The Dividend Cafe

Today's Post - https://bahnsen.co/3JnoIqp Although off the lows for the day, stocks closed down for a second day to start off the new quarter. 10-Year yields have now moved back towards the high end of their four-month range at 4.35%, which is about the level where we have seen markets start to pay more attention which is what today was about. Fed futures are still at 50/50 for a June cut and roughly 70% for July, and what’s being repriced into markets is rates that may stay a little higher this year. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4cDHCqg There is a lot of good stuff in the podcast today and, as always, we welcome your questions and curiosities. Dividend Cafe looked at a number of things around the Fed, market valuation, inflation, and more on Friday. We have some very exciting things in the works about our plans for daily and weekly content delivery, with even more additions and refinements coming. Meetings are underway and nothing will be ready to announce imminently but we are excited to bring what we are doing to another level. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4cDi2Sq The first quarter of 2024 is in the history books (both because it is done, so therefore now history – and because it was a big quarter with a lot of surprises for market pundits). As you go into your Easter Weekend and enjoy the market holiday that is Good Friday, take a trip around the horn as we look at history, market valuations, passive investing, credit, money supply, financial conditions, and more. Jump on in to the Dividend Cafe … Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3TT4Scl Another generally positive day in markets with today marking the 99th consecutive trading day that the SP500 closed above its 50 day moving average. This has happened many times in history believe it or not, and certainly isn’t even half way to 1995’s run of 257 (back when I was graduating high school), but its impressive none the less. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3TTReFO Markets traded positively for most of the day, although ended up closing slightly down by 31 points. This is the 10th time since 1950 that the SP500 has been up for 5 months in a row, so it certainly has happened enough before, but interesting that when I looked at those time periods 12 months following, they were also all in positive territory as well. All that said, earnings and fundamentals are going to have to pull their weight for that to happen an 11th time from these valuations (see David’s comments below). Historically speaking, it’s also rare to see markets top when there is such broad participation in new 52-week highs. Typically, that internal breadth starts to show cracks before the overall market reaches its cycle peak and turns lower, and that is not what we are seeing today. Energy, by the way, has reaccelerated, with now 80% of the sector at 3-month highs, as that market rotation and broadening of sector returns continues. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/49cizrs Greetings from Dallas, Texas where I am the next two days before then getting to Houston on Wednesday and then to the TBG offices in Austin and doing three events there for a couple of days before returning to NYC on Friday. Today’s DCT is housing-heavy with plenty else in the mix to make it worth your time. Dividend Cafe looked further into the time-tested wisdom of dividend growth investing, the historical factors that involved over the past few decades, and the lay of the land in the years ahead. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4924jl3 Predictions are fun. They are not, though, at the heart of the investment business. They can be very important in the methodology and process of some speculators, and they can even be marginally additive for some investors. But “predictions” are not quite the same as “calculations,” and they are categorically different from “belief systems.” At the core of all good investors lies a philosophy. I find it an unimprovable joy in life to study the investing philosophies of great investors. I never, ever, ever find one who relies on “feel” or “just has that Midas touch.” That very thinking is for simpletons and know-nothings. Great investors execute well off of a cogent philosophy. Bad investors either fail to execute or have an improperly formed philosophy (or, worst of all, options; they have no discernable philosophy at all). The Bahnsen Group embraces being defined by our investment philosophy, and we embrace being known by the role dividend growth plays within that philosophy. Dividend growth is not new. In fact, what is [relatively] new is NOT viewing the receipt of cash flow from the risk investments you make as a key objective in your investing and a significant part of your anticipated return. In today’s Dividend Cafe, we address the history of investor distraction from dividend monetization and the reorientation that we believe is about to shift the focus back to where it belongs. We are not talking a “new normal” but rather a “return to normal normal.” So jump on in to a very normal Dividend Cafe … Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3vpQejx Markets built on yesterdays rally today closing higher for a third straight session. For the markets, the porridge-is-just-right narrative around the balance of strong economic and employment backdrop combined with disinflation and a Fed that is now talking about slowing QT and accepting PCE at 2.6% this year (vs 2%) before they would begin cutting interest rates. Today we also had jobless claims and existing home sales both positive and supportive of that narrative as well. Keep in mind please, that markets are a forward looking pricing mechanism, and a lot of soft-landing narrative at this point is fully baked in. The question will be on fundamentals keeping up with those higher valuations names from here, and I still suspect there will be the haves vs. have-nots in that regard and the time for being selective here is very important. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/43pRAau Generally, a pretty market-friendly statement from the Fed, with some upgrading on the economy with GDP estimates moving up from 1.4% to 2.0%, they lowered their unemployment rate forecasts from 4.1% to 4% and raised the Core PCE forecasts by two-tenths to 2.6% for the year (and we are already at 2.8% now mind you). Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3ViQThg Markets built on gains quite nicely throughout the day today, with the Dow up 320 points, on an uncharacteristically consistent trading day heading into tomorrow’s FOMC decision and statement. The back up in rates we have seen the past two weeks eased a little today as well, with 10s down three basis points, which also supported our generally positive day. We are still in the range I mentioned on the 10-year, just at the higher end of it with 4.35%, the high watermark on the year so far. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3x6BWVi Ask David “Are tech stocks likely not going to be good dividend growth stocks for the foreseeable future? Given their reliance on good and expensive R&D to keep market share? Seems to be a no-brainer to me. Dividends and more meaningful dividend growth is seemingly better in other sectors. Or am I just underestimating the time it takes for dividends to grow? What will happen to tech stocks if they have poor dividends and stock price growth flattens out? Where would the value for shareholders come from? Or am I missing something or am I just worrying unnecessarily?” ~ Nathan Some tech companies will not pay a dividend, some will, some will grow it, and some will not. Technology is way too broad of a sector to answer in the context of monolithic treatment of dividends. What is constant where there are technology companies that pay consistent and growing dividends is that the company is mature, has recurring cash flows, and management that has exited the ego phase of corporate oversight. Value does not come from dividends – it comes from profits. The value of those profits is realized in dividends. If profits are not returned to shareholders but used to create more profits, that is where value creation could come from. Or, that is where value could be destroyed. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3IEE4WR Dividend growth investing is counter-cultural. It goes against the grain of “hot dots” and “shiny objects.” It functions outside the fads and fashions of the moment. And it insists that ancient ideas like “cash flow matters” are still relevant today (amongst many other ideas). It seeks performance and productivity but not popularity. It flows from a belief system and not a crowd. It is, indeed, counter-cultural. It also is not always understood correctly. Several misnomers persist that, if better understood, could jeopardize its counter-cultural status. One of my great fears in life is that dividend growth investing recaptures its status as “the known best way to do equity investing.” All things being equal, if dividend growth investing became a consensus understanding of the masses, I still wouldn’t change my belief system one iota, but I prefer running a portfolio at 15.2x forward earnings when the market is trading at 21x … the “non-shininess” of the strategy adds value. Nevertheless, when it comes to the Dividend Cafe, it is my sworn duty to inform, educate, equip, and edify, so clearing up misnomers is not just allowed but required. If enough people read and adopt the truth, I may have to sacrifice the counter-cultural status of dividend growth, but I’ll know I did the world some good. So today, we shall clear up a couple of things and even dig into some recent history. And as is always the case with financial markets, the more you understand the past, the better prepared you will be for the future! Jump on into the Dividend Cafe … Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4cjgL2o Markets were lower on the day with some higher than expected Producer Price Index numbers for the month of February that were up .6% versus .3% expected. Keep in mind, the year over year number on that same headline gauge is only at 1.6%, albeit up from the 1% read the month prior. If we annualize the last three months that included some of the higher figures, we get to around 3% year over year. This may not be exactly where we want to be at this point, but as I have mentioned, the path towards our target was just never going to happen in a straight line either. Commercial real estate values have begun to show some recovery in the past few months. The chart below shows both the decline in values we just went through and the beginning of recovery, but more importantly, the 20%+ run up that preceded it. The protective equity during the recent decline in values was hugely inflated leading into it, so when we hear about a looming crisis in something like commercial office loans, from an LTV perspective there was already a larger cushion, and borrows make payments when there is equity. I am not saying there isn’t stress in non class-A office, but if prices are leveling I am not sure it will materialize into more at this point. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3wTpet0 The Dow eked out a small gain, with both the SP500 and Nasdaq closing modestly lower. Yields drifted a little higher today Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3wT2REd A positive trading day in stocks with a fresh new read on CPI that was largely in line with expectations, with both Headline and Core up .4% for the month of February. While these are close to the same print we got in January that caused our 1.5% selloff, February’s read was priced in at this point, and if anything, more reaffirmed that the prior month ticking higher was more a one-off than a new longer-term trend. Yields were modestly higher across the curve, and Fed futures are at 60% for a June rate cut at this point. There is plenty of data from now until then, but all things being equal, our disinflation narrative remains intact. A quick state of the US labor force: Total Labor force participation rate total 16+ years at 62% = Not Great Labor force participation rate amongst 25-54 Yr. old’s at 83% = Great Labor force participation rate amongst 55+ at 38% = Abysmal (the chart fell off a cliff in the pandemic and hasn’t recovered) Total US Labor Force at a total of 160MM employed = Good The overall participation rate is still historically low at 62% (67%+ would be cooking with grease). Demographically however, with still positive population growth in the US, compared to declining population numbers in some other parts of the world (i.e. Europe, Japan, China), there is an advantage. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/43bfaYw Futures opened last night pretty flat and slightly improved into the evening, but this morning, futures pointed to a down -130 point open pre-market. The market opened down 100 points and got down -230 points before rebounding about +300 from there. The Dow closed up 47 points (+0.12%), with the S&P 500 down -0.11% and the Nasdaq down -0.41%. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/49VU9Du It's been a weird week to pick a topic for the Dividend Cafe. I have about six topics mapped out for future Dividend Cafes, yet none of them grabbed me to do this week. I took an Acela to DC from New York on Wednesday late afternoon and felt pretty inspired about one topic, and then felt inspired about another as I took the train back to NYC 24 hours later. I did a panel with David Malpass, recent president of the World Bank and Treasury Department Deputy Secretary for three Presidents, at the Library of Congress yesterday, and when I came off that stage, I had a whole new inspiration for today's Dividend Cafe. I did a podcast with John Mauldin earlier in the week that put many ideas on the table (as all my talks with John always do). We had a State of the Union address last night and experienced "Super Tuesday" just a few days ago. The White House announced plans for credit card fee restrictions this week. And the Fed announced a reversal of plans for onerous new "Basel 3" capital requirements on banks. Do you see what I am saying? I have had one idea, inspiration, or fodder after another for this Dividend Cafe all week, and when it comes time to put pen to paper, the only choice I have is to do …. All of the Above! Jump on into the Dividend Cafe. We have a lot to talk about! Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3T43 A second positive day in markets and one with a little more conviction than yesterday, with the SP500 notching a new high. Powell gave his second day of testimony to Congress. Lagarde at the ECB held rates unchanged at 4%, although he did tilt the scales more toward assuredness that inflation was lower and June was the base case on when rates start to move lower. I have more conviction in the US waiting until June with growth forecasts in the mid-2 % range than I do the ECB, given GDP forecasts in Germany are a tenth of that at .25%, but we shall see. Higher debt levels lead to lower growth, lead to lower rates – rinse, wash, and repeat. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3P9T82G After two down days to start the week, we closed higher on the day after Powell’s comments to Congress. He reiterated a peak in rates and a plan to lower rates once he has more data to confirm that 2% path beforehand. We have a more chart-heavy DC Today for you (my favorite), as the information pictorially is too good to pass up. Today, we got ADP payroll numbers largely in line with expectations, and there are reasons employment and, frankly, this market has defied all that doubted it in the wake of this meteoric rise in interest rates. Rising markets, tightening credit spreads, low jobless claims, fiscal deficits at 6% of GDP, and infrastructure spending have all eased financial conditions to become EASIER than where they were BEFORE the Fed began raising interest rates from the zero bound. We have spoken about both consumers’ and corporations’ resilience from rising rates as they locked in lower rates before this cycle, but the financial conditions in green in the chart below show the backdrop of the market’s resilience in light of rates as well. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3T7Ki6D Markets opened lower and traded that way the remainder of the day in stocks, with bonds catching a bid and rates falling across the curve. We actually had good numbers on both services ISM and PMI numbers, although there may have been some market angst over Powell potentially sounding hawkish tomorrow in front of Congress, and we just gave a little back on the day. Q4 earnings season is basically a wrap at this point, and while the quarter came in great at 9.8%, the earnings per share growth on the entire year was just .5%. Q4 acceleration is expected to last for most of 2024 with earnings expected to be up another 10% and then somewhere closer to 13% in 2025. Margins have also advanced recently up to 16.8%, and while all of these things are of course generally good, this move up we’ve seen the first two months of the year seems to already have taken note. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4c33Ql2 Manufacturing contracted in February again, coming in at 47.8 in the latest ISM measurement (below 50 is contraction, above 50 expansion). Manufacturing has contracted every month since November 2022. Export orders picked up a bit but the other categories were all negative. However, 8 out of 18 sectors saw expansion this month where last month is was only four. For what it is worth, the states with the highest population growth since 2019 (by %) are Idaho (+10%), Utah (+7%), Montana (+6%), Texas (+5%), and Florida (+5%). Right behind those leaders all tied at +4% is Tennessee, Alabama, Georgia, and South Carolina. The only states to have negative population growth are California (-1%), West Virginia, Louisiana, and Mississippi. Services remain below their pre-COVID share of total consumer spending. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4cbq1G7 This last week appears to (as of Friday morning’s press time) not been a particularly active one in equity markets. The Fed had no big announcements. Bond yields barely budged. Earnings season is very close to complete, and companies doing reporting of results have become few and far between. We are in a market news cycle lull, which is the perfect time to talk about alternative investments. “Huh?,” you ask. “What does the news cycle have to do with alternative investments like private credit?” All will be revealed. But in the meantime, I guess I should clarify that I never believe Dividend Cafe should be tied to a particular headline or market event. I may choose to do so here and there. But even then, those “ad hoc” news events become relevant to the Dividend Cafe only to the extent the lesson or message itself is a permanently relevant message. Some may be delivered in a more “timely” context than others, but what I want every week’s Dividend Cafe to be is something that can be read any time past, present, or future, and stand up. Day-to-day market reporting and analysis has its place (barely), but the Dividend Cafe is my baby for macro, evergreen truth and perspective. It will be the last thing I ever give up in this full-time endeavor, and by give up, I mean something rather morbid. So I write in today’s Dividend Cafe about something unrelated to the news cycle, the headlines, and big market noise, not merely because it was a quiet week on the western front but because every week should be a topic divorced from noise and focused on substance. Noise is the enemy of investor success. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3uKcswq A positive day in markets this Leap Year Thursday centered around PCE data that was inline with estimates for the month of January with December being revised lower. Headline year over year PCE rose 2.4%, and removing food and energy, Core PCE increased 2.8% from a year earlier. The dichotomy for 2023 was between goods price deflation of -.5% and services price inflation of 3.9%. So where does this all leave us? T his was the last major inflation data point prior to the FOMC meeting on 3/20, so the Fed is leaving rates unchanged in March, most likely the same (as of now) in May, with about a 50/50 chance for a rate cut in June. The bond market, fed futures, and the Fed’s own dot plots are estimating 75 bps of rate cuts by the end of the year. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3SZYlea The sectors that have historically performed the best following a rising Real Fed Funds rate in the past have been defensives like Staples, Utilities and Energy. The latter is obviously subject to commodity volatility in WTI, but its worth noting the strong out performance in Q4 results in Staples. We have exposure based on the bottom up fundamentals we like, but if there were also a part of the market to be watched with a contrarian lens as breadth shifts from tech elsewhere, these are on my list. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3TeiRcu A bit of a mixed day in markets with the Dow closing off its lows for the day down 96 points. The treasury raised $46B in seven year paper with a bid to cover ratio in the mid fifteens versus the thirteens where it has been (meaning there more buyers). I suppose if the big news in Asia today was a ‘hotter’ inflation read at 2% in Japan with 10 year government bonds rising to their highest yield since 2011 at an eye popping .165%, its no wonder this auction near 4.32% cleared with more demand. Capital will always flow around the world where it is most rewarded and with attractive economic fundamentals and positive real yields, its why the US Dollar is nearing its 2020 pandemic apex and trading 17% above its historical average versus trading peers. Short term, this can make US exports more expensive which can slow growth, and also further trade imbalance as we already import more things then we export, but its a net positive long term. Tomorrows trade balance figures may reveal more there Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3Iya6nH Financial markets have absorbed the $1.5 trillion (or so) of quantitative tightening thus far quite well, but reverse repos were at high levels, and bank reserves (and money market liquidity) were not challenged. Will the Fed press more QT when RRP’s hit zero? Color me skeptical. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3uNB8E7 History was made this week, and no, I am not talking about DA Jack McCoy retiring after 400 episodes on Law & Order, but rather the Japanese Nikkei closing at 39,098 on Wednesday night, its highest close in history, surpassing the previous closing high … which was (wait for it) … December 29, 1989. Yes, almost 35 years ago the Nikkei closed at 38,916, and finally re-reached and exceeded that level this week. It gives new meaning to the expression “buy and hold.” But beyond the statistical and numerical takeaways of what may seem like a distant story unrelated to the plight of American investors, the tale of modern finance embedded in the last four decades of Japanese economic life is one for the ages. It has been a mild obsession of mine for many years, and I fully intend to finish a deeper white paper on the entire saga in the years to come. But today is not that white paper, as exciting for your insomnia as that prospect may be. Rather, I want to provide a succinct look at the history of what happened and what a key, if not the key, takeaway of the whole thing is for American investors. Jump on in to the Dividend Cafe, and let’s pretend we left off in the mid-1980’s, in a very different time than we find ourselves today, Yet in many ways, perhaps not that different at all. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3OUiHEJ A big rally day today across the board, but particularly in technology stocks primarily fueled by AI euphoria. I honestly, can’t remember a time when the point move in the Nasdaq was almost on par with that of the Dow, up X and X respectively in what is more and more feeling like 1999. Japan however, is feeling more and more like 1989, closing at an all time high today surpassing its market peak of 12/12/1989, about a month after the fall of the Berlin wall when instead of trading stocks I was trading baseball cards. You read that right, it has taken the Nikkei 34 years to regain a new height following of the largest asset bubbles in the modern era. Do valuations matter? Yes, indeed they do. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3T6zpmI We began the day positive at least for the few hours and lost momentum mid day. The Fed minutes released today showed broad agreement in the need for more confidence for inflation moving to a sustained 2% target before decreasing rates. While this wasn’t new information and followed what Powell already revealed in statement and his press conference following the meeting, the minutes showed more Fed constituents citing inflation risks with as their primary concern then overly restrictive rate policy, and that is what saw rates move a little higher this afternoon and stocks lower. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/48o28b5 I love this long-form DC Today and I love writing all the things that go into it. A Monday holiday weekend just gives me even more time and space so hopefully all the things today fill your cup. Dividend Cafe went into the mailbag and provided some key economic definitions, some commentary on the Fed, a better understanding of capital spending, alternative investments, and even a reference to Steve Martin. Lots of great questions with succinct, understandable answers! Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/42K4tM5 Greetings from beautiful Palm Beach, Florida, where by the time you are getting this, I will have left my fourth Floridian city in five days and returned to New York City. It has been a whirlwind of a week in markets, in the data, in the political scene, in the weather, and in Florida speaking. But this week we took a whirlwind of questions covering a lot of topics and did a special “mailbag” Dividend Cafe. As always, the questions cover a lot of topics, and as always, the answers are meant to be succinct, direct, and clear. I love corresponding with your questions and I hope the wide audience of Dividend Cafe finds these questions (and answers) useful. This week we cover some inflation/deflation vocabulary, even bringing back vital words like velocity and Japanification. We evaluate the way the BLS covers the hilarity of social media “influencers.” We look at what the Fed should be doing in the world they have created. And really, so much more! Always feel free to reach out with questions of your own, and in the meantime, jump on into the Dividend Cafe. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4bySeX3 A consistently positive trading day in markets from start to finish, with the Dow closing at the highs for the day up 348 points. Yields have also settled in the last few sessions, which, as Tuesday’s knee-jerk move higher, gets normalized. Both the Empire and Philadelphia manufacturing index numbers came in meaningfully above expectations, and jobless claims also beat, so a few good data points in economic fundamentals. We did get a second quarter of contracting GDP for Q4 out for both the UK and Japan, indicating recessions in both countries. Japan has now lost its third-place spot on the global GDP stage to Germany, falling to fourth. I mentioned this a few quarters ago, but it will be very difficult for central banks to stick to higher interest rates in slower-growth areas of the world. Stagflation will be something to watch in some of these areas if unemployment rises faster than inflation falls, but either way, rate cuts are soon to follow. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/49ia3bk A more productive day in markets today following yesterdays sell off with with the SP500 regaining the 5,000 level and bond yields giving back some of yesterdays back up in rates. As expected, internals yesterday were quite negative at -13 to 1 on the advance/decline ratio, but without credit spreads even budging, we move on. For what its worth, in a meeting with House members following the inflation release yesterday, Powell mentioned that the CPI data was consistent with what they had expected. Moving back to actual fundamentals that matter more to me, with over two thirds of Q4 earnings season completed we are tracking a 9% growth rate for the SP500 on the year, with a few more percentage points to the upside by the time its all said and done. Hard to see issues in that, and margins are holding in nicely at 16.7% with another 10% of earnings growth expected for 2024. I do think the latter ends up getting revised lower, but it remains a positive backdrop nonetheless. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post -https://bahnsen.co/49ze1fb The big news today and cause for the market volatility was the latest read on inflation, with both Headline and Core CPI coming in one-tenth higher than expected (you read that right, above expectations by just one-tenth for the month). There were words thrown around like ‘hot’ inflation and a ‘spike’ in treasury yields circulated around the media to sensationalize it, and I am not at all making light of a down 524 point market day, but truth be told, while we are seeing a continued path of disinflation in this country, that path was never going to be a straight line. Keep in mind here as well that we came into today with 14 of the last 15 weeks to the upside by roughly 20% in stocks and a five-handle S&P 500 starting point. That long streak has only happened five times in history since 1928, with the last time being some 52 years ago. Suffice it today, with a complacent VIX coming into today’s number, we were also frankly due for some of this sell-off. As one would have expected, yields moved higher across the curve on the day, with the 10YR closing up 15bps at 4.32%. We did come off the intra-day lows heading into the close, but a lot of this move felt overdone to me (both in yields and stocks. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/42ztxFL Greetings from the sunshine state of Florida, where I will be all week (different cities each day of the week) seeing clients, talking about the new book, and speaking to a very large symposium of fellow financial advisors. And thank you to all of you who gave such helpful feedback and encouragement on the DC Today weekly program! Brian and I both really appreciate it! The Dividend Cafe on Friday looked at the relevance of work to our understanding of economics. It mixed in an updated thought on modern portfolio theory, and it concluded with a comparison of 2024 to 1999. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/42BoynY It’s been a whirlwind of a week, and today is going to be a whirlwind of a Dividend Cafe. I came into my writing this morning with two or three topics to choose between, and I settled on “all of the above, plus several more.” I’ll leave the introduction short so we can get right into it. Between earnings season, a certain crux in the geopolitical moment, potential (likely?) new tax legislation, a modest market re-pricing of revised Fed expectations, some company considerations in our own portfolio management, and a pleading of the case for a “full-time” work mentality, there has been a lot going on at Team Bahnsen, and there is a lot in today’s Dividend Cafe … Let’s jump in! Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/42FOvmj Stocks rose modestly again today as we flirted with a five handle milestone on the SP500 intra day but closed just two points below. We are up 13 of the last 14 weeks, which is technically the longest streak since 1986. Good thing there wasn’t volatility the following October (joking aside 87’ still closed higher on the year believe it or not). All said, earnings have been quite good, the Fed is on hold for now with the next move lower rather than higher, employment and GDP are quite good, and inflation is subsiding, so the path of least resistance has been higher. Elsewhere, with year over year decline in CPI out today the slowdown in China post pandemic has been one that few, if any, predicted. After decades of record economic growth aided by a rapidly expanding population and industrialization, growth has been slowing. There isn’t anything different about this playing out in China as it did in Europe and then the US mind you, it just happened faster because of technology and productivity being more advanced than in previous periods. Demographics in the country have also begun to shift. Today, 18% of the population is over the age of 60, and by the year 2032 over 32% will be, which will surpass that of the US. This isn’t to say there isn’t growth in China, it still grew GDP by 5.2% last year, but would you like to guess what the 30 year annual compounded return in the market has been there? -2.1% per year or about zero including dividends. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/42zrukM A consistently positive trading day in markets today without a lot of new economic data out, but I suppose no news is good news, so we’ll take it. We did have a widening trade deficit data released today roughly in line with expectations but I am intentionally keeping this intro short and sweet today to tee up the more meaty sections in the this podcast. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4bqijHA Markets traded modestly higher following global markets, particularly China, where broad indices closed higher by over 3%. Markets in China have given up over $7T in market value since peaking in March of 2021, and last night’s move had less to do with actual news than I think it just did with an oversold bounce on potential stimulus. I do suspect there will be more from the government there to stimulate the economy and a severely over-levered real estate market sooner rather than later. Slower growth in China, means less Yuan to recycle back in US Treasuries, as that share of ownership continues to decline. There are still plenty of long-dated liabilities that need to be funded domestically with pensions and insurance companies and the like, but the supply this year will be massive with $8.9T in maturing Treasuries. Add on another $1T or more in deficits, and we will need to see over $10T absorbed in markets this year. This, along with the fact that government interest payments have already doubled from $350B in 2021 to now $700B, just has me skeptical that the Fed will continue to sell $60B a month with QT for a whole lot longer. It was less of a data-driven market day, other than a host of Fed President comments, which I will sum up to effectively ‘…yeah, what he said…’ reiterating Powell’s Fed policy comments last week about more time needed with rates. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3HOoQy5 I am very excited to announce a few things going on with the DC Today … First, we’ll start with the changes coming to the Monday edition of DC Today: None. I will continue writing and recording the Monday DC Today every week and will continue doing so in the “format” you see below (which follows the template from the old “COVID and Markets” days for you nostalgic types – be safe, be well, be free – and has been the Monday template throughout the history of DC Today). I enjoy doing this. I use a lot of weekend morning time pre-sun to do the writing. And Mondays before our weekly Investment Committee meeting commences don’t have the morning workload other days do. I will continue to make the time Monday afternoons to record the DC Today podcast and video, as well. So Monday stays as is and you’re stuck with me. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/47Xsqk9 The Federal Open Market Committee of the Federal Reserve met this week for their scheduled meeting and announced that … wait for it … they were not doing anything with interest rates. The market knew this was coming – futures have had a 100% chance of no increase or decrease in the Fed Funds rate at the January meeting for months – but markets went down -300 points after Fed chair, Jerome Powell, gave his customary press conference. The bond market went way up as yields dropped. And sure enough stocks caught up to bonds the very next day as the Dow jumped +370 points. Maybe this sounds to you like a lot of drama for one or two market days when everyone already knew what was going to happen, and you would be right. But the question that many are asking is – if it doesn’t matter, why does it matter? In other words, why is market volatility so high and press attention so high about when the Fed will begin cutting rates? Maybe traders do dumb and speculative things but why do traders care about this so much? Why not focus on more important short term betting odds, like whether or not Travis and Taylor are going to get married? In this week’s Dividend Cafe we explore the question of, “well, does it matter?” And to understand if it matters or not what the Fed does, we may want to understand what they do, exactly. This is a good one. So jump on in to the Dividend Cafe. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3SoXYtv Welcome to the first day of February, and a 29 day leap year one at that. The Dow completely rebounded from yesterdays sell off in stocks, and the bond market has now had two big day of gains in a row with rates moving significantly lower across the curve. The Fed holding rates unchanged yesterday was expected, but the comments of a March rate cut not being the Feds base case until they see more supportive data is what moved markets. Two quick points: The dot plots of where the FOMC sees rates by year end was unchanged following the meeting and 2-Yr treasury yields moving lower by 17 basis points in two days rather than higher isn’t a vote of confidence from the bond market its buying it at all. The reality is that economic data continues to be stronger than expected which is allowing them to take their time on easing policy, but markets are pricing it in advance anyway (as they always do). Speaking of stronger than expected economic data, there was a fair amount today with both productivity and ISM manufacturing data both beating expectations Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/4bhe01g The Fed today did as expected, which was nothing, leaving rates in tact for what has now become a six-month pause. Chairman Powell reiterated the unlikelihood of a rate cut in March (more on that in a moment). Markets sold off with the Nasdaq especially getting pummeled (but it was already down over -1% on the day before the announcement. BUT, bond yields COLLAPSED, with yields dropping significantly making it a rare day (in the last year or so) where bonds rallied huge and stocks sold off quite a bit. The Fed futures moved down to 35% for a rate cut in March but I have to say that is shocking. I would have thought they would go to 0% (okay, more like 10%) with the Fed Chair kind of saying they are not cutting yet. My best guess is enough actors in the market just believe the inflation data will come in so improved and economic data will come in so questionable between now and March 20 that the Fed will change their minds. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3HB81Xw A pretty boring day in markets with the Dow up and Nasdaq down. A lot of eyes are on what is coming next in the Middle East after the horrific murder of American lives over the weekend. Oil prices so far are not responding with any panic. Microsoft and Google each release results after hours today. They are big companies, you may have heard. Earnings growth of +4.9% (year-over-year) is expected this earnings season from an expectation of +2.7% y/y revenue growth. We are barely at 25% of companies having reported so far so we will do a better assessment of how this is tracking after each of the next two weeks. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/48OKdeA Ask David “What is the best argument for why the distributed independent decisions of individuals, families, and businesses create more beneficial outcomes for most people than the top-down, centralized decisions of government, especially the federal government?” ~ David K. My argument is one of incentives and one of knowledge. These are two different arguments, even if they do overlap at points. Fundamentally, I believe better outcomes take place when the decision-makers reap benefits from their decisions and when decision-makers feel pain from bad decisions. I do not believe “disinterested third parties” (Thomas Sowell’s term) have the incentives to allocate and adjudicate risk and reward the way those with “skin in the game” do. But beyond the classical incentive argument, I am very much a believer in what Friedrich Hayek referred to as the “knowledge problem.” Knowledge is widely dispersed throughout a society and no central entity possesses the knowledge needed to properly steward the affairs of a diverse economy. I read the masterful essay, The Use of Knowledge in Society, by Friedrich Hayek while in high school. It was the beginning of a lifetime journey for me through Hayekian thought, particularly around Hayek’s thesis of the “fatal conceit” of central planners. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3OkKhL0 I did something fun today … I just picked random topics from various things on my mind, in my daily reading, or across my research feed – sort of stream of consciousness – and wrote about them. Therefore, I suspect there will be a little something for everyone today. Hopefully, each portion is “bite-sized” enough to make it all succinct and readable, and I certainly appreciate any feedback you have to offer. In fact, I am considering something like this in the daily DC Today (where I would write my own piece every day on whatever topic I am so inspired by that day, and let Brian run with the daily data recap). It's all a work in progress and your comments are welcome. And in the meantime, let's jump into the Dividend Cafe - bite-sized variety and all ... Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

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