The Dividend Cafe - The DC Today - Monday, April 8, 2024

Episode Date: April 8, 2024

Today's Post - https://bahnsen.co/4aMHEug Economic Front The primary news of the weekend was the 303k new jobs created in March, up by 89k over expectations. A full 232k of that came from the private sector. The two prior months were revised upwards by 22k. The household survey was up huge, as well. The unemployment rate fell to 3.8%. Construction was solid (39k new j obs), and leisure and hospitality led the way, with private education and health care strong as well. The annual gain in wages is +4.1%, and the average hours worked went up to 34.4 (had been 34.3). Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Welcome to the DC Today, your daily market synopsis of the Dividend Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. Well, hello and welcome to this Monday edition of the DC Today, whereby I'm going to go around the horn talking to you about the Fed, the market, the economy, public policy, and all the things. I'm doing this purposely before I get started because I want to give those of you listening or watching a heads up on some plans we have, and I want to solicit your feedback. We feel really good about some adjustments we're making. We've gone through a lot of deliberation and contemplation. But as a means of kind of adding to and improving, optimizing the way in which we serve our clients with thought leadership and content and the mediums in which we deliver this, we have become convinced that we want to consolidate what we're doing under

the Dividend Cafe. That having the DC today and Dividend Cafe has created more confusion. We think it'll be easier for us to provide a daily market recap at the Dividend Cafe. And to that end, we're kind of redoing the Dividend Cafe page where we are going to be adding some new things. Not only will we have a daily market recap, we're going to add to that a Friday edition. So we'll have the daily, and as you know, when I say market recap, it doesn't just mean what the Dow did, but oil and bond yields and economic data. So we'll include those kind of daily numerical summaries of things, and we'll do it each day, the sort of summary of more current event oriented around oil and energy and housing and the Fed, sort of the kind of evolution that came out of the old COVID and markets daily missive. That will still happen at Dividend Cafe every Monday.

And I'll write all of that myself. And I'll do a video every Monday and every Friday for both. Brian and I will continue to do the daily market recap that will be held at Dividend Cafe. And we'll do a podcast of that every Tuesday, Wednesday, Thursday. One of us will kind of alternate depending on schedules and availability. And maybe every now and then one of us will have to miss the podcast, but we won't miss the daily posting of info. And maybe every now and then one of us will have to miss the podcast, but we won't miss the daily posting of info. And then on the homepage at Dividend Cafe, we're going to have an Ask TBG section where all these questions we get in, we're just going to regularly in real time be answering. And we'll do an email blast of it once a week. Now, instead of Ask David or ask Brian, the reason for Ask TBG

is we can include questions that might come in about tax or risk or insurance or financial planning. Other thought leadership that we have available at our firm in different departments could participate when people have questions about some of those things. And in the meantime, I'll continue doing what I've been doing forever, which is answering, you know, sometimes I'm doing 10 to 20 of these a week. And so we'll keep those things going on the homepage of the site and then add another section for other original content that I don't write. Brian will write articles. Trevor will post his weekly thoughts on money there. Steve Treznan does a monthly alt

blend. He'll still write articles there. And we'll have outside guest writers too. We won't repost other people's content from other places. We'll use it for just original content of what people might write for us. This allows us to invite in guest content. All right. So I know it's been a long setup here, but I just wanted to give you the basic vision of what we want to do all out of Dividend Cafe, really taking nothing away, but just optimizing what we're doing and adding a few things in a much more organized, clean way. Questions at thebondsongroup.com if you want to send any feedback. In the meantime, let's get into it. The market was flat today. The Dow had been up 40. Futures were up 65 last night. They were flat this morning. The market did zig

and zag a little today, but basically Dow, S&P, and Nasdaq all flat within just a few basis points, literally. So very rare you see that, but a flat day across the markets. The Magnificent Seven right now, one stock up 80% since September, another stock down 40% since September, another up almost 70%, the most famous of all of them, literally down over 12%. You just have a massive dispersion of results in the Magnificent Seven, a few that are kind of flattened there. So at this point, enough time has gone by. You know, this has obviously been a theme I've talked about all year, but the Magnificent Seven is not really anything close. I'm not predicting that it will not be monolithic anymore. I am telling you or reporting that it is not monolithic. This has very much played out.

In terms of other issues in the market here today, oil prices were down just 50 basis points. We're still looking at over $87 a barrel. On the bond yield, the 10-year was up four basis points. So it's sitting at 4.42%. I think you know that I had said I believed it would be about 4.5% and holding there where we'd become problematic for equities. Maybe it's going to have to be higher than that. I don't know. But, you know, we opened the year at 3.9-ish. We're at 4.4-ish. You're up 50 basis points in the 10-year. Markets haven't cared much.

They've cared a little over the last week. But credit spreads have stayed pretty tight. And so even beyond the way we think equity markets are responding, credit has not. Today, the top performing sector in the market was real estate. And it's not misleading, but just to be clear, it was up 80 basis points. But you had a really big day with apartment REITs. A huge $10 billion acquisition was announced. And so that caused the whole sector to rally. was announced, and so that caused the whole sector to rally.

There is a chart at the dc2day.com today that I would encourage you to look at showing the NASDAQ to commodities ratio. It's showing the NASDAQ divided by the commodity spot index, and it is extraordinarily high. Last time it had been this high, you guessed it, right before the 2000 tech crash. What else do I want to point out here? I think that's good enough. I can't remember if I said it or not. Bottom performing sector today was energy down to 60 basis points. Okay. Is Iran ready to imminently attack Israel out of revenge for what Israel did in attacking some Iranian officials at the Syrian consulate? A few bullet points from one of my favorite geopolitical macro strategists, Rene Ananat-Korbu. The notion that Iranian officials are consulting with the New York Times on what they're going to do is not great intelligence. If they were to escalate with a direct attack that way, it would be quite disproportionate from what happened and expose them to a direct conflict with the United States that they very likely do not want.

So it's entirely possible that that has been dramatically overstated what the risk is there. By the way, another news item I would get into is that Treasury Secretary Janet Yellen has wrapped her trip to China. China is our second biggest source of imports. Mexico is our first. And it does not appear at this point that any headline worthy stuff has come out of that trip to China. But we until we hear more, we don't know what we don't know. I do think that there's a little reopening of this bill that's been stalled in the Senate, the Wiedensmith tax bill that overwhelmingly passed the House that would expand the child tax credit on the personal tax code side and then open up a significant amount of business deductions, bonus depreciation on real estate, R&D expensibility, CapEx expensibility.

I don't think right now it's likely to pass exactly how the House passed it. I still think to get it across the finish line with the Senate, it will require a little bit of adjustment. But I think those adjustments are likely to happen. And then from there, it's slightly over 50 percent chance that it will get done. I'm heavily following this story as I believe it is continually, bizarrely, one of the most uncovered stories in public policy that does actually impact financial markets. You know what maybe doesn't affect financial markets directly? The IRS was supposed to add 3,700 new agents with their additional $80 billion of funding. They've so far added 34 agents. 34, not 3,400. 34 agents. Now, I'm not complaining, obviously,

34, not 3,400. 34 agents. Now, I'm not complaining, obviously, but 63% of new audits have been targeted at middle-class filers. 80% of audits have been at those making less than $1 million a year. Obviously, the intent of this $80 billion of funding had been kind of presented as only and exclusively targeting uber-wealthy. Just interesting data points that have come out after really having to be pressured to announce some sort of evaluation.

Speaker Johnson is supposed to be announcing his plan on Ukraine funding. It's been stalled a couple of days. It's such a politically complicated thing. We'll see what happens. The big news over the weekend was the jobs report Friday, 303,000 new jobs in March, 89,000 more than expectation, 232,000 of that came from the private sector. The two prior months were revised upwards by 22,000. We'd been used to getting some downward revisions. The household survey was up huge. Unemployment rate fell to 3.8%. The household survey was up huge. Unemployment rate fell to 3.8%. Construction, new jobs were 39,000 for the month, which was good. Legion hospitality is still leading the way. Legion hospitality, by the way, is finally back to its pre-COVID level. So four years later. Wages, annual year over year, meaning 4.1% growth, and then average hours worked ticked up a tiny bit from 34.3 to 34.4 hours worked.

Bernie Sanders will be upset. The housing data, this just, I still cannot even believe what I read and then went and had to kind of fact check at a number of different places. But the report came from a huge asset manager, So I was not prone to disbelieve it. But it's so stunning to me that I had to kind of verify. One out of 20 homes for sale in 2008 were new homes, new construction. One out of 20. One out of three homes for sale now are new construction. Only two out of three are existing homes, where 19 out of 20 were existing homes back in 08. Clearly, there's only possible explanation for this, is existing homes, by definition, largely have a mortgage rate

associated with it that was much lower than current rates. Therefore, they're just simply disappearing from inventory and not available for sale. As someone holding a 3% mortgage, to use hypothetical, is not prone to sell and then want to buy something with a 7% mortgage. But a substantial amount of homes that are transacting right now are new construction. There's a real interest rate story behind that. Fed funds futures right now, about 50% chance of a cut in June, 70% chance of a cut in July. Keep in mind that 50 builds up to 70. So when you say 70 in July, that's including the 50 that's priced for June, just so I'm clear there.

including the 50 that's priced for June, just so I'm clear there. I have a little section at thedcda.com answering the question, what do I mean when I say the Fed does not drive markets? I wrote a dividend cafe about this two weeks ago. I obviously believe the Fed has a big impact on markets, so what is it that I mean and what do I not mean laid out there? I already mentioned oil prices today down just 50 basis points, really continued health in the midstream energy sector even last week when the S&P was down 1%, midstream energy sector was up 1%. And we have a chart showing you what happens to the S&P's P-E ratio when the energy sector, its weighting goes higher,

which largely happens when energy stocks are doing better. I hope you understand that math. And a lot of that is driven by higher oil prices. It stands to reason that this is not merely correlative but causative in the sense that higher oil prices. It stands to reason that this is not merely correlative but causative in the sense that higher oil prices can put downward pressure on the P.E. as margins for companies and earnings growth for sustained higher oil prices come under pressure. I encourage you to look at the chart now for a better understanding. Against doomsdayism, the average, average, average country for world economic freedom in 1980, on the ranking of world economic freedom now, what used to be the average, one generation later is 154th place out of 166 countries. Basically, what used to be average is now very near last place. You had 23% of countries in the late 1970s

that were electoral democracies. Over 50% are now. Do with that what you will. Great question about Russian asset seizure. Is it negative for the U.S. dollar? Marginally, is it negative when other actors, economic actors, see the U.S. taking assets and even if they're really bad actors, taking their money and giving it away? We have not done it yet. Congress has not approved it. But it's a discussion item of some of the $300 billion of Russian assets that we have seized to use some of those funds to give to Ukraine. Would that put downward pressure on the U.S. dollar? My answer is it would not collapse the dollar.

The people already have gotten used to it. It is a bad actor. It's controversial. But marginally, there is no question it impacts issues, There is no question it impacts issues, but that the dollar's reserve status strength continues to come from it being a relative strength compared to other currency options. So we've covered a lot of ground today. Thanks for listening to all this. I look forward to your feedback on what I started off the podcast with, and I look forward to talking more. And we hope to really implement some positive changes very soon.

But in the meantime, thank you for listening. Thank you for watching, and thank you for reading the DC Today. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. Thank you. Bonson Group and Hightower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice. Thank you. on the client's individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for any related questions.