The Dividend Cafe - The DC Today - Wednesday, April 3, 2024

Episode Date: April 3, 2024

Today's Post - https://bahnsen.co/3U2mBhF A modestly positive trading day today in markets with both stocks a little higher and the VIX lower following a few down days. ADP payroll numbers for March came in quite strong at 184k, although the actual employment report this Friday will get more attention. Powell had comments out today that reiterated their patient approach on lowering rates which is really just more of the same with Fed futures unchanged. Sort of a quiet day really all around. As the office REIT space recovers, earnings revisions for next year have brought the average estimate from -1.8% to now 12.2% for 2025. Healthcare REIT’s have also seen a huge revision from -17.2% to now 6.9% for next year EPS estimates. In fact of all 10 industries in the SP500 with upward revisions for next year, 6 of them are in the REIT space overall. Now, I imagine if interest rates don’t move lower as much as expected the shine may wear off for these analysts, but interesting nonetheless. 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. Welcome to DC Today, this Wednesday, April the 3rd, with you on a very, pretty, really quiet market day, trading-wise. Rates were unchanged, 10 years, stayed at 435 unchanged on the day. The Dow dropped 43 points on the day after being up for most of the day. So fairly quiet. S&P and NASDAQ were both a little higher in markets. The volatility index was

just off a little bit. So a little quiet day. We had comments from Powell out today that were so in line with what he's been reiterating before that it was almost verbatim. So there really wasn't any market movement from it at all. Just that they're waiting for more data. They want to see inflation more. They want to see it before they're going to actually cut rates. But they still expect to do that towards the second half of the year. Private payroll. So ADP was out today with really a pretty strong print. Actually, it was 184,000. We were expecting 150. And 184 is the highest number since we've had since July of last year.

Just keep in mind, the ADP private number is different and perceived different and less reliable than the actual nonfarm payroll report, which will come out on Friday. So the number was strong. We were expecting it to be, but it was even better than that. And so that's a good thing for the labor market and employment. And also February was revised a little higher as well. And so that's a good thing for the labor market and employment. And also February was revised a little higher as well. So good things there.

And again, like I said, good news is good news, even though markets may react one way or the other. We had the inside of that payroll number, the industries you might expect were spring break time. I know that number is a lagging number, but it was services, it was leisure, it was hospitality, it was all those areas of the employment market that are most hot right now. There was a ISM services figure today that was actually a little weaker than expected, which was, well, I guess it was bad news being good news in the sense of inflation, because the manufacturing number we saw earlier in the week was much hotter than expected, which is considered good because the inflation levels inside of our goods part of the market have already been all the way back down to the twos, the low twos. So that wasn't an issue, but the services side has been in the low fours to high threes. And so seeing ISM come in a little

softer wasn't looked at as a bad thing necessarily. It was still in expansion territory. So still over 50, it was 51.4. So that's good. And then I think really what was better about it was inside of that there's a price index and it lowered five points, which is the lowest that we've seen since March of 2020. So those are actually fairly good things where you get a little softness and a little bit lower inflation inside of services for the month. for the month. There was an Ask Brian section or a question that I fielded this morning, I think it was this morning or yesterday, regarding deep in the money option calls. Does TBG use them? What he was referring to was on positions that have gone up a whole lot, maybe they've appreciated 50, 100%. Are we going to sell a deep in the money call option against them to gain a little bit of premium, knowing that ultimately the position will get called away, meaning it will get sold? It's sort of a hedging mechanism where you get some premium in the short term.

And then for whatever reason, if the stock pulls back and doesn't get sold out of your portfolio, then it was sort of a win. You got a free lunch out of it. You got some premium and then you still own the stock. And then if the stock was going to get sold out, you would have sold it anyway. And so you feel fine about it. So I don't think there's anything flawed with this strategy necessarily, but in theory, in practice, if you do that for a long period of time across multiple positions, multiple accounts, at the end of it all, and you boil it all down to all the work and time that you spent doing it, I have never found it to actually provide any rate of return benefit. It provides complexity, but that's not necessarily a reason to do it. So I'm not a fan and no, we don't use it at TPG. You know, pragmatically it doesn't make sense because of the size of

our business, but then also just, you know, financially there's no free lunch out of it. So I'm not a fan. But I appreciate the question. It was an astute one. But I appreciate the question. It was an astute one. On deck tomorrow, we have initial jobless claims. There's some trade data. And then there other things to talk about on DC Today tomorrow. And I'll be back with you as I always am. Have a good evening. 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. There is no guarantee that the investment process or

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