The Dividend Cafe - The Dividend Cafe Monday - July 29, 2024

Episode Date: July 29, 2024

Today's Post - https://bahnsen.co/3Sux849 Monday Dividend Cafe: Market Recap, Election Insights, and Economic Data Analysis In this episode of the Monday Dividend Cafe, David provides a comprehensive overview of recent market activities, including notable observations about the Dow, S&P, and Nasdaq movements. He elaborates on the performance of various sectors like banks, healthcare, and homebuilders, and reviews bond market trends. The host also delves into the political landscape, discussing President Biden's removal from the race, Vice President Harris's electoral strategy, and former President Trump's campaign prospects. Additionally, he touches upon key economic indicators, such as the PCE inflation data, restaurant reservations, travel statistics, and housing market trends.David concludes with insights into the upcoming Federal Reserve and international central bank meetings. 00:00 Introduction and Market Recap 00:54 July Market Movements and Sector Performance 03:37 Global Political Updates: Venezuela 04:25 US Election Insights and Predictions 11:37 Economic Data Highlights 13:25 Housing Market Trends 15:29 Upcoming Fed and Global Central Bank Decisions 16:01 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, my favorite day of the week to be bringing you all the latest and greatest in the markets, the Fed, housing, politics, economic data. It isn't like there is nothing going on in any of these spaces. Let me do the market recap first, and then we can have fun with the politics and housing and all that good stuff. Today was actually a rare, somewhat boring day in markets. The market did open up a little bit. The Dow zigged and zagged, got lower at one point, something over 100 points. But then it got back near the flat line and stayed there most of the day and then closed down just 49 points, 12 basis

points. The S&P and the Nasdaq were both just a tiny bit above the flat line. So very flattish days in all three major market indices. I would argue that July was a significant month. We still do have two trading days to go this week, Tuesday and Wednesday, of course. But that what we have seen thus far in July amounts to some significant movement in this early part of a rotation. And yet it is very important to point out that when I say rotation, I do not mean half of the market is selling off and half of the market is rallying. You have a NASDAQ that going into today was down about three and a half percent on the month. That obviously didn't change much today with a kind of flat day.

that obviously didn't change much today with a kind of flat day. The S&P was about flat. It had been down about 4% and rallied a lot of that back late last week. But you basically had a significant amount of activity in markets, in some cases downside volatility, and yet 80% of the names in the market are above their 200-day moving average. That is very high breadth. When you look at the Russell 2000, the small cap index, you are talking about 73% of the companies in this index that had been somewhat beleaguered and troubled. 73% of the companies index are now above their 200-day moving average. 73% of the company's index are now above their 200-day moving average. That number has been somewhere around 40%, as high as 50% all year until this big move.

Very strong performance in July in the banks and financials, in healthcare, biotech, REITs. Homebuilders have done very well too. Now, obviously, all of those areas except for homebuilders have been big areas of focus for us. So we're paying attention there. And then you see a great month in the bond market as well. The 10-year bond yield closing today at 4.17%. The yield down another 2.8 basis points. That yield, of course, has seen 4.75 this year.

It's seen 4.50 recently, of course, has seen $4.75 this year. It's seen $4.50 recently, $4.17 now. So as those yields have come lower and lower still on the long end, you've seen duration in the bond market have quite a rally. Today, the top performing sector was consumer discretionary up 1.4%. And the worst performing sector today was energy down 87 basis points. Keep in mind when we think about what's going to happen in the market this week, and especially those cap-weighted indices that Microsoft, Facebook, which goes by the word meta, embarrassingly enough, Apple and Amazon are all reporting this week. So you got some major Amazon are all reporting this week. So you got some major MAG7, FANG, big cap growth names coming out this week with their quarterly results. I want to get to some U.S. election stuff, but just quickly from a kind of news around the world deal, if you do see headlines on your TV

or a clickbait or something about an election, contested, incumbent parties claiming victory, opposition party is claiming interference, no one knowing who has won. This is not foreshadowing to November. This is actually what is playing out right now on the world stage in Venezuela. So we would love for this to be a Venezuelan story and never a U.S. story. But I digress. That's the lay of the land in Venezuela where Maduro is claiming victory and the freedom fighters who oppose him are saying not so fast. Okay, so I am getting a lot of questions about the U.S. election, obviously. The Ask TBG today specifically asked me, do you have an updated opinion in light of President Biden's removal from the race of what

will happen in the presidential race this November? Please note they did not ask what do you think it's going to mean for the market or what's going on in the market now because of this, or what are your opinions as to different outcomes impacting the economy? This was a more political prediction type question. And so what I will say about this is that more or less, I think it's a 50-50 race. I do not believe it was a 50-50 race when President Biden was still the nominee for the Democratic Party. Biden was still the nominee for the Democratic Party. I think that he was apparently heading more so by the week to a dramatic loss at the bare minimum in the Electoral College as a result of the confidence crisis that came to be in his age and health. And essentially,

with him out of the race, the biggest vulnerability that I think has existed has been removed. Now, this is not to say that Vice President Harris doesn't have vulnerabilities as a candidate. She does. I would like to think that everybody knows that former President Trump has vulnerabilities as a candidate. And I'm talking politically here. Whether people love one of them or hate one of them, it's not my point. And I'm asking everyone who's listening and asking everyone who reads Diven Cafe to hear me on this. We can all have different opinions about what will happen or what the tea leaves reflect right now. That's what political handicapping and prognosticating is. And I'm on with some of the smartest people in politics every day.

And one person is saying up and one person is saying down. One person is saying left, one person is saying right. And they're both smart and they both can't be right. So it's okay that there's differences of opinion. But this is not me talking about what I want to be or what I think ought to be. I'm just offering the objective opinion as to where things stand and it's research I have to do to the extent it does play in to the formation of an outlook, expectations around certain legislation, around policy, around macroeconomic effects, and then ultimately to the portfolio.

My view with the vulnerabilities for Vice President Harris electorally are that even though the biggest concern a lot of voters had with President Biden has been removed, the electoral map and the strategy to get there is still more or less the same, which at this time is pretty much one path, which is holding a blue wall at Michigan and Pennsylvania and Wisconsin and landing right at 270 votes, essentially winning all the same states that President Biden won in 2020, but likely losing Arizona, Nevada, and Georgia. But then if you hold Michigan, Pennsylvania, Wisconsin, you're at 270. President Trump's at 268. And as I've pointed out before, that assumes that the county around Omaha, Nebraska

holds for the Democrats. It was red in 2016. It was blue in 2020. Because if that doesn't go that way, then you're actually at a 269-269 tie. And generally, you have a little more confidence in the outlook of winning the election when you have more than one path to get there. And in theory, President Trump could lose Pennsylvania but win Michigan. Or let's say he's wrong about the polls in Georgia, Arizona, Nevada, and one of those goes away, but he holds the other blue wall states. There's different ways it could go. But it does appear in the polling, at least for now, that there's a limited electoral path. So that is a harder issue. But there's no question on the positive side for Vice President Harris

that there's more energy at this time side for Vice President Harris that there's more energy at this time and the donor dollars that were freezing up around President Biden's attempt have come back in. I think issue-wise, inflation and immigration will be a challenge for her, but there are other issues that she can lean into that will be a strength. But ultimately, I think her challenge as a candidate or opportunity as a candidate will be a strength. But ultimately, I think her challenge as a candidate or opportunity as a candidate will be to try to make the race as much as possible about former President Trump, which was something that was not happening with President Biden still in the race. I would point out, too, in the plus column for Kamala Harris,

that Virginia, New Hampshire, Minnesota, some were talking about New Mexico, becoming vulnerable for President Biden look like they're probably not going to be vulnerable. And that's a very important part of this, too. When you have one narrow path to electoral college, you don't want to be losing any states. And I'm very skeptical that Vice President Harris will lose any of those states. The VP selection could make a difference. Josh Shapiro, the governor of Pennsylvania, Mark Kelly, the senator of Arizona, both add something theoretically to help on the electoral college side of things. Polls have tightened. So objectively, I think you have to say that there's a close race here. Now, just to sum this thing up, both candidates have a floor in American politics that they're

not going to go under. You could debate if it's 45, 46 percent. It's around there. And I think President Trump struggles versus many people who've been elected president before and have a good chance of being elected president again in that he does have a lower ceiling than most. There's a lot of people that don't like him and are not going to like him. But there are certainly enough people

that could theoretically vote for him that could get him elected again. But it will come down to something in the range of 8% who are either undecided or going to go with third parties or more moderate, centrist, independent. But there's no scenario, in my opinion, by which President Trump or Kamala Harris go below 45%. And so therefore, you really are fighting for four, five, six, seven percent. And I do expect that I'll come down to something in the range of 10 counties between three and maybe four states total. So that's why I say down to the wire. And that's certainly why I say it's not really worth thinking a lot about over the next month,

because until Labor Day, this is running in place. There's a lot of spin, a lot of appeal to momentum that is meant to create a self-fulfilling prophecy. But until we see the vice presidential running mate selection for Kamala Harris, the Democrats have their convention, and then just a gazillion dollars starts getting spent on the internet and television airwaves, I think Labor Day is the point at which we'll get a better feel for where this race stands. I have friends that believe it is 60-40 advantage Trump. I have other friends that think it is 50-50.

I'm in the 50-50 camp as to likelihood right now. Okay, out of the political realm, housing. I want to do some economic data real quickly first. The PCE did come out Friday. No new surprises. Pretty much confirming the direction of inflation. And in this case, more disinflation that the CPI had shown a couple of weeks earlier. Prices in the PCE were up to 0.1% in June. So year over year,

the headline PCE reflecting 2.5% year over year expense increase, getting much closer to that Fed target of 2%. Restaurant reservations at peak levels, well above pre-COVID levels. Daily travelers and airports measured by actual people going through TSA. So that includes all travelers. Combined personal and business travel at all-time highs, way higher than both pre- and post-COVID numbers. Tax receipts year to date are ahead of where we were each of the last five years. And the only thing I'd say about that is a year ago at this time, California filers had been given reprieve. They didn't necessarily owe a tax payment up to this point because they were given an extension until October. And California is a big state, you may have heard. So there's some apples to oranges in this that I would point

out. Gas prices right now at the same place they were from 2011 to 2015. Hotel revenue per room is at record highs. Average daily rate to stay in a hotel is at record highs. And the occupancy of hotels is in line with averages. So just a number of economic data points came across my screen over the weekend, give you a feel for general economic data. When it comes to housing, existing home sales were down another 5.4% in June. That strong spring sale season never came. The prices continue to not be lower, but the volumes continue to be lower, the actual volume

of transaction and activity. Homes priced above $1 million, by the way, are seeing a modest pickup in volume, but they're the only price range seeing a modest pickup in volume, but they're the only price range seeing a modest decline in prices. And those two things go together. I think to get volume higher, you have to see prices come lower. So we'll keep that in mind. In terms of the random statistics of the day in housing, the first time home buyer, average age in 1990, when I was in high school, was 28. The average age of a first time home buyer today is 36. That's a world changing statistic right there. The median age of all home buyers, anyone doing

a home purchase. so someone could be buying their fourth home, they could be buying their 10th home, it could be a vacation home. But the median age of all homebuyers is 49 now. It was 31 just 40 years ago. What that refers to, I think, is the significant change in mobility. Middle-aged people now often do sell a home, upgrade to a better home, a bigger home, a newer home. That was much less common in the early 1980s. 18% of households, this was in a New York Fed survey, but it was a national stat,

18% of households say that they are going to be moving in the next year. I'm not sure if I believe that or not. I think that we are 2.3 million homes undersupplied. There's a model built out to measure this relative to household formation. And the median estimate of the supply deficit is 2.3 million homes. Fed, they meet this week. They're not going to touch rates this week. There is a 12% chance of a 50 basis point, a half a point rate cut at the September meeting, but it's still overwhelmingly likely it'll just be a quarter point in September.

And again, there's a 100% chance right now of some rate cut in September and of at least 50 basis points coming out by December. Also keep in mind the Bank of Japan and the Bank of England both announced policy decisions, rate policy decisions this week. I'm going to leave it there. We spent a lot of time on the election. We have the Fed coming, the jobs report at the end of the month. But I think that's a lot to chew on. Do check out DividendCafe.com for any more info. Certainly if you missed the Friday Dividend Cafe, I appreciate a lot of positive feedback we got about some of the emotional realities of investing on Friday. And we'll look forward to earnings season continuing in high gear this week and next. And if you have

any questions, please do reach out. Questions at thebonsongroup.com. We will see how July finishes off and look forward to being back with you again soon. Thanks for listening, watching and reading The Dividend Cafe. Thank you. 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. 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 expressed or implied representations or warranties as to the accuracy or completeness of the

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