The Dividend Cafe - The DC Today - Wednesday, November 16, 2022

Episode Date: November 17, 2022

It was a very choppy (up-down) day in markets, to say the least. The chart itself is testimony to how much the market could not make its mind up today. A few nuggets to chew on here … MARKET ACTION Dow: -39 points (-0.12%) S&P: -0.83% Nasdaq: -1.54% 10-Year Treasury Yield: 3.69% (-11 basis points) Top-performing sector: Utilities (+0.87%) – only other sector up was Consumer Staples Bottom-performing sector: Energy (-2.15%) WTI Crude Oil: $85.32/barrel (-0.32%) Key Economic Points of the Day: Core retail sales were up +6.5% year-over-year in October and up 0.7% on the month (double what was expected). Industrial Production declined -0.1% in October, with mining and utilities output leading the way lower Links mentioned in this episode: 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 the DC Today. We are through the midway point of the week. A very, very choppy day in the market. And you may not totally see it at the Dow because the Dow is only down 39 points. But I mean, it was literally up, down, up, down throughout the day. Not violently up and violently down, but I mean, just a lot of choppiness. It was clear the market couldn't really make its mind up what it wanted to do. Now, the Nasdaq was down one and a half percent, so it had a more sizable down day, but that's pretty small compared to how much it's been moving higher as of late. The S&P was

in between there, down 83 basis points. So again, a little more weighted with the NASDAQ. The thing is, is that the stuff that held the market together, meaning the only two sectors that were up today, were in order utilities, which was up 0.87 percent, and then consumer staples. And I believe that health care was barely down. Actually, I'll look at that as we're going here. Health care was third place, but it was basically down just a tiny smidge. That's what I thought. down just a tiny smidge. That's what I thought. So, you know, you had one of those classic days where it's very easy to parse the data where all the defensive sectors were the better performing ones. Energy was down a little over 2 percent and you had your normal cast of characters down

as well. There were higher beta type sectors in the market. However, the 10-year bond yield was down another 11 basis points. So you're literally talking now about a 3.69% 10-year, which is really quite amazing, down from that high it had reached, you know, well into the fours just over a week ago. So it's been a rally over the last five days in the bond market that I have not seen in a long time, other than in a real shock flight to safety moment where you saw bond yields collapse as a lot of money poured into, let's say, treasury bonds in a distress event like COVID or financial crisis. But this is really something. So yeah, as things stand now, and obviously there's still two weeks to go in the month, but people are very likely to be shocked at how well their bond

portfolios are showing on paper later in the month. Crude oil was barely down 85, spot 32 on the day. And the thing I would add on the equity performance side is the issue. Yeah, I want to, it was semiconductors. The chip side of things. First of all, there was headline news about China taking over the largest chip plant in the United Kingdom, that that was getting blocked for national security reasons. You had Apple's announcement about using Taiwan Semiconductor's new plant in Arizona. After hours, so this was before the big pillaging in the chip sector today, before the big pillaging in the chip sector today. But after hours, NVIDIA reported a big drop in revenue on the quarter, largely expected.

So you had a few different headlines and different things that were moving around today in this sector. But there was quite a bit of distress. Most names in this sector that I saw were down over 3%, if not as much as 5% on the day. So various distress around semiconductors. And then that has a kind of trickle down effect in the market. Overall, the story of data center revenue being weak is not new, but that was weighing on markets today. Okay, then real quickly, on the political front, Mitch McConnell was elected. Again, the Senate GOP leader. I don't think that many people thought Rick Scott was going to be elected, but there was sort of a political story about the fact that he tried. And to be honest, I just don't even have the energy to get into it. There's no market ramification.

So I'll leave that alone. As far as crypto, I am not convinced. First of all, I am surprised. And I mean this pleasantly surprised that Contagion has not been worse with this collapse of FTX and now another very large lender declaring bankruptcy today. The ecosystem of the sector. It's one thing when you have the price of a digital currency or a coin dropping. But you're really talking about infrastructure collapse in a lot of the sector. And out of that, will some strong survive and some of the weaker ones or more

crooked ones go away? I suppose so. I'm not sure what is going to be left standing when all is said and done, because I'm not sure when we talk about like, oh, the weak go away and the strong stand, I'm not sure if there are any strong or if there are any who aren't corrupt. I mean, I mean that very seriously. I don't know. It just seems to me to be a story that day by day you kind of can't believe what's going on. And I intend to be writing about it more. In a less busy week, I would have already written 10,000 words, but I am absorbing a lot right now. Okay. Economically, core retail sales were up 6.5% year over year. The core side was up about 0.7 percent on the month. And I think the headline was up a little over one percent. So that's more than was expected, quite substantially more.

And year over year, that's it's not a bad move. And it's in line with what we've been saying all year that if people believe we're going to go into a recession and that the consumer is going to drop, then that's fine. But nobody can say that that is yet happening or there are signs of that yet happening because there simply aren't. But that's not to say it won't happen. Consumer activity, retail sales, these things are backward-looking economic indicators. They're not predictive. Industrial production, which is more predictive, declined 0.1% in October,

mostly because of a little bit larger of a drop in mining and especially utilities output. That's not necessarily much of a leading indicator unless you get more confirmation from other subsectors. But the industrial production was right around the flat line. And actually, a couple of past months were revised somewhat lower as well. The Ask David today at thedcda.com goes into why we use alternative investments, what kind of alternatives we don't particularly like, and what our use is there.

And it's something I've answered a thousand times over the years, but you get people that are new readers that are curious, and then they also want to know particularly do you do any alternative investing around commodity trends or managed futures or volatility strategies. And I explain why we really prefer investments, whether they're alternative or traditional, whether they're equity or debt, whether they're public or private. Those are the various categories we swim in. But things that we think are divorced from human activity. We tend to not care for much,

and I don't believe that predicting the volatility embedded in a marketplace, whether it's equity or bonds, is really investable. I think it is outside of the domain of what we care about. So speaking of what we do care about, rather than in Ask David, address this difference to help people that maybe don't fully understand financial vocabulary, help them understand what dividend growth versus the growth of the yield is. I started writing it in Ask David last night and quickly realized this was a full dividend cafe of a topic. There's a lot for me to unpack that's going to be really practical and really useful. So dividend cafe on Friday, our weekly commentary will go into that distinction. In the meantime, we have Thursday in front of us tomorrow.

I'm sure it'll be an action-packed day. Markets never sleep, either do we. Thank you for listening to and watching the DC Today. The Bonson Group is a group of investment professionals Thank you for listening to and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. Thank you. and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice. This document was created for informational purposes only. The opinions expressed are solely those of the Bonson Group and do not represent those of Hightower Advisors LLC or any of its affiliates. Hightower Advisors do not provide tax or legal advice.

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