The Dividend Cafe - The DC Today - Monday, March 25, 2024

Episode Date: March 25, 2024

Today's Post - https://bahnsen.co/49cizrs Greetings from Dallas, Texas where I am the next two days before then getting to Houston on Wednesday and then to the TBG offices in Austin and doing three events there for a couple of days before returning to NYC on Friday. Today’s DCT is housing-heavy with plenty else in the mix to make it worth your time. Dividend Cafe looked further into the time-tested wisdom of dividend growth investing, the historical factors that involved over the past few decades, and the lay of the land in the years ahead. 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. I'm recording in beautiful Dallas, Texas, where I've just arrived and we will be a couple of different client events and activities in Dallas and then Houston and then in Austin where TBG has an office. We have a big client event there on Wednesday night and another deal Thursday and then going back to New York City on Friday. Speaking of which, I'll remind everyone that banks

and the stock market and the bond market, all financial markets for that matter, are closed this coming Friday for Good Friday. So it's a somewhat shortened week, but not because of a Monday holiday, but rather a Friday holiday, which doesn't happen too often. And in the meantime, we're going to make the most of things here in the great state of Texas, where we will close out the first quarter of 2024. I'm going to get right into the DC today. Today, we had futures open last night, down 50 points. And then this morning we're down a hundred and the market did indeed a few hours later open down 100 points and stayed pretty much in that range most of the day between down a hundred and down 200 and ended up closing down 160 on the day, which was 40 basis points. The S&P closed down 30

basis points and the NASDAQ very close down 27. So not a big deal with any of the markets today, but all down pretty close to one another. In terms of this market breadth conversation and what it might mean here in the short term, which by the way is nothing because nobody ever has any idea what these various indicators will mean next. There are certain things that make stuff more common than otherwise, but as far as wonderful predictive value, I think it is utterly worthless. But I will point out that 23% of the stocks in the S&P are at a 52-week high, and it's generally a lot higher than that before things start to have a meaningful correction. Now, the breadth of the market, 82% are now above their

200-day moving average, which again, that's a pretty strong indicator. The moving averages and a literal 52 week higher are different. And those technicalities might seem insignificant, but technically they're not. The 10 year bond yield was up three basis points today, closed at four and a quarter. So it never did break through that 450 and it hasn't come back below 4%, but it's now staying here around this four and a quarter range. Although it did come meaningfully lower last week, about 10 basis points last week from its high on the 10-year yield. So that was the first kind of meaningful rally in bonds we've had in a little bit. Today, energy was up almost 1%.

Industrials were down 0.68%. So a lot of dispersion of results across sectors on the day. I think everyone else kind of knows where we are in the lay of the land. Big, meaningful move up in most risk assets this quarter. Rather stretched valuations. A lot of optimism that regardless of what the Fed is doing, it isn't all that unfriendly. And I think that my basic exhortation that the Fed should not be considered the primary factor in what's happening in markets has been quite correct. On the news front, just, I don't know, I could barely care less about these stories, but Boeing CEO stepped down. Everyone knows they're going through a lot of drama at the moment and their COO is replacing them. bail by $275 million, which means I think it's now $175, it was $450. In the meantime,

the shareholders approved the SPAC that was acquiring the Truth Social social media company, and that stock rallied up huge today, and it does officially convert to be president Trump's shares. So I think his net worth on paper grew by billions of dollars today. Okay. Uh, public policy Friday night. This is what happens when they pass legislation at 1152 PM on a Friday night. Uh, that by Monday, Monday, you barely care anymore. But the Senate passed a $1.2 trillion spending resolution, primarily with defense appropriations. They're going to increase by 3%. Domestic spending will remain totally flat. Military troops will get a 5% pay increase, a little over 5%. And there's a few other funding things in there for child care and cancer research. But a supplementary security bill that addresses Ukraine funding, Israel support, is still not passed.

But nevertheless, there was no shutdown. The House passed it, and now the President's passed it and signed it into law. I have a few different things to talk about with housing. I'll take up the bulk of our time. People always like hearing on the housing front. I do believe that the more I've studied this settlement with the National Association of Realtors that was reached a week ago Friday. So it's now a week and a half full of news, but there had been a $1.8 billion judgment against the National Association of Realtors. I think many felt that that was vulnerable on appeal, but they settled it at

$450 million. So obviously everybody felt it was vulnerable on appeal. $1.2 billion of it got wiped away, but now they confirm that they will go forward paying $450 million. But the biggest issue than the dollars were these concessions. Far more transparency, particularly on buyers now entering written agreements with their own agents and the seller no longer paying the buyer's agent other than what gets worked out. It becoming negotiable. Seems as a game changer. There's all kinds of ways that creative market forces

can work through this, but it is greater price transparency that we've had. And price transparency is always good. Unless someone has something to hide, why would transparency ever be a bad thing? It promotes competition. It promotes optics and decision making. And I don't know. And I don't think anyone else does either.

What the exact ramifications will be. I spent some time over the weekend with some real estate professionals. And there was a lot of conversation around this. And most agree that this is going to lead to change. Just what those changes will be are not fully defined yet. So I want to keep that on your radar. In the meantime, existing home sales volume was up nine and a half percent in February versus January, but still down over 3% versus February of last year. So sales volume had already declined a ton. It now declined even more year over year, but picked up a little bit month

over month. It does seem to me that a little bit higher activity indicates that some buyers are willing to go forward transacting now, believing rates will come down in six months, one year, one and a half years, whatever, allowing them to refinance. So they'd rather buy now, refinance later. But they're not doing that at a meaningfully higher number, but marginally higher. Now, new home sales, by the way, because everything I just said was about existing home sales, new home sales were a little less than expected, down 0.3%, lower than expectations. All of this is with a backdrop of the national home price appreciation numbers, which national home price appreciation is practically an oxymoron because you're really taking an average price level of something that doesn't exist on a national basis. It exists

on a local or regional basis, but then you aggregate all those things together, you get a number and it was up 5.9% in February from the year prior as far as national mean home prices. All four price tiers from the least expensive to the most expensive participated around the same level. Indianapolis was the highest depreciation in any major metro area, up almost 13% year over year. With Austin, Texas seeing the worst depreciation, down 3.7% year over year with Austin, Texas seeing the worst depreciation down 3.7% year over year. But keep in mind, Austin had been one of the highest numbers for five years in a row. So that's why markets like Phoenix and Austin that have cooled a bit, certain Florida markets as well, they're cooling off of absolutely, what is it, El Fuego numbers.

Things had been really, really hot there, obviously. Inventory is down roughly 33% from pre-COVID levels. On a national basis, the number of houses available to buy are down by a third from where they were in 2019. And that statistic is basically everything. from where they were in 2019. And that statistic is basically everything. It's very hard to get prices to drop when supply is dropping like this. We're down to a 12% chance of a Fed rate cut at the May meeting. I expect that I'll get to zero very soon, but still sitting at a 75% chance of a rate cut at the June meeting. I want to point out that the yen, since Japan modestly raised rates for the first time since 2007 last week, the yen has declined. So all those who said,

well, now they're tightening and they're going to strengthen the currency. Just don't ever believe anybody who says anything ever about currency or foreign exchange is where people go to make fools of themselves. Oil close to $82 a barrel up 1.6%. Last week, midstream energy was up another 1.8%. It's up 12% on the year. Oil is up 12% of the year. Natural gas is down 34% on the year. But you do seem to have a non-correlation right now between midstream and S&P, where when the S&P is down, midstream is up. And when the S&P is up, midstream is up. Interesting. Okay, finally, against doomsdayism. I don't think this really has anything to do with doomsdayism. I just wanted to put it given age. And then there's 4.7 million, 32 year olds. So almost 10 million between 31 and 32 year olds, the highest concentration of an age in our country. Uh, so that's either a really positive stat or negative stat,

but either way, I'm sharing it with you. You can check out the chart to see what age you are, how many there are of you around the country, both of men and women. I think it's quite interesting how these demographics work and just the monumental improvement. And this is where it does fit in against doomsdayism that, you know, people in their 30s, 40s is such a high number. And then you can see over time the way the demographics are that reflect what birth rates were X number of years ago. So the number of 50 year olds reflects how many people were being born 50 years ago. And then of course starts to factor in a certain mortality as well. And that becomes a more

poignant number when people are into their 70s and 80s for obvious reasons. In the Ask David section, somebody asked me why the Fed's inflation target is 2% if it's averaged 3.3% since the 1950s and wondered if they're trying to indicate that it's a more fragile economy. But of course, the 3.3% we averaged from the 50s included some very high inflation decades, most notably the 1970s, where it was running at double the run rate, excuse me, the historical average, I should say. The historical average we've had now was significantly higher. If you look at where the inflation rate has been since the 90s, you're talking about something in the low twos. People could disagree with them targeting inflation at all, any rate. I do. People can disagree as to

what that number ought to be, but I don't think you'd find anyone that wants them to target 3.3% inflation, nor does anyone believe 3.3 really is the new normal. It's sort of an old normal because of those higher decades. The fact of matter is that the bigger conversation is what rate policy they set. Targeting to a given inflation rate, they just started doing in much more recent times. And I think they've already shown a willingness to play games with that to kind of provide a pretextual rationale for what they're doing with rate policy. Okay, that's it. We've gone around the horn here in Dallas, Texas with the DC Today. I think we covered all the categories. The Fed's PCE number will come on Friday, which is what they use as their preferred inflation measurement. And in the meantime,

we'll have three market days left, Tuesday, Wednesday, Thursday, before the first quarter of 2024 comes to an end. With that said, reach out with any questions you may have, questions at thebonsongroup.com. And 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,

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