The Dividend Cafe - Thursday - January 16, 2025

Starting point is 00:00:00 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 Thursday, January the 16th. Brian Seitel with you here in our West Palm Beach, Florida office. West Palm Beach, Florida office. On a bit of a follow-through from yesterday in markets, but a much quieter day overall. Yesterday we had the biggest move higher on the year for 25 at least. We had a good amount of breadth as well, meaning market strength internally. Advancers, outpaced, decliners, four to one. I give that sort of a B plus type of grade or a solid B at least. Sometimes in the five to one range is where you really see a meaningful move in the opposite direction after a correction. This was only about a 5% correction from the peaks if this ends up being a turnaround here.

Starting point is 00:00:57 But regardless of that, what is moving markets is interest rates pulling back. And that is because inflation was slightly weaker than expected as of yesterday. So big day yesterday, very quiet day to day. 36% of the names did hit 20 day highs yesterday, but I wanted to ship gears a little bit into actual fundamentals, which is earnings season. Q4 earnings season is just getting underway. And as we hit stride here for it, there's some notable takeaways. So from a sector perspective, financials, which had a huge move yesterday, by the way, are now expected to reach about an 18% earnings growth for the year of 2024. After we get this Q4 result, that's a big

Starting point is 00:01:36 number. And part of some of this is because of a steepening yield curve. But a lot of that steepening yield curve wasn't necessarily priced into some of the early quarter earnings in the first part of 24. So things have really picked up steam on financials. Obviously, one of our larger exposures is the sector. And so we pay attention. Same thing on industrials. As far as positive outlook, they're going to hit kind of a triple play here of revenue growth, margin expansion, and then of course with those two things, you end up with earnings growth. But that phenomenon really isn't going to occur until the second half of 25. And we've spoken about this for some time, but part of that is capital expenditure and investment as supply chains get relocated, nearshoring, onshoring, things like this.

Starting point is 00:02:22 So we'll wait to see on the industrial side. Technology, you know, including MAG-7 is still looking to post after Q4, something in the mid teens, mid to high teens. MAG-7 itself is still almost 20% earnings growth for the year 24. So still positive on tech from an earnings perspective. It's just that the multiples of those companies have already priced in all that. So for the year, we're looking at a 13% growth rate on earnings to 273 a share on S&P. So if you look at where we are today at roughly 59.50, it puts us at 21x still. So markets still aren't cheap, even with earnings growth like that. So like I said, it isn't that good things aren't going to happen in 2025. I suspect they will. Fundamentals are positive. The economy is doing good things.

Starting point is 00:03:09 New administration, partisanship aside, whether you think that's good or bad, there's some pro growth policies on deregulation and either continuation or a decrease in tax rates. So all those things will happen. It's more a matter of what is expected already. And there's a lot of good stuff already expected. So just keep it in mind, there likely isn't going to be a whole lot of multiple expansion from here. And in that kind of environment, we favor and are looking at more of a rotation from growth to value. Steepening yield curve speaks to it. Just what has gone on the past couple of years speaks to it as well. And then where the starting multiple is also bodes well for it. So stay tuned there. On the economic calendar for the day, we had initial jobless claims slightly above consensus. We got 217. We were thinking 210. Anything below 250, like I said, is in fine shape as far as the labor market is concerned.

Starting point is 00:04:06 Retail sales missed by 10th. They were at 0.4% for December. That's fairly good. The Philly Fed Survey hugely and meaningfully beat consensus. We were thinking a negative six. We ended up at a positive 44. I know those numbers seem arbitrary, but just think of the delta between those two things. So big surge in manufacturing in that particular district. And that follows yesterday's Empire State survey of similar fashion. That was the opposite. It was quite weaker than expected. So with that, I'm going to let you go.

Starting point is 00:04:36 As always, this is Thursday. So Friday, we'll have a longer form dividend cafe for you teed up. And then we're into a holiday weekend with Martin Luther King, holiday on Monday. I wish you everyone well and a good weekend. Hopefully your team is still in the playoff race in the NFL. Mine certainly isn't, but that's for another story. So have a good evening.

Starting point is 00:04:55 We'll talk to you soon. 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 LLC. This is not an offer to buy or sell securities. No investment process is free of risk. There is no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. Thank you. 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 expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein.

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The Dividend Cafe - Thursday - January 16, 2025

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