The Dividend Cafe - The Dividend Cafe Thursday - November 21, 2024

Episode Date: November 21, 2024

Market Recap and Economic Insights - November 21 Edition In this episode of Dividend Cafe, Brian Szytel discusses the positive performance of the equity markets on November 21st, highlighting a 461-point rise in the Dow, a modest increase in the S&P, and a flat Nasdaq. He covers the economic side, including better-than-expected initial unemployment claims, a contraction in the Philly Fed manufacturing index, and strong existing home sales. Szytel also provides insights into future market expectations, emphasizing realistic expectations for index returns and a focus on dividend income given current valuations. The episode concludes with a preview of upcoming content for the holiday week. 00:00 Introduction and Market Overview 00:44 Economic Indicators and Labor Market Insights 01:17 Manufacturing and Housing Market Update 01:47 Market Expectations and Valuation Analysis 03:32 Conclusion and Upcoming Content 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. Welcome to Dividend Cafe. This is Thursday, November the 21st. And Brian Seitel with you on a very pretty positive day overall in the equity markets. The Dow ended up closing up 461 points. We've been in this consolidating sideways move here for over a week now, an up-down movement in markets. So we broke through a little today and resumed our move higher for the month of November. The S&P was up about a half a percent also on the day, and the NASDAQ was essentially flat. A lot of that was tech earnings related companies coming out there, but bonds sold up just a small amount. We went up about a basis

point on 10 years. Treasuries closed at 442. So there's your market wrap. On the economic side of things, we had initial claims actually come out much better than expected. We got a 213,000 print for the week. We thought it would be 220. So that's better with less people filing for unemployment. Although it is interesting to see that the continuing claims continue to edge higher, not just this week, but the past four weeks, month over month. And so we're seeing people that are on unemployment stay that way for a little longer in this labor market. But it's still very resilient overall. The labor market is in very, very good shape still.

The Philly Fed Manufacturing Index contracted for the month, which was unexpected. Last month, we had a pretty positive number. And that's off of the New York Empire State Index that was expansionary as well. So that was a little bit of a mess on manufacturing. And then we had existing home sales that were beating expectations. They were at three and a half percent for the month, 3.4. So there you go on the economic side in your market recap. What I wrote in there is more about expectations. I know we're entering a holiday week. I believe that it will slow down is my guess in markets as earnings kind of finish and we head

into a shortened holiday week next week. But expectations on the S&P, most sell side analysts, not all, some of them are in the 6,500 range, some of them in the 7,000 range. But on average, if you call it around 6,700 on the S&P, we're close today at 5,948. So if you think about earnings at the end of 2024, ending the year somewhere around 245 a share, that puts us about 24 times earnings current. And if you think about those expectations of 6,700 on estimates for next year and an estimate of, say, 265 or so on earnings, it's not only assuming that valuations are going to hang in here at these higher levels, it's saying that they may actually expand a little bit. Now, I can see some logic if you think that interest rates are going to go dramatically lower and you hold all things

else being equal. You could say maybe multiple gets expanded a little bit. My point isn't to throw cold gravy on your turkey before it's served, as I wrote, or anything like that, or be negative on markets. It is to say that I would keep forward index, passive index type of returns at a realistic expectation. I think you'll be disappointed if what you're expecting is just multiple expansion to drive a hefty double-digit return from there. drive a hefty double-digit return from there. And I do think it'll be more income-focused and, frankly, dividend-focused for where you'll be better served going forward, given these valuation levels. We've spoken about it a few times. But I wanted to give you some numbers, so there you have it on those expectations. In the meantime, I will let you go for this evening. Tomorrow, Friday, we'll have Dividend Cafe long form, as always, in your inbox.

Next week, we'll have Dividend Cafe, as usual, Monday and Tuesday, with a Thanksgiving version of a longer form Dividend Cafe on Wednesday for you. So you'll have some good material to read through with your family over Thanksgiving, which I'm assuming everyone will do after the blessing, of course, as we do in my household. Anyways, with that, I shall let you go. Have a lovely evening and reach out with questions. Thank you. The Bonson Group is a group of investment professionals

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