The Dividend Cafe - The DC Today - Tuesday, April 11, 2023

Episode Date: April 11, 2023

Today's Post - https://bahnsen.co/3moAxo7 Days like today tend to be pretty boring because stock and bond markets are limited in what they are likely to do a day ahead of a news announcement like tomorrow’s CPI reading. The fed funds futures have a 70% chance right now for a quarter-point rate hike next month, and we will see how markets respond to the CPI tomorrow. In the meantime, I tried to make some stuff up today to keep you interested. =) I’ll put it here instead of down below, but the NFIB Small Business Optimism Index has stayed at a low level in March, February, and January. Now, it hasn’t gone much lower from each of those months, but it has stayed level at a spot that is pretty near where it was ten years ago. Their access to capital (particularly from banks) has dropped substantially, and the confidence one would deduce from hiring plans and capex plans is just not there. It isn’t collapsing, but it isn’t good. The number one issue cited: uncertainty over the economy. It will be interesting to see if the Fed wants to resolve their uncertainty the hard way. 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. About as boring a day as you could hope for, based on the fact that all eyes in the stock and bond market are on the CPI number coming out tomorrow. So the Consumer Price Index data for the month of March will release tomorrow morning. And then we will sort of see what adjusts in the Fed Funds futures market, obviously in stock valuations and in the bond market itself. But I want to give you a quick example of what I'm referring to here in today's market action. Why, when I say things were kind of boring, you had a 10-year bond yield that went up a grand total of one basis point, a 30-year that went up zero basis points, three-month and six-month, excuse me, the six-month was down one basis point, three-month down four. You had very, very little movement around the bond market. Bond yields from

the short end to the long end barely moving at all. But then when we look at the equity markets, on one hand, the Dow was up 98 points. It had been up almost 200, came off of that a little. So you go, okay, well, 100 to 200 points isn't bad. But the S&P 500 was up 0.00%, literally flat as could be. The NASDAQ was technically down about 50 points. You had a couple big tech companies that had an issue there. But when you're talking about both bonds and S&P hugging around that flat line in the midst of what's been a higher vol environment, the volatility has been elevated in both stocks and bonds. All you're really looking at is people just saying today is a wasted day to get to tomorrow. And the reason people are

so amped up about tomorrow is to see if you do get substantially decelerating CPI, it may rationalize the market's view that the Fed is about to throw in the towel. My view has been, and I'll share it again and again and again, that of course the Fed should be throwing in the towel. My view has been, and I'll share it again and again and again, that of course the Fed should be throwing in the towel, that there is no benefit whatsoever to the stability of prices by them continuing to raise rates, and yet they would and will and have and are substantially contracting elements of the economy that are not pertinent to the inflation dynamic. We'll see what is in the ingredients of the CPI number. And I don't expect that the Fed is going to change their mind one way or the other. I would like to say that I still believe that the Fed's

not going to hike next month. I do believe that. But the futures market are up to 70% anticipating a quarter point rate hike. And yet the bond market and equities and everything else is acting a little different. So it's a mixed bag right now. And I suppose you'll get a little bit more alignment or clarity as to what is expected after the CPI data tomorrow. I hate the fact that markets hinge on some of these things in the short term. I don't think it's healthy, but I don't really think you want to hear my hobby horse message about all that right now. Oil prices, energy was the top performing sector today

and oil prices were up a decent little chunk, closed up above $81. Energy was up almost 1%. Technology was the worst performing sector, down 1%. And most things in between were up, but not a lot. So it was a boring day. And that's what you're going to get. Tomorrow may not be. Unfortunately, I don't get to do DC Today tomorrow because I'll be on a plane after the market's closing. And so Blonson Group partner, author of

the prestigious Thoughts on Money, Trevor Cummings, will be bringing you DC Today tomorrow. But I'm going to leave it there. There is a little commentary today about money market funds in the Ask David section of the DC Today. And I will point out that the Small Business Optimism Index from NFIB, it wasn't a big move down from the month over month. And January, February, March have all been right around each other. And January, February, March have all been right around each other. But that number I'm referring to, the three numbers are all down quite a bit from where the things have been. It's back to about a 10-year-ago level. And even though it's not continuing to worsen, I think that there is this general dynamic of uncertainty in the small business world that's evidenced in plans for CapEx,

plans for new hiring, et cetera. And just general feeling of optimism is not very high the small business side. And the number one reason cited is uncertainty about economic conditions. And so that obviously lands squarely with the Fed in terms of the possibility of recession coming from tightening credit. So tomorrow's a new day. Trevor will bring you CPI. Reach out to us with any questions you have. And thank you, as always, for listening, watching, investment advisor with the SEC. Securities are offered through high tower securities LLC advisory services are offered through high tower advisors LLC. This is not an offer to buy or sell securities. No investment process is free risk. There's no guarantee that the investment process or investment opportunities referenced herein will be profitable.

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