The Dividend Cafe - The DC Today - Wednesday April 12, 2023

Episode Date: April 12, 2023

Today's Post - https://bahnsen.co/3muBoUs Today was a highly anticipated day, as we were set to get the latest look at inflation data. This data came in lower than expected, which appeased markets at first glance but lost its luster throughout the trading day. Some pointed to the FOMC minutes and the glooming use of the word recession that took the wind out of the market’s sails, yet this was not “new” news (more in the post). Perhaps now, everyone will shift their focus and attention to Friday as we start to gather another season of earnings reports. 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. Hello, welcome to DC Today. I'm Trevor Cummings. I'm filling in for David Bonson today. I'm going to ask for some extra grace. I feel like I've been sick for about two weeks now, a cough I can't get rid of, So brain's a little bit foggy, but I'm going to encourage you to go to the written piece because there's a lot there. I pasted a pretty large piece that David emailed out this morning that I think you'll enjoy. It's kind of his perspective on inflation, which I think is extremely helpful because inflation has been headline news everywhere. And what you're seeing in prominent media really isn't kind of what David's synopsis is of what's going on.

So my encouragement is to go to the DC Today written to grab that. Today was all about inflation data. So people were anxious to see where that print would come in. I even read some reports this morning of Goldman Sachs saying, hey, if it came below expectation, then markets were going to take off and then obviously vice versa. Interesting thing is that the data did come in lower than expectation. I believe expectation was something like 0.2 or 0.3 for the month of March. It came in at 0.1. And then the year over year figure came down from a 6% year over year inflation number to a 5% number.1 and then the year-over-year figure came down from a 6% year-over-year inflation

number to a 5% number. So what did the markets do? They took off. And mid-trading day, you had positive on all three indices, Dow, S&P, and the NASDAQ. And then markets fell off a cliff. I shouldn't say a cliff, but they did end the day negative. So midday, you saw the Dow up maybe half a percent, and the Dow finished the day down 0.11%. So not a meaningful move, but a meaningful intraday move.

One of the questions would be what caused that? So if you went to just kind of your normal media sources, they would say it was the Fed minutes. What's hard for me is minutes are just that. They're minutes of a meeting that's already happened. So one of the headline things from those FOMC minutes was this talk of a mild recession sometime later this year. And one of the things I pointed out in the article or the writing today is that is not new news. Again, these are minutes of a meeting that's already happened. David Bonson, on the March 23rd issue of DC Today, he pointed this out and he said it in kind of a comical way.

He said he was driving home and he was thinking about math and the idea that Jerome Powell reported that the expected GDP growth was X. And if you looked at what it was for first quarter and you did the math, you saw there was a recession baked in there. So although investors got exactly what they wanted today, a lower inflation number that talk from the Federal Reserve about this potential recession later this year causes fear. So again, investors went back to what they've been doing most this year

is they sat on their hands. Markets didn't move much, but you did see, like I said, the Dow went down 0.11%. S&P was down about 0.41. NASDAQ was down 0.85. 10-year treasury hardly moved, approximately down three basis points. Top performing sector of the day was industrials.

I believe it was industrials, energy, healthcare, and materials were all positive for the day. You saw some of the more speculative sectors get hit the hardest. Consumer discretionaries were down 1.54% on the day. Oil prices were up 2.06% on the day. That left a barrel of oil about $83.23. So where does that put us now? I would assume that most of us are going to shift our focus to Friday, where we start getting some earnings reports. Now, again, earnings reports are backwards looking, but we're going to shift our focus to Friday, where we start getting some earnings reports. Now, again, earnings reports are backwards looking, but we're going to get some context and some projection of how the last three months of economic data and everything is impacting

earnings. It's unfortunate that we've become addicted to these Fed meetings and everything going on when markets really, in the long run, they are driven by profits. Growing earnings have the highest correlation to stock returns in the long run. But we have a culture that has made Jerome Powell as famous as Michael Jordan. So we hang on every word and we are very curious. Again, I'm going to encourage you to go to David's writing because we are lucky here at the Bonson Group that we have a very strong economic mind that we happen to name the group after, the Bonson Group.

So his writing will give you some insight that I don't think you're really going to gather anywhere else. One of the conversations I've been having a lot with clients, and it's not a conclusion, it's more of a question. And I asked this, hey, if we take a time machine back to March of 2020, we know what happened. It was COVID, right? And somebody decided to basically take the light switch and turn the whole world off. So we all found ourselves locked in our homes. And there's two different things happening. The consumer didn't really have the opportunity to spend money. We saw a big spike in personal savings rates. But businesses were left with the decision of, hey, what do we do

with inventories? How much should we be ordering? And there's some chaos that was created for supply chains. Now, as you know, with consumers, I'm sure a lot of you felt this in that time of March of 2020, going into 2021. And even further, we all had this pent up desire to buy stuff and do stuff. We wanted to go on vacations. We wanted to go to restaurants and things like that. So from my vantage point, if you take that light switch and you basically turn it off for the consumer and you leave businesses scrambling to figure out how they're going to survive for this moment, and then you all of a sudden turn that switch back on with a lot of pent up demand and supply chains that weren't ready for it, that's going to have an impact on inflation. And again, then you have a Federal Reserve that comes

and they want to fight inflation, right? Because they believe in a strong employment and stable prices. And what do they do? They raise interest rates. And then we have issues like the Silicon Valley Bank issue, right? There's a lot to unpack there,

but I think most people would agree a big issue for them, right, when they had $20 billion of what they would call safe assets that went down. I think it was $1.8 billion. They had to sell them at a loss. Why were they selling those at a loss? Because of rising interest rates. because of rising interest rates. So I think David Monson does such an excellent job at zooming out,

allowing you to see how those dominoes fall and the knock-on effects of all these decisions, whether they are from businesses, whether they are from Capitol Hill or whatnot. So again, strong encouragement to go and read the written DC Today. David will be back tomorrow with his normal DC Today writing. On Friday, we will begin to get earnings reports. Tomorrow, we'll also get jobless claims. So we will be here every single day providing you what's going on in the world,

our perspectives, and we're always available to answer questions. So reach out as things come up. I wish you the best. And again, you'll have David Bonson back tomorrow. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Thank you. The investment opportunities referenced herein may not be suitable 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.

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