The Dividend Cafe - The Dividend Cafe Tuesday - September 10, 2024

Episode Date: September 10, 2024

Market Update and Economic Insights - September 10th In this episode of Dividend Cafe, Brian Szytel provides a market update for Tuesday, September 10th. He discusses the mixed performance of the Dow, S&P, and NASDAQ, along with a decrease in the 10-year Treasury yield. Key economic insights include the NFIB small business survey results, inflation concerns, upcoming CPI data, and banking regulation updates from the Fed. Additionally, there's an analysis on dividend yields relative to stock price appreciation and a brief mention of the Fed's quantitative tightening efforts. The episode concludes with a note on the evening's Harris-Trump debate. 00:00 Introduction and Market Overview 00:48 Economic Indicators and Surveys 01:55 Banking Sector Updates 02:46 Upcoming Economic Data 02:57 Dividend Yield Discussion 04:03 Federal Reserve and Quantitative Tightening 04:46 Conclusion and Sign-Off 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, September the 10th. Brian Seitel with you here on somewhat of a mixed market day. The Dow was actually lower most of the morning and gained a little bit of momentum midday, only to close just slightly lower. It was down about 92 points on the day. The S&P was up about a little over four tenths of a percent and the NASDAQ was up about eight tenths of a percent. So some positive rebound in some of the technology and semiconductor names inside of those two indices with the Dow slightly negative by about 0.2% on

the day. The 10-year was down five basis points on the day to 365. So we got some lower rates pretty much across the curve in interest rates. And on the economic calendar, somewhat of a quiet day, frankly, we had an NFIB small business survey that is out. And these surveys, just keep in mind, are always, whether it's consumer sentiment or a small business optimism survey, they're always a little backward looking. They're lagging indicators. It's how people have felt going backwards, not necessarily about what will come to pass. So keep that in mind. But the index itself dropped two and a half points to 91.2. Those are arbitrary numbers. But if you put it in the historical sense of the average being 98, it's below that.

And it's about the 32nd month below that sort of average number. So small business optimism has been weak. And part of that is because of inflation. In fact, this report or this survey indicated that is still the number one concern. Again, a lagging indicator here. Going forward, obviously we've got inflation data out tomorrow on CPI. We'll get that out Wednesday. We're expecting a 0.2% for tomorrow. So we'll see where we come in on CPI, but that's what markets are paying attention to right now. So otherwise, somewhat of a quiet day. On the banking side, we actually had the Fed chair for supervision, his name is Barr,

send out his outline to update Basel III, which was banking regulations previously set forth. His new outline proposed lowering it from a 19% capital requirement for big banks down to 9%. So this is good for the banking system. It's what Wall Street has been looking for, and it will allow more capital to go into the private sector, which is always a good thing, with that reason, as long as those capital requirements are honored. But from 19 to 9, on that side, the banks actually were down today on the news. So maybe there was some hope for something more than that. But otherwise, it was widely anticipated. We had a couple of different note auctions today in the treasury market, which went fine. Again, interest rates were lower. And

so the demand on those was quite strong. And then tomorrow, like I said, you've got CPI in focus. And then you've got PPI in continuing claims and jobless claims on Thursday. And then tomorrow, like I said, you've got CPI in focus, and then you've got PPI in continuing claims and jobless claims on Thursday, and then consumer sentiment on Friday. There was a question in there that David answered very nicely about the sort of thing that happens when stocks tend to appreciate a little more dramatically. And so the dividend yield, which is calculated by dividing the share price by the dividends per share, ends up going lower because the share price of the stock goes higher. And is that good or bad? How do you rectify that? And the answer is essentially it just depends on a case-by-case basis.

There are situations where it still makes sense to hold on to the name, even though it's done so well, and even though the absolute yield is lower, if the sense of a larger amount of dividend growth potential is there, and if the valuation is still warrant amount of dividend growth potential is there and if the valuation is still warranted given the stock price appreciation. So we look at this stuff all the time. It's a good problem to have. I could rattle off a half a dozen or probably a dozen names where this has been the case. So it's always something that I'll take. That type of analysis is fun. Sometimes we move on. It comes down to whether we can put that capital to work elsewhere

and have it be rewarded in a greater way than keeping it in the name that it is in, but it just comes down to individual stock by stock selection and portfolio management decision-making. The other thing too that we have, and well, we've spoke about it a little bit. The media hasn't spoken about it too much, but technically the Fed is right now engaged in quantitative tightening. They're reducing the size of their balance sheet. They've gotten it down to a little under $8 trillion, closer to $7 trillion. And it'll be hard for them to start talking about lowering interest rates next week without talking about what they're going to do on the balance sheet. My suspicion is that they're going to end up pausing that and keeping the balance sheet status quo as they start to ease

monetary policy. Because if they're doing both of them at the same time, reducing balance sheet status quo as they start to ease monetary policy, because if they're doing both of them at the same time, reducing balance sheet and reducing interest rates, those two things are counteractive to one another. And I think that would be a little bit of a waste of time. So I'm sure that we'll be hearing more about that, especially next week and some of their statements. So with that, I'm going to let you go for the evening. Enjoy your Harris-Trump debate evening. Get out your-Trump debate evening. Get out your popcorn. I think it'll be one that will be worth watching.

So I know that I'll be watching it and I'll be talking about it with you tomorrow on Dividend Cafe. With that, have a good evening. 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. Thank you. 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. The Bonser Group and Hightower shall not in any way be liable for claims and make no express or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained

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