The Dividend Cafe - The Dividend Cafe Tuesday - December 17, 2024

Episode Date: December 17, 2024

Dividend Cafe: Market Recap and Insights on December 17, 2024 In this episode of Dividend Cafe, Brian Szytel provides a midday market recap for Tuesday, December 17, 2024. The Dow has experienced a significant losing streak, down around 300 points, marking its ninth consecutive negative day. The S&P and Nasdaq also closed lower. The Federal Reserve's meeting is anticipated to conclude with a 25 basis point rate cut, and Brian discusses its impact on bond markets. Additionally, Brian comments on China's budget release, capital outflows, and the devaluing Yuan. He briefly touches on the topic of moving IRA balances to 401(k) plans for Roth contributions and ends with a call for listener questions. 00:00 Introduction and Market Overview 01:10 Federal Reserve Meeting Insights 01:38 Bond Market Analysis 02:59 China's Economic Strategies 04:20 Investment Advice and Q&A 05:20 Conclusion and Upcoming Topics 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 Tuesday, December the 17th. Brian Seitel with you here in this midday weekly market recap for Dividend Cafe. Negative day overall in markets. I'm actually recording this about 12 minutes before the close, so it'll change a small amount from this number, but we're down right around 300 points or so on the Dow. Fun fact, and not to cause any unnecessary alarm per se, but the Dow is down nine days in a row, and that's the longest streak of it doing that since 1978. Believe it or not, I was one years old. So usually you get a positive day in the middle of things that breaks up a consecutive losing streak like that. So not to spoil anyone's

holiday shopping or holiday vibe, but kind of a fun fact. Keep in mind, though, we're only off the highs of about 4%, so it's not like it's down really all that much. But a couple of factoids there on the Dow. The S&P actually closed lower today as well by about half of a percent. So did the Nasdaq. So all markets were down about the same. The 10-year on the day was about flat. We closed at 440 on 10s.

That yield has come up a little bit. We have the beginning of the Federal Reserve meeting started today. We're expecting with all assurity that a 25 basis point rate cut will be announced tomorrow at the conclusion of the meeting. He'll have a nice press conference after the meeting as usual. And we tend to get more information from that than the actual minutes released from the meeting itself. So we'll be paying attention to that. I do think it's interesting that with this rate cutting cycle now turning to three months old, they've lowered interest rates. We actually have had a sell-off in the bond market. The aggregate bond index is down about 2.6%. The long bond, if you go out 20 years on treasuries,

is down closer to 5% or 6%, if not a little bit more. Unusual that you would have declining interest rates and then also declining bond prices. What it means is that the bond market priced in ahead of expectations, interest rates that would be much lower than they're actually turning out to be. So just like anything else, any asset class, if it prices in things that are too optimistic and then gets disappointed, things sell off. That's what you've seen in the bond market here. For whatever it's worth, I actually think most of that happening has now been undone. But my comment was about some of the other longer duration aspects of the market.

So if you think about companies without earnings or high valuation tech companies, or high valuation any sector companies, or things like cryptocurrency, things that just are longer duration assets for a return of capital or for some sort of calculation of a rate of return that's predictable in the future. They have not repriced yet. And I guess my comment is just as the bond market got ahead of itself, I'm anxious to see how some of those other asset classes may reprice here as we get a little bit higher interest rate paradigm. But more to that after tomorrow's meeting and after the press conference and things like this. I did have a couple of comments in

there about China. They released a budget today. They usually do this in March. They're doing this in December, likely because of the election results and the pending potential for upcoming tariffs. And they're looking at ways to stimulate to maintain their 5% growth target. The tough thing that they're dealing with is that as they spend more, as they run a deficit, as they spend more than they're taking in, and as they have a devaluing yuan currency, it's tough to not keep capital from coming out of the country. So investment, outside investment into the country was negative for this month by the most on record. So there was $45.7 billion worth of capital

outflows. That's a big number for China. And so that's sort of the situation that they're in. They're trying to have an advantage. They're very much an export-led economy. And so they need to be able to sell the widgets they're making there across the world. Having a weaker currency is an advantage because it becomes cheaper, and they have an advantage to sell them. But at the same token, having money leave the country is a problem as well, and that's what that capital outflow number is. So a couple things for readers to consider, at least today. But I just wanted to do a little round the horn, at least on this Tuesday edition, on the shortened version of Dividend Cafe, with some of the things that are going on in the market. There was a question in there from a good client about potentially moving an IRA balance back into

a 401k plan in order to be able to qualify for backdoor Roth contributions. So look, it potentially can make sense. I'm not a big fan per se. There's some downside to it as well. And as they say, no free lunch. A 401k plan is typically pretty limited in the investment choices. And depending on your age and your balance, there may be reasons to just not do that and not worry about the incremental benefit of a $7,000 Roth IRA contribution. If there's many, many years to go and you're going to be contributing for 20 years or something like this, and then I suppose some of these things might make sense. But again, putting that tax cart before the investment horse is typically not a good idea. So those are some of my general feelings about it. Some things that make sense on paper, in other words, in reality, when you look at total balance sheet

or total net worth, may or may not actually drive an outcome that is meaningful, number one, and may not be worth the trouble that they meaningful, number one, and may not be worth the trouble that they are to go through. So I'm going to let you go for this evening. I will be back with you tomorrow on Wednesday, again, after the FOMC meeting conclusion. So I'm assuming that'll be the main topic of the day. But with that, I encourage you to reach out with your questions, please, and have a lovely evening. Thank you. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities

are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk. There's no guarantee that the investment process or investment opportunities referenced herein Thank you. 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 data and other information, or for statements or errors contained in or omissions 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.