The Dividend Cafe - The DC Today - Tuesday, December 5, 2023

Episode Date: December 5, 2023

Today's Post - https://bahnsen.co/4a8TMWG As we get ready for a busy week of jobs data a few things stick out: (1) The weekly jobless claims remain very low which seems to indicate a continued healthy employment market (2) The “quits” rate (people voluntarily leaving their job) has been very high, and even as it has come down from early 2022 highs, it remains very elevated historically (3) The number of job openings remains very high (though it fell to 8.7 million this month, still 1.5-2 million higher than pre-COVID average, but well off 2021 highs) (4) The average work week has steadily declined on the margin (from 35 hours, which was above the 15-year average, to 34.25 hours, which is below the average). (5) Several data points have softened in recent months, but not softened to what can be called “weak” conditions – just “less strong” than had been the case previously A few other market tidbits and things that caught my eye today … It is interesting to me that small cap value has outperformed growth since the turn in the middle of the year, but large cap growth has modestly outperformed large cap value. The two are normally correlated. Some of the “big seven” names that have driven a lot of the market this year have not moved at all in six months (well, they have moved up and down, but I mean they currently sit flat from where they were this summer). The broader market has begun playing a little catch-up. 2024 earnings expectations are now up to $246/share in the S&P 500. We are likely going to end at $221 for 2023 so this would mean earnings growth of +11.3% in 2024, rather amazing if it happened. Of course, at that earnings level, the S&P is still trading at an 18.6x multiple (forward projected), and is trading currently at 20.7x. 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 Tuesday edition of the DC Today. Markets down a little bit today. NASDAQ was actually up a little. I'll do the market recap real quickly. I want to talk a little bit about the NASDAQ was actually up a little. I'll do the market recap real quickly. I want to talk a little bit about the state of the jobs market. As far as the market today, Dow was down 79 points, just 0.2%. S&P barely down six basis points. NASDAQ barely up, up 30 basis points. Pretty good rally in the bond market. 10-year all the way down to 4.18%, down 11 basis points. So rally continuing in bonds.

Top performing sector was technology in the stock market, up 82 basis points. Energy was down 1.7%. Pretty big hit today to the energy and production, excuse me, exploration and production side of energy. The crude oil price closed still at 72.50, right down about 80 basis points, not a huge move in oil. In terms of the job market, a few things going on at once. The weekly jobless claims remain very low. That seems to indicate continued healthy employment. The quits rate has definitely come lower, but it had been quite high. People voluntarily leaving their job. And even though it's come down from those highs of 2022 early 22 it's still elevated historically the number of job openings remains quite high now this number is called the jolts

data and it came in today for last month down several hundred thousand from where i've been the month before but it came in at 8.7 million. So yeah, the days of 10, 11 million job openings has definitely gone away. But that average at around six and a half to seven million for years pre-COVID, we're still, you know, one and a half to two million above that rate on an ongoing basis. The average work week has steadily declined on the margin. And what we're talking about is we were at 35 hours is like the 15 year average, let's call it since post GFC. But right now it's come down to 34.25. So you may think 0.75 hours isn't a huge difference, but these are definitely things that kind of move on up or down on the margin. There are several data points that have softened in recent weeks, but not softened to what can be called weak.

They've softened to be less strong. And this to me is the theme of the job of the jobs market overall, labor conditions overall. That whether it's job openings, a quit rate, weekly jobless claims, the kind of whole ecosystem of data that one could use to look at it, they're all good numbers. And they're all less good than they were maybe six months ago or so, six to 12 months ago. That, to me, is a summary of where we are. As we get ready to head into Friday, the BLS, the month of November Bureau of Labor Statistics report, this is kind of where we are. A few other market tidbits real quick. I think some of them are important, so if you're ready to tune out, hang in there for just

a bit. A, I'm really surprised. It's becoming a very consistent theme. How many companies I follow that are interluding to comment, interjecting to comment that they are seeing weakening of their business in China. It's becoming very consistent across multiple sectors in reports and analysis and research that I do literally every day. Small cap value has outperformed small cap growth quite a bit since the middle of the year. Large cap growth has outperformed large cap value. cap growth has outperformed large cap value. These two things, growth to value relationship from small cap to large cap, are normally highly correlated. They have absolutely broken apart in that correlation. And it'll be very interesting to see what the inevitable reversion to the mean

will look like. Less than 20% of the S&P 500 was above its 50-day moving average a month ago. More than 80% of the S&P is above its 50-day moving average now. What's interesting, by the way, some of the big seven names, these kind of major tech companies that have driven a lot of the market return. They, well, how do I say this? Because it's a little different story by story. Some of them, names, have not moved at all in the last six months, are pretty well flat. They have moved up and down because there's been a lot of volatility within the six months. But from starting point to

ending point, pretty well flat in a few of these names. It's quite interesting. The broader market has been playing catch up. 2024 earnings expectations. Go ahead and take note of these numbers right now. And I'm going to have this updated before I go do my year end white paper that we do every year. But 2024 earnings expectations are now up to $246 a share for the S&P next year. Looks like we're going to end this year at about $221. So unless there's big revisions downward, right now they're projecting 11.3% year-over-year earnings growth in the S&P from 2023 to 2024. That's $221 a share to 246 of earnings. That would be very amazing, very surprising if it happened.

But even at these earnings levels, if you hit this 246 number, 146 number, we are right now at 18.6 times S&P earnings forward on those optimistic projections. If you look over the last 12 months, we are at 20.7 times. So there's high valuations here, both trailing and forward, no matter where you come down on things. All right. That's pretty much the scoop. There's a great Ask David to take a look at, and I gave you the economic data for the day. Let me leave it there.

I'll be with you again tomorrow here in the D.C. today. Reach out with any questions, questions at thebonsongroup.com. Thanks for listening. Thanks for watching, and thanks forbonsongroup.com. Thanks for listening. Thanks for watching. And thanks for reading the DC today. 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.

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