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:

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:

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:

Today's Post - https://bahnsen.co/3vEgA0Y

Ask David

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:

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:

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:

Today's Post - https://bahnsen.co/4aN8tiB

An up day for markets across the board.

The drama on the SEC/bitcoin ETF deal moved today. Yesterday it was that they had approved a bitcoin ETF as expected, and bitcoin prices fell. But then they announced that, no, they had not approved it (yet), and the announcement was from a “hack.” Uh-huh. Then the chairman of the SEC took to Twitter to announce that people investing in crypto should “be cautious” due to “serious risks involved.” And today they approved the ETF exactly as had been reported yesterday.

I was on Varney this morning talking wealth tax, Wall Street’s view of government spending, and dividend thoughts.

Links mentioned in this episode:

Today's Post -https://bahnsen.co/4aPFc6P

Yesterday we released our annual white paper recapping all that was the year behind and all of our perspective and themes for the year ahead. We welcome you to send it far and wide, distributing it anywhere you’d wish. It is an important part of our annual process and I am proud of this year’s product, and grateful to all in my production and design teams who helped make it happen.

Because we devoted Monday to this special Dividend Cafe white paper I have run today’s Tuesday edition as if it were Monday, except, you know, with Tuesday market info (I’m not that dumb as to use yesterday’s market data).

Off we go …

Links mentioned in this episode:

Today's Post - https://bahnsen.co/41UHaPl

Over the numerous years dedicated to this annual project, it has been a rewarding journey and continues to be one of my most cherished endeavors. I derive great satisfaction from the research, narrative crafting, and the sense of responsibility it instills. I sincerely hope you find value in this year's retrospective and prospective white paper. Brace yourself for an exciting year ahead!

Links mentioned in this episode:

Today's Post - https://bahnsen.co/3Oe52YT

Generally positive markets this morning lost momentum throughout the trading day with the Dow closing completely flat and both the S&P 500 and Nasdaq down a pinch. Yields were up on the day, with the 10-year back to just under 4%, and Fed futures starting to show a little less conviction on a rate cut in March (albeit still at a 64% chance). We had some better-than-expected payroll numbers today, and with slightly lower new Job openings yesterday are slowly but surely seeing a supply imbalance normalization in employment. We have roughly 162MM people currently employed in this country, with another 8.8MM new job openings posted, so call about 171MM on the demand side. The current US labor force is roughly 168MM, so while not perfectly matched (still more demand), it is getting there and what the Fed wants to see.

Links mentioned in this episode: