The Dividend Cafe - The DC Today - Thursday, January 19, 2023

Starting point is 00:00:00 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. Hello and welcome to the DC Today. As you might recognize, I am not David Bonson. I'm Trevor Cummings, filling in for David Bonson. means filling in for David Bonson. He had quite a busy day, which I actually hesitate to even say that because I know the life of David Bonson well, and every day is quite a busy day. So I will be filling in for him today. A few tidbits on what's going on in markets, give you an update on what happened. And then I really want to encourage you to check out the Ask David section. We'll speak to that a little bit on the video here and podcast. So as far as what went on today, the Dow Jones was down 0.76% on the day. S&P matched that. So exactly the same, down 0.76. The NASDAQ was down 0.96%. Not a lot of movement in the 10-year treasury. Went up about two basis points, hovering around 3.4%. I think it's important to anchor on kind of where that peak was at the 4.4%.

Starting point is 00:01:06 So you have a softer 10-year treasury. Why is that important to you? The bond market is probably the best place to get your point of view on where interest rates are going and from that where inflation is going. So if in fact, and we don't know, the 10-year treasury did peak and it's retreating to a more natural level, that would make one believe that every print we get on CPI and everything going forward is going to be softer inflation data. So you can juxtapose that against what you're reading in the media. But again, the 10-year treasury sits at about 3.4%. As far as today, top performing sector was energy. It was up 1.11%. That was supported by oil.

Starting point is 00:01:50 That was up 1.25%, putting oil at $80.47 a barrel. Bottom performing sector, down about 2%, was industrials. One thing that I'll point out, and David spoke to it yesterday, and I think it's important important and it can be overlooked. We spent a long time over the last year or so, and hopefully this makes sense to you, but where good news was bad news and bad news was good news for markets. What do I mean by that? The biggest concern has been what will the Federal Reserve do? biggest concern has been what will the Federal Reserve do? So when data came out showing that labor markets were good or manufacturing was strong, the markets would react poorly. Good news

Starting point is 00:02:33 was producing bad market results. Why? Because it felt like that type of data would support the Fed on continuing to hike interest rates. And that's not what investors wanted. Now, on the other side, bad news, meaning you see things softening. Investors would react buying equities and markets would go up because they thought, hey, the Fed isn't going to push us into a recession. So therefore, that will slow them down. Yesterday, we saw something a little bit different. We saw some bad data points or weaker data points, however you want to describe it. And we saw the market react poorly. What that is telling you is now the market has two concerns. They're very curious on what the clarity of what the Fed is going to do, but the market also has concerns of recession. So if any data point shows little

Starting point is 00:03:23 cracks or little weaknesses in the system, the markets are getting jittery. So there will be days now where bad news is bad news and good news is good news. And that's the most fun part about markets. They are built to absolutely confuse you. And that's what we're here for, to help as much as we can. So here's the data points you got today. You got unemployment. That was the highlight.

Starting point is 00:03:43 Kim. So here's the data points you got today. You got unemployment. That was the highlight. So unemployment numbers, about 190,000 claims, much less than the 215,000 expectation. What do you get from that? Labor markets are strong. Labor markets are tight. And one thing that David Bonson has been hammering home, if you have earnings growth and if you have a strong labor market, you are not going to have a recession in that environment. So if you want to see the cracks in the system and the leading indicators, you're going to see earnings retreat. You're going to see those labor markets weaken, which we have yet to see that. Now, there was some other data points.

Starting point is 00:04:21 We look at the Philadelphia Fed Manufacturing Index. That's a regional index to try to give us an idea on what national manufacturing looked like. It's five months in a row of a negative reading. But again, that reading was better than the estimated or consensus view. We also got new housing starts. That's new construction.

Starting point is 00:04:39 That came in stronger than expected, was still down 11%. And what's that showing you? That folks in construction, new housing starts. It's jittery right now. When mortgages were high and activity or transactions slowed down, it makes people up the supply chain that actually build homes hesitate to start that process.

Starting point is 00:05:03 So we study and we look at what does new construction look like, new starts, actually hammering nails, and what do permits look like, right? Because we're just peeling back the layer of you have to get a permit to get construction, you have to get construction to get an actual future sale. So again, we're showing weakness in that area, but more of that is just a posture of unsure where the real estate market is going. An interesting thing in that data point too, is that we saw a decent construction on the new single family homes, where it was much weaker on the apartment side. So you start to get this idea of kind of personal use versus commercial use. The other thing I pointed out is that all eyes still are on the Fed.

Starting point is 00:05:47 A lot of Fed representatives have spoken in the last few weeks, and there are some mixed messaging. We don't know if the posture is as hawkish as we might think or dovish as we might hope, depending on what side of you you're on. I put a quote in there that Jamie Dimon, for what it's worth, CEO of JPMorgan Chase came out and said that he thinks 5% is that ceiling on the Fed funds rate. We will see how it plays out. As I said at the beginning of the video, I really encourage you to read the Ask David section. The reason is, is the question he addresses today is a question we've gotten quite a lot lately.

Starting point is 00:06:24 We've hosted a few client dinners recently, and every single dinner, this same question comes out, and people are asking about this debt ceiling. Why? Because it's all over the news. It's what people are reading about. It's what's captivating, I suppose, right now. And it's something we deal with every year. This year feels a little bit stronger, more exaggerated. There's some tension amongst politicians, even in the same party. So they will use this as a leverage point to get media appearances to try to jockey for what they're looking to do. But what David points out is that this is not a market story. Could this cause gyrations in short term? Absolutely. But if

Starting point is 00:07:04 you're reading anywhere about does this mean the U.S. defaults on debt or anything like that, I really encourage you to lean on David's wisdom and follow him there. It's not only about your ability, a lot of it's mental, right? You could have the greatest financial plan. You could build the right portfolio that fits exactly what you're trying to achieve. But the mental part, the fact that you have to open a newspaper every day if you read the newspaper, or you have to go online and you have to mentally fight through these headlines to figure out what is the signal and what is the noise. And ultimately, that's why we produce something every day, because we want to show you here's our digest of the daily news, what matters

Starting point is 00:07:51 to you, what doesn't matter, and kind of where you should be thoughtful. Hopefully you guys appreciate it, enjoy it. I know David puts his heart and soul into it every single day. So thank you for having me today. Tomorrow, you'll get the long form Dividend Cafe. David's going to touch on housing. I know a lot of our clients and our readers really are interested in that topic. So look for the Dividend Cafe on housing tomorrow. And you also, I think I put it in here tomorrow. I think you get the new home sales data as well. So you'll be able to check that out. With that said, thank you for joining us and allowing me to be a guest today. And we will see you tomorrow for the Dividend Cafe.

Starting point is 00:08:33 This is me signing out. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through 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. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk. There is no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee.

Starting point is 00:09:06 The investment opportunities Reference Tyrion may not be suitable for all investors. All data and information Reference Tyrion are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary and does not constitute investment advice. The Bonser Group and Hightower shall not in any way be liable for claims and make no Thank you. information are provided as of the date referenced. Such data and information are subject to change without notice. This document was created for informational purposes only. The opinions expressed are solely those of the Bonson Group and do not represent those of Hightower Advisors LLC or any of its affiliates. Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information.

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The Dividend Cafe - The DC Today - Thursday, January 19, 2023

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