The Dividend Cafe - The DC Today - Tuesday, November 22, 2022

Episode Date: November 22, 2022

Today we are one day closer to cutting into that turkey, enjoying some homemade gravy, and spending some quality time with those nearest and dearest to us. A great time of the year to be grateful, and I, Trevor Cummings, am personally grateful to be filling in for David Bahnsen today. I wish you all a wonderful Thanksgiving, and I encourage you to take a moment to watch or listen to what’s happening in markets today (links below). And off we go… Full Blog post here: https://bahnsen.co/3V7jsLO Topics discussed: Dow: +397 (+1.18%) S&P: +1.36% Nasdaq: +1.36% 10-Year Treasury Yield: 3.76% (-6 basis points) Top-performing sector: Energy (+3.18%) Bottom-performing sector: Real Estate (+0.46%) WTI Crude Oil: $81.20/barrel (+1.15%) 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 and welcome to DC Today. I'm Trevor Cummings filling in for David Bonson today. Just about around the favorite time of the year for me. I love this time of the year because everybody starts to share what they're grateful for. Everyone's thankful.

Hopefully everyone's in a good mood as long as they're not going to Costco trying to buy some last minute turkeys or whatnot. Also, markets are somewhat quiet around this time of year. And as you get closer to Christmas and New Year, you see volumes drop a little bit. And kind of just the general news feed is a little bit less than normal. So markets were positive today. A lot of that was backed by this idea that maybe inflation is going to come down faster than the general market assumed. The rate hikes will be a little bit lighter than assumed. Maybe a 50 basis point rate hike is what's most likely rather than a 75 basis point hike.

And again, that changed the general mood of markets. So you saw the Dow go up 397 points, which is 1.18%. S&P was up 1.36%. NASDAQ actually matched that. It was up 1.36% as well. Top performing sector was energy. Energy was up 3.18% today. Bottom performing sector was real estate up 0.46%. Why did energy do so well? Well, again, markets are all based on expectations and assumptions. OPEC Plus came out and said they are going to stick with their production plans. And therefore, you saw oil go up about 1.15%.

That's $81.20 a barrel. There wasn't a lot of economic data today. So in the D.C. Today, I kind of just talked about top news stories. Things that would make the headlines today is that the Supreme Court said no to Donald Trump. He asked them to stop the Ways and Means Committee from getting copies of his tax return. And the Supreme Court did not side with him. The other big news came out actually just before I jumped in here to record. And that was that the Biden administration is going to extend the time where you don't have to pay interest on your student loans.

Why? Because there's a bottleneck in the courts. We don't know to pay interest on your student loans. Why? Because there's a bottleneck in the courts. We don't know how that's going to end up. Folks are fighting against that debt relief. And I will tell you, for me as a financial planner, it makes things difficult. I was just in a planning conversation with a client this week talking about some student loan debt and the best way to manage it. And my advice and guidance was because

they were going to start having interest accrue in January is some ideas on how to refinance that debt. Guess what? My advice doesn't matter now because they can go all the way till the summer with that extension. And we'll see how that all plays out. Other big news, everybody who's not a soccer fan just became a huge soccer fan as we watched the World Cup. US, I thought they're going to pull up the win, ended up being the tie. I don't watch soccer a ton, but it seems like it'll be interesting how it turns out based on the group they're in. So good luck to the American soccer team. What else do we have here? If you go to the written, you will have not asked David, but you

have an ask Trevor section today. A question I'm getting a lot lately is this question, is rising bond yields good for investors? What somebody really means by this question is they don't totally understand how bond prices work and how bond yields work. So I just want to take some time on the article to explain kind of the relationship between the two. The thing that's hard is if you don't understand bond math, this terminology of yields and prices can get mixed up and you don't know what's positive or negative for you as an investor. And that's kind of what I wanted to spell out in the article. Now, I'll make it simple. Bond prices and bond yields have an inverse relationship. Let's talk about what yield actually means. And David wrote a whole Dividend Cafe article a few weeks ago on this. I would encourage you to go there. But yields are really

simple. You look at the income that that bond produces and you divide it by the price of that bond. So if we assumed that income stayed the same, what would drive yields up? The bond price coming down. Again, I will remind you, bond prices and bond yields have an inverse relationship. So what does that mean if you're asking is that good or bad for investors? So what does that mean if you're asking is that good or bad for investors? If you currently own bonds, that means your bond prices came down, which probably was a little bit unsettling for you because you saw a change in the value on your statement. If you're looking to buy bonds, it's a good thing for you because now you're like, man,

I'll get paid a little bit more income or I'll get a little bit higher yield. The chart I put in here that I think will be helpful is you show going into COVID how bond yields were dropping. And I don't know exactly where it was, but the 10-year treasury sat somewhere around a half a percent in that kind of depths of the COVID moment in 2020. And I show two arrows, a green arrow showing those yields come down and a red arrow showing those yields go up. I never got a lot of questions about bonds until the last, call it 12 months. And why? Because what was formerly a tailwind for folks that own bonds is now a headwind. And people are wondering, man, why are my bonds performing like this? Because isn't this supposed to be the conservative or safe part of my portfolio?

It was an ahistorical year so far. We've never seen bonds move like they have this year. Another thing that I'll note is it's very rare, if you go back in history, for you to find a year where stocks and bonds were negative in the same year. It has been significant for 2022. So investors feel like they have nowhere to hide. My encouragement to you, if you have an advisor, I would connect with them and understand how bonds work and understand how bond math works, just to make sure that you can kind of frame your expectations and make sure that you're not overthinking or adding

anxiety where it doesn't need to be with that said I'll end with this we are extremely grateful for everybody that watches these videos everybody that reads our commentary that we produce, and extremely thankful for the clients that we are honored to serve. So I send my blessings here from Newport Beach. I hope you have a wonderful Thanksgiving. I hope you eat great food, watch some football, whether you consider football soccer or American football, and you get genuine, great time with your family. And with that, this is Trevor Cummings signing off for the DC Today. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC,

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