The Dividend Cafe - The Dividend Cafe Tuesday - August 6, 2024

Episode Date: August 6, 2024

Market Recap and Insights – Tuesday Analysis David Bahnsen presents the Tuesday Daily Recap, recommending listeners to check out the recent Monday and Friday Dividend Cafe sessions for insights into last week's market volatility. David discusses the market's partial recovery, with the Dow closing up 300 points, despite losing some momentum in the final trading hours. He attributes this volatility to pre-emptive caution towards overnight financial activity and external market influences, such as the yen carry trade concern. David also touches on bond market movements, with yields rising and discusses potential future yield curve inversion. He concludes by emphasizing the importance of their financial role during these turbulent times and looks forward to discussing levered finance in the upcoming Friday Dividend Cafe. 00:00 Introduction and Market Recap 00:21 Today's Market Recovery 00:53 End-of-Day Market Dynamics 01:33 Volatility and After-Hours Trading 02:51 Oil and Bond Market Update 04:07 Upcoming Topics in Dividend Cafe 04:41 Final Thoughts and Engagement 05:07 Conclusion 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. This is David Bonson. I'm bringing you the Tuesday Daily Recap here. Our Dividend Cafe yesterday, Monday is worth listening to. The Friday Dividend Cafe, worth listening to, to capture what we believe was taking place in markets last week and what hit a crescendo on Monday in terms of downward market volatility. Today, there was a bit of a recovery. I want to put it in context for you very quickly. The Dow ended up 300 points on the day, up about three quarters of a percentage point. But at one point it was up 700 points. So in the final hour, really about an hour and a half

of trading. So it wasn't just the last 10 minutes or so. In the last 30 minutes, it gave up close to about a hundred points, but it had given up a few hundred before that. And so all that to say that the momentum by the end of the day was to the downside, but the market still did close up 300 points. The S&P was up 1%. The NASDAQ was up the exact same amount. So no one's going to complain when you've been going down a thousand points and we're going down a few percent in some of these big indices. It feels like a positive to have had the market be up, but the markets definitely by the end of the day are more fatigued. There's a lot of reasons. This is very common that the final half hour and a half of trading, some of the big market indices could give up a big lead. Generally, there's just people in this kind of volatility that don't want to go to bed

overnight with the potential of announcements, potential of changes of things in the Asian markets. This yen carry trade concern that I talked about yesterday in volatile markets, after hours activity becomes quite paramount. And so therefore, you have people that prefer not to be exposed. And for those of you who remember some of the hyper volatility that makes the volatility of the last few days look like child's play that we experienced during COVID, that was a very common thing where a lot of after hours and middle of the night and early morning activity could be quite violent. And so you just have enough uncertainty that there's some

who I think wanted to be engaged in markets throughout the day and put some positions on and whatnot, but then didn't want to be exposed overnight. All of it is outside the domain of regular human beings doing regular things, operating in the context of financial planning or financial management or aligning a portfolio to their real life purposes. It has a lot more to do with other financial actors that represent a significant amount of market volume. Oil today was basically flat. It's still just been hanging around there around $73 a barrel. So nothing big to report there. But on the bond side, it was a pretty meaningful backup in prices,

meaning yields moving higher. The 10-year yield was up 12 basis points. So you could go, okay, wow, bonds sold off a little bit. The 10-year had been at $75 and closed yesterday at 378. Monday morning, I believe its low was 366. And now you look at the 10-year back at 390. But the only thing I want to point out is that you're talking about 390 after yields have moved up 20 basis points in the last 36 hours.

And 390 is still 80 basis points less than we had been a few months ago. So it's been a significant rally in bonds. We have not uninverted the curve. The six month is still at 490. The three month is still at 520. It's that three month that is obviously not going to come down until the Fed funds does. But we will basically, when the Fed begins cutting, uninvert the yield curve, I would imagine by the end of the year. And so that's where we are on the bond side. I'm going to talk in the Dividend Cafe on Friday at greater length about not just the yen carry unwind and what that means and how it mattered this week, but just in general, what levered finance means in terms of these market sell-off moments. There's a big lesson there. I'm going to do my best to explain it in a comprehensible way, but I'm

looking forward to this Friday's Dividend Cafe already. In the meantime, if you have any other questions for me or Brian, please feel free to reach out. It's a very busy time, lots going on. We are deeply engaged and I will be very honest with you. I have a lot of people asking me, you doing okay? You hanging in there? I love these times. This is what we live for. This is our Super Bowl. It's our job. And candidly, I think that it's a moment in which our role is very important. I take it seriously. There is nothing to be moaned here. We're enjoying it because it's what we're here to do. Thanks for listening, Dividend Cafe. Look forward to talking to you soon. Thank you. emissions 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.