The Dividend Cafe - The Dividend Cafe Monday - August 26, 2024

Episode Date: August 26, 2024

Today's Post - https://bahnsen.co/476p1Rs Market Insights: August Market Dynamics & Key Economic Indicators In this episode of 'Monday Dividend Cafe,' David reviews the market activity for the final Monday in August, highlighting significant trends observed over the summer. Key points include the Dow closing at an all-time high, a notable disparity in performance between energy and technology sectors, and significant market breadth on Friday. The script also touches on sentiment indicators, the 10-year bond yield, and the weakening U.S. dollar. Additionally, key policy updates are discussed, featuring the FTC's legal challenges and labor market dynamics. Economic indicators, such as durable goods orders and home sales data, are analyzed, alongside Chairman Powell's announcement on rate cuts. David wraps up with an invitation to check out Friday's Dividend Cafe for additional insights. 00:00 Introduction and Market Overview 02:10 Tech Sector Struggles and Market Sentiment 05:35 Policy and Regulatory Updates 06:29 Economic Indicators and Housing Market 08:31 Federal Reserve and Energy Market Insights 09:27 Conclusion and Final Thoughts Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Well, hello and welcome to the Monday Dividend Cafe, the final Monday in the month of August as we get ready to embark upon the last week of summer. It has been a very interesting summer and candidly, a very interesting August within that summer, starting off with the big notorious drama sell-off that got a lot of attention and then ending with today. As a matter of fact, the Dow closing at an all-time high. That in and of itself is noteworthy to the extent that nobody cares. in and of itself is noteworthy to the extent that nobody cares. No one's talking about it,

doesn't feel like it, and yet you literally have the Dow at an all-time high today. I guess when you get your high by a 65-point up day, you were so close the day before, obviously, that maybe it didn't move the needle a lot emotionally for investors. But my point is, emotionally for investors. But my point is, we were talking about a big sell-off. The NASDAQ from mid-July through an early part into the month of August had been down 13% or 14%. And then now here we are today talking about a new all-time high in the Dow. That's the times that we are in. I don't have a ton to go through today, but I have a little bit in each category. So I'll get right into it. I mentioned the Dow being up 65 points today. That's only 16 basis points in percentage terms. But that happened with the S&P down a third of a percentage point and the NASDAQ down

almost a full percentage point. So what you really had today was a big rally in energy and consumer staples up over 1%, and then you had technology down over 1%. So you just had one of those days with Dow-type things doing pretty well, NASDAQ-type things not doing so well. When you look at the big rally that we had in the market on Friday, the breadth, meaning the strength of advancers relative to decliners, was 11 to 1, which was the highest daily breadth reading advanced decline ratio since November.

So you had a very strong internal breadth in the markets on Friday. And I think one of the stranger things, potentially encouraging, but potentially not depending on the seat you're in, that's happened this month is that Microsoft has really struggled. Amazon has struggled. After the earnings results, it wasn't a very positive outcome with Google, for example. I use some of these big tech names merely as an example to make the point that you have a lot of the tech stuff that's a bit more vulnerable, but the market itself has really recovered quite well. The investor expectations around this, the sentiment, the Citigroup panic euphoria model has had the euphoria level at the top decile for quite some time. It's actually been about six months. I would argue that's a bearish

indicator, but it is not a timing indicator. And obviously that's true by the fact that I said it's been there for six months. At some point, generally, the sentiment proves to be a contrary indicator. The 10-year bond yield close today at 3.82%. It was up just one basis point on the day. I mentioned energy was the top performing sector, up 111 basis points. And tech was the worst performer, down 112 basis points. Another sector I should allude to is REITs, which has had quite a strong rally in the last month, both on a relative and absolute basis. And a lot of that, I think you could chalk up to the correlation to declining interest rates being favorable for the sector. And speaking of declining interest rates, the dollar

has weakened all month, really against yen, against Canadian, against Australian, against a whole basket. And as I mentioned a couple of weeks back, you're in a position now where the dollar was dropping as markets were dropping, and then the dollar was dropping as markets are rallying. And so the markets are not taking their piece and piece from the dollar, but nevertheless, the dollar does seem to be having a bit of a weakening adjustment, and that's been bullish for emerging markets. Okay. In terms of the news events, I'm not going to spend any time talking about Robert Kennedy dropping out of the presidential race, endorsing former President Trump. It certainly got a lot of headlines over the week.

We'll see what kind of significance it ends up representing in the race. There seems to be a bit of back and forth between the two leading candidates, Vice President Harris and former President Trump, around the rules of their debate. I think it's funny because in the Biden-Trump debate that had been agreed to, President Trump strongly resisted but ended up agreeing to have his mic turned off and President Biden's mic turned off when one of them was not speaking. So the mics would never be hot and open, only for the speaker. And then now Vice President Harris is demanding that rule for their new debates had not been agreed to previously or discussed. And President Trump is wanting it to

be the way they agreed to with Biden. And so you have a flip-flop on both sides, but I think for obvious reasons, politically for both candidates. We'll see what happens with that. On the policy front, a federal judge last week had already put a stay on it, but now threw out entirely the FTC ruling. It's been a really difficult time in the courts for the Federal Trade Commission, which, depending on your point of view, seems to have overplayed their hand on, I've mentioned before, several mergers that they attempted to block. And in this particular case, trying to throw out entirely the legality of non-compete clauses rather than coming in with a more humble, moderate, muted ruling that limited

some of the more egregious non-competes. They tried to throw the whole baby out of the bathwater and a federal judge has ruled that that's not going to fly. So we'll see where that goes. So much of policy is done at a regulatory level. And we're seeing that now with this FTC ruling where the judge referred to it as arbitrary and capricious, which doesn't sound very good. Labor data continuing to offer all sorts of messages. We're going to get the jobs number for August at the end of next week, the first week of September, appropriately on Labor Day week. But the thing I wanted to talk about real quickly was the big revision from last week. I wrote about it a couple of times in the middle of the week at my What's on David's Mind section of our daily recap. But the 818,000 jobs that were revised down, and by the way, I also had a comment on this in the

Dividend Cafe on Friday, that is a negative indicator of the state of jobs. The unemployment rate has ticked higher all the way from 3.5% up to 4.3%. And yet layoffs are at record low levels. So you do have some evidence of a softening job market, but you do not have evidence of employers firing people. And so that mixed bag, I think, is the most honest way to describe where things stand within the jobs data. Other economic news real quick, the durable goods orders were up 9.9% in July, but barely up at all apart from transportation. So almost all of that was in aircraft. And year over year, ex-transportation new orders were down in July and are only up 0.6% year over year. I guess it's good to have it in

one sector, but it doesn't appear to be a real broad or penetrating data point on durable goods. Existing home sales in July were up 1.3%. They're 2.5% lower than they were a year ago. 2.5% lower than they were a year ago. New home sales, new construction were up 10% in July, and they're down 1.4% versus a year ago. Excuse me, the median prices of these homes are down. So where there's price softening, you're getting a little bit more volume now. And that's, of course, what you'd expect at the fulcrum of supply and demand. I think everybody knows by now that Chairman Powell and Jackson Hole on Friday did say the time has come, that they will begin cutting rates. The market's placing a 70% chance that they'll do a quarter point cut in the September meeting,

a 30% chance of a half a point cut, and really no indication at all out of Chairman Powell's speech about the future of quantitative tightening. Oil is up above $77. It was at 3% today. Gasoline demand is running below pre-pandemic levels, but it is higher than it's been the last couple of years. And exports of crude oil are at all-time highs, highest level in American history on a four-week average and a six-month average. U.S. LNG levels are up, too, since the beginning of this administration, but way down from where they were in the middle when they began. Basically, they put a couple rulings in place to curtail some of that. I'm going to leave it there. There's an Ask David

in the Ask TBG section. You also see that on the homepage of Dividend Cafe. In the meantime, reach out with any questions. It's going to be an interesting final week here in the month of August. Definitely check out Friday's Dividend Cafe if you missed it. A lot of interesting charts and data points. And I'll be with you here all week in Newport Beach. Thanks for listening. Thanks for watching. And thank you for reading the Dividend Cafe. This is not an offer to buy or sell securities. No investment process is free of risk. There is no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information referenced herein are from sources believed to be reliable. believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary and does not constitute investment advice. The Bonser Group and Hightower shall not in any way be liable for claims and make no express 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. 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. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client's individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for any related questions.