DJIA: 52-wk:+6.92% YTD: +0.84% Wkly: +0.38%
S&P 500: 52- wk: +7.45% YTD: +9.18% Wkly: +1.65%
NASDAQ: 52-wk: +11.48% YTD: +20.94% Wkly: +3.04%
Industrial Select Sector SPDR ETF : 52-wk: +11.19% YTD: +1.60% Wkly: +1.32%
Housing Data:
Existing-home sales receded 3.4% in April to a seasonally adjusted annual rate of 4.28 million. Sales fell 23.2% from one year ago.
The median existing-home sales price slipped 1.7% from one year ago to $388,800.
The inventory of unsold existing homes increased 7.2% from the previous month to 1.04 million at the end of April, or the equivalent of 2.9 months' supply at the current monthly sales pace.
The yields are also near the day’s highs as the regional banks continue to behave themselves. There should be some technical resistance on the yield on the ten-year at 3.67% to 3.70%. So, we will keep an eye to see if they ratchet them higher.
The yield on the 10-year Treasury rose to 3.69% from 3.65% on Thursday. That yield helps set rates for mortgages and other important loans.
A Historical Look At Bank Failures And Market Performance
The point here is that the high-profile failures of SVB And SBNY, in addition to the regional bank stress that continues today, may feel like a crisis that isn’t being taken seriously enough. But the other perspective—which I would argue is the equity market’s perspective—is that this string of failures is small and contained relative to what the U.S. economy has experienced historically. The fact that the market has been rising in 2023 may be telling us all we need to know about the scale of this banking ‘crisis.’
Bottom Line for Investors
Investor worries about the regional bank crisis – and its potential for economic disruption – may be entering a new chapter with PacWest Bancorp. In a security filing in early May, the bank reported losing 9.5% of its total deposits, most of which occurred on May 4 and 5 when news reports hinted at a potential sale. The stock has been pummeled.
For PacWest and other regional bank names, bond markets are demanding higher yields for regional bank bonds, and short sellers are eager to identify the next possible shoe to drop in the sector. These factors are adding additional pressure, which can easily rattle depositors and result in more failures. But considering the overall health of the U.S. banking sector and the so-far slow roll of these regional bank failures, I do not see the problem escalating the size and scale of previous waves, when hundreds and thousands of banks failed. The stock market seems to have arrived at the same conclusion
Dividend Stocks:
It's the American way. It's easy to become enamored with large-cap tech stocks. Of course, every investor wants the best possible returns for their portfolio. All investors are susceptible to thinking that great results can only come from big tech companies that continuously pump out large profits.
I am here to tell you otherwise. Dividend-paying stocks can provide outsized returns – in some cases better than many technology stocks – all with relatively lower risk. This is what makes the dividend strategy one of my favorite strategies. I think every investor should consider owning dividend-paying stocks as part of their overall portfolio.
U.S. companies paid out a record $574.2 billion in dividends to shareholders last year. Dividends in the U.S. grew a substantial 7.6% in 2022, with 94% of dividend payers either raising or sustaining payments. Corporate balance sheets remain healthy, which is vital for future dividend growth.
There's no doubt that 2022 was a challenging environment for stocks. Yet, it highlighted the many strengths of dividend equities, which out-performed non-dividend stocks and bonds during the year. And many of these companies have continued their outperformance into 2023.
It should also be noted that although dividend paying companies have a strong track record, they are not entirely riskless. Companies from time to time also cut or reduce their dividends without notice.
This Market is Putting All of Its Eggs in Five Baskets:
AAPL , MSFT, GOOGL, AMZN AND NVDA:
Have a combined market cap of about $8.7trillion, almost 25% of the S&P 500 cap and about 3.2 times the $2.7 trillion Russell cap. What’s more, those top five stocks have returned an average of 50% in 2023, accounting for roughly 80% of the S&P 500 gain. The medium stock in the index has gained less than 2% and less than half are trading above their 200-day moving averages. The top five stocks are also expensive. They trade for an average of 31 times estimated 2024 earnings, while the index trades at 17.4 times earnings.
Proceed with caution.
Richie Naso
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