The Dividend Cafe - Tuesday - January 21, 2025

Episode Date: January 21, 2025

Market Updates and Team Meetings: Insights from Dividend Cafe In this episode of Dividend Cafe, hosted by Brian Szytel from The Bahnsen Group's Newport Beach office, the discussion covers market activity following the Martin Luther King Jr. holiday. Key points include a significant rebound in the Dow Jones, S&P 500, and NASDAQ indices, observations on corporate margins, particularly in the financial sector, and the impact of potential policy changes on the market. The episode also highlights a quiet economic week, leading economic indicators to be discussed later, and The Bahnsen Group's annual team meeting aimed at enhancing team culture and business efficiency. A long-form Dividend Cafe installment is expected on Friday. 00:00 Introduction and Market Overview 01:10 Corporate Margins and Sector Performance 02:36 Animal Spirits and Market Sentiment 03:14 Upcoming Economic Indicators 03:37 The Bahnsen Group Annual Team Meeting 04:21 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 the Dividend Cafe. This is Tuesday, January the 21st, and Brian Seitel with you here in our Newport Beach office of the Bonson Group here for a very big week of company meetings and client events and a whole slew of different things that I'll get into. But for now, on the market day, we actually had a nice positive day here. We were closed yesterday, as you know, for the Martin Luther King Jr. observance and

national holiday. So we reopened today and the Dow closed up over 500 points, 537. The S&P was up about 0.8% and NASDAQ was up about a half of a percent. So it's this continued rotation. Year to date, the Dow Jones is up something around three and a half percent. The other indices are closer to two and a half percent.

And so there's some outperformance in some of those more value-oriented names, particularly some of the financials this year. The 10-year was down three basis points, so interest rates continue to have normalcy and to calm down from their run-up. We're now at 458 on the 10-year. So what I wrote about today in there was we've talked about earnings and we've talked about the expectations and one of the risks to markets is not that good things won't happen that we think they will but that the Expectations are very lofty and so you can get disappointment

That said if you look at margins inside of corporate America right now, they're the highest they've ever been Going back to 1990 at least. And that's where my thinking goes back to. So in the modern era, this is the highest percentage of margin that we've had. If you get some continued rotation back into some sectors like energy and healthcare, which has had negative numbers on the earnings growth side, if you start to get some positive numbers there, we're looking at about a 13.7% margin in the market in the S&P 500. To put that in perspective, in 2019, which was pre-pandemic,

it was just over 10, maybe 11. So meaningful above that, call it 20% above that at 13.7. And if you go back to, say, before the GFC, which was maybe 2004, 2005, you weren't even at 10. It was something like eight. If you go back to 1990, it's mid single digits. Margins in corporate America have just continued to take higher. I think some of the valuations speak to that.

But all that to say, this is a very alive and a profit-making machine that we have in this country. So things are going well there. There was continued positive, I'm going to call them animal spirits on both declining or disinflationary environment on that heading, a labor market that has held in there, and then some pro-growth policies out of Washington. All those things are fueling some animal spirits in markets, and so you're getting some of these nice positive days.

We're still not quite back to the high, but we did close over 6,000 on the S&P today and that was the first time since December. So down the pike, obviously, we still have things like tariffs and how that will play out and then also what type of bill we'll get through Congress to talk about things like energy and things like taxes. For the day, there wasn't frankly really any new economic news out for today. Tomorrow, we'll have some leading economic indicators that we can talk a little bit about. And then there's more coming on Thursday and certainly Friday. We'll have initial jobless claims on Thursday and some PMI

data on Friday. It's frankly a fairly quiet week on the economic calendar, but there'll be still plenty to talk through, of course. As I mentioned in the letter, this week happens to be, number one, holiday shortened, and number two, an important week for TBG because we have our annual team meeting. We do this once a year. We get all 70-plus employees in one location.

It's two days of important and meaningful meetings that we put on. It builds team culture. There's camaraderie. We learn how to be a better business, and obviously to serve all of you more and better than we currently do. So that's our effort on Thursday and Friday.

So you'll have Dividend Cafe today, which is Tuesday, and tomorrow, which is Wednesday. Thursday, we're going to opt out of it for the day to focus on that important team meeting, but then Friday you'll have the long form dividend cafe in your inbox for your enjoyment for the weekend. With that, I'm going to let you go for this evening and keep this fairly short and sweet, but I wish you a lovely evening and please reach out with your questions. Thank you very much.

RICK VALLEE 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's 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. The investment opportunities referenced

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