The Dividend Cafe - The Dividend Cafe Wednesday - May 29, 2024

Episode Date: May 29, 2024

Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and economic understanding. On May 29th, the markets saw a significant downturn, with a decrease of over 400 points, attributed to a more hawkish tone from the Federal Reserve and the release of the Fed's Beige Book indicating modest economic expansion. The episode also discusses Q1 earnings, with an 8% beat and a notable future outlook, emphasizing the importance of selective portfolio management. For 2024, an 11% earnings increase is expected. Listen for detailed market insights and forecasts. 00:19 Market Overview: May 29th 00:39 Federal Reserve and Economic Insights 01:42 Earnings and Company Performance 02:26 Future Earnings Projections 02:59 Valuation and Portfolio Strategy 03:11 Closing Remarks and Contact Information 03:23 Disclaimer and Legal 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. Hello and welcome to Dividend Cafe. It is, let's see, Wednesday, May 29th. And good to be with you as always. We actually had a down day in markets today for the entire trading session, more or less. We closed lower by over 400 points on the day, which was right around sort of the lows for this session or close to it at least. So down day in markets, yields on 10s were up seven basis points at 461. So you got a little backup in rates and there was some Federal Reserve governors and presidents speaking today. Tone was more hawkish. And so, you know, we got a little backup in interest rates on the day. We also had the Fed's beige book for the month of April.

I didn't take away a whole lot of new information from it. The markets did not like it, but really it just said there was modest economic expansion. I would say there was a slight downgrade to sort of an upbeatness about the economy, and maybe that was what caused it. But overall, it was basically in line. There was, again, modest input price increases noted in the report as well. But eight out of 12 districts had positive economic activity. Four of them were basically flat. That was the major news for the day. It was somewhat of a quiet day on the economic front. Tomorrow, you have a whole lot more going on with things like initial jobless claims and some other data on the economy, economic front. So we'll have more to talk through tomorrow.

But that's kind of what we have for today. You know, the what's on Brian section in there, I basically just talked about where we are with earnings, which is you had an 8% per Q1 beat on earnings, which was only about a 3.8% beat for revenue. So what's happening is companies are able to be more efficient and make profits fall to the bottom line with higher margins. Inflation has caused some input prices to come up. And so those companies with pricing power have raised their prices. And now that some of those input costs have come down, I've spoken about this several times on TV and even on Dividend Cafe, but those margins have been a little stickier there. I do

sense that they'll get squeezed here going forward, but they're quite healthy, and that's what's falling to the bottom line. For the remainder of 2024, we're looking at about an 11% increase in earnings from prior year, which puts us around 245 on S&Ps. So if you think about 5,300 on S&P 500, you divide it by that earnings per share at 245, you're at about 21 times earnings current. So that's about where we are now. Next year, we're expecting, or at least the average expectation is another 14% earnings growth for next year. And that'll put us around 278. So again, I think both of those numbers are on the higher end to what I would assume we'd get. And that'll put us around 278. So again, I think both of those numbers are on the higher end to what I would assume we'd get. And so from a valuation standpoint, it's just

important to pay attention and be selective with what's going inside of portfolios. And of course, that's exactly what we do at the Bonson Group. So you're in good hands there. So listen, with that, I'm going to let you guys go for the evening. Thanks for being with me. As always, please do reach out with questions. We really do like getting them and fun to answer them. So reach out with your questions. Okay. Have a great evening.

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