The Dividend Cafe - Tuesday - June 17, 2025

Episode Date: June 17, 2025

Market Commentary: Volatility and Sector Valuations – June 17 Update In this week's edition of Dividend Cafe, Brian Syztel provides a comprehensive overview of the current market landscape as of June 17, discussing recent geopolitical tensions affecting oil prices and stock market performance. Key points include a detailed analysis of the impact on various indexes such as the Dow Jones, S&P 500, and Nasdaq. Brian emphasizes the significance of sector valuations, highlighting defensive sectors and their historical performance compared to growth stocks. Additional economic indicators, including retail sales, industrial production, and the NAHB Housing Market Index, are also reviewed. The episode concludes with a look ahead to upcoming jobless claims and the FOMC decision. 00:00 Introduction to Dividend Cafe 00:21 Market Update: Middle East Tensions and Market Reactions 01:03 Valuations and Defensive Sectors 02:08 Growth vs. Value Stocks 03:28 Economic Calendar and Housing Market 04:22 Upcoming Events and Conclusion 04:39 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. Welcome back to Dividend Cafe. This is Tuesday, June the 17th. Brian Seitel with you here again from our Newport Beach, California office. We had an update yesterday on some easing tensions in the Middle East. The exact opposite happened today as those tensions heated back up between Israel and Iran and also comments out of the Trump administration on the

subject as well. It oil up today, 4%. You had stocks down. The Dow dropped just under 300 points. S&P was down eight tenths of a percent. NASDAQ was down nine tenths of.9%. Then you had a big rally in the bond market as the safe haven asset as treasuries are where capital flows in during tough times. You had the 10 year drop about seven basis points. We closed at 439. Bitcoin

was down 4 or 5% today. Big sell off on all risk assets across the board. The defense have held up much better. My main point today is about where valuations are. So we're trading here at 22 times earnings. And even if you thought the earnings picture was gonna be rosy and expand from here to kind of validate and make that multiple worthy of where it is, it's just pretty hard to see any multiple expansion from here.

If you look at the actual defensive sectors in the S and P 500, call that energy, healthcare, utilities and staples, and you combine all the weightings in the index, you're under 21% of all of those sectors combined. The last time it was this low was the year 2000 when the dot com bubble had occurred and technology was overvalued then. And of course, what you got for the next 10 years was a sideways action in the overall indices and you had value stocks and dividend growth stocks typically during that period And of course, what you got for the next 10 years was a sideways action in the overall indices,

and you had value stocks and dividend growth stocks typically during that period of time just largely outperform. I believe that's a contrarian indicator and an important signpost here as readers and listeners look at their equity allocations. Most people are heavily overweighted and the stuff that probably will have a tougher time

going forward, given its valuation. Some of those defensive sectors really make a lot of sense. In a related topic, actually, last night, there was a question in from a reader about the definition of growth and value. The way the question was posed was about the style classification. What is the difference between the two? Value stocks are just more mature businesses. They tend to be lower valued, have lower valuations,

lower multiples, they tend to pay dividends, they tend to be more defensive. Obviously, TBG is a dividend growth investor and so this tends to be our area of expertise and where we tend to play. But on the flip side, growth stocks tend to be the opposite, which is they have higher earnings growth, they have much higher valuations,

they tend to be more volatile, they usually don't pay dividends, or if they do they're very small. And you have different periods of time where growth quote unquote will outperform value and vice versa. I just went through a period of 2000 and 2010 where value hugely outperformed. But if you look back and forth between the two over history, call it 100 years, those cycles last about 15 years typically, and they sort of oscillate back and forth

as a pendulum swing based on economic activity, based on markets, based on valuations, all those things. But there's a better description and a much more eloquent and thoughtful way to look at it from a qualitative perspective. In last Friday's Dividend Cafe that David wrote, it was a masterpiece. And if you haven't read it, I would read through it.

It's really an enjoyable read and a great definition and description. There was a couple of pieces of news out in the economic calendar. Retail sales were out. They actually missed expectations in May. They were down 0.2% more. We came at negative 0.9%, mainly around a larger decline

in auto sales. Industrial production also missed and was down 0.2% versus a 0.2% gain on the month. And then we had the NAHB housing market index come in weaker than expected for June and the third lowest print in 13 years. Housing still stuck here. And what's happening now is with affordability so low and interest rates remaining high and prices stubbornly high as you're just having buyers step aside here and so that's why the other day I wrote about the supply demand imbalance inside of housing and you're seeing that here

in some of these housing market index numbers. That's what I have for you today tomorrow we'll have jobless claims out we'll have the FOMC decision out, and looking forward to the press conference following tomorrow's FOMC meeting and I'll be able to walk you through that a little bit. In the meantime, reach out with your questions as always, and I shall talk to you soon. Thank you very much. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC,

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