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.

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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.

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Today's Post - https://bahnsen.co/48OKdeA

Ask David

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.

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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:

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:

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:

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:

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:

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 …

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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.

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