The Dividend Cafe - The DC Today - Wednesday, February 14, 2024

Episode Date: February 14, 2024

Today's Post - https://bahnsen.co/49ia3bk A more productive day in markets today following yesterdays sell off with with the SP500 regaining the 5,000 level and bond yields giving back some of yesterdays back up in rates. As expected, internals yesterday were quite negative at -13 to 1 on the advance/decline ratio, but without credit spreads even budging, we move on. For what its worth, in a meeting with House members following the inflation release yesterday, Powell mentioned that the CPI data was consistent with what they had expected. Moving back to actual fundamentals that matter more to me, with over two thirds of Q4 earnings season completed we are tracking a 9% growth rate for the SP500 on the year, with a few more percentage points to the upside by the time its all said and done. Hard to see issues in that, and margins are holding in nicely at 16.7% with another 10% of earnings growth expected for 2024. I do think the latter ends up getting revised lower, but it remains a positive backdrop 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. Hello and welcome to DC Today. It's now Wednesday, Valentine's Day, February the 14th, and it's great to be with you here from our Newport Beach office studio. Following yesterday's move lower in markets that I think both David and I wrote about as being a little bit flash in the pan based on some CPI numbers that were hardly indicative of something drastically

changing, of course today we get a recovery day and markets are up. The Dow closed up 151 points on the day. The 10-year cooled off a little from yesterday's backup in rates. Interest rates were down about six basis points on 10s, closed at 425, 426. And overall, a fairly good day in markets, broadly speaking. The S&P 500 actually retook its 5,000 level, which is always surreal to me. I haven't been able to talk about it yet because we lost that level yesterday. But I remember distinctly intraday on March 6th of 2009 when intraday was 666. So to have it back above 5,000 both makes me feel old, but then also is neat to see. And again, yesterday's numbers were really not that bad with inflation. So

I said that, David said that, and then today, Powell reiterated that, Janet Yellen reiterated that, and then another Fed president out of Chicago, Austin Goolsbee, reiterated that. So Powell yesterday, same day as the inflation data came out, said that it was basically what he was expecting. And Austin Goolsbee today said that this data is never going to be what I said, which was never going to be in a straight line. So there's going to be months in which you get ups and downs. But overall, there's a lot of progress being made. And with how restrictive interest rates are, there is a risk to waiting too long. And so that was considered dovish.

And then same thing, Janet Yellen, Treasury Secretary, said something similar today that we're making good progress and there's not a lot to worry about with whatever yesterday's worry was, which shouldn't have been much. So all that to say, down day yesterday was a 13 to 1 negative to positive decline advance ratio. So it's a decent sell-off. But again, credit spreads didn't move. And then you get volatility that comes back in line the following day. Not something that I'm overly worried about. The actual fundamentals of markets in earnings, which is what I care about much more, I've been still quite positive. We're now roughly 70% through earnings season for Q4.

And we're tracking, well, so far with a 30% left to go, we're at about a 9% growth rate on earnings for 2023. So with more to go, I assume that'll hit somewhere in the 10s, maybe even an 11% growth range for the year of 23. And something similar is actually expected for 2024. We're looking at about a 10% expected earnings growth rate, which I think is going to come down a little bit as revisions go on throughout the year. That's just my feeling on it. But still, it's positive nonetheless. There's a positive backdrop with fundamentals and earnings, which is what matters. The margins inside of S&P have come down a little from where they were, but they're still quite healthy. They're at about 16.7%.

They're holding in there fine. Companies are making money. That's what you want to see to have ultimately good stock prices. And frankly, where markets are priced at this point, we need that. We need that growth just to rationalize the, you know, the, the, the multiple and the market that we have right now. So those, those things I'm, I'm paying attention to, um, and inside of those numbers, industrials still tend to look at, look to be the leader at this point, which is nice to see. Um, and then I, I did say this yesterday, inside of that inflation number, we've talked about it before, but there's a shelter cost in

there of owner's equivalent rent. I guess the only thing I wanted to note, which I read today, was that the gap between what I was talking about, which is the actual rent index, let's call it the recent Zillow rent index, and then where this number is inside of CPI, the gap right now is as wide as it's been since 1995. So I thought that was somewhat notable. In other words, the Fed knows that too, that shelter cost coming down is going to get them to the two handle on CPI that they need anyways. You know, I added in a section of a common question, but I've gotten several times the last week in there about how we deal with complexity in transferring outside accounts. I think most listeners and most readers and certainly clients know that we have a growing business, and so we're constantly moving money into the custodian that we choose to use, which is Fidelity. And the question I get is, how do we manage that? Is it too complex? With hundreds of positions coming over,

are we just selling all of them on day one? And so my response is to just hopefully help readers understand that, no, it's definitely done surgically. So every case is just dramatically different. And so there isn't a standard answer. But almost always, we're consolidating accounts, meaning making people's lives simpler. We're bringing those assets over in kind. There's no cost or tax ramifications for doing that. We're allowing all that cost basis information to mature in the account so we can see it and we can analyze it. And then yes, we are going through to reposition portfolios to align them the way that they should be. And involved in that is replacing some with others inside of

the portfolio. But at the end of it all, it is done to dramatically improve the situation and it isn't something that is complex for us at all so if it seems daunting for some where they have you know 14 different accounts at vanguard schwab fidelity and you know morgan stanley or something like that for us it's just something we do all day long and it's very seamless the whole process doesn't take more than a couple of days so if there's any more questions on that feel free to reach out if I can provide more color there. Tomorrow, you have a more exciting day with data, at least for me. We have manufacturing data out of the Empire survey and also the Philly Fed index, Philly Fed manufacturing survey, which will be good. There's some jobless claims numbers out tomorrow,

retail sales and industrial production. So good amount to chew on through tomorrow that I'll get to write about. And with that, I'm going to let you go for the night. And I hope that you're able to spend a little extra time with those loved ones on Valentine's and reach out with more questions. Thanks, as always. 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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