Stock Market This Week – 09/30/23

Stock Market This Week

Stock Market This Week – 09/30/23

If the result of a recent survey comes true, the second half of 2023 may differ from the first half for dividend stocks.

In 2020, retail investors entered the stock market in large numbers. In two years, 30 million new brokerage accounts were opened in the United States alone. Many of these new investors were actively trading, causing volumes to double for this category. They continue to diversify.

The survey indicated that half of the people were interested in dividend investing. They also stated interest in artificial intelligence (AI), the total stock market index, renewable energy, big tech, and Treasuries. However, they are not interested in a broad bond portfolio, hedge funds, Europe, China, and Commodities.

Overall, the survey makes sense. Dividend yields are the highest across multiple categories in years. Companies in sectors like Utilities, Financials, Basic Materials, and Real Estate are typically interest-rate sensitive, and their yields have surged. In some cases, the percentages are at a decade high. 

But it goes beyond the sectors. The Dividend Kings are now yielding the most since November 2020. Similarly, one has to return to the pandemic bear market for correspondingly high yields of the Dividend Champions and Contenders. 

Deals abound because dividends are increasing and valuations are declining. One only has to be selective and pick quality equities.

Stock Market Overview

As shown by data from Stock Rover*, the stock market had a mixed week, with some indices and composites gaining and others losing. The Russell 2000 was the best-performing index. The Nasdaq Composite also had a positive week. However, the S&P 500 Index and the Dow Jones Industrial Average (DJIA) declined.

Five of the 11 sectors gained this week, while the remainder fell. Energy, Basic Materials, and Communication Services led the way. But the Real Estate, Consumer Defensive, and Utilities sectors performed worst. In fact, in aggregate, utilities were punished down 6.7%.

Oil prices were flat for the week at $91 per barrel. The VIX increased 1.5% because of investor fear. However, it is still near the long-term average. Gold dropped below $1,900 per ounce to $1,865, the lowest since April 2020.

The Nasdaq is performing the best for the year, followed by the S&P 500 Index, the Russell 2000, and the Dow 30. Despite recent weakness, the Nasdaq remains in a bull market. In addition, six of the 11 sectors are up year-to-date. The three best-performing sectors are Technology, Communication Services, and Consumer Cyclical. But the worst-performing sectors are Healthcare, Real Estate, and Utilities.

The dividend growth investing strategy has returned to positive results across all categories. The recent market volatility has lowered returns, but the trend has reversed. The table below shows their performance by category.

Category	YTD Return (%)
Dividend Kings	-5.1%
Dividend Aristocrats	+0.3%
Dividend Champions	-3.4%
Dividend Contenders	-1.8%
Dividend Challengers	-1.7%

Stock Market Valuation This Week

The S&P 500 Index trades at a price-to-earnings ratio of 24.48X, and the Schiller P/E Ratio is about 29.48X. These multiples are based on trailing twelve months (TTM) earnings.

The long-term means of these two ratios are approximately 16X and 17X, respectively. 

The market is still overvalued despite the recent correction and a bear market and rebound. Earnings multiples of more than 30X are overvalued based on historical data.

Economic News This Week

Provided by Stock Rover*.

New Home Sales

The U.S. Census Bureau reported new home sales decreased 8.7% in August. New home sales in July were revised up to 739,000. August’s seasonally adjusted rate was 675,000 units, showing a (+5.8%) increase year over year. Sales decreased in the Midwest (-17.2%), West (-9.4%), and South (-7.5%). The Northeast saw a (+6.7%) increase. The regional year-over-year figures were mixed with the West (+44.1%), Midwest (+24.2%), and Northeast (+18.5%) showing increases, while the South was down (-9.2%). 

The median new house price was (-2.27%) lower than last year at $430,300. The average sale price was (-3.15%) lower than the previous year at $514,000. There were 436,000 new homes for sale at the end of August, up from 431,000 units in July. Year over year, new homes for sale were down (-5.21%). Houses under construction comprised roughly 44% of the August new home sales, with homes not started accounting for 16.7% and completed homes accounting for about 39.1%.

New Manufacturing Orders

The U.S. Census Bureau reported that new orders for manufactured durable goods increased 0.2% to a seasonally adjusted $284.7 billion in August. The reading, up five of the last six months, follows a revised (-5.6%) for July, initially reported as a (-5.2%) drop. A primary contributor to the upturn was an increase in new orders for defense aircraft and parts, which posted a (+19.2%) increase in August after dropping (-8.3 %) in July. On a year-over-year basis, new orders for manufactured durable goods grew (+4.2%). Ex-defense orders declined (-0.7%) month over month, while ex-transportation orders rose (+0.4%) month over month.

Core capital goods orders, which exclude the volatile aircraft and defense orders, increased by (+0.9%). This followed a revised (-0.4%) from a previously reported (+0.1%) reading for July. Core capital goods orders reported up (+2.1%) year over year. Core capital goods shipments reported up (+0.7%) after declining (-0.3%) in July and are up (+4.1%) year over year. Shipments of nondefense capital goods increased (+1.2%) after declining (-1.2%) in July and are up (+7.2%) year over year.

Gross Domestic Product

The Bureau of Economic Analysis’s third estimate on second-quarter gross domestic product (GDP) growth reported an economy expanding at a seasonally adjusted annual growth rate of (+2.1%) unchanged from the second estimate but slightly above the (+2.0%) pace set in the first quarter. While consumer spending was revised down, it was partly offset by upward revisions to nonresidential fixed investment exports and inventory investment. The report also revised GDP readings for every first quarter from 2020 to 2022, removing the residual seasonality component as it was not seen as a factor. 

Q1 of 2020 was revised to show the economy contracting at a (-5.3%) annualized rate instead of the previously reported (-4.6%). The GDP for 2020 was revised (+0.6%) to show the economy contracting (-2.2%). Q1 of 2021 was revised to show the economy expanding at (+5.2%) instead of the previously reported (+6.3%). The GDP for 2021 was revised (-0.1%) to (+5.8%). Q1 of 2022 was revised to show the economy contracting at (-2.0%) instead of the previously reported (-1.6%). The GDP for 2022 was revised (-0.2%) to show the economy expanding (+1.9%).

Resources

• Stock Market Holidays
• Dividend Stock Lists
• Investor Relations Guides
• Checking and Savings Account Resources
• Dividend Investing Resources
• Reviews

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

• How Often to Rebalance a Portfolio (Oblivious Investor)
• Is the Fed Done Raising Rates? (What Goes Up)
• Letting Go: Why Selling is so Hard to Do (Flyover Stocks)

Retirement

• Why I Sold My Target Date Retirement Funds (The Retirement Manifesto)
• You don’t need to be rich to work with a financial planner (Vox)
• Expenses, expenses, expenses (The Italian Leather Sofa)

Financial Independence

• Are You Saving Enough for College (NPR)
• Why I Don’t Own a Home (Morningstar)
• Rise of the Ronin (HumbleDollar)