The Dividend Cafe - The Dividend Cafe Thursday - October 24, 2024

Episode Date: October 24, 2024

Today's Post - https://bahnsen.co/3UiSoe3 Market Overview and Economic Data Insights - October 24th In this episode of Dividend Cafe, Brian Szytel discusses the mixed performance in the markets on October 24th, with the S&P 500 up 0.21%, Nasdaq up 0.76%, and the Dow down 140 points. He highlights a decline in interest rates driven by economic data, including better-than-expected initial jobless claims and mixed PMI data showing services outperforming manufacturing. Szytel notes a significant drop in prices paid in the services sector, suggesting potential disinflationary trends. He also touches on new home sales and the implications of rising interest rates amid expanding debts and deficits. The episode concludes with a mention of NVIDIA's market cap comparison to G7 countries and the performance of defensive equity portfolios. 00:00 Introduction and Market Overview 00:26 Economic Data Insights 01:23 PMI Data Analysis 02:22 Interest Rates and Fiscal Policy 03:14 NVIDIA Market Cap Commentary 03:40 Client Portfolio Performance 04:18 Closing Remarks 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, October 24th. Brian Seitel with you. On a generally, actually mixed day in markets, more to the upside, the S&P was up about 0.21%. NASDAQ was up 0.76%. The Dow actually fell 140 points. Some of that is around certain earnings reports and things in that price weighted index on the day. But overall, generally a positive day in stocks. In the bond market, we for once had interest rates fall here today a little bit. We had the 10-year down, two basis points closed at 421. And some of the economic data is what likely brought interest rates down a little bit because they've been running up here for several weeks. But initial jobless claims actually were a little better than expected. As I've mentioned,

we've had things like big weather hit the country and there's been a strike at some of the big industrial airline manufacturing companies or company that you could probably guess up in Seattle that has caused some of these number anomalies. But nonetheless, we've got from a mid 250 area down to now 227 on the week. So that's a healthier number in initial jobless claims. Continuing claims, however, were the highest and they've inched up. And so people are staying on unemployment a little longer, in other words. This is the highest level that we've seen in three years. So something to keep an eye on, see if that kind of comes back down. We had PMI data out on manufacturing that was a

little bit better than expected, although still in contractionary territory. And then the services side of that PMI data that was a little better than expected and actually in expansion territory. So it's still a mixed bag, services outperforming manufacturing. The one thing I noted in there was it was interesting inside of the services PMI data to see the prices paid fall so dramatically. They actually fell, the delta, meaning how much they fell for the month, was the sharpest decline since right in March of 2020. So it could be an anomaly, it could be a one-time thing, but something to pay attention to. It speaks to the disinflationary camp on the services side, which has been really the larger inflationary side of the equation in the last couple of years. So something to keep an eye on there. We also had new home sales in September of 4%, 4.1,

a little better than expected. So all in all, decent economic data for the day, decent market for the day, little rise in bonds, little rise in stocks. Did talk in there about the term premium in treasuries and interest rates. And my point was, these things have risen, meaning some risk perceived in the bond market

is term premium, that has risen. Interest rates have gone up a little bit. And that's how these things used to work. You'd have with less fiscal solvency, it would make sense that you would pay more in interest to borrow money. That's how it works for credit scores for consumers. And so when you have debts and deficits that keep expanding, at some point, the consideration is that interest rates will rise too. Well, as I've said for a while, the Fed in the GFC and then also in COVID has used their balance sheet to be the buyer of last resort of more or less all asset classes. And so I think some of those things have deteriorated. That free market that set interest rates higher isn't there as much because the Fed is that ultimate put. And that was the point I was trying to make there. I also think it's a less popular topic. I threw out an NVIDIA comment about how

its market cap is larger than literally five of the G7 countries. Only the US and Japan, by the way, are the two that have a GDP larger than the market cap of NVIDIA. But it's just more of a popular topic than reducing the debt or solving the deficit. And so even though there's election now, there you have it. So I believe interest rates are a vague, kind of subtle sign of that as they've risen. But take that for what you will. The other question in there was about how we did during the sell-off periods. And all I can really say without getting specifics, because each client situation is different, is just that fared well, it would be the way I

answered it. I don't know exactly what you want me to say other than did the defensive equity portfolio outperform the broad indices? Yes. Did a higher level of services offered to clients mean that they probably stayed and did better? Yes. Things like that, which are all very truthful and honest answers. But if you were looking for the market was down 25 when we were down 21, it's hard for me to give you precise numbers like that just because each person's account is quite different from the other. So I hope those things are helpful to you. But it's Thursday now. We've got Friday durable goods orders out tomorrow. And then we'll have our long form dividend cafe, as we always do. And with that, reach out with questions. Have a good night. Thank you.

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