Dividend increases remain robust with ample cash on the sidelines by corporations. As you can see in the chart shown in the video for this episode, S&P 500 companies continue to deploy some of their cash in the form of dividend payments, with 72 increases and 5 initiations taking place in the third quarter. For positive dividend actions, this is a marginal quarter-over-quarter increase but impressive on a year-over-year basis. Also, aggregate dividends are paid on pace for a record year. Despite the dividend yield remaining historically low for the S&P 500 due to higher stock prices, the aggregate number of dividends paid is on pace for a record year. As the chart in the video shows, during the first three quarters, companies have paid $377 billion dollars, which is only $108 billion less than the 2019 record. Historically speaking, the fourth quarter has been the most robust quarter for dividend payments as well, so it could be a record year for dividend payments.
The jobs report came out very disappointing. Out of the expected 500,000 private sector non-farm payrolls to be created, only 194,000 came in. It kind of highlights the separation of corporate America, Wall Street, and Main Street where we’re seeing companies have record earnings and record payouts. We’re seeing productivity of the overall economy back up but with fewer employees. The good news from the labor department report was that wages are up 4.6% year-over-year. The people that are coming back to work are getting higher paying jobs which are part of being more productive, so that is a positive for the economy. We still have millions of people unemployed compared to where things started before the pandemic. Additionally, one interesting data point that people may have seen over the weekend and from news reports, was that the unemployment rate fell more than expected. That’s not because people got jobs, it was more because a lot of people dropped out of the labor force. Because of the way they calculate the labor force, fewer people were considered and that’s because a lot of people have been unemployed for so long that they’re no longer considered to be in the labor force. That’s not necessarily a positive point but it is something to look at when you are really looking under the hood. The good news is that people are getting more money for the jobs they do have and we are still adding jobs, it’s just at a slower pace. Another silver lining is that this slow pace will likely cause the Fed to pause any talk of tightening up policy which is, again, good for the market. With an easing Federal Reserve, a growing but not an overheated economy, increasing corporate earnings, and rising dividend payouts, all that’s likely positive for the market and may not be good for those that are unemployed, but very positive for investors.
We talked last week about September and the volatility that kind of continued through the month. We do anticipate volatility potentially continuing to the end of the year or so. On a week-to-week basis, we like to give a short-term resistance and support level. However, this week, we want to give an end of the year resistance at the support level. The end of the year resistance level we’re looking at is 4,550 with a support level of 4,350. It’s important to keep in mind that these resistance and support levels are not something that we’re aiming at or anticipating getting to. But it is important to say that this could potentially be either the ceiling or the floor for the markets continuing into next year. This is something we want to keep an eye on, especially with the fundamentals previously mentioned, and we want to compare back to the technicals to get good compound research behind us.
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