The Dividend Cafe - The DC Today Thursday, June 29, 2023

Episode Date: June 29, 2023

Today's Post - https://bahnsen.co/3prCOAq An upward revision in Q1 GDP fueled by stronger consumer spending and exports, jobless claims figures that came in better than expected, and a passing grade for all US banks in Fed stress test results were what fueled today’s market rally and run-up in short-term rates. 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. Hello and welcome to DC Today. Thursday, June 29th, almost about a day away through halfway point on the year. through halfway point on the year. Nice day in markets today. The Dow was up almost 270 points. S&P was up about half a percent, a little less. NASDAQ was flat on the day. We had a couple of good data points out today that kind of fueled the rally, which was nice to see.

GDP for Q1 was revised up from 1.3 to 2%. So pretty big upward revision. A lot of that was, or the biggest contributor was consumer spending, which was something like 4.2% inside of that number, which is great to see. The one thing I'll say to that, to take it sort of with a grain of salt, is just that we also had about an eight and a half or 8.7% increase in social security COLA, cost of adjustment, living adjustment amount from the government in there too.

So that could have been what fueled some of that consumer spending. But exports actually were up nicely inside of that number too, something like 8%, a little less than 8% in there too. So I think that was the better part of that number. But any upward revision of GDP is always welcome. So you had that as good news. There was completed Dodd-Frank stress test that the Fed concluded today, which showed all 23 banks passing. And pretty meaningful stress test. It equated to something like a big recession globally, unemployment rising up to 10%, and equated to something like a $541 billion loss inside of the banking system. They were able to withstand that. It included a 40% drawdown in

commercial real estate values, which is a topic du jour lately after Silicon Valley Bank failure with what if commercial prices go down, all those lenders are going to struggle with not getting repaid on their loans and things. So pretty decent stress test and good results on the day. The labor market continues to show strength. The jobless numbers that came out today were better than expected. It was a 239,000 print versus 265 expectations. So a lot less of those filing for initial jobless claims, unemployment, which is good. The continuing claims also beat. So again, those three pieces of data on the day were pretty positive.

There's not a lot of holes I could poke through them. And it's kind of nice to see markets actually go up, or at least part of the market went up on the news. So good news being good news. In other words, instead of good news being a fear that the Fed will raise rates more than others predict. So I'll take that too. There was pending home sales on the day were lower than expected. We expect sort of a flat number and they came out negative 2.7, you home sales on the day were lower than expected. We expect sort of a flat number and they came out negative 2.7 on the week, which I don't know what else is to be expected. I mean, there's really not a lot of inventory for sale. We're at about half the inventory that we had before the pandemic, just because mortgage rates are high and people have either moved or

set to stay where they are. But other than new home sales, there's just not a lot of inventory on existing home sales. And so obviously, the sales volume is lower. There was some additional comments out from the Fed today. Also in Europe, there was a Bank of Spain event where Powell spoke a little bit. He just kind of walked back some of the language he had yesterday, which is to say that he's not predicting there'll be two consecutive rate hikes. He just said that it's on the table and that whatever he needs to do to get inflation back to 2% is what his goal is. But as he said yesterday, he's not expecting that until 2025. And also the dot plots, meaning their estimate of where rates are going to go, isn't much higher than where they already are.

So to me, that just says that they've, they've accomplished what they want to accomplish and they're gonna let this thing play out a bit. So whether they leave rates where they are, whether they raise rates, another 25 or 50 basis points, pretty immaterial in my opinion, the value stocks outperformed today, rates went up. The 10 year was up, like, I think it was 13 basis points on the day. Two year was also up about the same. So you can sort of see a flattening on the yield curve a little bit with some hotter economic numbers,

which is to be expected. But with that, you saw shorter duration stocks, so value stocks, dividend stocks, those types of things outperformed pretty significantly today. Again, the Dow was up 0.8%. The NASDAQ was a zero. It gives you a difference between sort of value and growth. But all that to say, I'm encouraged by the news today. It's all expansion zero. It gives you a difference between sort of value and growth. But all that to say, I'm encouraged by the news today. It's all expansionary. It's all showing a pretty resilient economy, even in the face of rates that have gone up 500 basis points. So I think it's still kind of further good news to speak today. With that, I'll let you go for the night. We've got some inflation data out tomorrow on CorePCE, which I

think we'll be telling. And then we'll have Dividend Cafe in your inbox as always. Of course, we've got the weekend and then probably a pretty slow week is my guess, at least the first half next week as we head into the 4th of July holiday. So if I don't speak to you, have a great 4th. Reach out with questions and we'll talk soon. 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. 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's

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