The Dividend Cafe - The DC Today - Thursday, May 25, 2023

Episode Date: May 25, 2023

Today's Post - https://bahnsen.co/45JhuqH The debt ceiling discussions advanced today though no final deal was struck. The adjectives and nouns across the headlines refer to “fresh urgency,” and “potential default,” and “sensitive phase”. The Fed seems to be telegraphing a “pause” at the next meeting … The new language being thrown out is whether or not they are “pausing” or “skipping.” The Artificial Intelligence space is rallying like crazy as one of the good companies that make money reported a huge quarter, which naturally led to a big rally in the bad companies that don’t make money … One year ago today, the market closed 32,637. Today it closed 32,765 – up 0.39% in one year. 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. The market is still open going into Memorial Day weekend. And yet it will be a dividend cafe day, not D.C. today. Let me just go through a couple of things real quickly. It was a really interesting day because you had the Nasdaq on fire. The Nasdaq ended up 1.71 percent. And that's with the technology sector up 4.4 percent. But a massive amount of it was from the huge announcement in the news from NVIDIA.

And a lot of names in the artificial intelligence space flying as NVIDIA forecasted a big boost around the chip side in the AI space. And so you get most of the AI companies rallying like crazy as a good company that makes money reported a huge quarter. And then of course that leads to a rally with a lot of bad companies that don't make money as well. But big, big day in that space. And yet the Dow was actually down a tiny bit, down 35 points. Although it had been down, not quite 200, about 170 at its worst, and it ended up coming up in the final half hour of the day and closed down just 35 points. S&P was up 0.88%, again, huge disparity right now between the cap weighted and the equal weighted index.

The 10-year treasury yield closed at 3.82%. That's another 10 basis points higher. So bonds are getting hit decently, nothing substantial, nowhere near back to their old high yield levels, and yet worth watching for sure as so many other assets are priced around all that. The fundamental news, oh, by the way, the worst performing sector, I said the best was tech. The best performing sector all week had been energy and then it got hit today 1.8%. Oil was down 3%, about $72 a barrel. And so, you know, energy on the one side, tech on the other. The Fed does seem to be telegraphing a pause at the next meeting. That's getting a little clearer, even with some of the more hawkish members of the FOMC. Yet now the language we're starting to hear is the debate between a pause and a skip. Are they pausing rate hikes or are they skipping one, which implies the inevitability

of another one? And we shall see. It's a little hard for me to believe, but nothing is impossible that it would be a skip, that they would go through the effort of pausing and then choose to come back and do another hike. You know, we shall see. You already know how I feel the overall headline CPA data is going to go as that shelter lag arbitrages itself out of the mix. I don't think it's very likely, but we shall see. The debt ceiling discussions did advance today. No deal was struck.

It's a little hard to get a read because you do see quite a few people saying we think we're close. They're in the minutia. We have just a few days to go. But then you're seeing more and more of some of the Republicans expressing concern about what will be in the package. A lot of the Democrats seem utterly despondent about how much the White House appears ready to give here. So that could be very interesting if the far left is upset that the White House is giving too much and the far right is upset they're not getting enough, and then that could submarine a deal. I do think it's possible that in the end,

the Freedom Caucus types end up submarining a deal. But it's also very possible that you get enough Democrat support for a deal with enough moderate Republicans to pull it over the finish line. I wouldn't say it's very likely, more than likely. I mean, no matter what, it needs to be somewhat bipartisan, but I would think it's likely to be a more heavy Republican majority than Democrat in the end, assuming they get to a deal. But if the White House comes out behind a deal, I just don't believe we're going to have that many Democrat defectors in the end, but you never know. So that was sort of the big thing in the news and the overall markets. What am I missing? I think that's about it. The initial jobless

came in 229,000. That was quite a bit below the 245,000 that had been expected. Plus they downward revised last week's data by 17,000. So a little positive number on the job front. In Ask David today, somebody asked if there was a better way or a more real-time way to be able to measure consumer confidence. They've heard some of my criticisms in the past, the consumer sentiment, the famous University of Michigan monthly sentiment indicator, the survey, that these things are inherently backward looking. And I will say that I don't think there's a problem with how they're measuring consumer confidence. That's never really been what I've implied. I think that these surveys and indices do a good job. My issue is that I think that these surveys and indices do a good job.

My issue is that I think consumer confidence itself, if it were somehow divinely perfectly measured, is a backward-looking thing regardless of how it's being ascertained. And when it's backward looking, that it's just my comment on human nature, that it's responding to things that just were not things that will be. And because we tend to love consumption in America, buying, spending, consuming, even borrowing to do so. I don't think that people getting a bonus yesterday means feeling good about, uh, uh, excuse me. I think getting a bonus yesterday makes people feel good about spending today. I don't think that people form their confidence in spending today on some thought of six to 12 months down the line. There's more rear view mirror going on than anything else.

And that's really the natural way it is with consumer confidence. So hope that's helpful. Very excited about tomorrow's Dividend Cafe. Put a lot into it to really talk about this very controversial subject of shareholder engagement in the midst of a new environment for how corporations, especially publicly held corporations, are acting. So you will get that tomorrow on Friday. And I'll be back with you next week for the DC Today back in the Newport Beach studio. Although, of course, Monday will be off for Memorial Day. So I'll see you on Tuesday. And in the meantime, thank you for watching and listening and reading the DC Today.

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