Dear Valued Clients and Friends –
It’s a healthy amount of Monday Dividend Cafe today, well with the election “stuff,” Fed week, housing tidbits, valuable economic data, and more!
Dividend Cafe on Friday looked at the reality of a balanced portfolio, the fascinating truth about July market action, a forward thought on Ukraine, and a historical reference to consider re: AI. The written version is here (my favorite), the video is here, and the podcast is here.
Please note that we will be ringing the opening bell of the New York Stock Exchange on Friday, August 9, in celebration of our dividend growth fund, ticker TBG.
Off we go …
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Market Action
- The market opened up a tad and then zigged and zagged for a bit before leveling out near the flat line much of the day.
- The Dow closed down just -49 points (-0.12%) with the S&P 500 up +0.08% and the Nasdaq up +0.07%
*CNBC, DJIA, July 29, 2024
- It is hard to say what the final days of the month will produce but it has certainly been a month of what appears to be “early rotation.” 80% of the names in the market are above their 200-day moving average, and breadth has improved across the board even as the Nasdaq is down -3.5% on the month (it had been down over -7% but recovered much of that late last week)
- Strong sectors have been banks/financials, health care/biotech, REITs, and homebuilders (all but the latter being areas of focus for us)
- It is not just the broad Russell 2000 small-cap index that has rallied, but the internals of the companies within it, as 73% of the companies in the index are now above their 200-day moving average (most of the year that has been about 40-50%), indicating much-improved breadth across small-cap, as well.
- The ten-year bond yield closed today at 4.17%, down -2.8 basis points on the day
- Top-performing sector for the day: Consumer Discretionary (+1.42%)
- Bottom-performing sector for the day: Energy (-0.87%)
- Much of big tech is releasing quarterly results this week (Microsoft, Facebook, Apple, and Amazon)
Top News Stories
- There is a huge contested election with the incumbent party claiming victory in a tight race and the opposition party claiming interference and the real win … Foreshadowing November in the USA? No … The results over the weekend in … Venezuela. Ay yi yi.
Public Policy
- The Ask TBG section below includes the question I received about my personal handicapping of the Presidential race
- President Trump appeared at the Crypto conference in Nashville over the weekend to assure crypto enthusiasts that he would be a supportive President for crypto-currency and that he would fire Gary Gensler, the current head of the SEC. I, of course, was somewhat confused, since I have been assured that one of the great benefits of crypto is that it completely transcends and skirts the arm of government, therefore making the “support” of a President unnecessary. But alas, I am sure it means something to someone.
- President Biden today announced an agenda for a Constitutional amendment to create 18-year term limits on the Supreme Court (amongst other things, including limits on Presidential immunity, etc.). I will leave it to those of you who know how an amendment to the Constitution is passed to chime in on the likelihood of this happening.
Economic Front
- The PCE data on Friday basically confirmed the direction of prices as reflected in the CPI a couple weeks earlier. Prices were up 0.1% in June and year-over-year are down to a +2.5% increase.
- Personal Income rose +0.2% in June and personal consumption rose +0.3%.
- With a h/t to Torsten Slok of Apollo, a few comments about the state of the “real” economy as measured by “real” things in the lives of “real” people:
- Restaurant reservations are at peak levels and well above pre-COVID levels.
- Daily travelers in airports (so combined personal and business travel) are higher than every year pre and post-COVID.
- Tax receipts year-to-date ahead of where we were each of the last five years (though keep in mind that last year at this time, California filers had been given a reprieve until October).
- Gas prices are right now basically in the same range as where they were from 2011-2015.
- Hotel revenue per room is at record highs, the average daily rate is at record highs, and occupancy is in line with averages.
Housing & Mortgage
- Last week’s news that existing home sales were down another -5.4% in June provided the final clarity that a “strong Spring sales season” many were expecting never happened. Prices continue to not be lower. Volumes continue to be lower. It is worth noting, though, that homes priced above $1 million are seeing modest volume pick-up, combined with modest price decline (yes, those two things will have to go together right now).
- A few highlights from the recent Housing Outlook report from Apollo:
- The average age of a first-time homebuyer in 1990 was 28; the average age now is 36. This is the most stunning statistic I have shared in Dividend Cafe all year, in my opinion (besides any other ones I referred to as “the most stunning”).
- The median age of “all homebuyers” is 49 now – but was 31 just over forty years ago. This massive move higher is simply about mobility; middle-aged people so often “upgrade” their home now (with a new purchase), where it was much less common in the early 1980s.
- 18% of households SAY they will move in the next year (hmmmm).
- The inventory of available homes for sale is the lowest it has ever been.
- Adjusted for household formation, the median estimate of supply deficit is currently 2.3 million homes.
- 40% of U.S. homes now do not have a mortgage at all.
- 62% of the 60% that do have a mortgage are paying less than 4% in the interest rate on that loan.
Federal Reserve
- Well don’t look now, but the market is now pricing in a 12% chance of a 50 basis point rate cut (half of a percentage point) at the September meeting (the odds of just a quarter point hike are 88%, which means there is a 100% chance in the futures market of some rate cut in September).
- The Fed meets this week, and while there is no expectation of any change in the Fed funds rate this week, expect traders and the media to be scrutinizing the language and tone of the FOMC release and Chairman Powell’s presser for any possible melodrama, delusion, and indication they can muster.
- I should point out that the Bank of Japan and the Bank of England both announce policy and rate decisions this week, as well.
Oil and Energy
- WTI Crude closed at $75.90, down -1.65% on the day
- Natural gas dropped -4% last week and oil prices dropped -2%. Utilities were up +1.7% as most defensive stock sectors were up, but midstream was down over -1% on the week.
- A fair amount of major midstream players report earnings throughout this week and both Exxon and Chevron report at the end of the week.
Ask TBG
| “Do you have an updated opinion in light of President Biden’s removal from the race of what will happen in the Presidential race this November?” ~ Roger P. |
| So my own take is this, and many people I respect a great deal disagree with me … I believe it is an absolute 50/50 toss-up, with the disadvantage of the Kamala Harris pick for Democrats being that it is still the exact electoral “get right to 270” strategy (by holding blue wall of MI, PA, WI), without really putting any other states in play (NV, AZ, NC). She takes the biggest Democrat liability off the table (President Biden’s age and health), but maintains others (inflation, immigration) and exacerbates another (her far left/progressive brand). But the advantages she brings are seemingly stemming off fears of vulnerability in VA, NH, MN, and also adding energy and donor dollars. The VP selection of candidate Harris could very well make a difference in the race, with the potential for Gov. Shapiro of Pennsylvania or Sen. Kelly of Arizona intended to shake things up electorally. Polls have tightened a bit but I would still suggest it will take time to see where the race really stands. I am in daily calls with as many sources and resources as I can muster and will do my best to provide objective commentary along the way where warranted. I believe both candidates have a 45-46% floor, and yet former President Trump’s ceiling is lower than most candidates (for a variety of reasons). I think it comes down to whether or not she makes mistakes (I would not bet against her making some), and whether or not Trump behaves (I would not bet on him doing so). Hence, 50-50. Down to the wire we go, but Labor Day is the next moment to really view it all. Along the way, a lot of noise. Just my two cents. |
On Deck
- The FOMC meetings tomorrow and Wednesday with the Powell presser on Wednesday
- The July jobs report will come this Friday from the BLS
Have a wonderful night and, by all means, bombard us with questions.
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.
