The Dividend Cafe - The DC Today - Monday, January 22, 2024

Episode Date: January 22, 2024

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: 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 the Monday edition of DC Today, back here in the New York office. What a freezing cold weekend for this Southern California kid, but nevertheless, a lovely weekend in the world's greatest city. And some fun things to talk about here today. If I feel like, if it feels to you like I'm going very quickly, it's because I am going very quickly. I am running late for an appointment, but I did not want to miss the podcast and video for you all. Just quickly, I shall say that the market was up big on Friday and then futures opened up last night, up 50 points. The market opened up about 100 points this morning and got higher than that.

At one point, it gave some of that back and then kind of bounced around, did end up closing up 138 points on the day. So 36 basis points as a percentage higher on the Dow, 22 higher on the S&P, 32 higher on the NASDAQ. So about a third of a point, give or take, on the market indices. The S&P and Dow were at all-time highs, but the Russell 2000, the small cap index, is still down 20% from its 2021 high. That is just weird. Not just that it's still down, not every index is going to all make an all-time high at the same time, but I have to say that it is quite strange to actually have the Russell 2000 technically in bear market territory. Similarly odd, the best performing country stock markets so far this year, we're only

a few weeks in the New Year's, Japan, it's up over 9%. That's up after a 28% upside last year. The worst performing year to date is Hong Kong. So even though you could think of them in a similar region, obviously very different economic circumstances and different drivers of their stock market performance creating this disparity year to date. The bond market was up today. The 10-year came down to 4.1, down four basis points. Best performing sector on the day was industrials, up three quarters of a percent. Consumer discretionary was the worst performer, down half of a percent. A couple of interesting tidbits. Financials

are projected to be 18 percent of the S&P's earnings this year, but they are less than 13 percent, about 12.8 percent of the S&P weighting of the actual market cap of the S&P. Inversely, S&P weighting of the actual market cap of the S&P. Inversely, the Magnificent Seven are projected to be 21% of the earnings of the S&P, which is a monumental number. Seven companies representing a fifth of the earnings, of the total earnings. And yet they are right now 28% of the current S&P weighting. 21% of earnings, 28% of the weighting within the Magnificent Seven. All right, top news story I got.

I think by now it's been 24 hours. Everyone's heard the news of Governor DeSantis backing out of the presidential race. Former President Donald Trump is clearly going to go on to New Hampshire and win the primary there. And that primary drama on the Republican side appears to be headed to an uncontested path very closely. The biggest news to me right now in public policy, I am mystified. I had a breakfast meeting this morning with one of the top political commentators and pundits in our country for 30 years. commentators and pundits in our country for 30 years. And I was asking him because he is as mystified as I am why this story is not getting more media coverage. But essentially, it is going to pass out of the House Ways and Means Committee with good, strong bipartisan support. And then in the overall Senate, not just the Senate Finance Committee, the overall Senate is going to pass by a wide margin

of this child tax credit redo. That is essentially about $8 billion of personal tax savings. It's not very large. And then what will amount to about $200 billion of corporate tax savings in 2024 and 2025. And that comes through the things I've talked about before, expense, instant expensing on CapEx, R&D expensing, and more or less is being paid for by getting rid of that silly employee retention tax credit. So I don't know why it's not getting more coverage, but a very large supply side benefit coming in tax I don't know why it's not getting more coverage, but a very large supply side benefit coming in tax reform, likely by the end of the month, could go into early February.

Economic front, the Suez Canal traffic is down 50 percent with this drama going on out there. So think container ships, tankers, bulk carriers. We have not seen a big move yet in shipping costs upwards because of it, but it would seem to me that supply chain disruptions represent a good way to get prices higher. A wonderful chart in our housing and mortgage section today about the median age of a first-time home buyer being 29 years old in 1980 when I was in first grade. It's 35 now, so six years later for the average age of one making a first-time home purchase. But then the average age of all other buyers besides a first-time home buyer, so it could be a second home and it could be an eighth home, used to be 35 years of age and now it is, excuse me, used to be 36 and is now 58.

So speaks to a couple of demographic and cultural things there. Odds of a March rate cut are now from 80 percent down to just a little bit below 50 percent. But then the odds of the May rate cut, May 1st, so it's only five weeks later after the May 20th meeting, are at 100%, and they're reflecting a 50 to 75 basis point rate cut. So the futures market is basically saying you're going to get the same amount of rate reduction, but you're going to get it all in May

instead of some in March, some in May. Take it for what it's worth. Oil closing today up over 2%, back up above $75. And please read DC Today for a little extra touch on against doomsdayism and an Ask David question that I thought was very useful. I will leave a podcast and video participants to go to thedctoday.com because of time constraints. Thank you as always for listening, watching, and reading the DC Today. And I will see you from New York City here tomorrow. Take care. The Bonson Group is a group of investment professionals registered with Hightower

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