The Dividend Cafe - The Dividend Cafe Tuesday - November 12, 2024

Episode Date: November 12, 2024

Market Update and Economic Insights - November 12th In this episode of Dividend Cafe, Brian Szytel from The Bahnsen Group provides a comprehensive market update from their Newport Beach office. The Dow Jones fell 382 points, the S&P 500 dropped 0.3%, and Nasdaq remained flat. Key points discussed include the recent fluctuations in the market following the post-election rally, the notable rise in interest rates with the 10-year Treasury yield closing at 4.43%, and the impact of better-than-expected growth numbers. Brian also touches on the strengthening dollar, the shifting political landscape in Congress, and upcoming economic data releases, including the anticipated CPI report. Federal Reserve comments on restrictive Fed funds and inflation are also highlighted. The session concludes with an acknowledgment of the market as a discounting mechanism and a reminder to consider the difference between policy announcements and actual implementations. 00:00 Welcome to Dividend Cafe 00:14 Market Overview: A Day in Stocks 00:51 Interest Rates and Treasury Yields 01:27 Political Landscape and Market Impact 02:39 Economic Data and Surveys 03:32 Federal Reserve Insights 03:46 Inflation Expectations and Market Predictions 05:26 Conclusion and Upcoming Events 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. Good evening and welcome to Dividend Cafe. This is Tuesday, November the 12th. you in our Newport Beach, California office here at the Bonson Group. On a fairly flat day, slightly lower overall in the market, we had sort of an up and down trading day for the most part, although we closed right near the lows. The Dow was down 382 points. The S&P 500 was down about 0.3%. NASDAQ was essentially flat. So a little bit of a down day in stocks. Obviously, there's been this big run-up here post-election here over the past week. And so some of this consolidation I don't think is a bad thing.

I frankly think it's a good thing. We don't want one direction on the market forever. It needs to trade in a normal fashion, and it's still trading high. But a little give back today. Interest rates were probably the most notable news on the day. The 10-year was up 13 basis points. We closed at 443 on the yield. So, I mean, at the low, we're now up about 75 to 77 basis points from where we were at the low. And most of them, we've higher in interest rates, is because of growth numbers coming in better than expected. So it's not necessarily a bad thing. But just keep in mind the two-year treasury yield now

is actually higher today than it was when the Fed started cutting rates in September. So we're getting some repricing and some things. The dollar has strengthened since the election. There's been some added momentum on additional House of Representative seats for the GOP. And again, all the races are not done yet. So the final numbers are not in. Of course, we need 218 for a majority inside the House. But it's projected that the Republicans should be somewhere near 215 at this point, Democrats around 210. And so that's where it's leaning with plenty more to count here. So we'll see where that shakes out. But I do think markets are looking into that.

If there is a full control of both chambers of Congress and in the White House, then those policies of whether you agree with them or not is separate. But as far as tax policy, some things that are market friendly are being priced in. And that's what we've seen here since the election. I don't know that's necessarily news to anybody. But again, with the House starting to shift here a little bit, I think that is news. Also, keep in mind on interest rates, Monday was a holiday. So we had Veterans Day. And so the bond market was closed.

And so today's pretty big move in interest rates. Part of it was because we had an up day in stocks and bonds weren't able to sort of follow suit until today when markets reopened. So there you have it. There was a couple of pieces of economic data out on the day, but not anything major. We do get a CPI read tomorrow that I'll be looking at a little more heavily. Today, a couple of surveys. There was an NFIB small business survey that's out almost like consumer sentiment. I look at these things as notable, but you know, the surveys and they're usually more lagging than they are forward looking. They're about humans are humans. And we tend to answer questions based on how we

currently feel more than what we're able to predict to the future that is unknowable. So take it for what it is. But the survey was actually ticked up for October. So good news there. Bad news is this is the 35th month where it's been pretty handily below the historical average over the past 50 years. So optimism is not high. It's technically low, even though it ticked up for the month of October. There you have it. On the Fed side, there was four different Fed speakers today out in markets saying different comments, mostly about Fed funds being restrictive and needing to come lower. Inflation topics definitely coming back into the forefront. I think tomorrow we'll get a better picture on that. There's an

expectation of a 0.3% monthly increase on the CPI. So we'll see if that comes in or not. But with interest rates having now moved up, and again, currencies move up along with interest rates, some higher inflation expectations are being priced in or already have. And to David's point in what he wrote in the written version, the markets are discounting mechanisms. They're really good at trying to take all known data today and then predict the future. And so just keep in mind, a lot of this run-up in the markets, both with bonds selling off and yields going higher and stocks moving considerably higher over just the past week, is a lot of what may be pro-growth policy being priced in the market

already. And as we know, not all things actually come to fruition. David wrote about that today too. And when asked about tariffs in the Ask TBG section, are they inflationary? Yes. But there's a difference between talking about them and actually implementing them. And so in the first term that Trump had, same thing. There were more things talked about for a negotiating tactic likely than were actually implemented. Of course, what is being spoken about now is much higher than in that period. But I don't know that markets are pricing in that happening simply because I don't know

that it should because they may or may not actually come to fruition. Take that for what it is. Difference between what is said and what actually gets done, or what actually gets done, but with enough loopholes and carve-outs that it could become somewhat benign from an effect standpoint anyways. But with all that to say, moving along, tomorrow again, like I said, we'll have CPI, a little bit more data towards the end of the week. Again, some more movement with what ends up happening with the House of Representatives as the couple of days unfold. In the meantime, we'll be back with you tomorrow on Dividend Cafe.

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