The Dividend Cafe - The Dividend Cafe Tuesday - May 21, 2024

Episode Date: May 21, 2024

This episode of Dividend Cafe provides a weekly market commentary with a focus on dividends and economic insights. On May 21, the markets saw a slight increase despite the lack of major economic news, with the Dow up by 66 points and both NASDAQ and S&P 500 up by about a quarter of a point. Interest rates were slightly down, with the 10-year treasury dropping three basis points. Fed officials, including Waller, shared diverse views on the economy, generally indicating a cautious approach towards changing interest rates. The episode also discusses the current low market volatility, compares GDP in aggregate versus per capita with Japan as a case study, and looks ahead to the FOMC meeting minutes and existing home sales reports. Lastly, it emphasizes the importance of not becoming complacent due to current positive market conditions. 00:00 Introduction to Dividend Cafe 00:16 Market Overview: A Quiet Summer Day 00:45 Federal Reserve Speakers and Interest Rate Insights 01:22 Market Volatility and Economic Indicators 02:39 GDP Insights and Global Economic Trends 03:21 Looking Ahead: FOMC Meeting and Home Sales 03:34 Closing Remarks and Compliance 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 this Tuesday. It's May the 21st. And another what feels like just a kind of a summer quiet period in markets right now. The market was not a lot of economic news out on the day. Markets ended up closing a little higher on the day. The Dow was up 66 points. NASDAQ and S&P were both up about a quarter of a point. Rates fell just slightly. Ten-year was down three basis points to 441. So not a lot of news out in the economic calendar and just sort of a quiet summer day. We had a good amount of different Fed speakers, though, with different comments and different

speeches throughout the country. The most notable for the day, at least, was Waller. He was more dovish than some of the others, generally, citing that April was pretty good as far as what we saw with inflation coming down and being a little better than expected, but still cited several more months being needed before they're actually going to ease. expected, but still cited several more months being needed before they're actually going to ease. Both Bostick, Barr, and Mester, all those Fed officials basically were in the higher for longer camp on interest rates. Again, Fed futures are still that 60% chance for September as our starting point to when rates move lower. As noted, the volatility of the market has come down. The VIX is now in the low 12s.

It's back basically to right where it was in 2019 as we headed into the holidays before the pandemic and markets were doing well then, but it was a quiet period of time. It's not the lowest it's ever been. 2017 comes to my mind as a period of time when volatility was lower, but I just noticed that it's taken this long to come in a full circle from where it was at the peak of the pandemic, which was in the 70s when volatility shoots up and markets sell off, that type of thing. And then we sort of have just been working our way down here as people become more comfortable with which way the world is turning and so on and so forth. The economy has done pretty good things. Inflation did peak and is now coming down. Interest rates are thought to have peaked at this point and coming down. And so markets are feeling a little less inked, I suppose. And so

the volatility is a little lower. And what I noted in there was while technically, historically, average returns when vol is this low are generally positive, six-month returns are in the 4% range. Just keep in mind that it doesn't mean every single time, and there's plenty of periods of time when the ball picks up for different reasons. So there's no sense in getting complacent just as markets are trading a little friendlier. The question in there I thought was useful on citing GDP in aggregate or GDP per capita. And David had a nice answer in there about, typically it's an aggregate because you're looking at what a country is producing overall, not just per person or per

capita. Japan is a good example where GDP has basically stagnated. It's around the same as it has been for 30 or 40 years. And so the rest of the world has outgrown it. And so it's fallen off of competitiveness. But per capita, GDP still looks fine. And that's because, of course, the population is also moving lower, too. It hasn't grown. And in fact, it's been declining. And so those things do matter. So we look at aggregate numbers typically on GDP. Tomorrow, we've got not a lot out either. We do have the FOMC meetings, the minutes from May, that we can chew through a little bit. And then we also have some existing home sales. So we'll be out with you tomorrow on Dividend Cafe. I

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