The Dividend Cafe - Tuesday - January 7, 2025

Episode Date: January 7, 2025

Market Overview and Yield Curve Insights - January 7th, 2025 In this episode of Dividend Cafe, Brian Szytel provides an analysis of the market movements on January 7th, 2025. He discusses the day's overall market decline with the Dow, S&P, and NASDAQ all down, especially in technology sectors. Szytel highlights a positive shift in the yield curve, indicating economic stability, and mentions higher than expected job openings along with a balanced labor market. He also addresses a viewer's question about the importance of dividends, emphasizing that while dividends are a sign of good corporate stewardship and management, other factors should also be considered. The episode concludes with encouragement to reach out with questions and a promise to return the next day. 00:00 Welcome Back to Dividend Cafe 00:23 Market Performance Overview 00:53 Economic Indicators and Yield Curve Analysis 02:18 Job Market and Labor Trends 03:03 Services Report and Interest Rates 03:29 The Importance of Dividends 04:39 Closing Remarks and Upcoming Updates 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, January the 7th. Brian Seitel with you here today, and it's good to be back with you after what was a week or so with not recording here on Dividend Cafe. I missed it. But I hope you all had a wonderful Christmas and holiday season and a great new year and are off to a good start here in 2025. So with that, let's take a look at today. We had markets down overall on the day. The Dow was down about four tenths of a percent. The S&P was down a little over 1%. The NASDAQ was down almost 2%. So a much more larger sell-off in the growth areas of the market and technically more of the technology space overall in markets. So almost the polar opposite of yesterday. Technology

outperformed and staples underperformed. Today, more of those defensive sectors did better, and some of the higher valuation areas of the market sold off. On the economic side, you actually had the 10-year yield up six basis points. We closed at 468. So the 10-year yield continues to creep higher. The 210 spread, by the way, the yield curve at about almost 40 basis points, not quite, it's about 39 basis points. That's technically the steepest yield curve that we've had in over two years. If you look back, I mean, we went inverted on the yield curve right around the 4th of July of 2022. And we more or less stayed inverted, meaning that the short end was a higher rate than the long end, all the way through September of

last year. So over two years of inverted yield curve. So now at almost 40 basis points positive, meaning 10 year yields are higher than two years by about 40 bps. If you take that back, it's all the way early of 2022. When you get a yield curve that that was that steep, it's actually a positive sign for the economy. That's a normal relationship, albeit a small one, The spread is pretty small, but it makes sense to have a higher borrowing cost the longer you go out in maturity. So that's a positive thing. It means that good things are happening in the economy. Things are functioning fairly normally. We have about two rate cuts priced in on the short end of the curve on Fed

funds this year. And so that'll take us down, just call it four or so by the end of the year, maybe a little lower than that. In the economic calendar, we had new job openings out today that were a little bit higher than expected. We thought it would be somewhere around 7.7 million. We actually got a little over 8 million on new jobs for the November report. Inside of that number, though, the quit rate was only 1.9%. That's actually the lowest that we've had since October of 2020, which is in the pandemic period of time. So if you had a job back in the pandemic, of course, you weren't leaving it. You were keeping it, probably working from home at that point. Now you have just a more balanced labor market.

People that have jobs are quitting them less. So the balance shift between employer and employee seems to have taken place more to a normalized state. Usually people tend to like to have their jobs versus trying to hop around all the time. The ISM services report came out for December better than expected and well into expansion territory. This is a good thing. We were at 54.1. Consensus was 53. So a stronger than expected services report, that's definitely a good thing. Like I said, some of the interest rate move up today and some of the steepness in the yield curve is because of these positive economic reports. And again, that's good news. There was a question in there that

David answered really eloquently. So I'd like you to read it when you have a chance. And so I won't be able to say quite as well, but the question was back to shareholders in the form of income to them that's tax efficient. I believe that's the sign of good management. It also speaks to the viability of the business in order to be able to do that, because once you commit to that, it's hard to uncommit to it. And so it's a longer term way to manage and steward returns to shareholders in a consistent way, in a predictable way, and again, in a tax efficient way. So there's other things to consider than just the actual dividend payout or the dividends themselves. It has to come down to all those other factors of the qualitative components of looking at

a company. Often all those things tend to coincide with one another. And so that's something we pay attention to. So with that, I will let you go for this evening. Again, Tuesday evening. I wish you all well. I will be back with you tomorrow, which is Wednesday on Dividend Cafe. Reach out with your questions. Thank you very much. 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.

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