The Dividend Cafe - The DC Today - Wednesday, April 10, 2024

Episode Date: April 10, 2024

Today's Post - https://bahnsen.co/3PWoA4P A down day in both stocks and bonds today following a disappointment on CPI numbers by one tenth on both Headline and Core, that sent the Dow down XXX points and the 10-year bond yield up .18XXbps. We expected .3% on both and got .4% instead to cause todays action, so on one hand a risk off day as higher rates were priced in on yields, and on the other, the difference of a tenth is far from dramatic in and of itself. I do believe the Federal Reserve is an independent institution adhering to its employment and price stability mandates. I also believe they are aware of the Fiscal paradigm as well however (not driven by, but aware). Do I think a $2T budget deficit when we are at full employment with interest expense now accounting for 17% of tax revenue when our average termed government debt interest rate is only at 3.3% is on their radar in terms of Quantitative Tightening, yes I do. They can’t go until inflation gives them the OK sign (or gets close enough), but they are ready to reduce rates later this year as they’ve telegraphed, and from the Fed minutes released just today my point on reducing QT will come in to play sooner than later. 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 Wednesday, April the 10th, in what for the week at least so, has been the largest down draw on the day. We were down 422 points on the day, which is a little over 1%, 1.05 to be exact on the Dow. The NASDAQ and S&P were both down as well, although less than 1%. So in point terms, it sounds probably worse than I suppose it is. These types of ups and downs just happen in

markets. It's what they do. But it was surrounded around the CPI number that came out on both core and headline. That was an entirety of one-tenth higher than we expected. So we were expecting 0.3% for both headline and core. We got 0.4% on both. Year over year, headline was 3.5. We thought it would be 3.4. And core was 3.8. And we were hoping for 3.7. Keep in mind on core, last month was also 3.8. So it's not that it went up. It's just that it went the same. And it didn't go a little down like we were hoping for. So markets were upset about it and pretty much were down all day long. Interest rates were the bigger news. The 10-year closed up 18 basis points, which on a single day is a pretty decent move up in interest rates. And part of it was because of a higher CPI number

that came out. And the other part of it was there was a 10-year bond yield, $39 billion that went poorly. Those two things are tied together, rates going up and the bond auction not going as well as far as bid to cover goes. So there you have it on the day. The PPI numbers, like I said, they were a 10th higher, so 0.4% for the month. If you look at what was inside of those numbers and kind of open the hood, food was only up 0.1% for the month and up 2.1% on the year. Energy, which was up 1.1% for the month, so a big move up on the month, is still only up about 2.1% on the year. Auto insurance was a big gainer, up 2.6, 22% year over year. So that's kind of a big mover. I don't know what percentage of people's budgets necessarily that accounts for, but it is in there and it matters.

Hotel prices were lower by 2%. Core goods were lower by 0.2%. So all in all, it actually, in my opinion, really wasn't all that bad. I think there was a little something for everyone like David wrote in there, depending on how you wanted to sort of spin it. how you wanted to sort of spin it. But at the end of it all, if we're super upset because it was a 10th different than we thought it would be, I just don't think that is a whole lot of difference personally. There was minutes out from the Federal Reserve's meeting in March that essentially showed most participants, while they discussed it, were still pretty set on the fact that we had seen peak rates and that rates would go down towards the second half of the year, which is good. They did open the door, I thought, pretty far with slowing down, not

necessarily ending, but starting to slow down the pace of quantitative tightening. And so my comment today was, I fully subscribe to the Fed being independent. I believe they are. I think they've got their mandate. I think they follow the mandate of full employment and price stability. And I think that's where they set rate policy. And I think that's where they maneuver their balance sheet. But I also think they're aware of other things too. For example, the fiscal side of the equation and what the treasury has to do, which is sell government bonds in order to fill a $2 trillion budget deficit. $2 trillion. So it's a big number. And right now we're spending 17% of total tax revenue on interest expense,

which is historically quite high. And that average interest rate is only 3.3%. So it isn't like we're all the way where interest rates are. It's still a pretty low, low rate. So I do think the Fed pays attention to that. And I say that because of quantitative tightening. I believe that they'll end up talking about slowing that down sooner than later. And I think the minutes today showed that. The Ask Brian section in there talked a little bit about our estate planning services. It was a question that came in a few days ago, and I answered it basically, which is that we do the planning and the design in-house and then

outsource the legal documentation to attorneys and local arenas and give clients benefit of scale from our business and a due diligence that we've already done on the attorneys. There's a big, huge benefit of saving time, saving money, making it easier for people, all those things. So design is done in-house and then outsourcing the legal documentation. Tomorrow, we have a jobless number, jobless claims, and an input on inflation, which is the PPI, producer price index, that will be out. And so we'll have that to kind of talk through with you. And with that, I'm going to let you get on to better things for this evening outside of looking at your media, looking at the market, which was down on the day. And just know that, you know, we're talking about a 10th

difference than what was expected on CPI, still trending in the right direction. So with that, I'll let you go. Have a lovely evening, and I shall talk to you soon. Thank you. for all investors. All data and information referenced herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary and does not constitute investment advice. The Bonser 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 of the data and other information, or for statements or errors contained in or omissions from the obtained data Thank you. are solely those of the Bonson Group and do not represent those of Hightower Advisors LLC or any of its affiliates. Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information.

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