Dear Valued Clients and Friends –
I suppose everyone knows what the big story of the weekend was, and hopefully, everyone knows how just unbelievably close we were to it being a lot, lot, lot bigger story. I cover some of it in the Top News Stories below, and there is a little market perspective, as well, but I am sure you have better sources for what took place Saturday night than an investment bulletin like this. That said, and no matter what one’s political take may be, I thank God that the bullet that grazed President Trump’s ear missed; I pray for the family of Corey Comperatore, who died a hero; and I pray for our country where this kind of insanity must stop.
The Dividend Cafe on Friday looked at the conditions for innovation needed in a society, along with a vast array of other comments about current market conditions. The written version is here (my favorite), the video is here, and the podcast is here.
Off we go…
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Market Action
- The market opened up a couple of hundred points, went higher from there, zigged and zagged throughout the day, and closed around where it opened (a new record-high close for the Dow).
- The Dow closed up +210 points (+0.53%), with the S&P 500 up +0.28% and the Nasdaq up +0.40%.
*CNBC, DJIA, July 15, 2024
- It is safe to say market breadth improved last week, and the even-weighted index rallied relative to the cap-weighted a great deal, with the expected outcome of “laggards going up” and “leaders going down.” There are some who believe (hope?) that the problem of hyper-narrow leadership in the market is solved by laggards “catching up” (without the over-valued components having to decline). I would say that this is, well, mathematically possible.
- The Russell 2000 rallied today (+1.80% for the small-cap index) and is up +7.8% in the last week!! 64% of the stocks in the index are now above their 200-day moving average.
- The ten-year bond yield closed today at 4.23%, up four basis points on the day.
- Don’t look now, but the 2-year and 30-year bond yields have UN-inverted (not yet for the 2/10)
- Top-performing sector for the day: Energy (+1.56%) and Financials (+1.42%)
- Bottom-performing sector for the day: Utilities (-2.39%)
Top News Stories
- An assassination attempt on President Trump in Pennsylvania on Saturday night failed by about one centimeter, grazing President Trump’s ear, killing one rally attendee, and wounding two others. The shooter was immediately killed by the Secret Service.
- I should add to the above story that this morning a federal judge dismissed the classified documents case against President Trump, citing a violation of the appointments clause and thereby rendering the appointment of a special counsel in this case unconstitutional.
- Just an hour before the market closed, President Trump announced that he was selecting Ohio Senator JD Vance as his running mate for the vice presidency.
Public Policy
- What should an investor think about the state of the race? A former President is one party’s nominee. That individual is one of the most famous people in the world, is hated more than any political figure by those who hate him, is loved more than any political figure by those who love him, was convicted of felonies in a very controversial legal case a little over a month ago, survived an assassination attempt a couple days ago, and is leading in nearly all polls at this time. His opponent is the incumbent President, has a significant part of his own base, the media, Hollywood, and others pleading with him to drop out amidst fears of his own physical and mental decline, has the lowest approval rating of any President since the polling began, and is still within a point or two in the key battleground states (rust belt blue wall of MI, WI, and PA) of being re-elected. It is an election like none any of us have ever seen, and it is going to be a wild, wild 3-4 months.
- It is hard to focus on the issues at play when the politics are so frenzied. The assassination attempt. The mutiny in the Democratic Party. The VP selection. The convention starting tonight. The polarized electorate. Seeing betting odds up to nearly 70% chance for a Trump victory is interesting but obviously not reliable.
- The issues that will matter in due time will involve China, India, trade, LNG, regulation, and the status of the 2017 tax bill (and what may sunset and not sunset at the end of 2025) … For now, it is just a crazy time to be living in, and I don’t imagine the next few months will get any less crazy.
Economic Front
- Consumer confidence fell to 66, over two points lower than expected, and the lowest in six months. It is not a data point we find very instructive.
- Sometimes, you can find the info you are looking for right on the government’s own website, with survey information provided by the workers themselves! Seeing is believing. (h/t Chris Trimarco)
*Bureau of Labor Statistics, July 2024
Housing & Mortgage
- ATTOM’s mid-year foreclosure report showed that there were 177,431 foreclosures or default notices on residential homes so far this year, a -4.4% decrease versus what the number was in the first half of 2023 (also worth pointing out, it is a 7.8% increase over what the number was in the first half of 2022; markets were still escalating until mid-2022)
- New Jersey and Illinois had the highest foreclosure rates in the country (which was 0.21%, for what it’s worth). Foreclosures in Kentucky are up the most (+73%), but that percentage is only high because the actual number of foreclosures is so very low.
Federal Reserve
- In the futures market, there is an 88% chance of a September rate cut and, for the first time in a long time, a 100% chance by November.
Oil and Energy
- WTI Crude closed at $82, down just a pinch.
- Midstream companies begin reporting quarterly results this week (Kinder Morgan starts Wednesday). However, the last few months have been strong, and last week, midstream was up over +1% again.
Against Doomsdayism
- According to a Goldman Sachs research report, “60% of workers today are employed in occupations that did not exist in 1940. Put differently, their estimates imply that more than 85% of employment growth over the last 80 years has been driven by the technology-driven creation of new occupations.”
I really hope that gives you all pause the way it does me. What a stunning and beautiful testimony to the miracle of a market economy. And what hope and promise for the future, that new jobs not yet invented represent such hope for the future.
Ask TBG
| “I know you don’t necessarily subscribe to the theory that money supply is the sole driver of inflation, MV=PT and whatnot, but I’m curious about your take on the idea that a monetary rule would largely constrain inflation. In your most humble and reasoned opinions, would binding Fed monetary policy to some measure of economic growth and targeting some agreed on Nominal-GDP target, help prevent wild inflationary cycles?” |
| Well, let’s, first of all, clarify what I have written over and over and over in the pages of Dividend Cafe, and I fully intend to continue studying, unpacking, and applying in my work for decades to come – I absolutely do believe that inflation is a monetary phenomenon, and absolutely do believe that MV=PT is an undeniable true algebraic expression! But MV=PT does NOT NOT NOT NOT NOT say that “money supply is the sole driver of inflation.” It says the exact opposite. In the MV=PT, the P is the price level, and there are three other variables involved – only one of them being the Money Supply (M), The Velocity of money (V), and the Supply of goods and services/transactions in the economy (T) are also variables that play into the calculation of Prices. I believe inflation is caused by too much money chasing too few goods, and therefore, the money supply matters, subject to its velocity and relative to the production of goods and services in the economy. Output matters. I very much believe a rules-based system would be superior to the discretionary and interventionist one we have now. Nominal GDP targeting, as proposed by Scott Sumner, is one such rules-based system, and there is much to like about it, prima facie. However, I do not believe the objectives of a rules-based system are merely to constrain inflation (or defend against deflation). They may improve that element of monetary policy, but the far greater advantage, in my view, is the reduction of distortions in the economy that facilitate malinvestment and provoke poor allocation of resources. That, to me, is the argument for some rules-based system – reducing arbitrary Fed adjudication that distorts price discovery and feeds suboptimal allocation of resources, most notably, the resource of capital. |
On Deck
- Convention coverage.
- A Weekly Portfolio Holding Report for clients on Wednesday.
- And EARNINGS season is here!
National Review is still at it.
And with all that said, have a great night, and reach out with any questions whatsoever. And may God Bless America, and may all Americans act with civility and decorum, even in the face of, horror of horrors, people who disagree with them.
With regards,
David L. Bahnsen
Chief Investment Officer, Managing Partner
dbahnsen@thebahnsengroup.com
The Bahnsen Group
www.thebahnsengroup.com
The Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.
