The Dividend Cafe - The DC Today - Monday, October 9, 2023

Episode Date: October 9, 2023

Today's Post - https://bahnsen.co/3tpEJXU All attention this weekend immediately moved Saturday morning to the unspeakable attacks on Israel by Hamas, the declaration of war to protect themselves by Israel, and speculation as to what the ramification would be. I assure you ample commentary is provided on those subjects in this edition of The DC Today, An important thing to note today: the stock market was open, but bond markets (and banks) were not. There is obviously action in the bond futures world (indicating yields down and prices up), but with no cash market bond action it is simply a distorted and weird day. It only happens twice every year (Columbus Day being one of them), but it basically never happens following a weekend of such global turmoil. As an earnest believer in price discovery, I feel somewhat limited in terms of thoughts and deeds when all useful information is not actually available. 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. It's a very odd Monday for a number of reasons. I'm going to just kind of get right into it. I probably will not hit all the bullet points in the podcast here that are covered in the written DC Today, but I want to hit some of the major issues. The first thing that I want to point out is that today is Monday, October 9th, which is Columbus Day. And so banks were closed today and the bond market was closed today. But the stock market was open. And this only happens twice in any given year, Columbus Day being one of them. I think it is a very frustrating set of circumstances. But this is the first time I can remember where it's happened right after a tremendous event like the unthinkable attack on Israel from terrorist group Hamas over the weekend that has resulted in a really significant warlike escalation in the Middle East. And yet we don't have a bond market open today to process and price some of that. And I'm going to focus my comments today on stock market ramifications. And yet, I just want

you to know that there would be more to say if there was more price discovery. But when you have stocks open and bonds not, it is somewhat distortive. And I've always said this. I've probably written this, you know, 20 years of this happening or maybe less than that. But it's been a number of years. And yet the significance of it in a day like today, I think, is more enhanced. Basically, just let me get some easy stuff out of the way. Futures last night when they opened, and again, this vicious assault on Israel from Amas to play Saturday. And there was a lot of speculation as to where oil markets would go and where stock markets would go. And obviously, we're already in the midst of a very vulnerable period of time. And yet you had

Futures last night open only down 200 points. And I think a lot of people would have expected it could have been much worse. And then that even improved a little throughout the evening. And I think it was only down about 150 by the time I went to bed pretty late last evening. And then early this morning down about the same. By the time the market opened several hours later, it was basically flat. And it did go down a little. At one point, I think the market was down 150 for a very short period of time within the first hour, hour and a half of the day.

But you had a 400 point intraday swing and the market closed near its highs on the day up just shy of 200 points. And if you look back to where we were Friday with the intraday move down 200, closing up over 300, the market's up 750 points from its intraday low on Friday. And so that can seem quite odd that it would happen in the midst seemed quite odd that it would happen in the midst of the events over the weekend. Yes, energy was up quite a bit, over three and a half percent today alone. And the defense sector was up dramatically. And so you could say, well, energy and defense rallying in the midst of Middle East geopolitical turmoil, that actually makes a lot of sense. But there were no sectors that were down on the day. And even the NASDAQ, which had been down over 1%, did close up 39 basis points. The S&P was up 63 basis points. You had even financials up. They were the worst performing sector and they

were just barely above the flat line. But 11 out of 11 sectors in positive territory. So a very peculiar day. And I have to think that bond yields will tell us more of a story. The futures market for treasuries was pointing to higher prices earlier and therefore lower yields and kind of a risk-off move. But then as equities went up today, not having a cash market in bonds to be able to look at what the full story is, is difficult.

I hope you follow what I'm saying there. Because there's so much stuff in DC Today that's outside of the Israel-Gaza story, I want to really stick to the main thing and allow you to read the DC Today for some of the peripherals. I mean, we know the death toll in Israel alone is apparently going to be getting close to 1,000 people soon. It's well over 700 already. And the Israeli army has struck back at a thousand targets in Gaza already, basically with missile attacks. They've pulled up 300,000 reservists, so they're certainly acting as if they're preparing to send in ground troops. And they've stated that they will be cutting off all food, electricity, water, etc.

So this is going to be significant. electricity, water, etc. So this is going to be significant, and I believe, certainly deservedly so, for the atrocities that have been perpetrated against them. And yet, Iran's role, there's no ambiguity about Iran having a role, being supportive, enabling. What the specifics will end up being there may very well determine where this escalates to and what Israel chooses to do as it pertains to Iran's support of Hamas. I think that's a very intense issue for the Biden administration, the politics of it, certainly just the overall geopolitical ramifications, what American policy may be, probably what the American electorate's response will be. But then in terms of markets

and macroeconomics, knowing where Israel and Iran will go with this will end up being a very big step. I want to elaborate more on this in days to come, but there's an argument he made as well that what China's response looks like. And right now you have Senator Schumer and a delegate from the United States Senate meeting with Xi and Chinese delegate. And that's a pretty significant story in its own right. And so this ends up having a lot of adjacent stories to it the Israel Middle East situation there's talk today about Speaker McCarthy possibly being asked to stay as Speaker in lieu of this

I don't think that will go anywhere but the idea of them getting the votes in the House to appoint either Jim Jordan or Steve Scalise seems very unlikely to me or at least seems like it's a volatile path to get there they'll get one of one way or the other eventually but I just think that part's probably increased in its uncertainty as a result of all this so yeah I think what Iran will end up doing will end up and what comes out around that and how Israel responds will have an impact in oil prices. I don't see anything right now that pushes oil below 80. But I don't see anything necessarily that's going to push it above 100. That 80 to 100

range seems to be where things have been headed and where things are likely to stay for some time. I would point out that WTI crude closed at $86.38 today. That was up 4.3%. That's a decent move. It's not huge for war breaking out in the Middle East. And it's only about half of what oil had lost in price last week. But again, I think that OPEC Plus's commitments, their economic objectives, that's why I set that $80 to $100 range, which is up from the prior $70 to $90 range. And that's kind of where things stand. There's a great chart, by the way, in DC Today about oil price response to different Middle East geopolitical instabilities over the years. I really encourage you to check that out. And yet, you know, the job market report on Friday, payrolls coming in at $356,000, double expectations, wages up 0.2% for the month, softer than expectations. Average hours didn move, 34.4 hours. The labor participation rate

didn't change, still 62.8. So you had a top line number of a lot more jobs created than expected, exactly in line with the current narrative of the labor data just not really being impacted by tightening monetary policy. And yet some of the other ingredients within it that we care about not moving at all in the month. That's the state of affairs right now. Healthy jobs market, upward pressure in oil prices, significant upward pressure in geopolitics, and human tragedy that's really unthinkable

with our friends in Israel. And markets today responding to the upside, not the downside. And so we'll see where things go tomorrow on this Columbus Day impacted financial market limited day that we've had. Please reach out with any questions. I encourage you to read the full dctoday.com. And I look forward to being with you again tomorrow here in New York City for the DC Today. Thanks so much for listening, reading and watching. Thank you. referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. All data and information referenced herein are from sources

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