The Dividend Cafe - The Dividend Cafe Wednesday - October 9, 2024

Episode Date: October 9, 2024

Market Update and Economic Insights Amidst Hurricane Threat The October 9th edition of Dividend Cafe discusses the positive trends in the stock market, with the Dow rising 431 points and the S&P and NASDAQ also seeing gains. The video highlights a slight increase in interest rates due to favorable economic data and the FOMC's leaning towards a 50 basis point rate cut, focusing more on employment than inflation, which appears to be subsiding. Meanwhile, Hurricane Milton's impact on Florida and its potential effects on oil production are noted, leading to fluctuations in the energy market with heightened volatility and bullish sentiment in oil prices. The episode also addresses the concept of money velocity post-financial crisis and its implications on economic demand. Viewers are encouraged to reach out with questions and are offered thoughts and prayers for those in the Gulf amid the hurricane threat. 00:00 Market Overview and Positive Day Recap 00:41 Federal Reserve Meeting Insights 01:14 Hurricane Milton and Market Impact 01:48 Energy Market Volatility 03:11 Understanding Money Supply and Velocity 04:23 Closing Remarks and Well Wishes 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 Wednesday, October the 9th. And Brian Saitel with you here today on a overall positive day in markets. We had the Dow actually close up just about at the high, maybe just a few points off. We closed up 431 points. That's a little over a percent on the day. The S&P was up about 0.7%. The NASDAQ was up about 0.6%. So sort of a blue chip stock rally. Ten-year was up five basis points at 407. And so interest rates have started to creep a little higher. Most of that is on generally positive economic data that has come out. We actually

didn't have a lot in the economic calendar itself. We had the minutes from the September meeting from the FOMC out, and it was really a pretty broad-based, not quite unanimous, but close to it, push for the 50 basis point rate cut that we started with a pretty clear delineation between employment being the bigger issue over inflation. In fact, most of the comments were related to inflation, more or less completely subsiding, or at least getting to a point at which they felt comfortable. So there you have it on the Fed side. There was some wholesale inventories that were roughly in line on the day that wasn't a big piece of news. Again, interest rates have moved. In the main non-economic news

calendar, it's really about Hurricane Milton at this point in the Gulf, which is now, as I'm talking here right this second, as market closed, now impacting the Sarasota, Tampa Bay area of Florida. And so our thoughts and prayers go out to everybody there, all of our readers and clients. I've spoken to many of them that have battened down the hatches here for this storm. Hopefully it dissipates faster than the estimates are showing. Again, markets closed, not quite at the all-time high, but close to it. Intraday, the S&P did make an all-time high. The energy market, and I wrote wrote about this is been quite a volatile landscape we had about a 15 percent little less but a 14 and a half percent move over the past week given

employment numbers in the u.s stronger given the israel and iran tension in the middle east and retaliation from israel that is imminent the stimulus in china which can spur demand for oil and all those things and then on top of that the storm in the, which can spur demand for oil, and all those things. And then on top of that, the storm in the Gulf, which about maybe a little less than 25% of total crude production comes out of the Gulf, but something like 40% of refining is in that area. And so this particular hurricane doesn't look like it'll impact a lot of that. But nonetheless, you get a lot of bullish sentiment baked into the oil market. And so that moved crude up a good amount just on the week last week. And then you saw the biggest drop of the year yesterday of 4.5%.

And then today, a completely flat number. So volatility is heightened in the stock market here with the VIX in the 20s, but even more so in the energy landscape with more or less record bullish call volume behind the scenes. with more or less record bullish call volume behind the scenes. So there's a lot of bullish sentiment in the price of crude going higher from here, more so even than when Russia invaded Ukraine. So we'll see. My guess is just that volatility continues. As far as that actually playing out into higher prices, I think that'll come down to the demand story. And I think China will play a pretty big role in that. And so we'll give this some more time. So with that, I've got a comment in there on the difference between the money supply and velocity. And I just gave a real simple explanation to this particular reader a few days ago,

showing a chart of where velocity is now compared to historical periods. His question was related to, is a deposit basically the same as there being more velocity of money? And of course it isn't. There's a calculation. The velocity of money is calculated by dividing the GDP estimate, which is prices and goods, divided by M2, which is the money supply. So a larger money supply often leads to lower velocity per incremental dollar, that is, because it's the divisor rather than the numerator.

But aside from that, you can see where we are. The chart I thought is telling. I hope people get something out of it. But you can really see the fall off in velocity after the financial crisis. And for everything that ZERP was, taking rates to zero, it still doesn't necessarily put demand into that side of the equation of money being lent out of banks. Money can sit on bank balance sheets and get hoarded. But if it is being lent out into the economy to fuel and to solve for a demand of loans, it doesn't necessarily just create velocity. And you can see that in the chart there that I included. So I think that's enough for you to chew on for today. Again, thoughts and prayers to all Floridians. I hope you stay safe and reach out with your questions as you always do. We appreciate it. Have a lovely evening. Thank you. The Bonson Group is a group of investment

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