The Dividend Cafe - The DC Today - Thursday, April 11, 2024

Episode Date: April 11, 2024

Today's Post - https://bahnsen.co/3JfyXwQ A modestly positive day in markets overall today on some better-than-expected PPI numbers following yesterday’s selloff on CPI. So what one-day taketh, another giveth back (well, not quite). The Producer Price Index numbers showed a gain of just .2% for the month on headline when .3% was expected, and the Core PPI only gained .1% for the month. The takeaway is PPI is just not confirming a reacceleration in inflation on the wholesale side, which is a positive. We unpacked yesterday’s CPI numbers pretty well, I thought, but I am sharing this chart from our friends at Strategas with you below to show you where rate expectations have now moved since. My point here is that while they have moved meaningfully higher, I do believe this to be a good thing, contrary to what some may say. The economy, employment, and the markets have all digested these higher rate expectations and it’s simply far healthier for markets to focus and trade on the actual fundamentals of the economy and earnings versus solely on the hopes of looser monetary policy. Shown below, we came into the year expecting Fed funds at 3.5% by Christmas and have now priced in just two rate cuts and ending this year closer to 4.75%. The bar of Fed expectations has been reset to a level high enough that it is now more supportive for markets than the opposite at this point. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Welcome to the DC Today, your daily market synopsis of the Dividend Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. Welcome to DC Today. It is Thursday, April the 11th, and it's great to be with you here again today. And what a difference a day makes, although markets didn't move a whole lot today, the Dow actually closed down a point or two, basically unchanged on the day, but the S&P and the NASDAQ were both higher. The S&P was up 0.8,

roughly 0.75, sorry, and the NASDAQ was up about 1.6% on the day. So I'll call it modestly positive on the day following yesterday's sell-off. And we got some better than expected PPI, producer price index numbers today that were a little bit better. So yesterday, CPI disappointed by one-tenth and markets kind of did what they did. Today, PPI, which is an input wholesale measurement of inflation, which is an input wholesale measurement of inflation, rose a 0.2% when 0.3% was expected. So it was a 10th better, at least on headline. Poor was only 0.1% for the month. So both good numbers. I mean, my takeaway with it, and let me go back, inside of those numbers, the goods component deflated slightly, and the services component was a 0.3% for the month, which is the second month in a row, but it's down from 0.6 in January. So what are all those

decimal points to decimals mean? Basically the consumer side yesterday showed inflation a little higher than expected. We talked about that, I think pretty well, but the producer side today, the input side show didn't confirm it or reaffirm, I guess I should say the, those, those numbers. So markets felt a little better today, although interest rates did not change today. So we had a big run up yesterday. The 10 year was up 18 basis points today was actually up again, one basis point. So the reason I, so all that to all that to say, the numbers are slightly conflicting, but really it's not ever going to be a linear path. The numbers are not going to just go in one direction. We're going to have different months where part of it goes up a little more than others and so on and so forth. But over time, we want to see that trend going lower.

And I believe that we are. That all said, I put a chart in today's DC Today to show you where rate expectations have moved because they've moved pretty substantially, even just since the beginning of the year. Beginning of the year, we were expecting by the end of this year, Fed funds would be all the way down to three and a half. Now we're expecting Fed funds to just be down to four and three quarters. and a half. Now we're expecting Fed funds to just be down to four and three quarters. And I'm saying this is all a good thing. Why? Because markets have fully digested all of this. Yesterday, those Fed futures expectations significantly moved the other way. June is now a 75% chance that they will not change rates. And then July is just a 50-50.

And then these further along the path of the year, expectations are much higher. So significantly higher. So I say that is a good thing because markets have been able to withstand all of that. We still have unemployment that's low. We still have positive economic data. We've got earnings that are starting to pop out just now, particularly tomorrow with the financials start to kick off. So those are all good things. And the bar, the expectation is not so great on rates, but we've been able to withstand it and the world

didn't end and everything's actually going just fine, so to speak. So take that for what it is. I prefer a bar or an expectation that is a dismal one, and we have the chance of coming ahead versus one that's expecting 150 basis points of rate cuts in order to just keep everybody happy. So I take all that as a positive. And then the last thing is, I do still think, regardless of where Fed futures expectations are, that they're going to start talking about the balance sheet very soon. I don't know if it'll be May, but I'd be pretty surprised if it wasn't at least in June. And I think that is significant. And I think that'll be supportive of markets, frankly, when they start talking about that.

We also had initial jobless claims today come in better than expected. We were thinking 217. They came in at 211. So fewer people filing for unemployment. We'll take it. It's always good on the employment picture. And so all in all, decent day in markets. There was a question and answer section that I responded to from a new, actually, prospective client that I spoke to yesterday in the state of Montana.

Lovely people. But the idea was around, you know, a family office and family foundation that they've been running very successfully. So these are sizable, you know, asset figures that we're talking about, call it mid-eight figure numbers. But that they still were having problems getting deal flows, having access to private real estate transactions, even certain alternative investments because they have high minimums, but it's not just that. There's a due diligence process that has to go into them. It's a tough landscape to navigate on your own. And they were having issues with just getting a real proactive response on their tax planning side, because, again, they're outsourcing it.

They're hiring an outside CPA and they're having the same issue on the estate planning side. And so the Q&A was, how can TBG help based on what we've told you, and that's why it exists. The family office was built to cater to those types of the AOM figures. If you've got somewhere north of $500 million and you've got your own family office, I think you can start to put together some of the pieces in-house. I do, but I still don't even think you would quite get there

to what we can offer. So for someone in the $50 million range or something like that, it's really is a pretty great offering. So with that, I'm actually going to let you go here for the day. As always, I do appreciate you listening. I wish you all a very fun filled weekend watching the masters that just started today. I know I hopefully will get to watch a little bit some on the weekends. Tomorrow we have your dividend cafe in your inbox. And I also added the link in there about what our vision is for adding the two properties of DC today and dividend cafe together, because David and I are very excited about what it will bring to you. It's a fresh new look. I think you will like it. And so there's a link there that describes

some of the new features that we'll have for you very soon. But with that, I'll let you get into your evening and wish you all a good night advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk. There is no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. Thank you. investment advice. The Bonson Group and Hightower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to the accuracy or completeness

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