The Dividend Cafe - The DC Today - Wednesday, August 23, 2023

Episode Date: August 23, 2023

Today's Post - https://bahnsen.co/44nfT7G Markets caught a little relief today, and the biggest AI chipmaker seems to have hit it out of the park after hours (we’ll see what holds tomorrow). Bonds rallied substantially, and so as bond yields fell, equities rose … There has been chatter about rising credit card delinquencies. Let’s be clear – rising from 2% to 2.6% is an increase, but this is an increase to the average of the last ten years, which is exactly 2.6% since 2011. And for the twenty years prior to that, the average delinquency rate for credit cards was 4.4%. There is nothing, yet, that is concerning or prophetic in the credit card delinquency data. Not yet. 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 the Wednesday edition of DC Today. We actually had an update in the market today. The market had been down five of the last six days and the Dow was up 184 points today, a little over half a percentage point. So not a ton there, but some degree of recovery. 10 out of 11 sectors were positive. Energy was still down, but only by 30 basis points. That was the only sector that kept us from running the table in positive sector performance today. The S&P was up a little over 1%, NASDAQ up a little over one and a half. So you still continue to see a lot of the market rallying around the big tech names. And in fact, NVIDIA, the major chip name around artificial intelligence reported their results after market today

and as of the time i'm talking here the aftermarket action looks like it's up quite a bit and that's just an incredibly expensive stock that has rallied huge this year and going up further still so a lot of momentum in that in that name for whatever that's worth but tech was leading performer today. And it's kind of gone in cycles here this year. You have had periods where the whole market did not look good, and tech did. And you've had, particularly big tech and some of the key large capitalization names. Then you had a little period where the breadth of the market really kind of expanded. And tech was not doing great, but a lot of other market sectors were. That started to give the feel of the rally

a little bit more legs. And then everything kind of sold off together, including a lot of tech. And then now you seem to have a lot of things in the market not doing well, but some of the big tech still doing well. That's the environment, candidly, that I think is least sustainable. But what that means in terms of timing, I wouldn't be able to guess. The other thing that happened today, though, is just probably kind of the real story of the market movement today is bonds did finally catch a bid. You had the 10-year yield down 13 basis points. So it came from 4.33 back down to 4.20, a tiny bit below 4.20 as the rate market was closing up. So that correlation up and down between bonds and stocks continues. Oil closed at 79.50, so not a big movement around oil prices. And in terms of economic data,

first, let me start with the composite PMI, which is the number from Standard Porters today that blends manufacturing and services. And you got a downtick in both. So the overall composite PMI stayed in expansion territory, but barely at 50.4. It had been at 52 last month. And that's the lowest level since February. But then within that, the manufacturing number went from 49, which was already contractionary, to 47, a little bit more contractionary. And then the services came in at 51, down a little more as well, but still technically in expansion mode. So that's really kind of the issue right now is services are keeping the economy up a bit. Manufacturing is on the downtick. New homes,

new home data came out today. We had existing home sales yesterday. New home sales were up year over, excuse me, month over month, but prices were down 8.7% versus a year ago. And that's with 55% of home builders offering incentives to get homes done. realtors offering incentives to get homes done, 25% offering out-and-out price discounts. So the market is hung in there, and we've talked about this ad nauseum, but no one can really look to anything firming up per se. It just kind of remains somewhat vulnerable, and new home construction is a great example here. A piece I wanted to quickly cover on, and it's somewhat anecdotal, but I've had a number of people ask about the credit card delinquency data. And then I've seen more in the media.

Is there an economic concern, a macroeconomic concern around potentially rising delinquencies on credit cards? And of course, if you hear that there's a whole lot more people not making a minimum payment on their credit card, that doesn't sound good. So that's a fair expectation. But I just want to point out by way of relative data, the delinquency rate had gotten below 2% when the interest rates were very low and when the government had, during COVID, extended such a long period of benefits and in some cases out and out direct cash transfer payments. But when we say it's now come up, we're talking about it's gone from 2% to 2.6%.

Well, 2.6% was the average delinquency rate for 10 years pre-COVID, after financial crisis up to COVID. And that was in a period of economic expansion and the delinquency rate was 2.6. So all we've done is get back to what the delinquency rate was pre-COVID in a good period. And even that understates a certain reality, which is that the delinquency rate for 25 years before that had been 4.4%. So I don't think you like it going from 2 to 2.6, but I don't think it's super meaningful yet. I mean, it would really have to move above at least what it's already been in a good period for it to really start to be predictive of any economic vulnerability in my assessments. I wanted to share some of that data with you. So that's the scoop across some of the economic news bits today, as well as market happenings. And we'll see

where things go tomorrow, Thursday. I have meetings all afternoon tomorrow. And so my partner, Brian Saitel, will bring you DC Today tomorrow, Thursday. And I, of course, will have the Dividend Cafe for you on Friday. In the meantime, reach out to us with any questions. And happy debate watching tonight. Thanks for watching, listening, reading the DC today. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and 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. Thank you. The Bonson Group and Hightower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein.

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