the stock market was down below 1997 levels.)

If you find the debate over valuation unsatisfactory

There are also technical indicators, which look at how traders react to a wide selection of market measurements. One of the most interesting right now is the 200-day moving average on the S.&P. 500.

John Kimelman at Barron’s gave a good run down on why it matters:

But at one point Friday, it looked like that was where things were heading. Shortly before 1 p.m., the Standard & Poor’s 500 briefly broke below its 200-day moving average, or 2539, before recovering and closing the week above 2619, up 1.5% on the day.

The 200-day moving average—the continually updated average price of the past 200 days—is considered a strong measure of investor sentiment. If the S&P 500 had continued to fall below the average, it would have conveyed real bearishness. The S&P 500 hasn’t closed below that moving average in 408 trading sessions, going back to around the U.S. presidential election in November 2016, according to LPL Financial.

— Peter Eavis

Photo

Under the deal announced on Wednesday, Xerox, of Norwalk, Conn., will become part of the Fuji Xerox joint venture, which sells office products and services in the Asia-Pacific region.

Credit
Douglas Healey/Associated Press

Icahn and Deason urge shareholders not to “let Fuji steal” Xerox.

Carl Icahn and Darwin Deason, two of Xerox’s biggest investors, sent a letter to shareholders criticizing the printer and copier maker’s deal with Fujifilm Holdings of Japan.

From the letter:

It really is a remarkable achievement by Fuji. Without putting up any cash, they will acquire majority control and ownership of a venerable American icon. In exchange, we – the existing Xerox shareholders – will receive (1) an additional, indirect 25% interest in a Fuji subsidiary that just last year disclosed a $360 million accounting scandal caused by a “culture of concealment” and Fuji’s failure to have adequate management systems and (2) a one-time special dividend financed with our own assets.

The backstory

Xerox said on Jan. 31 that it would combine operations with Fujifilm Holdings in a $6.1 billion deal.

The complicated transaction will fold Xerox into an existing 55-year-old joint venture. Xerox shareholders will receive a special cash dividend of $9.80 a share and will own 49.9 percent of the combined business, which will be publicly traded. The move is expected to save at least $1.7 billion in costs, though Fujifilm will cut 10,000 jobs.

At the end of last year, Mr. Icahn launched a campaign to unseat the Xerox’s board, and late last month, he and Mr. Deason pressured the company to explore a deal — including revising or ending the Fujifilm joint venture.

Xerox’s statement, via Reuters:

Xerox said it “considered several other options in detail and concluded that the combination with Fuji Xerox is the ‘best path to create value’ for the company.”

— Stephen Grocer