The Dividend Cafe - The DC Today - Tuesday, January 9, 2024

Episode Date: January 10, 2024

Today's Post -https://bahnsen.co/4aPFc6P Yesterday we released our annual white paper recapping all that was the year behind and all of our perspective and themes for the year ahead. We welcome you to send it far and wide, distributing it anywhere you’d wish. It is an important part of our annual process and I am proud of this year’s product, and grateful to all in my production and design teams who helped make it happen. Because we devoted Monday to this special Dividend Cafe white paper I have run today’s Tuesday edition as if it were Monday, except, you know, with Tuesday market info (I’m not that dumb as to use yesterday’s market data). Off we go … 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 DC Today, my first time recording from the studio this year. Recording DC Today, that is. We did the Dividend Cafe year ahead, year behind yesterday. I do hope you have gotten that white paper that you'll put aside to be able to read when you have the time. And in the meantime, we want to start, you know, getting into a normal rhythm around the day-to-day stuff. We did a little longer form of DC today, even though it's Tuesday, because of not having it yesterday. And so I'll just kind of walk through the normal stuff, and I have a few other particular things I want to go through.

Let's just get today's market action out of the way. The Dow opened down 225 points pretty much right at the open and got down as much as right around 300. And then it made about half of that back throughout the day. And there was a little, you know, chippy choppy, ziggy zaggy type stuff going on. But it closed down a little over 150 points, about half of what its bottom was earlier in the day. So that 157 points was 0.42 percent to the downside. The S&P was down 15 basis points. The NASDAQ was actually up nine basis points. You had technology and consumer staples tied as the best performing sector today, each up a quarter of a percent. It really was a pretty boring day. Even

bonds were kind of flattish. The 10-year yield closed at 4.01. It was up one basis point. Energy was the worst performer, although oil was actually up about 2% of the day. The energy sector was down 1.6%. It's funny. The written DC Today right now has already been submitted, and it talks about the SEC having approved a Bitcoin ETF for trading. And then crypto and Bitcoin prices fell. And that was the Ask David question that came in as to why that would be. And then now there's reports that the SEC is claiming that they were hacked and that they didn't approve it yet.

And that someone posted that they had approved and that they didn't approve it yet. And that someone posted that they had approved it when they hadn't approved it. And I, I, I'm sorry, I should not be laughing real time. But this whole story, to me has so many things in it that would make a guy like me laugh if I wasn't on camera. So all I can say is I'll have to tell you tomorrow what in the world is going on. But there's some irony in some of this that I find rich. Okay. I think by now most people have heard the story about our Defense Secretary Lloyd Austin, the hospitalization, as far as news stories and the White House not knowing and all that stuff.

The New York Times ran a big story over the weekend about Justice Department potentially preparing a rather substantial antitrust lawsuit against Apple. It's in the final stretch of a rather significant investigation. And then on a really cheery note, if you're a Michigan fan and really even if you're just a college football fan, congratulations to the Michigan Wolverines on a very well-deserved NCAA college football championship. On the public policy front, there is a lot of wood to chop here. This is not something I expect an imminent announcement on, but there is definite bipartisan movement, shockingly so, I should say, to get to a potential deal for a tax cut that would allow an extension, an expansion, I should say, of the child tax credit on the personal side and also allow full expensing for R&D, allow companies to write off 100% of CapEx and expand the corporate net interest deduction. So some business-friendly tax moves, very supply-side

oriented, I should add, along with a personal tax extension through the child tax credit. I don't know how they get it across finish line. I do know that some of my sources believe they will. So this is a big deal, but it's early enough that I can see why it's not getting a ton of play yet. It was over the weekend that House Speaker Michael Johnson and Senate Majority Leader Chuck Schumer announced that they had reached an agreement on $30 billion of spending cuts. And there is still some on the House side, Republican side that don't like the deal. I suspect they have the votes, but it's a tricky thing. So most assume this means that they've really been able to punt away a shutdown threat, but you know, there, there's just

no way to kind of say that this is a done deal. Um, what else? deal. What else? Economically, the unemployment report came out Friday. And the jobs report, these are getting kind of complicated. You had 216,000 jobs created in December, which was 40 more than expected. But you had downward revisions of 71,000 from the past couple months. So net net, you were lower than expected. But the private sector had the lion's share of jobs growth, which is always good. And you ended the year with 2.7 million jobs created for 2023, a significantly higher number than most people would have expected at the beginning of the year. An unemployment rate at 3.7 percent, a lot lower than a lot of people would have expected at the beginning of the year. percent, a lot lower than a lot of people would have expected at the beginning of the year. But then the negative to me that the labor force, the labor participation dropped by 676,000 in December, a pretty significant number. It's not really related

to housing, but more on the office real estate side. Just some anecdotal information from some commercial real estate reports I studied over the weekend. A, three hottest office markets in the country right now are Nashville, Miami, and Las Vegas. In-office employment in those three markets is running anywhere from three to four times the national average. The positive net absorption is driving rent growth higher for obvious reasons. As a tenant in one of those markets, Nashville, I don't have to like the fact that office rents are growing there, but I definitely understand it. Speaking of this commercial real estate space, one of our big themes has been quit calling

it commercial real estate because self-storage is not, hospitality is not, multifamily is not, industrial is not, retail, et cetera, et cetera. Data centers, year over year growth in asking rental rate, 15%. Significant growth in the data center space. The Fed is a big theme in our annual report. One of those themes being that they shouldn't be a big theme, that it's an overrated response when people say, oh boy, the dot plots here or the rate cuts are expected here or there, that whether it's three, four, five, six cuts, whether it's 100, 200 basis points, whether it's March, June, all of those little front end things could be pertinent to traders who are probably going to get their faces ripped off anyways, but it is just not pertinent to real life. What I do think could be pertinent to real life,

meaning the financial liquidity of our system, our financial system is quantitative tightening. our financial system, is quantitative tightening. And you had Fed Governor of Dallas, Lori Logan, over the weekend say that they should slow Treasury runoff, quantitative tightening, as overnight reverse repo balances approach a low level. And that slowing down the quantitative tightening reduces the likelihood they'll have to stop it prematurely. So one of the Fed governors is sort of talking along the lines of what I was writing about in the white paper. And we're going to keep watching this. Excerptations, by the way, for Fed rate cuts have already come down

in the market from six to five. So it's still rather dovish in terms of expectation, but less so than a couple of weeks ago. Okay. I'm going to leave it there. We'll get more clarity on what's going on with this SEC tweet hack Bitcoin ETF thing if you care about it tomorrow. And I'll try not to laugh when I present the news. Clients big bulletin coming your way early in the morning weekly portfolio with a special video and with a big update on a lot of aspects of our portfolio management for 2023. In the meantime, please do reach out with questions questions at the Bonson group.com. And thank you for listening. Thank you for watching. And thank you for reading the DC today.

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