The Dividend Cafe - The DC Today - Thursday, April 4, 2024

Episode Date: April 4, 2024

Today's Post - Our morning rally in stocks turned decisively negative midday. There was geo-political tension with Iran threatening action after Israel’s strike on Syria and then some mixed messaging from different Fed presidents today that seemed to both contribute to today’s decline. That said, there really wasn’t a whole lot to warrant such a large 750-point swing from top to bottom on the day, so some strange market action with volatility picking up. While the overall labor force participation rate has come up recently, it’s still on the lower end of the historical norm at about 62.5%. It’s interesting to see the bifurcation of what’s driving it. The participation rate amongst the largest cohort of working 25-54 year olds is actually the highest it has ever been in this country at 83.5%, while the 54+ is basically at the lowest level it has ever been at about 38.5%. Read into that what you will, but the charts seem to shift just following the pandemic with a greater gap between the two cohorts. Younger folks with fewer assets had less wealth effects from rising prices, while the opposite was more prevalent in the older is my take. 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's Thursday, April 4th. And actually, one of the larger drawdowns actually on the day, we closed down 530 points on the Dow. But the interesting thing was we were up pretty much most of the morning until about 2 p.m. Eastern. So we were up a few hundred points, actually.

So the swing on the day was about 750 points from top to bottom. And I wish that there was some sort of real definitive culprit to that or smoking gun. There was a few things. One, geopolitical tension with Israel's strike on Syria. Iran pledged to have a retaliation there. And I think there was angst there. There is a non-farm payroll number tomorrow that may have caused some just angst in the market, but I'm not sure I'm reading into that a ton. And then there was about a half a dozen different Fed

presidents speaking over different engagements across the country that, frankly, most of them I thought were more dovish, really. They were middle of the road. There wasn't a whole lot of new statements. One of them in Minnesota, who used to work in the building that I used to work at here in Newport Beach, Neil Kashkari, had a comment that said, I'm expecting two rate cuts for this year, but if inflation keeps trading sideways, then maybe we don't need any at all. And that was right around the time the market turned. But I don't know that that was necessarily the reason. I think it was a combination of these different things.

And sometimes there isn't always a huge definitive reason when markets turn. But nonetheless, markets sold off quite a bit. And, you know, so with that, you know, we have with tomorrow's payroll number, I thought I'd put a section in there just on labor force participation. Because it is interesting, the actual total rate, the labor force participation rate has moved up. It was in the low 60s. We're at about 62.5 now with everyone back at work and all that. But if you look at the breakdown between the two cohorts of like 25 to 54 year olds, it's an 83% participation rate, 83 and a half. So it's a very high rate. In fact,

it's the highest participation rate in that age group that we've ever had in this country. Whereas if you look at 54 and older, it's about 38.5, which is on the lower end historically ever. So it's really interesting when you look at those charts right after the pandemic, how they've sort of diverged. And you have a greater percentage of people younger working and a lower percentage of people older not working. So read into that what you will. I look at it as with ZERP, zero interest rates, I look at it as with ZERP, zero interest rates, asset prices have inflated, real estate, stocks, bonds, and people that are of greater age have more of those things. So I think there's a wealth effect associated with some of this stuff tied to lower interest rates. It's that divergence of the wealth gap, in other words. That could be part of it. There's too many different reasons to point, but I think it's interesting nonetheless.

We had initial jobless claims out today at 221 versus 213 expected. I'll call that similar, but technically it is inching a little higher there. And that was originally this morning when the news came out. Markets actually reacted positively to that, which is bad news being good news, basically. Gives the Fed more reason to maybe lower rates if jobless claims are moving higher. The trade balance figures today, this is the third month in a row we've had a wider imbalance there. It was up 1.9%. We were at about 68 point, what was it? 1 billion versus 67.7 expected. So again, a trend of, of widening, you know, widening trade imbalance there, trade deficit.

The let's see tomorrow we have a dividend cafe coming out. Obviously it's Friday, so you'll have that live in your inbox. There's also the non-farm payroll number out tomorrow, which I think will be important, especially following today, which is this sort of sell-off day, to see if we get a recovery out of it. a recovery out of it. But we're expecting the unemployment rate to move from 3.9 to 3.8. So actually tick a little lower here. But that'll be out with you tomorrow. And then, you know, like I always say, you know, please reach out with questions. I get a lot, but I always appreciate them. And I encourage you to reach out if you have some. And if I don't speak to you, I wish you all a great weekend and good luck in your brackets and watching the final four. I was too busy to get my bracket in on time with David. So I missed out on all that action. So I'm officially calling for the underdogs to sweep, which is NC State and Alabama. So I'll take those two. With that, I'll let you go for the evening and wish you well. Talk to you soon.

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