The Dividend Cafe - The DC Today - Wednesday, June 7, 2023

Episode Date: June 7, 2023

Today's Post - https://bahnsen.co/3Joqzf1 Big rally in Energy and Real Estate today even as other markets stalled and reversed. The media world went into a trance this morning before the market opened on the news that CNN’s CEO, Chris Licht, had been fired. Though not much of a market story, it distracted everyone for the day and allowed it to be a mostly boring day in the world of financial media. As expected, Mike Pence, Chris Christie, and Doug Burgum (billionaire Governor of North Dakota) have all entered the Presidential race this week, vying for the Republican nomination. Add them to the list that includes Donald Trump and Ron DeSantis as top candidates and then Nikki Haley and Tim Scott, and you have basically 7-10 total candidates, two of which poll high, three of which poll a little, and the rest of which poll basically not at all. It’s going to be a wild summer. And I am sure at some point, I will have to talk about it more in terms of policy and market implications, but we are nowhere near that point yet. For now, my forecasts are rather simple: I am dubious that Joe Biden will end up being the Democrat nominee; I am highly dubious that former President Trump can win a general election; and I believe there is a candidate or two who could beat President Trump for the Republican nomination, but am as unsure as anyone else as to whether or not that will happen. There are so many wildcards out there right now; predictions are a fool’s errand. 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. Well, hello and welcome to the Wednesday edition of DC Today. Very interesting day in markets because the NASDAQ was actually down 1.3%. The S&P was down about 0.4%. The Dow was up 92 points, which was just 28 basis points. So that kind of disconnect between the Dow, S&P, NASDAQ isn't that extreme. And in fact, that disconnect has been there quite a bit the other way lately with the Dow down and NASDAQ up. So I don't think there's anything particularly abnormal about market indices today and even their relative performance relative to

one another. But energy being up 256 basis points today when communication services and technology were each down over one and a half percent, that I'm not sure has happened all year. And if it has, it's definitely not happened more than once. A 400 basis point spread between energy and tech in one day favoring energy, that is, has been really, was very common last year and has been not at all common this year. And so that was kind of the unique thing in today. Energy of 2.56%, technology down 1.6%, communication services down 1.8%. And then you got bond yields going higher on the 10-year nine basis points. It's up to 379 as a 10-year yield. So a little continued sell-off in the bond market. And crude oil with that energy rally was up, but not huge, 1.2%.

So crude is sitting at $72.50 a barrel. So really still kind of anchored into that low 70s mark, but off of the lower level in the mid to high 60s that it's hit a few times lately, but still kind of hovering. So that was the case in the market today. The only economic data point I'm going to talk about, I get into the trade deficit in the written DC today, but year over year, total trade imports plus exports was down about 3.2% in the month of April, yet you had trade deficit narrow a little bit. So nothing really overwhelming there. The mortgage applications, I think is more interesting, is down, I think,

1.7% week over week, but more importantly, it was 27% year over year. So there continues to be quite a drop in mortgage applications for new purchases. And that year over year basis is worsening. The thing that I will spend the rest of our time talking about, and I'll just take a few minutes, is the state of the Republican primary. I've gotten a few inquiries from people saying, hey, what do you look at as the market ramifications to the way this race is shaping up? And markets don't have an opinion today on Vivek's chances versus Chris Christie coming in and other things. There's one person with 1%, one person with 3%. And, you know, I mean, markets don't work that way. The financial markets would be thinking to the other side of a primary, to the general election, to what the lay of the land could be into a general.

And I'm still pretty far out from having to write about it. to write about it, what actual market projections could be out of different scenarios, because we're so far away, very candidly, from knowing who either party's nominee is going to be. And you say, well, look, we know the Democrats have the incumbent president, Joe Biden. And I certainly understand that. I'm not being political or partisan myself when I say this, but look, I don't know that Joe Biden will end up being the nominee for the Democratic Party. I think there's any number of scenarios that people who really like the president, people who don't like the president, people rooting for the Democrats, people rooting for Republicans, any number of grown up, reasonable people could make an argument that Joe Biden may not end up being the nominee, just in terms of the way some of this stuff could shake out and health considerations and age and whatnot. So even that, I think, versus most years where the incumbent presidents eschew in for their party's nomination, some things could still alter differently there. nomination. Some things could still alter differently there. And yet on the Republican side, it's even more so obviously wide open because there's going to be a real primary battle.

You had a person who had been president, who when he was president, suffered significant losses for his own party in the midterm, then lost a re-election bout. And then in the first election after that, a lot of the candidates that he had supported lost. So on one hand, you could say, well, there might be concerns for the party to re-nominate him from an electability standpoint. And certainly if I could wave a wand and whatnot. I would say that those electability concerns would be a big deal. But that may not matter. I mean, the name recognition and there's still a certain base of popularity there that he could end up being the nomination nominee. So it's way too early.

And anyone who's done this for a while, I hate I say this all the time. You guys have no idea how much I hate being a political junkie, but I am one and I have been one my whole life. So I have done this long enough to know that in May, now June of the year before the year in which the election is going to take place, nobody knows anything about what the nomination battle will look like. In June of 2015, President Trump had not even announced his entrance into the race, let alone begun polling at 1%, let alone begun a rampage through the field that would result in him running away with the nomination. You have a very similar story, by the way, in 2007, when Barack Obama defeated Hillary Clinton for the nomination.

And so things just change. You know, the Republican side in the same year, Rudy Giuliani looked like a shoe and ended up just utterly collapsing. And you went through a number of other nominees in that contested race for the Republicans in 08. So Chris Christie entered the race yesterday. Former Vice President Mike Pence has entered the race. The governor of North Dakota is a billionaire

who most people never heard of. He's now entered the race. I don't think you're going to end up with more than seven candidates. And I think that will end up going to four or five before Iowa, and then probably two or three after Iowa, New Hampshire. That's probably how it'll go. So the political side of it, if you're interested, you're going to hear a little tidbits from me along the way because I can't help myself. But you're going to hear plenty more than tidbits

anywhere else you get your news and information along the way. So you don't need us for that. But I will be evaluating policies. You know, if Vivek is not a viable candidate, but he has something interesting to say about the Fed, I'd be happy to look at that and dissect it and what the actual policy platforms are. A lot of this stuff becomes cult of personality. I don't think you're going to hear a lot of real substantive policy proposals from the Trump campaign. It's not really his shtick. It's not what he thinks he needs to do to win the nomination. looking at it from a policy standpoint, certainly as the Biden administration announces more of their intention and how everything's shaped up with the Democrat primary, whether it's tax or trade or whatnot, I would be covering it from the aspect of financial markets and economic implications. But that's pretty premature right now. I think we're into the

political side of it. A lot of this stuff is kind of sport for people. And as the debates go down in August, we're a couple months away, a little over a couple months away from the first debate, and then plenty of time still over six months until either the Iowa or New Hampshire primaries on the Republican side. So that's the lay of the land there. There are particular questions that are of interest as it pertains to expected ramifications in the economy and in financial markets as a result of some of this electoral stuff. Feel free to shoot it to us, questions at thebondstonegroup.com, and I'll address it. That's where I'm at now.

Hopefully that gives you a good, honest assessment. That's where we are today in the D.C. today. Thanks for listening. Thanks for watching. And thank you for reading. 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.

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