The Dividend Cafe - The Dividend Cafe Tuesday - October 15, 2024

Episode Date: October 15, 2024

In this episode, recorded on October 15th, host Brian Szytel reports on a generally down day in the markets. The Dow dropped 324 points, the S&P 500 fell by 0.75%, and the NASDAQ decreased by over 1%. He discusses the weaker-than-expected New York Fed Empire State Manufacturing Index and its ramifications. Additionally, he touches on comments from the San Francisco Fed President on interest rates and inflation. Brian highlights recent market activities, including a slight rally in bonds and considerations for small cap exposures in growth equity portfolios. Recommendations for asset allocation and insights from the recent annual asset manager week are also shared, emphasizing the importance of active selectivity and defensiveness. He wraps up with a note on the upcoming election and answers a question about adding a small cap sleeve to the portfolio. 00:00 Introduction and Market Overview 00:29 Manufacturing Index and Fed Updates 01:26 Bond Market and Small Cap Exposure 01:45 Asset Allocation Insights 03:09 Small Cap Portfolio Strategy 03:55 Conclusion and Q&A 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, October the 15th, and Brian Seitel with you here in our Newport Beach office in California. On generally a down day overall in markets, marginally, the Dow was down 324 points on the day. S&P was down about 0.75% and the NASDAQ was down just over 1%. So a little drawdown, we actually closed right around the lows on the session. Not a lot of real big news out on the day. There was the New York Fed Empire State Manufacturing Index was quite a bit weaker than expected. It was a negative 11.9. Expectation was for positive three. And I know those numbers are a little arbitrary for most listeners, but this is a gauge and a measurement inside of a large manufacturing base in the country. And so these numbers can be a little volatile. It was basically new orders and shipments that were the largest detractor inside of the number, although six-month forward expectations were actually still fairly positive. So it was more of a mixed bag than as negative as

it appeared at first on the day. The Fed president from San Francisco daily mentioned that while rates have come down here 50 basis points and that there's another call at 25 basis points in November and December coming off before the end of the year that still leaves the Fed funds target at a restrictive enough stance to still bring inflation lower from here. So take that for what it is there. But overall, generally, slightly down day. The bonds rallied a little bit. We had a 10-year treasury drop about six basis points. It closed at 4.04% for the day. There was a question in there today about some small cap exposure. We had a nice dividend cafe on Friday that I really

encourage, if anybody hasn't read it yet, to go ahead and read it regarding our annual asset manager week. There's some takeaways in there. There's some thoughts, there's some insights in different types of asset classes like public and private equity, public and private credit and debt, things like this. And going forward, just with where markets are priced, if you expect a 240 number on the S&P earnings for 2024, and then the growth expectation for next year, what is priced in, what is expected is a 15% growth rate. And you've got really high margins that are expected. And a lot of these things have to come to fruition to get that 15% growth rate. That brings us to 275 on S&P 500 earnings. If you divide the two, or I'd call it 5820 roughly

on the S&P, you're still at 21 times forward earnings. And so I've said this a few times. It doesn't mean there's any sort of dire prediction here, but what I am saying is that active selectivity, some defensiveness, all those things will be important, but also asset allocation. I think because equities have done well the last couple of years, that there's been a shift more towards an equity-based portfolio for a lot of people out there. And my mentioning of the re-reading of Friday Dividend Cafe was to just take a look at some other parts of the market. And I believe asset allocation will definitely be something important as we go into 2025, not to mention the election that's happening here in a few weeks, things like this. And so with that, there was a

small Q&A session in there about, from that manager trip we did in New York, about an addition of a small cap sleeve within our growth equity portfolio. And this is right in line. I've known these managers, both of us, David and I have known these managers for decades, 10, 15, 20 years. They're right in line with what we want to focus on. It's bottom up, high conviction names. It's a concentrated portfolio, about 25 stocks in the small cap space. And it'll be complimentary to both the emerging market piece and the mid cap piece in that portfolio. And that was just answering a question there. These aren't a target of style box investing, where we just want to have, for whatever reason, a certain percentage in small, mid, or anything like that. It's just where we're finding value in the market. And I'll leave it at

that for the day. So with that, I shall let you go. I hope you have a good evening. Reach out with your questions. We'd love to get them. And we shall talk to you soon. Thank you very much. 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 Thank you. or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities 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.

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