The DC Today - Wednesday, October 25, 2023

Today's Post - https://bahnsen.co/45RiZ4B

Yesterday’s little market move was pretty weak sauce (not even 2-to-1 advancers to decliners and not even 1% in any index). Yields soared back today, putting downward pressure on the S&P and Nasdaq in a 2022 kind of day.

Yesterday, I recorded DC Today in the studio in our Newport Beach offices, had already submitted the final written edition, and then walked down the hallway to my office to eight pop-ups and notifications and alerts that Tom Emmer had removed himself for contention for the House speakership. Five minutes earlier, I had talked about how he was the most recent candidate, but I still didn’t see a path for him to get the votes. Twenty-four hours later, Congressman Mike Johnson of Louisiana is the new Speaker of the House.

In one day, our Q3 earnings season theme of divergent results amongst companies was on high profile display as the largest software company and an up-and-comer in cloud applications (Microsoft) posted positive results, while the largest search and advertising revenue firm in the world (Google) posted negative cloud revenue.

The S&P earnings yield is still higher than a 10-year treasury yield (total earnings dividend by share price). Of course, that differential is less than it has been in the last twenty years, but it is actually much more historically in line with where it was in the 1980s and 90s. The highest earnings yield in the market? Energy.

China increased its tolerance for a deficit to the highest in thirty years last night (above the 3% limit of deficit-to-GDP) and stated that deflationary risk will not be tolerated. President Xi actually made a trip to their central bank (he has never done that). The fiscal side of Japanification seems to be coming. The monetary side is the question mark.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com