The Dividend Cafe

Today's Post - https://bahnsen.co/48LulK1 An overall positive trading day without a lot of volatility behind what was a pretty decent batch of economic data. The Dow was up well over 200 points, and the S&P 500 notched a sixth day of gains. We had the first read on Q4 GDP come in significantly higher than expected at 3.3%, with the consumer powering almost two percent of it. Both durable goods orders and jobless claims came in just enough below expectations that bonds also rallied, with the 10 YR down six basis points. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/48MsRiD We experienced positive market sentiment throughout the morning until approximately 10:30 AM, driven by better-than-expected PMI data in both services and manufacturing. It’s noteworthy that typically, indications of economic expansion don’t lead to a decline in stocks. However, despite four days of gains on the Dow, the news of improving economic data led to a loss of some early morning momentum. This occurred on a day of relatively uneventful trading as interest rates edged slightly higher. One key metric closely monitored by the Federal Reserve, The Taylor Rule, suggests that the Fed Funds Rate should currently be approximately 1% lower at 4.5%. Looking ahead, futures indicate a balanced probability for a rate cut in March. However, there is a significant amount of economic data expected between now and then that could influence this outlook. As previously mentioned, it wouldn’t be surprising if there were more discussions in March about the conclusion of Quantitative Tightening (QT), potentially easing financial conditions and essentially resembling a rate cut. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/47R5iUm A short and sweet market recap today as earnings season launches further. Small cap seems to have bounced well since its rough patch to start the year. Bitcoin has dropped -20% since its peak in the midst of ETF approval. I was on set at Fox this morning with the chair of the House Ways and Means Committee, Jason Smith. The 40-3 vote on this tax bill was shocking to me, and it sure seems to foreshadow a comeback of some of the most stimulative parts of the Trump tax bill that previously went away. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/42bAxYY Earnings seasons gets a lot more intense this week (and next). All the info around the horn on the normal categories is here in today’s DC Today. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3O8BRpX I love these “question and answer” editions of the Dividend Cafe. I should say that 100% of the questions that appear are always completely real, from actual readers, reflecting different things on your mind across a variety of topics related to markets and the economy. Today, we get to talk about what it means for markets to “price things in,” about gold, about government debt, about dividend growth, and so much more. It is digestible, succinct, easy, comprehensible, and it is about as much fun as one can have in weekend reading. Let’s jump into the Dividend Cafe … Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3vIRb6n A positive morning of trading in markets gave way to losses mid-day, only to gain it all back and then some as we headed towards the close, ending up 200 points. Interestingly, the correlation between rates and stocks today actually moved together with both rising, where the opposite has been the case much of this year. 10’s are moving further into four handle territory up to 4.14% as rates crept back up today with a stronger jobless claim number. We are at about a 54% chance on futures for a March rate cut at this point. We are still early in earnings season, but it has been notable that while 92% of companies reported thus far have exceeded expectations, 58% of them have actually traded lower on the news. A combination of some exuberance over lower rates this year coming out of markets and just some general consolidation after the year-end run-up seems to be at play. I find this consolidation healthy, and with an advance decline ratio only back to -3:1, I doubt we have seen the last of it. More in the link below. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/47HzpgS Markets have stayed in what is pretty much a buyer’s strike this month, as no violent sell-off has been forthcoming, but down days have piled up in advance of the heart of earnings season and with several Fed governors trying to modestly re-frame expectations. Odds of a March rate hike have come down a bit but still remain the most likely view in futures markets. This noise was, if you recall, a highly predictable and overrated theme as discussed in our Year Ahead piece for 2024. China’s economy grew +5.2% annualized in Q4 vs. +5.3% expected. The jobless rate sits around +5.1%. Most importantly, they indicated their third consecutive quarter of consumer price deflation (longest streak in 25 years). Did I mention this, too, was a huge theme in our Year Ahead piece for 2024? I was intrigued to see this morning that about 60% of BB and B+ rated high yield bonds are now trading above par value (it was around 20% just six months ago). That is an extraordinary rally in credit that is clearly a by-product of improved financial conditions (i.e. expectations for greater liquidity and easier access to and cost of capital). Retail sales for December exceeded expectations (shocked!) as core sales jumped +0.8% month-over-month. Online sales closed the year up +7% from the year prior, and across food/beverage/clothing there was meaningful increase on the month and year, even above what had been forecast. I expect the biggest public policy issue over the next thirty days to be a Ukraine deal tied to U.S. border security and likely tied to Israel support funds as well. The challenges to getting this done are immense. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3vEgA0Y Ask David “What is your view about investing in the Indian economy since it appears to have the potential for considerable growth and is not hampered by the regulations of the CCP?” ~ Al On one hand, India is the highest country allocation in our emerging markets strategy. On the other hand, that is not really “investing in the Indian economy” as much as it is investing in “companies that happen to be based in India.” The domestic market strength is a huge factor, but it is really more of a bottom-up than top-down decision. We are not looking for good countries but rather good companies. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/48Sg4um Before I get into this week’s wild fun Dividend Cafe on the subject of government debt, I want to make sure I do one final push around the Year Ahead, Year Behind White Paper that we published last Monday. Because of its depth and length, I imagine some of you printed the chart-filled PDF and plan to digest it this weekend. So don’t worry – if today’s Dividend Cafe is coming on top of your white paper reading, I assure you the data I cover this week about our fiscal position in America will not be going stale in the days ahead! But now we re-dive into the standard Friday routine of our weekly Dividend Cafe. And this week’s is a very cheery one, if you are cheered up by massive government spending and debt (hey, “we’re all Keynesians now,” right?). A fundamental component of our macroeconomic view going out ten years and longer is a belief in an internal tension in the American economy – that is, the extraordinary engine of growth and innovation that the greatest Western democracy the world has ever seen is and has been for 250 years, VERSUS the significant headwinds for growth created by excessive government indebtedness. The story is more nuanced than that, and I will get into those nuances and more in this week’s Dividend Cafe. Don’t think of this week’s Dividend Cafe as a position paper on how to solve for the national debt. It is not a policy paper, but rather a reaffirmation presentation of the state of affairs. Let’s jump into the Dividend Cafe! Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3NYiJuG Volatility came down and markets were flat as a pancake as we got inflation numbers that were in line with Core CPI and then just barely above on Headline by a tenth for the month. Rates moved higher initially but came off during the day with 10’s down six basis points and the curve steepening a little.  I have more on CPI below and in the podcast, but markets feeling better or worse over a tenth different than expected on CPI each month is one thing but the trend is so blatantly going in the right direction with annualized CPI over the past three months now below the feds 2% target at 1.77%,  I just don’t think it’s material at this point.  Fed futures by the way agree and were unchanged on the day still at a 65% chance for a March rate cut. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com