The Dividend Cafe - The DC Today - Monday, June 26, 2023

Episode Date: June 26, 2023

Today's Post - https://bahnsen.co/3NMJ3bk Top News Stories Friday night the absolutely fascinating news hit that a coup d’etat was underway in Russia, or at least an attempted one, with mercenary chief, Yevgeny Prigozhin, leading troops out of Ukraine and into a city south of Moscow with significant military headquarters for Russia. Putin, of course, called the act a treasonous betrayal and vowed revenge. As the day went on Saturday it was announced that a truce had been reached and Prigozhin had called off the march on Moscow, and would be allowed to peacefully enter Belarus. But then over the next 24 hours more and more news and analysis came that seemed to indicate that, ummmm, maybe that wasn’t going to prove an entirely safe exit plan for Prigozhin. The entire question comes down to whether or not this indicates the beginning of the end of the Ukraine war, and it is too early to tell. If nothing else, it still indicates a vulnerability for Putin, especially if reports are true that other Russian generals and oligarchs were actually favorable (quietly or out loud) to what Prigozhin was doing. I wouldn’t read too much into kneejerk responses from anyone, but it all does seem reasonable enough to say that (a) Putin’s position seems weaker than at any time since he took power, and (b) An internal Russian move may be a more likely end to Putin and the aggression against Ukraine than anything else we have seen so far. 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, coming at you live from our studio here in the New York office. from our studio here in the New York office. Really an interesting day. It was an interesting weekend. Actually, a lot of our time today will be covering some of these events in Russia over the weekend that in a lot of ways seem more like a future movie than a geopolitical thriller brought to the big screen as opposed to market sensitive activity. But as has been the case through a handful of things in this Russia,

Ukraine war, there is certainly some degree of market impact. I want to unpack a few things where we stand now. But just first, in terms of the market today, the Dow ended up flat on the day. It had been up 100 points, more or less, that was the exact high. It had been down 100 points, more or less the exact low, and closed right there in that mid spot around zero. The S&P though was down about half a percent and the NASDAQ was down over 1%. So you had a very slight reversal of the trajectory from last week. The top performing sectors today were real estate, which was up two and a quarter percent, and energy, which was up one and three quarters percent. And they had been hit last week and had a pretty sizable rally today. And then the worst performing sector today was communication services, which was down almost 2%. That had been a big rally spot last week. So I don't know if it's a total mean reversion yet, but at least a partial one here today.

That theme in markets, though, remains kind of the interesting story. I'm going to unpack a lot more about this in Dividend Cafe on Friday. But certainly it has remained a bifurcated market. But bifurcated does not mean half up, half down. It's really been less than 20 companies that are the lion's share of market returns, really six or seven that are a sizable amount of that. And then kind of everything else you do have just barely half, it's a tiny bit over half the S&P that is above its 200-day moving average. And then, you know, until the more recent period, you're talking about, by recent, I mean today,

you're talking about banks and REITs being the most troubled part of the market. And so, yeah, they both had a little run here today, particularly energy and REITs. But those rate sensitive and those liquidity sensitive areas of the market, I think, have been more troubled. Utilities have been a mess. Anything that has really levered to China recovery that has been underwhelming, energy is the great example there, hasn't garnered much 2023 momentum yet. We'll unpack more of that on Friday in Dividend Cafe. The other thing I'd say at the dctoday.com, if you like some of the links that I'll occasionally put in,

and I try not to put links to outside articles much, unless I think it's really special, because I know we all have so much we're already trying to read. But The Atlantic ran a story on crypto that I thought was fascinating and the impact that the speculative zigs and zags the whole crypto space has had so far, what that means for its future investor base. And I thought it was an article worth sharing, so I did. worth sharing, so I did. As I mentioned, though, the Friday night of news of a sort of coup d'etat underway in Russia, at least an attempted one, was quite interesting. And there was a sort of mercenary chief, and I can't pronounce the name, so I'm just going to say Prigozhin, but I don't know if I'm hearing, I've heard it pronounced on the media so many different ways. I can certainly phonetically spell it out. But for those who are really astute at Russian

pronunciation that are offended by my mangling of this, I beg your pardon. Leading troops out of Ukraine into a city south of Moscow with the intent, he said, of basically attacking Moscow was really something else. Putin had come out and made a video presentation to the country calling it a treasonous act, vowing revenge. And then six hours into the day on Saturday, it was announced that they had come to a truce, that he would be sort of exiled off into Belarus, and that the attempt at this sort of siege was called off. And I wouldn't be sleeping great, you know, if I were, let's call it, progosen. But what an interesting turn of events. And the most interesting part is not that it happened or that it failed or the sort of half full, half empty for both sides conclusion to it.

It is the fact that there's just no denying that it exposes some vulnerability to Putin's hold on power. There did not seem to be a strong rally of support from the military, from others in Russian aspects of government. There was very little noise to come to his defense. And I think as a sort of knee-jerk response, it seems appropriate to point out that this doesn't seem to bode well for Russian strength and unity and resolve in finishing out a Ukraine war successfully. And yet I wouldn't want to be making any prediction that this thing is over. It just seems to me that it increases the odds that the way it ends has to do with an internal Russian move more than some sort of victory in the Ukrainian conflict itself that reverses their aggression,

the Russian aggression against Ukraine. There could be something internal that unfolds. That's really, I think, what this weekend opened the door to. By way of the Fed, I just think this is worth continuing to point out. It's globally incoherent, not merely domestically. We talked about the incoherence last week of pausing this month, but then saying we need to do two hikes later in the year and leading to some people, this, your current analyst included, saying that I don't believe then they'll do two more hikes this year. And yet everyone being open to the idea, they don't really know what they're going to do. But you did have the Swiss National Bank last week effectively hike less than had been expected, right as the Bank of England hiked more than expected and the European Central Bank hiked exactly what was expected.

So there were a couple of different indicators from different central banks, and it's pulling in a number of different directions, just as domestically and internally our own Fed has done. His congressional testimony last week by his, I mean, Chairman Powell, it didn't move markets. It was basically exactly in line with the script from the week before from the Federal Open Market Committee. I think it's a jump ball at the late July meeting. I will point out it is a late July meeting. There's a lot of time and a lot of data that will come between now and then. So I understand pricing indicators. That really refers to the futures market, the Fed funds futures,

indicating more likelihood of a pause of a hike at the next meeting after this pause than not. I see an ongoing pause as entirely possible. And I see that as a form of tightening. And so it isn't like if they were to stay still, that all of a sudden that becomes a form of easing. And that's a point I'm going to make in the Diven Cafe Friday as I elaborate on it more for what the second half of the year holds. Okay. But speaking of later this week, the Fed's money supply reports comes

tomorrow, Tuesday, M1, M2, M3, where things stand. All those money supply indicators have been negative here for several months. Speaking of negative, the rig count dropped for crude oil, another six rigs last week. We're down to 546 nationwide. So about 40% down still from our high. This is the lowest level we've been since April. Natural gas rigs are the lowest they've been since March. So we've continued to see more rigs coming offline in both oil and gas. Why am I against doomsdayism? In 1900, 20% of males died at childbirth or in their first year. They never made it to their first birthday, 20%. Now you have that age 62 is the age at which 20% do not make it. So pretty handsome increase of life expectancy for males over the last 100 plus years.

Someone had asked me in the Ask David section, what recovery looks like normally after a Fed pause? What happens in the economy? What happens in earnings traditionally when the Fed does a pause and they've been in the middle of hiking? The problem is that if there were a precedent, and I'll tell you right now there isn't, it still wouldn't be predictive. If there were some precedent from before, I wouldn't even pretend for you that I thought it was somewhat useful in predicting what happened this time. But really pauses in the past have been, we are hiking, we're going to pause from hiking, and then we're going to go to cuts. And so I see that as something that is very different from hiking, pausing, and then hiking again. And that's what the Fed's saying they're going to do. And we don't know what

they're going to do. But to try to extract from past to current some baseline expectation for the economy or for corporate profits or interest rates across the yield curve, I think would be totally impossible. So anyways, we've covered a lot of ground there. I'll have a daily market synopsis for you here tomorrow as well. From New York, I really welcome any questions you have. Questions at the Bonsai Group dot com. Looking forward to really finishing the first half of 2023 strong. We're here for you.

And we encourage you to reach out if you have any questions for us. Have a wonderful evening. Thanks for listening. Thanks for watching. And thanks for reading the DC Today. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC.

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