The Dividend Cafe - The DC Today - Wednesday, February 22, 2023

Episode Date: February 22, 2023

Coming off the worst day of the year yesterday we get some market recovery and a little volatility relief with rates coming off yesterdays highs. Today is a more Fed heavy podcast with meeting minutes released which I discuss along with some economic takeaways on the day 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. Good evening and welcome to DC Today. Brian Seitel here with you. It's February 22nd, which is Wednesday. It's February 22nd, which is Wednesday. And I'll kind of kick us off here and go through the market on the day, which was quite a bit less volatile than yesterday, which I'll take. And I'll kind of go through. We ended up closing down a little over 80 points on the day, although for most of the day, the market was up probably 50 points. It was just kind of a quiet day. We were basically with a kind of a lull in economic activity, really just waiting to see what the Federal Reserve minutes were going to reveal from their last meeting, which

is now a full three weeks old from February 1st and kind of what they discussed. And we know that they raised rates 25 basis points, but the market was really just sort of in a holding pattern until that data was released, which is around two o'clock or so Eastern. So we closed slightly lower, meaning that we lost a little ground following the minutes and I'll sort of go in to them and go through them. The S&P was down fractionally 0.16%. The Nasdaq actually closed positive, which was the first day in four that eked out a little bit of a gain of about 0.13%. Rates came down a little bit today.

They were up significantly, like I mentioned yesterday. Came off a little bit. The 10-year closed at 393, which was down a couple basis points on the day. And pretty much across the curve, we traded either a little sideways or the bias was just a little bit to the downside on interest rates. The top performing sector was materials,

but not by a lot, you know, two thirds of a percent. And real estate was the lagger today, down over 1%. So let's get into the minute. So basically, we know they raised 25 basis points. The minutes basically said a few of the participants had a goal of raising at 50 basis points. And we know that it was Mester and Bullard. And I'm assuming when they said a few, maybe that means one other person, maybe like Waller. But for the most part, pretty unanimous across the board. They wanted to kind of go to slower, gradual pace. They want to see how all of this monetary policy is actually

affecting the economy before going too far. And so that was pretty much what markets expected, which is why they didn't really move. It was quiet day following yesterday into this thing. And then it was basically quiet afterwards, slight bias to the downside, but not very much. And again, 80 points is not a whole lot. Um, and, and, and again, I think it was largely in line. Um, there was some comments separate from the minutes from, um from St. Louis President James Bullard earlier this morning that was

geared more towards, in his view, having a Fed funds terminal rate of around 5.375%, which Fed funds futures are basically pricing that in now. So that's pretty much in line. But he basically said the market had overpriced in the chances for a recession or a slowdown, meaning he what he's saying is, is that economic growth is actually really pretty good. And he's not too worried about that. He also and again, he's, you know, as Fed presidents are, you know, they're in the soft landing camp that they're going to get it just perfectly right. But they're basically saying that they don't have to destroy the labor market completely or even hurt it much in order for them to bring down inflation. And I think that that is fine. There was some news. Oh, the Biden

administration is kind of narrowing down Lael Brainard's replacement. And it looks like Dynan, Eberle, and Carpenter, all of which in different ways and different periods served under Obama in the Treasury Department. So they're kind of working on that. She basically, so more to come there. Some other news, and I feel for anybody traveling, as everyone knows, I travel a lot. So there's a certain place in my heart that kind of goes out, but there was about 1,100 flights canceled today. So there's a certain place in my heart that kind of goes out. But there was about 1,100 flights canceled today. It's just frigid across two-thirds of the country.

It's a big storm, I know. Where I have a house out in Park City, they got over two feet yesterday of new snow. But I know a lot of people were somewhat stranded. I did add a chart in today's DCT, DC Today, that just is showing you the absolute yield on the one-year treasury right now, north of 5%. And it hasn't been over that yield for over 20 years. So it's 2001. And there were some kind of neat comparisons between the market then versus now. My point to showing that was not to say that it's like 2001 necessarily, because

if you remember back then, we had a shallow recession we were dealing with and a bunch of other factors, Gulf War and things. So not comparing the time period, but just the absolute yield of 5%. We haven't seen it in over 22 years. And so the old TINA acronym, there is no alternative. I think that is at this point pretty much out the window because there is an alternative. You can basically get 5% on a risk-free investment in a one-year treasury. And so that is pulling money out of markets. We're seeing the velocity of money slow down and pull back and actually go a little negative here. And we're seeing risk assets struggle here a little bit. And I don't know that it means anything other than somewhat of a range here as we kind of go

through things. But we just got to keep an eye on all of these different things. I added a question that I just got, I think yesterday or today from a client about the volatility index, because I mentioned it yesterday, being that high, it was up a lot yesterday. So I have just a definition of what it is, what it means, why we pay attention to it. It has gone up the last couple of days, but it isn't really very high is the best way I can describe it. So I pay attention to it. But we're not dealing with a highly volatile market number one, and then also technically very fear driven market. To me, it feels a little complacent, frankly, in markets. And so whether that changes here over time, we'll have to kind of kind of pay attention to.

But I'm keeping it a little short today. Tomorrow, we have some jobless claims that are going to come out and then a revision of Q4 GDP, which is expected to be unchanged. So we've got some more data tomorrow to kind of go through. But the takeaway from today is Fed Minutes basically revealed what we thought they would. And markets kind of were fairly benign on the day. And so I'm going to leave it there for you today. David was quoted on CNBC. I have a link there. You can check out what he said about yesterday's sell-off as far as it pertaining to interest rates. But I'll let you get back to your evenings. I appreciate you listening very much. Reach out, as always, with any questions. I love them. And we'll talk to you soon. Thank you. The Bonson Group is a group of

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