The Dividend Cafe

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The DC Today - Tuesday, March 12, 2024 Mar 12, 2024

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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

The DC Today - Monday, March 11, 2024 Mar 11, 2024

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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

When Just One Topic Won't Do Mar 08, 2024

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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

The DC Today - Thursday, March 7, 2024 Mar 07, 2024

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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

The DC Today - Wednesday, March 6, 2024 Mar 06, 2024

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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

The DC Today - Tuesday, March 5, 2024 Mar 05, 2024

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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

The DC Today - Monday, March 4, 2024 Mar 04, 2024

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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

How Heavy is this Shoe? Mar 01, 2024

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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

The DC Today - Thursday, February 29, 2024 Feb 29, 2024

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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

The DC Today - Wednesday, February 28, 2024 Feb 28, 2024

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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

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