How is the pace of dividend cuts in the U.S. stock market during 2016-Q2 coming along compared to the previous quarter? And how does that compare to the pace of dividend cuts that was recorded in the year ago quarter of 2015-Q2?
The last time we answered these questions was six weeks ago, so now that we're in the home stretch for 2016-Q2, let's find out how the pace of dividend cuts announced in the quarter has progressed. Our first chart below updates our chart comparing the pace of dividend cuts between 2016-Q1 and the current quarter of 2016-Q2.
We find that the number of dividend cuts announced in 2016-Q2 through Friday, 17 June 2016 puts it in the borderline range that falls between recessionary conditions being present in the economy and outright contraction occurring within the economy. This marks an improvement over the past six weeks that suggests that the U.S. economy is relatively healthier now than it was just weeks ago.
But how does that compare to the year ago period? Our second chart reveals the differences between the current quarter of 2016-Q2 and the year ago quarter of 2015-Q2.
Going by the measure of the number of announced dividend cuts that we've been able to track through our two main sources, the U.S. economy in 2016-Q2 is unequivocally slightly worse than it was in 2015-Q2. We can confirm this in that the total number of dividend cuts with nearly two weeks remaining in the second quarter of 2016 is already higher that the level that our two sources recorded in the same quarter a year earlier.
At the same time, although they have generally followed a similar trajectory through this point in time, dividend cuts in 2016-Q2 have typically been announced sooner than they were in the year ago quarter of 2015-Q2.
Consequently, we would describe the economic trajectory of 2016-Q2 as very similar to 2015-Q2, although having come out of a worse first quarter of the year.
We don't anticipate many additional dividend cuts to be announced through the remainder of June 2016, so unless that significantly changes, we won't visit these charts again until after the end of the calendar quarter.
Next, let's update our chart showing the trajectory of the S&P 500 with respect to the alternate trajectories that our futures-based model of how stock prices work would project.
In Week 3 of June 2016, the S&P behaved largely as our model would predict if investors are focused on the distant future quarter of 2017-Q1 in setting today's stock prices.
As for why that might be, let's review the headlines we considered to be significant in explaining the behavior of stock prices in the trading week ending on Friday, 17 June 2016.
- Monday, 13 June 2016:
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- Wall Street sags for third straight session as tech weighs - the article's original headline was "Wall Street little changed as oil prices recover", and its mid-day headline was "Wall Street down for third straight day as Microsoft drags"
- Tuesday, 14 June 2016:
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- Wall Street falls as Brexit vote becomes major fear - the first headline for this article was "Wall Street little changed ahead of Fed meet", which was updated midday to be "Wall Street down ahead of Fed meet as financials weigh", before being revised to be all about the risk of 'Brexit' (Britain voting to exit the E.U.) Some risk - the S&P 500 only fell 3.74 points on the day....
- Oil slides as rising chance of Brexit spooks investors
- Wednesday, 15 June 2016:
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- Wall St. opens higher as focus shifts to Fed
- Fed keeps interest rates unchanged, signals fewer future hikes - Ah yes, Fed capitulation, once again. It's like the smell of napalm in the morning!
- Wall Street falls as Fed holds steady and Brexit vote looms
- Fed's Yellen acknowledges difficulty of escaping world's low rate grip
- Brexit helped keep Fed on hold, could slow future U.S. rate rises
- Thursday, 16 June 2016:
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- U.S. mortgage rates hit lowest in over three years - thanks to a falling 10-Year Treasury as the yield curve flattens.
- Wall Street erases losses as Brexit campaigning suspended
- Oil slides 4 percent on worry of market turmoil if UK leaves EU
- Friday, 17 June 2016:
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- Reuters' morning headline: Wall Street opens lower as Apple drags, investors remain wary - Reuters' evening headline: "Wall St. ends week on down note as Apple weighs"
- St. Louis Fed's Bullard says U.S. may only need single rate hike for now - Bullard also says that the gap between Fed forecasts and action is eroding credibility. No, really?!
- Oil jumps 4 percent as Brexit fearsease, still down on week
Data Source
Seeking Alpha Market Currents Dividend News. [Online Database]. Accessed 17 June 2016.
Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 17 June 2016.
Labels: chaos, dividends, SP 500
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