The Dividend Cafe - The DC Today - Tuesday, January 31, 2023

Episode Date: January 31, 2023

ASK DAVID “Would you mind giving me your Cribb note version of your expectations on the USD’s devaluation now that Saudi Arabia (and probably others) are willing to trade oil for other currencies than the US dollar? If you expect a significant currency related (not just inflation related) devaluation, do you have an idea of how we can offset that?” ~ D.M. The main thing to say is that: Saudi has not yet done it, it will take a while to happen, it may happen at very small levels, and we do not expect a significant devaluation from this alone. We do believe it is a shot across the bow geopolitically, but not in fundamental forex (yet). The major thing for investors to understand is not that the collapse of the dollar is imminent (I wish I had one dollar for every time someone has suggested that or fretted over it in front of me over the last 25 years, for I would surely have a great deal of very spendable and exchangeable and useable dollars). Rather, it is that China is desperately seeking international legitimacy for their Yuan. The rest of this subject is mostly noise. Links mentioned in this episode: [TheDCToday.com] https://bahnsen.co/3JMMeP1 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. Welcome to the Tuesday DC Today. It's the final DC Today of January as we close out the last market day of the month. of January as we close out the last market day of the month and we closed it out with a bit of a rally. I'm going to give you the numbers real quick and make a couple comments. We'll keep it quick today for you. The Dow was up 369 points which was up over one percent but I'm not going to be able to see how much of that. I wanted to give you the exact point number that was in the last 15 minutes, but it was kind of up throughout the day steadily, and then in the last 15, you got kind of a spike higher. The S&P was up 1.46%, so it brought its monthly return to a little over 5. The NASDAQ was up 1.67, brought its monthly return to 9.99, basically a 10% month on the NASDAQ.

The 10-year Treasury yield closed at 3.51%. That's down four basis points. So that is on the year down 37, excuse me, yeah, I mean the year and the month down 37 basis points, which is a massive rally for bond prices in the month of January. Today, the materials sector and the consumer discretionary sector were both up exactly 2.22%, tying for first in the lead. Utilities were last place, still up 0.71%. So one of those days when 11 out of 11 sectors are positive. WTI crude oil at 79 plus change, up maybe 20 basis points. So rally day to close and we have the Fed tomorrow. Is the market rallying today because it believes the Fed's going to say something good tomorrow?

Maybe. Is the market rallying today and the Fed's going to say something bad tomorrow and the market's wrong? Maybe. Is the market rallying today because there was short covering coming into the final part of the month? Oh, I bet that's pretty likely. Is the market rallying today because there's people afraid to go into the Fed day short? I bet that's pretty likely. And is the market rallying because it was the final day of the month and there was index fund buying to rebalance trading books? I bet that's pretty likely.

So there's a number of things at play here, not any of which I would really pay a lot of attention to. The Fed will make their announcement as the FOMC, the Federal Open Market Committee, concludes their two-day meetings tomorrow. The market expects a quarter-point rate hike, and they will likely say things that will sound like we want to continue watching and not pause too early,

and at the same time recognize that there's risk on the other side and we're keeping an eye on everything. So they will talk both ways and we'll see. Could they surprise markets with excessively hawkish rhetoric? They could. Could they surprise markets with excessively dovish rhetoric? They could. I don't expect that.

That's my expectation going into tomorrow, Wednesday. All of you who have financial goals that go beyond 1 o'clock p.m. Pacific time tomorrow, I wouldn't worry about any of this. That's all I have to say. The employment cost index was up 1% for the fourth quarter. That was a little less than expected. I do want to point out private sector wages. The quarterly move of the prior three quarters up 1.2, 1.6, 1.3.

The fourth quarter was up one. So you see the beginning of a disinflation there on private wages. The S&P Core Logic Index, which looks at 20 rather significant markets for housing. It's one of the staple of large city residential real estate indexes. And it posted its fifth month in a row of month over month price declines in residential real estate and what was interesting about december was that it was all 20 cities that had a month over month decline that was the first the whole index has been down five months in a row but this is the first time that 20 out of 20 went negative. Consumer confidence also was down a tiny bit. Read DC Today for the question of the day, my take on the impact of China potentially

buying oil from Saudi Arabia, denominating it in Chinese Yuan currency versus US dollar. And other than that, get ready for Fed Day tomorrow tomorrow and thank you for listening to and watching and 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. 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.

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