The Dividend Cafe - The DC Today - Thursday, March 21, 2024

Episode Date: March 21, 2024

Today's Post - https://bahnsen.co/3vpQejx Markets built on yesterdays rally today closing higher for a third straight session. For the markets, the porridge-is-just-right narrative around the balance of strong economic and employment backdrop combined with disinflation and a Fed that is now talking about slowing QT and accepting PCE at 2.6% this year (vs 2%) before they would begin cutting interest rates. Today we also had jobless claims and existing home sales both positive and supportive of that narrative as well. Keep in mind please, that markets are a forward looking pricing mechanism, and a lot of soft-landing narrative at this point is fully baked in. The question will be on fundamentals keeping up with those higher valuations names from here, and I still suspect there will be the haves vs. have-nots in that regard and the time for being selective here is very important. 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, welcome to DC Today on Thursday. Today is March 21st, and it's great to be with you here, as it always is, on another nice update here. So we've got follow through from yesterday's nice rally of 400 points again today. Another big update. Rates on the day were basically unchanged.

And so we're just still digesting more or less what the Fed went through yesterday with their statement and press conference. And like I mentioned yesterday, they did have mention on quantitative tightening and just starting to ease that back a little bit. That's meaningful to markets. And then they added a PCE goal for the year target at 2.6, which is on the way to 2%, but not at 2%. And so I think it's just where things are going and knowing they need to start easing

policy before they actually get to 2%. There's still the three cuts priced in for this year. I think those things are good. And so markets are feeling good about all those things. And my comment is just remember that markets price things in advance. A lot of that step is baked in at this point. I don't want people to get too ahead of themselves. There's a lot of soft landing narrative and good things now priced into markets. And so I suspect going forward, it's going to be about how those company fundamentals are going to keep pace with what the valuations of their names are actually trading at. And I think some will do better than others. And I think it's a time to be

very selective. But all in all, generally speaking, the numbers today, the economic numbers, were also all pretty supportive of that soft landing narrative. We had jobless claims that were about in line. We got a 210 number versus about a 215 expectation. So that's a little bit less on initial jobless claims. That's a good thing. Existing claims were actually a little higher. So people that are unemployed are staying that way for longer. But generally speaking, the employment picture is still very positive. We had a existing home sales number today that was quite a bit better than expected. It was nine and a half percent for the month

at 4.44 houses, and that was better than expected. And so you're continuing to see positive things in real estate and housing and support for it. And I talked about the demographics being supportive and the inventory amount that we have being lower and that being supportive of some of these things. But that's what we are seeing in some of those numbers, which is good. There was a manufacturing number out of Philadelphia today that was still in expansion territory. It was down a little from last month. But again, that was still fairly positive on the day. And then you had PMI numbers come in in expansion territory as well. So all in all, most of the numbers in the economy are looking fairly good, fairly decent. Fed seems like it's on a certain path to start to ease here heading into the end of the year or mid-year to the end of the year.

And so again, markets are feeling good. And that's what you're seeing in risk assets right now. There was a question on commercial real estate. I actually did a write-up on the March 14th, DC today on commercial real estate starting to bottom. And I was particularly talking about different segments of it, including office. And the particular question that came in was more on office and is it still a big risk? And is there more to, you know, more shoe to drop and all that? And I basically just said, you know, a lot of that's priced in there too. And there's just a big disparity between the word office. I mean, there's class A that was really not impaired at all during this downturn. And then a lot of the other parts of it

that were upwards of 20%. But all that to say, now that we're getting through that, and we are seeing lower interest rates start to come back into the picture a little bit with the economy still doing normal things, you are starting to see some price rebound. And if that's where we are in that cycle, then I'm not sure that that shoe to drop is going to materialize at this point. I think that we'll get through just fine. The other thing is just there was a big amount of equity buffer built in there. And so it wasn't like other periods where there wasn't enough equity to support a declining price from a loan to value perspective. We had that protective equity in there. So with that, we've got tomorrow, we're going to have Dividend Cafe

in your inbox as we always do. There's a few Fed presidents talking tomorrow, I know Bostick and Barr are, and I think Powell may have some words at some point too. So you may see some reiteration or some follow through from yesterday's comments tomorrow. But other than that, I wish you all a lovely evening and reach out with your questions as always. Thank you so much. The Bonson Group is a group of investment professionals registered with Hightower as always. Thank you. 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 expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein.

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