The DC Today - Tuesday, April 18, 2023
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 18 April 2023
⏱️ 12 minutes
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Summary
Today's Post - https://bahnsen.co/40eo9VP
I would say, at this point, the market is definitely pricing in yet another rate hike at the next FOMC meeting two weeks from today (futures are up to 87% implied odds). Markets obviously haven’t cared much. Bond yields today didn’t move a lot. Sometimes you have to report what is and not what ought to be, and sometimes what is or what will be is different than what is or what appeared to be just two weeks sooner. Nevertheless, I take it not merely as the Fed likely hiking one more quarter-point in May but the Fed likely cutting more aggressively when they swing the pendulum back the other way. I don’t like any of it, to be honest.
The spread between BBB’s and BB’s (low-end investment grade and high-end junk bonds) is a mere 150 basis points – well below the 200 basis points, we have seen a few times in recent months when it looks like credit is about to weaken. Corporate credit has hung in there remarkably well throughout this cycle, for now, despite all the recession talks and doom and gloom of Fed tightening. It almost feels like the Fed can’t be satisfied until they break corporate credit, only, when they do (if they do?), they then will feel like they have to immediately put it back together again, but they can’t put it back together again if they don’t break it first, and I have the distinct impression that is frustrating them.
As for what to like within markets, we like dividend growth stocks, always and forever (surprise). But it does seem to me the clear trend for extracting liquidity from the system favors value over growth and less shiny assets than those that have been shining. We shall see.
Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the DC Today, your daily market synopsis of the Dividing Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. |
| 0:15.1 | Well, hello and welcome to the Tuesday edition of the DC Today. It would be very hard for me to come to you with a more |
| 0:22.8 | boring day in the markets. You literally had a flat Dow, a flat S&P, a flat NASDAQ, flat oil |
| 0:30.8 | prices, and a flat bond market, all, you know, give or take a couple basis points up or down. |
| 0:38.0 | Having all of these major asset classes and components flat on the day is very rare. |
| 0:45.4 | You get flat, boring days all the time, but there's usually something that moves. |
| 0:49.9 | Maybe stocks aren't moving, but oil is up or down or something like that. |
| 0:53.6 | But it really was quite a boring day and not even really a lot of intraday movement, |
| 0:59.0 | but even apart from the bit of intraday activity that was there, |
| 1:04.3 | it was a pretty dead day in terms of market indices. |
| 1:08.1 | Interestingly, the industrial sector and energy sector were each up |
| 1:14.3 | about half a percent and then the health care sector was down about a half a percent. |
| 1:19.1 | So within the equity indices, there are a few things moving up and down, but the net sum of |
| 1:25.5 | parts was really quite flat. |
| 1:29.2 | The fact that bond yields were not really moving much, |
| 1:32.7 | the 10 year was down one basis point, |
| 1:36.5 | the three year was up, one basis point, |
| 1:38.3 | that kind of stuff, |
| 1:40.5 | is in the face of the Fed Fund's futures market now at an 83% probability of a quarter point rate hike at the next Fed meeting, |
| 1:51.6 | which the FMC meeting begins two weeks from today on that first Tuesday in the month of May, |
| 1:57.7 | and then they'll announce their decision on the Wednesday, as they always do, followed by one of J. Pal's famous or infamous pressers. |
| 2:07.4 | It seems really quite well priced into markets at this point that the Fed does intend. |
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