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The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 6 October 2023
⏱️ 19 minutes
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Summary
Today's Post - https://bahnsen.co/3LS40QV
On August 1 of this year the Dow Jones Industrial Average closed at 35,630. As of press time this morning, just a tad over two months later, it is trading just below 33,000. This is a -7.5% drop in about nine weeks, which we will discuss more in today’s Dividend Cafe. If -7.5% in nine weeks doesn’t seem like that big of a deal, it’s because it isn’t. However, what I didn’t mention is that almost all of that drop has been in the last three weeks (-6% of the -7.5%). The Nasdaq has fared a tad worse with similar timing in the numbers – a peak at the end of July, a slow drip down since, with an accelerated downturn the last few week.
The right thing for me to do in this period is probably not write about it. By addressing it I enter the unavoidable territory of contradicting best behavioral practices around market downturns. And yet we exist to offer perspective, point-of-view, commentary, and conviction, and so to not address key market or economic activity would also be problematic.
The reality is that a -5% or -7% drop in markets (or more, for that matter) is a par for the course, standard, status quo, always-to-be-expected part of equity investing. I shouldn’t (and won’t today) write as if it is an urgency or source of panic in any investor’s life. The behavioral realities around market volatility should (and will be today) constantly reinforced. And at the same time, there are particulars in this stage of the cycle that I think are worth unpacking.
So today’s Dividend Cafe does it all today – it holds in tension the two things I most struggle with on these pages: the macro commentary of current events, and the behavioral wisdom of how not to react to such.
Let’s jump in to the Dividend Cafe …
Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. |
| 0:12.5 | Well, hello and welcome to this week's Dividend Cafe. It has been quite a wild ride in markets. And I wanted to spend just a few minutes with you today to talk about |
| 0:23.2 | why that has been, what's going on, and just a few thoughts around it. You know, you look at, |
| 0:29.5 | I want to set up a little context here to explain the tension that I'm very purposely holding |
| 0:35.8 | as a wealth advisor. The Dow closed at the beginning of |
| 0:42.3 | August at 35,630. When I began writing the Dividend Cafe this morning, it had gone below 33,000. It |
| 0:50.0 | ended up going from down a few hundred to up a few hundred. |
| 0:58.8 | And we're, as I'm recording right now, we're up like 250 points on the day. |
| 1:01.5 | And so who knows where we'll end up closing on the day. |
| 1:05.1 | You've already had a five or six hundred point swing intraday. |
| 1:08.0 | But the percentages don't move that much. |
| 1:14.6 | You're talking about roughly a 2,500 point net drop in the Dow in the last two months, and that's about 7.5%, but 6% of that is in the last three weeks. And all at once, this is a, |
| 1:27.1 | no big deal, status quo, historically far, far, far more common than not, |
| 1:34.9 | in fact, kind of muted if the total downside within the year of the market were to only end up |
| 1:41.6 | being around this level, 6, 7, 8%, it's generally even more. |
| 1:46.0 | That is all true and warrant some comment. |
| 1:50.4 | And at the same time, three weeks of a down 6%, NASDAQ even a little bit more, |
| 1:56.6 | lots of vulnerability in the overall economics story, questions about what oil prices and bond yields |
| 2:04.8 | could do. It's clearly more than a headline, more than just a little hype. In fact, |
| 2:14.6 | it really serves, I think, to highlight how silly some of the things the financial |
| 2:19.2 | media does to draw hype and clicks and sensationalism around other stories. |
| 2:28.7 | Because here you're talking about things that are obviously more economically complex, |
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