The Dividend Cafe

This is a long DC Today with a lot more market talk than you are used to, largely because the “legacy” version is only one day a week and I am purposely trying to pack a lot in. The last week has been brutal for markets and I have a lot to say today to quantify it, and a lot coming Friday in Dividend Cafe to qualify it. I was the market guest on Maria’s Wall Street over the weekend, discussing all sorts of aspects of the market and investing environment. Dividend Cafe on Friday dug deeper into foreign policy and geopolitical threats and their potential ramifications to markets. The video is here and same comments on podcast here. Off we go … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The stock, bond, and housing markets are in pretty real distress right now as higher rates re-price risk assets, and general instability in monetary policy becomes the natural consequence of years of excess and irresponsibility. And yet, everyone is already talking about it, making it a far less compelling candidate for this week’s Dividend Cafe. I have covered plenty on monetary policy this year and it will remain a primary macroeconomic focus in my shop for years to come. And as far as the general equity market distress playing out, I do think a general primer on bear markets next week will be useful (I have already begun writing it in my head). But this week, I believe we are due for a topic that may be more dramatic than even stock market volatility, inflation, or Fed breakage. I think that through the lenses we normally think about various international affairs, particularly as it pertains to countries we consider enemies of the United States, we are missing some economic and market-sensitive ramifications that will be important to better understand. So grab your globe but not your passport, and let’s devote this week’s Dividend Cafe to a few matters of international significance. I confess up front that it may not all cheer you up, but I can promise you this: It is not going to be the standard level of depth you are often exposed to. Let’s dive deeper, and jump in, to the Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market really doesn’t want to close strong these days, going from +100 to -100 in the last ten minutes of trading today. MARKET ACTION Dow: -107 points (-0.35%) S&P: -0.84% Nasdaq: -1.37% 10-Year Treasury Yield: 3.71% (+20 basis points!) Top-performing sector: Health Care (+0.51%) Bottom-performing sector: Consumer Discretionary (-2.16%); now down -27% on the year, just 1% away from the down -28% of Technology but not nearly as bad as -36% Communication Services WTI Crude Oil: $83.45/barrel (+0.60%) Key Economic Points of the Day: The Bank of Japan left their policy rate unchanged (as expected) Initial jobless claims came in again at just 213,000, and last week, it was revised down to 208,000. The four-week average is now the lowest since early June. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I’d love to say “Fed comments caused the market to drop today” but it would be untrue. Within seconds of the Fed release the market went from +200 to -200, but then the market went back to +250, and that was all AFTER the Fed announcement, the release, and the Powell press conference. THEN, after all that, the market unraveled into the final thirty minutes of trading. Dow: -522 points (-1.70%) S&P: (-1.71%) Nasdaq: (-1.79%) 10-Year Treasury Yield: 3.53% (-4 basis points) Top-performing sector: Consumer Staples (-0.34%) Bottom-performing sector: Consumer Discretionary (-2.37%) WTI Crude Oil: $83.04/barrel (+0.12%) Key Economic Point of the Day: Existing home sales dropped -0.4% in August and are down -19.9% from a year ago Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

A volatile day to the downside in markets today as traders await comments from the Fed tomorrow and as bond yields bring down risk asset valuation. Dow: -313 points (-1.01%) S&P: -1.13% Nasdaq: -0.95% 10-Year Treasury Yield: 3.56% (+7 basis points) Top-performing sector: Technology (-0.51%) Bottom-performing sector: Real Estate (-2.57%) WTI Crude Oil: $84.16/barrel (-1.38%) Key Economic Point of the Day: Housing starts came in at 1.575 million annualized for the month of August, a whopping 125k above expectations. Nearly all of the excess vs. expectations were in multi-family, with single-family coming in the second lowest since mid-2020. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

It is not accidental that I write so much about the Energy sector. First and most applicable, we are big energy investors at The Bahnsen Group, carrying an allocation in our Core Dividend portfolio that is triple the weight that the S&P 500 has. What is happening in energy markets has profound relevance for the economy at large, for all people in their everyday lives, and across all national borders. Few things are more globally relevant than access to energy. But if I am being totally honest, even apart from the large financial exposure we have to the energy space, I love this subject because energy fascinates me. It should fascinate anyone who spends just sixty seconds thinking about the fact that natural resources around for thousands of years with almost no known utility have created a more significant increase in the quality of life for more people than anything under the sun. “Transformed energy” sits at the heart of all economic activity, as my friend Louis Gave is fond of saying. You cannot destroy energy, which is both a law of the universe most of us learned in elementary school and, these days, apparently a vital message for investors. In the physical universe, it merely means energy is constantly changing – usually for the purpose of doing work – but in the investing world, I believe it means something different but perhaps not entirely disconnected. So let’s do a little autumn analysis of the energy sector, where we are, where we may be going, and see what may edify us in the discussion. Let’s jump into the Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Special thanks to all who have reached out to say how much they like and appreciate the new format. Between the addition of a podcast, a video, a transcription of the podcast, and the continuation of a daily written synopsis, along with the legacy version on Monday and the real meat of Dividend Cafe on Friday, I think the vast majority of readers have been extremely positive in their feedback. Ironically, the one or two nasty emails we got (you should see the stuff my communications team receives sometimes) were not even from clients, soooooo …. I do recognize that sometimes people like routine and familiarity (I am one of them), but change is part of life, and these changes were done to add mediums that are most popular and sought after, and to harmonize the workload with the reality of someone who has worked 16-18 hours per day for 25 years. Beyond that, I’m pretty much done talking about it … Okay – off we go! MARKET ACTION Dow: -173 points (-0.56%) S&P: (-1.13%) Nasdaq: (-1.43%) 10-Year Treasury Yield: 3.45% (+3.7 basis points) Top-performing sector: Health Care (+0.55%) Bottom-performing sector: Energy (-2.54%) WTI Crude Oil: $85.30/barrel (-3.62%) Key Economic Point of the Day: Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The day after the market sell-off you had a small move higher in each equity index but I unpack it all and then some here … MARKET ACTION Dow: +30 points (+0.10%) S&P: +0.34% Nasdaq: +0.74% 10-Year Treasury Yield: 3.41% (- 1 basis point) Top-performing sector: Energy (+2.85%) Bottom-performing sector: Real Estate (-1.39%) WTI Crude Oil: $88.68/barrel (+1.57%) Key Economic Point of the Day: Even as the Consumer Price Index came in a bit higher than expected yesterday, the Producer Price Index dropped -0.1% in August (consensus was for no change) ASK DAVID “When you refer to the futures market predicting a 88% chance of a 75bp rate hike or whatever the percentage and outcome may be, how is that determined?” ~ Don D. The CME (Chicago Mercantile Exchange) makes a market in fed funds rate futures. Real people using real money to buy real futures contracts on what the real rate may be at real future intervals. This futures market is the gold standard of measuring market expectations around the fed funds rate. ON DECK I will be on set co-hosting for an hour tomorrow with Stuart Varney (9am-10am ET) on Fox Business. CHECK OUT I was on set with Maria Bartiromo on Fox Business early this morning talking energy, inflation, markets, growth, and more. A worthwhile interview! Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The Consumer Price Index (Headline CPI) came in +8.3% over where it was a year ago. Core CPI (which excludes food and energy) came in at +6.3% versus a year ago. Food prices and the lagging effect of shelter cost put upward pressure on prices while energy prices and used cars put downward pressure on prices. TheDCToday.com DividendCafe.com TheBahnsenGroup.com

It’s pretty anti-climactic that I announce the new DC Today plans on Thursday and then we get to Monday and … it’s the same DC Today you are used to … But that is the idea – no difference in the written program for DC Today on Monday, but with the addition of this daily podcast (and video) … TheDCToday.com DividendCafe.com TheBahnsenGroup.com