The Dividend Cafe - The Dividend Cafe Monday - October 28, 2024

Episode Date: October 28, 2024

Today's Post - https://bahnsen.co/4hkQJOZ In this episode, David Bahnsen, Chief Investment Officer at The Bahnsen Group, provides a detailed market recap, highlighting the recent rise in the Dow, S&P, and NASDAQ, and increases in bond yields. He mentions NVIDIA's impressive market cap and sector performances, noting financials' gains amid declines in energy. Bahnsen also shares insights into the upcoming U.S. election, drawing parallels with Japan's parliamentary changes, and discusses global public policy, economic data, and energy production. Additionally, the episode covers significant health advancements, including malaria eradication in Egypt, and discusses the broader economic implications of past budget deficits, especially during Ronald Reagan's presidency. The episode concludes by touching on the current earnings season and hinting at a forthcoming significant event.1 00:00 Welcome to Monday Dividend Cafe 01:03 Market Overview and Key Highlights 01:43 Tech Sector Insights and Trivia 02:15 Bond Yields and Market Reactions 03:31 Sector Performance and Oil Price Dynamics 04:18 U.S. Election and Voter Sentiments 04:51 Turnout vs. Persuasion in Elections 05:12 Japan's Political Shift 05:45 Election Polls and Predictions 06:42 Economic Indicators and Market Trends 07:18 Energy Production Insights 07:55 Electricity Demand and Data Centers 09:06 Global Health Milestones 09:35 Historical Budget Deficits 10:22 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. Just a little quick housekeeping. We're going to get right into it. My name is David Bonson. I'm the Chief Investment Officer here at the Bonson Group and our Monday edition Dividend Cafe we always like to do around the horn of markets, the Fed, public policy, energy, housing, economic data, all the election. We are now eight days away from the United States election. And we took a dozen or so questions from different people around all that and went through all of them

on Friday's Dividend Cafe. So the links are there in today's Monday edition Dividend Cafe and the links to today's Fox Business appearance that I did on the Varney show this morning, as well as my Bloomberg appearance that took place at the end of the day today. They're both of the links are available online as well. And let's move on. Okay. Market today up 275 points. The Dow had been down every day last week. All markets have been mostly rallying, but you did have a little divergent action last week with a lot of NASDAQ tech stuff up and a lot of Dow normal stuff down. Today, the Dow was up 275 points. It opened up 275 points, and then it did move higher and lower throughout the day from

that opening point, but it closed pretty much right exactly at its opening point. And that represented a 65 basis point move higher. The S&P and the NASDAQ were both up a quarter of a percent. So not too much, but nevertheless up a little. Speaking of NASDAQ and last week's tech run, NVIDIA now has a larger market cap than all of Canada, than all of the United Kingdom, than all of France, and then all of Germany and Italy combined. Germany and Italy combined have a smaller market capitalization,

their public stock markets, than NVIDIA. Just throwing it out there in case you're curious. A little bar trivia for you, if you're so inclined. Okay, the 10-year bond yield today was up another four, almost five basis points, closed at 4.28%, although the market was up nevertheless. Look, the market is not minded. This four and a quarter range, that is up about 50 basis points from where it was back in in early to mid-September. I think at 450, the market would start to mind. I think near 5%, it would mind a lot. I don't know that we're getting up there in the 10-year yield. I'm very skeptical that we will, but I do know that if we did, I think markets would revolt just from a valuation basis, etc.

The VIX, some people have asked me, does it bother us that the VIX has moved higher? It's up near 20. It's not at 20, but it's been sitting in the 18, 19 ranges right now at about 19.80. The only thing I want to point out is that credit spreads have not widened. And I believe a risk factor of a rising VIX and widening credit spreads together is more confirming. One without the other is much harder to take seriously as a forward-looking risk indicator. We're watching it and we'll keep you posted. So the top performing sector today was financials up 1.14%. Energy, one of the only down sectors, was down 65 basis points. Not a big surprise because oil was down over 5%. Why was oil down over 5%, you say? Because Israel attacked some key strategic military spots in Iran over the weekend. It was very successful.

And you say, why would oil go down on news like that? And the answer is if oil markets were fearing a greater geopolitical risk, a greater retaliatory action that might bring about more escalation and seeing the successful operation of Israel being less than maybe market stock in terms of aggressiveness caused oil prices to come lower. I mentioned the U.S. election a week from tomorrow. I know a ton of you are undecided out there trying to figure out what you're going to do, which is one of my favorite jokes these days because I'm still trying to figure out who in the world is really undecided. I don't even know that many people are unvoted at this point. I think we're over 50% of people have already voted at this point, but undecided, I just find very hard to believe.

I'm on a big tangent right now, but I want to finish this point actually. What that means, if I'm right, that there's very few undecideds and you can judge anecdotally for yourself if you know a lot of people that you think are undecideds. And you can judge anecdotally for yourself if you know a lot of people that you think are undecided. I don't. And my observations and study and analysis and impressions of the country are that there's not a lot of undecided people. That would mean that the final week is much more about turnout and much less about persuasion. And so we will see how this plays out. But in the meantime, Japan had an election. And for the first time in 15 years, the Liberal Democratic Party,

those are all capital L, capital D, capital P, that's the formal term, lost its parliamentary majority. And the prime minister has said he intends to continue running things, but without a coalition on his side. So in a parliamentary form of government, that's always very interesting when it happens. And we will see what happens with the yen as well as Japanese markets in the days and weeks ahead. Let's see here. Public policy. I did state this Friday in Divock Cafe. I just want to reiterate.

More polling came in over the weekend. There's more vibes. There's more energy. There's more interpretation of events. There are more events, rallies, interviews. I'm not moving from my theory of the case that it's a 50-50 election. I think all outcomes are on the table. I get emails from people telling me that I'm very, very dumb because obviously Trump's going to win, or I'm very, very dumb because obviously Trump's going to win, or I'm very, very dumb because obviously Harris is going to win. And I accept that I might be very, very dumb, but I don't think it should be for both of those reasons. So it's going to have to be one or the other. But in the meantime, 50-50 is the humbly accurate and intellectually honest answer, given the various analytical

things that could be said about the state of the electoral college, the state of the polling, the state of questionable turnout models, etc. Economically, durable goods were up half a percent in September. That was a little higher than expected. Electronics fell, metals rose, shipping rates are way down. Now, they're still higher than they were when the year started, but quite a bit lower from their mid-year high, down about 50%, very disinflationary there in recent months with shipping. 97% chance the Fed cuts rates next week, a quarter point. 73% chance of another quarter point cut in December, 0% chance of a 50 basis point, a half a point cut at either the November or December meeting. Lots on energy in this week's

dividend cafe. Please read it to see the chart of oil production in the United States for about 12 years now. The big run up through the initial explosion of the fracking revolution, the drop when OPEC plus flooded the world of markets, the increase throughout the Trump administration, the collapse during COVID, the increase since the post COVID moment. It's one of my favorite charts and I think you'll get a lot out of it in seeing we've gotten up to a new high at 13.5 million barrels a day. One of the big arguments to be made for greater natural gas movement is the need for greater electricity production. And one of the great arguments for more electricity production is the need for power data centers, us being under, is the need for power data centers, us being under, we're not capable of getting it from nuclear, although I believe there is a concerted effort being made to try. But fundamentally, the report I read this weekend is that six gigawatts of electricity

is needed to run all in New York City and that we need 18 gigawatts more for data center capacity in the next five years. So triple the amount of power for all of Manhattan and Eclare. No, no, no, not Manhattan, New York City, meaning all five boroughs. See, only a very snobby Manhattanite would say that, but I know better. I'm talking about with Brooklyn and Bronx and Queens and Staten Island, the whole kit and caboodle of this beautiful city, six gigawatts. And you're talking about triple that power needed for data center needs online alone in the next five years. What else do we want to go through?

Malaria has been eliminated from Egypt. You say, why do I care about malaria in Egypt? Well, hopefully you're a decent human being. So there's that. And secondly, it is indicative of another issue that is so paramount in my against doomsdayism. And that is things that were once really bad that then go away or get fixed. And there are 44 countries now on earth that have eradicated malaria. How could that be anything but a good point? Someone asked me about budget deficits when Ronald Reagan was in office. And that is the Ask TBG for the Week, making the point that it was 2.7% of GDP when he entered office and 2.7% of GDP when he left office. And the total dollar amount of deficit grew

as we increased military spending a great deal to win the Cold War and, of course, reap a huge peace dividend from that throughout the 1990s. But the debt to GDP measured by budget deficit didn't move at all, despite the huge increase. That's the huge difference. That's why we talk about debt to GDP. The ratio, the proportionality is being the operative issue when we think about debt and growth. I'm going to leave it there. A lot of earnings season stuff going on this week. Reach out.

You know where to find me. And of course, next week, there's that big event happening. Thanks for listening. Thanks for watching. Thank you for reading The Dividend Cafe. Thank you. 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

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