The Dividend Cafe - The Dividend Cafe Tuesday - June 25, 2024

Episode Date: June 25, 2024

Mixed Market Movements and Resilient Housing Prices in Focus In this episode of Dividend Cafe, market commentary includes a mixed performance across the indices with the Dow down nearly 300 points while the S&P and Nasdaq posted gains. Economic updates reveal all-time high home prices per the Case Shiller Home Price Index and decreased sales of previously owned homes. The episode delves into consumer sentiment, emerging markets strategy, and the implications of refinanced consumer and corporate debt amid current interest rates. Additionally, considerations on geopolitical risk in China and the evolution of the emerging markets landscape are discussed. 00:00 Introduction to Dividend Cafe 00:19 Market Overview: A Mixed Day 00:52 Economic News and Housing Market 01:50 Emerging Markets and Consumer Focus 03:19 Debt and Interest Rates Discussion 04:18 Conclusion and Upcoming Events 04:29 Disclaimer and Legal Information 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. It is Tuesday, June the 25th, and happy to be with you here today. Kind of a mixed day in markets. The Dow is actually down pretty significantly. It was almost a mirror image of yesterday's trading action with what went up and what went down. But the Dow was down 299 points, just under 300. But both the S&P and the Nasdaq were both positive on the day with the Nasdaq up over a percent and a quarter. A bit of a mixed day again, kind of a mirror image of what transpired

yesterday. The 10-year yield was basically flat. It dropped the basis point. We closed at 423. So pretty quiet in bond land, a bit mixed in stocks on the day. A couple of economic news that came out today. Not a whole lot, really, but there was a Case Schiller Home Price Index number that was out. We got 7.2%, which puts it at an all-time high technically versus about 7% expected on home prices. So prices are resilient. They're staying up. In fact, still going up slightly, but there's just not a lot of transactions. And I've spoken about this several times, but there just remains to be this sort of dearth of activity in housing. And that was shown today also with sales of previously owned homes for the month

that were down 0.7%. So not a lot of transactions happening. And again, I believe housing just remains stuck with higher interest rates and consumers hesitant to refinance and want to move. Consumer sentiment on the day was out in line with expectations. Again, we always look at this as a lagging indicator, so take it for what it's worth. There were some comments. There was a Q&A session in there about emerging markets and the way that we have our exposure and if it's still focused on the consumer, and then some concerns over China. And I walked through both of those topics. You should take a read, but I'll summarize in that, yes, we still focus on the consumer, but that theme was more driven by bottom-up, just realization

of where value was with the managers that we tend to select in that space of emerging markets. And so you had more of a consumer bias. And at that time, it was really compared to the indexes that were all super commodity heavy. So you had real big oil companies and commodity companies that were basically the top five or so companies in the emerging market index. So I'd say this, yes, still focus on the consumer because that's the growth story. But the caveat to that is that things have changed. The emerging market landscape has changed. China was once 40% of it. It's now 26% of it. Largest holdings were commodity-driven. Now they're technology-driven. And so with that evolution, I am really convinced we have the right manager in place, which is that you have to evolve as these markets that are ever-changing and quick to evolve also do that.

And so that's the strategy that we have there. And then as far as things like geopolitical or just political risk in China, you know, it is one of our larger underweights in that arena. But again, I would look at that more as a company story and less as a country story, which is the way we tend to look at things. Hopefully that's helpful. There was another comment I had in there just about the differences between the consumer having refinanced its largest debt, which is a mortgage, when rates were low. And so 60% of all mortgage owners have an interest rate on their mortgage of under 4%. Whereas the same is true in corporate America. 68%, for example, of all high yield, so junk bonds, corporate bonds, were issued that are outstanding today,

were issued when Fed funds was sub 1%, so under 1%. And there's about a five-year maturity window still remaining. And so the point was mortgages are 30 years, high yield debt is now five years. And that's the lowest maturity on average of outstanding high yield since 1987. So time is eroding there. I do think that'll get us through this rate tightening cycle, but I wanted to talk about that a little bit on where debt is. And I suppose I could have added government indebtedness in there and the

maturity wall there, but I shall save that for another time. So with that, I will let you go for the evening tomorrow. We have new home sales out, an otherwise quite economic calendar, and we'll be back with you live on Dividend Cafe. Reach out with questions. Thank you. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and 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. Thank you. referenced herein 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 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. Thank you.