The Dip Was Bought, But Is The Low In?

Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

• DJIA 52-wk: +8.52% | YTD: +10.82% | Wkly: +0.34%
• S&P 500 52-wk: +14.71% | YTD: +14.49% | Wky: +0.08%
• NASDAQ 52-wk: +22.59% | YTD: +18.59% | Wkly: -0.45%
• Roundhill Mag Severn ETF 52-wk: +28.60% | YTD: +19.24% | Wkly: -1.16%

What went well

On Monday ( Nov. 10 ), the major indexes jumped sharply, driven by optimism that the extended U.S. government shutdown might be nearing an end. Krilogy+4Reuters+4AP News+4

The S&P 500 rose ~1.5% to about 6,832.43. AP News+1

The Nasdaq Composite surged ~2.3% (its best one-day return since May) on strong gains in tech/AI. AP News+1

The Dow Jones Industrial Average rose ~0.8%. AP News+1

A rebound in tech, especially companies tied to artificial intelligence (AI), helped lead the rally:

For example, Nvidia Corporation jumped ~5.8%. Reuters+1

Memory and data-storage stocks (Micron Technology, Western Digital Corporation, Seagate Technology PLC) also gained on strong AI demand outlook. Investopedia

The potential end of the shutdown added relief: the mood improved as markets reacted to signs the federal funding impasse might resolve. Reuters+1

What were the worries

Despite the Monday rally, on Tuesday (Nov. 11) the market pulled back somewhat: the S&P and Nasdaq fell modestly, as valuation concerns in tech/AI resurfaced. Reuters

The labor market picture remained mixed: alternative data (private payrolls, etc.) indicated weakness; consumer sentiment dipped. Interactive Brokers+1

The prolonged shutdown and its economic fallout remain a drag on sentiment and data reliability. AmeriServ Bank

Overall market mood & themes

The week was characterized by relief + caution: relief at signs of progress on the shutdown and tech rebound, but caution on valuations and the underlying economy.

Tech and AI-related stocks remain a major driver: both the upside (on Monday) and the pullback (on Tuesday) were heavily influenced by how investors view that theme.

With data releases disrupted (because of the shutdown), markets are relying more on "alternative" indicators (ADP, PMI, sentiment surveys) which have given mixed signals. Interactive Brokers+1

MORE THAN 90 PERCENT OF S&P COMPANIES:

Have released their financial results for the third quarter, reporting average earnings growth of 13 percent compared with last year. The index is also about 13 percent higher than a year ago.

Companies have also enjoyed another quarter of widening profit margins, which are not the highest on record for the S&P 500, according to data from Factset that goes back to 2009. Profit margins from the latest quarter surpassed the previous peak, in 2021.

Wary of high valuations and potential market potholes, investors are punishing companies that miss earnings expectations more harshly than usual, which some analysts say is an indicator that they are more attuned to signs of stress than shows of strength. It is hard not to worry, investors said, when valuations have risen so quickly, propelled by bets on the profit potential of AI. Kristina Hooper, chief market strategist of Man Group, pointed to the surge of gold prices this year as another sign of underlying worry, despite stock markets also rising at the same time.

“This is a bipolar market environment where you have fear of missing out at the same time as real fear,” she said.

Here’s Where to Find the Best Dividend Stocks Now

Dividends are on the ropes—but investors might not want to give up just yet.

Investors love dividend stocks for regularly providing quarterly income, which makes retirement planning easier. What’s more, dividend investors have historically been able to have their cake and eat it too. Much academic research shows stocks that pay dividends tend to outperform those that don’t in the long run—a dynamic investors have theorized was tied to the discipline required to make quarterly payouts.

Lately, however, the magic of dividends hasn’t worked. So far this year the Vanguard High Dividend Yield ETF, a popular index tracking dividend option, is up 13.5% compared with 17.6% for the S&P 500. Over the past decade, the ETF has lagged behind the broad market by more than three percentage points a year.

Of course the reason is no secret: In a market dominated by AI, many dividend payers in traditional industries simply

“Dividend-focused investing used to be an effective, risk-averse way to largely match S&P 500 total returns,” wrote DataTrek Research co-founder Nicholas Colas in a note Tuesday. “But the style’s underweight to tech and overweight to fundamentally challenged industries like consumer staples threatens to make it a structural underperformer in all but the deepest of bear markets.”

DataTrek’s research highlights the problem. Five stock sectors—consumer staples, utilities, industrials, materials, and real estate—payout roughly two-thirds of all dividends, but make up less than 20% of the S&P 500’s market capitalization. By contrast, technology and communications make up more than 45% of the index’s market cap, but pay less than 10% of its dividends.

But investors may not want to give up on dividends just yet. Stocks in dividend-paying sectors may thrive in 2026, especially defensive ones that tend to hold up well when the economy lags. While the S&P 500 remains close to its late October record high, policymakers remain worried about persistent inflation and a sluggish labor market.

Look at utilities, which account for nearly 15% of dividends but only 2% of the S&P 500’s market cap. The normally staid sector has been benefiting from a big jump in electricity prices, which have risen much faster than inflation in recent years. While that is partly due to AI, it also reflects increased U.S. manufacturing and underinvestment in infrastructure. The Utilities Select Sector SPDR exchange-traded fund is one way to target the sector; another is an active fund like Gabelli Utilities Fund.

Real estate is another sector that may be worth a look. Real estate investment trusts were hit hard when the Federal Reserve started hiking interest rates in 2022, pushing up mortgage rates. Now, rates are slowly coming down and markets for premium office space in key markets, such as New York City and Boston, have come back. The Real Estate Select Sector SPDR is an index fund focused on REITs.

Investors looking for growth stories can also check out Brixmor Property Group, a shopping center REIT recently highlighted by Goldman Sachs, or Welltower, a senior housing REIT that stands to benefit from the wave of retiring baby boomers.

Resolution of the federal shutdown: full reopening would remove a big overhang.

Upcoming official economic data: inflation (CPI/PPI), jobs, retail sales. Some were delayed because of the shutdown. AmeriServ Bank+1

Tech / AI valuations: if the narrative shifts (slowing growth, margin pressure, regulatory issues), tech could correct.

Interest rates / monetary policy: investors are considering how weak labor data might influence future rate cuts from the Federal Reserve.

NVIDIA third-quarter results on Wednesday.

Eighty-five (85%) of fund managers have underperformed the S&P so far this year. Portfolio managers’ compensation for the most part is based on their performance into years end. I believe they will put some money to work before years end. The question is when.

— Richie

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