The Dividend Cafe - The DC Today - Thursday, December 21, 2023

Episode Date: December 21, 2023

Today's Post - https://bahnsen.co/41AnBfi Markets rallied today after their sell-off yesterday, moving up +322 points on the Dow. Some of yesterday’s heightened downside does appear to be related to zero-day option expirations, something so silly, stupid, and complex that I will spare you all the details. 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 Thursday edition of DC Today, which is going to be our final DC Today of 2023. our final DC Today of 2023. There will be a Dividend Cafe tomorrow on Friday, and it's one that I greatly encourage all of you to read, watch, listen, whatever your chosen medium may be. I think it's an important topic, and I'm looking forward to sharing with you the things that I have to say. The reason we're not going to have a DC Today next week is hopefully obvious. It's Christmas on Monday, and then with the end of the year, the holidays and so forth, I'm going to be out of the country with my family, and my team deserves a few days off from all this production, and you deserve a few days off from having to hear mine and Brian's voice or read our boring

literature. So we'll get back at you into the new year, and there's going to be a lot of fun things that we kick off the year with. I do this annual white paper recapping the year behind and forecasting a lot of things about the year ahead. And I'm really looking forward to writing that this year. It's one of my favorite things to do every year. It's become a tradition that it kind of serves as that bridge from one year into the next. So I'm looking forward to that project and bringing that to you in the early part of the new year. As far as just closing out 2023's DC Today, just keep in mind that what I'm about to share doesn't actually close out the year in the market because we still do have tomorrow, Friday, and then we have four

market days next week. And so any number of things can happen in five days. But the market was up 322 points today on the Dow. You recall it was down 450 or so yesterday. So it made back a good portion of yesterday's drop. And I put a link to the article. It kind of explains what happened yesterday. I don't want to get too into the weeds because I just could not care less about this stuff. I am convinced that it is what happened. believe that what happened yesterday was related to that and that there were some put options in the S&P as they were expiring was forcing traders to do more selling to offset some of meeting these option deals. It's a very silly, very stupid, very unwise thing. And I'll let you read the article if you're interested. And if you're not interested, kudos to you because it really doesn't make a bit of difference in your life. But all that to say, there was a little enhanced volatility yesterday.

Obviously, we've been in a multi-thousand point rally in markets. Lost 450 yesterday, gained back 322 today. So the Dow was up nearly 1% today. The S&P was up just over 1%. The NASDAQ was up one and a quarter. The bond market was pretty flat today with the 10-year at 3.89%. The leading sector today was consumer discretionary up 1.4. Healthcare was second at 1.2. And then the last place performing was still positive.

So one of those days where the entirety of S&P 500 sectors were in the green, and that was utilities up 13 basis points. Oil was pretty flattish, still at about $74 a barrel. Economically, they did adjust the real GDP growth number for Q3 before the annualized figure come in at 5.2%. They revised it downward, but still at 4.9%. So still quite a number. Initial jobless claims came in at 205,000 for the week, which was a full 10,000 less than anticipated. So still not a super robust hiring environment, but really very few firings going on. And that's what would generally create a spike in initial jobless claims. But there just doesn't seem to be a lot of firing, even as there isn't necessarily a lot of hiring in this particular exact context.

So the question in Ask David today had to do with whether or not, in addition to looking at the fundamentals of dividend growth, we also are curious about a stock story or some sort of special catalyst that might give the share price a pop. Do we think about those things in our buying decisions? And again, even though I could tease a little about some of the ambiguity in the language about what a stock story is exactly, especially in what you're talking about in hindsight. I guess people can say there was a story, but without the gift of hindsight, what is this catalyst that produces an unexpected pop. It's either something everyone already knows about, which isn't going to pop anything, or it is a kind of narrative that I don't think exists. You know, I want to be real clear. We're going to talk in Dividend Cafe tomorrow more about dividend growth and the fundamentals and philosophy behind it and where that fits in, in particular, this current environment. But there is a story we carry about it. The dividend does deal with the

operating performance of a company. And so let's go ahead and understand this. Quantitative things are themselves a byproduct of qualitative things. Companies have a story and then out of that story, you get cash flow, you get earnings, you get assets, you get a return on assets, you get a return on invested capital. There's a lot of different metrics that we can call quantifiable, but they come out of something qualitative. So we are interested in the quantitative and qualitative aspects of a company and its operating performance. And then from that, the propensity of the company to share those earnings in the form of a dividend with investors and to do so in a way where the dividend is growing year over year, indicating a growing company. and to do so in a way where the dividend is growing year over year, indicating a growing company.

And that is not a story that we look to to get a share price pop. We want sustainable and dependable and reliable operating growth over time from high-quality businesses. So that's our story. We're sticking to it. I hope that's helpful, and I really encourage you to listen to Dividend Cafe tomorrow. I'm going to leave it there. It's really been a lot of fun doing DC Today this year. We're always open to your feedback. And I look forward to coming back to you with another DC Today on the other side of the new year. But in the meantime, enjoy Dividend Cafe tomorrow and have yourself a very Merry Christmas.

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