The Dividend Cafe - The Dividend Cafe Tuesday - September 24, 2024

Episode Date: September 24, 2024

Market Update & China's Economic Stimulus Analysis - September 24 In today's episode of Dividend Cafe, Brian Szytel offers a market overview for September 24. The Dow, S&P, and Nasdaq showed incremental gains, reaching record highs for the year. Significant highlights include a detailed analysis of China's robust economic stimulus measures aimed at revitalizing its sluggish economy, which has prompted rallies in Chinese and commodity stocks. Additionally, the episode covers U.S. consumer sentiment, showing lower than expected figures, and updates on the Richmond manufacturing index and Case-Shiller home price index, exposing a slower rate of home price appreciation. Tune in for more insights and upcoming real estate data. 00:00 Welcome and Market Overview 00:57 Chinese Market Stimulus 03:02 US Consumer Sentiment and Economic Indicators 04:02 Upcoming Data and Closing Remarks 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, September the 24th. And Brian Seitel with you here from our West Palm Beach, Florida office and recording a decent day in markets, although fairly quiet. The Dow closed up 83 points on the day, and the S&P was up about a quarter of a percent. The NASDAQ was up a little over a half of a percent. And this was another record close, technically, for both the Dow and the S&P. And this makes about the 41st record close for the S&P on the year. So just been inching along here piece by piece. Well, we're technically at those record highs. We had

10-year yields drop one basis point on the day. We closed at 373 on the 10-year. And the 210 curve continues to steep it. We're now at about a 20 basis point spread positively, so uninverted between two-year notes and 10-year on the yield curve. So there you have it on the market day. As far as what moved markets most, we had a rally in Chinese stocks and we had a rally in some commodity names and some other technology names. There was a really a good amount of stimulus coming out of China. I wrote about this at least a week ago that I thought that this was something imminent and obvious that they were going to do given the slowdown there. This is the world's second largest economy. It matters when it's slow. And of course, it moves things when they start to heat it up a little bit.

So some of these Chinese names were up a good amount on the day. What they did is they lowered the reverse repo rate, which is a financial rate that they apply in their markets by 20 basis points. They cut their RRR, which is the required reserve ratio, bank reserves, if you want to think about it like that, the interest rate that banks pay it on reserves. They cut that by 50 basis points, which is a good amount. They cut 50 basis points across existing mortgages. So think about that. It doesn't quite exist in the U.S. with the, at least it doesn't yet, knocking on wood. As far as monetary stimulus to actually cut interest rates on existing contracts of mortgages, it's an interesting idea there.

Obviously not a very American one. Again, there's a central bank there. The PBOC is a communist nation. And so they have more authority. They have more ability to just sort of act unilaterally. That can be a good and bad thing, obviously. As far as reducing and stimulating, it can be a good thing at times because they sure have a lot of ability to just do things like that. But 50 basis points off existing mortgages. They also reduce down payments on second homes from 25% to 15%. So really encouraging people to borrow, trying to purchase homes.

Frankly, it's more real estate focused. They also had some incentive on the equity market participation, increased liquidity mechanism inside of non-bank financials for them to buy things like their own shares back, for example. So that's stimulative for the stock market. So all that to say, pretty broad-based stimulus package in China to try to revive a very slowing economy there. And we'll see how that plays out over time. For now, you get a rally in Chinese stocks. Back in the US, we had consumer sentiment come in lower than expected. It was technically the lowest since August of 2021. We got a 98.7 versus a 104 as expected. And the two things that were mentioned mostly in the survey were things like deteriorating employment market and just concern over inflation still. The consumer sentiment,

by the way, is always kind of lagging as an indicator. It's how people felt in the past. I know we talk about that a lot, but I don't know if I'd breed into that too, too, too much. There was a Richmond manufacturing Fred survey that was weaker than expected. And then there was the 20 city case Schiller index that was up, but it was only up about 0.27% for the month of July. And that was the weakest in about eight months. So home prices are still kind of creeping higher, but at a slower rate. And year over year, they're up about 5.9%. So, you know, the home price appreciation is slowing here, but still positive. In fact, speaking of which, that's basically it for today. Although tomorrow we'll have new home sales and some more real estate data for you to go through

and some other Fed speak and some other things to go through. So with that, I will let you go for the evening. I appreciate you listening. Please do reach out with your questions. They're always great. We appreciate them. But have a lovely Tuesday evening and I shall talk to you soon. Thank you.

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