The Dividend Cafe

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.

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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.

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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!

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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.

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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.

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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.

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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.

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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.

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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!

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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.

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