The Dividend Cafe - The DC Today - Wednesday, July 5, 2023

Episode Date: July 5, 2023

Today's Post -https://bahnsen.co/3ricXf2 I am hopeful all had a wonderful Independence Day spent with family and friends in celebration of the 247th year of the greatest country to ever inhabit the Earth.  The biggest news on the day was the Fed minutes that were released, indicating the rationale behind their decision to pause and hold rates steady last meeting while leaving the door open to raising again in the near future.  While the decision was unanimous, the discussion revealed a debate by some on moving rates up 25 bps last week.  The next FOMC meeting is out on 7/25 and 7/26, and while we do get some employment data this week, I think it will be less relevant than the consumer price data we will get a week from today that will ultimately drive their next decision on rates.  It does appear the Fed is erring on the risk of recession over the risk of having to repeat the 1970s style stop and go on Fed policy.  All said, it was a low-volume trading day following the holiday and the first full trading day in the second half of the year that was modestly negative in stock and bond prices throughout.  All discussed and more in today's video podcast link below. Brian Szytel Source: https://www.usatoday.com/story/money/2023/07/05/ups-teamsters-negotiations-end-as-strike-looms/70382580007/ 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. July the 5th on Wednesday. And I hope everyone had a great Independence Day with family and friends and got to celebrate the 247th year of this great country. So today was as expected following the holiday. It was a little quiet in markets. Volume was low. We were down something like about 129 points on the day on the Dow. And the big news on the day was the Fed minutes that were released. And I'll sort of go through that a little bit. Interest rates were a little higher on the day. The 10-year is sort of inching its way towards that 4% figure. We'll see if it gets there. We're at something like 393 as of today. So we're up seven basis points on the day. Two-year yields were higher too. And again, mostly because of the Fed minutes that were released. So the meeting they had a week and a half ago, or yeah, but a week and a half ago,

released the minutes. They obviously didn't raise rates. They paused. The minutes showed that while the vote was unanimous, meaning that everybody voted to go ahead and not do anything in the last meeting, the debate back and forth was definitely with several of the constituents talking about, Fed presidents talking about potentially raising 25 basis points. So I do think the Fed is basically risking the potential recession or a potential recession at this point more than it is wanting to risk what happened in the 70s, which is they sort of declared victory on inflation and then had to kind of reinvigorate a rate tightening campaign after they had stopped officially. So I don't think they want to do that. The next meeting is the 25th and 26th of July. So that's a good amount of time from now, call it three weeks or more. There's a couple

of data points that will come out. This week, actually, we've got some employment data. We'll get the ADP payroll number tomorrow and then jobless claims and some more data on Friday. So that'll be something that can change direction on Fed policy in that next meeting, but it'll end up being somewhat stale just because it's going to be a pretty far away from when they're actually going to meet. There is some inflation data that'll come out that is out on the 12th, so a week from today. That thing will be a little bit more relevant just because it'll be a little bit fresh, more fresh, or closer to the date of when they're going to meet. And so we'll see where prices are going to ultimately be.

We got some factory orders and some durable goods orders out today that were below expectations, although they were basically the same exact number as they were last month. So sort of more of the same. There were some bright spots in there. Aircraft was bright, machinery, transportation, those types of things. And I think some of that has to do with some of the manufacturing data that we're getting out of sort of the onshoring or reshoring phenomenon that's happening as we pull supply chains from places like China. But it is showing a slowdown. So, you know, manufacturing is a little, it's below 50. And so we've got a little contraction there. And the factory orders were below expectation.

Speaking of near shoring or on shoring, the president of China, Xi Jinping, had comments today about how countries should cooperate. And basically speaking to that, you know, that they're starting to feel and notice in their economy is, that those manufacturing jobs that were once all in China, mostly in China, are now starting to relocate either towards the US and Mexico, different parts of the world, because of what kind of went through in the pandemic with supply chain issues and so on and so forth. We had a commitment to reduce production from both Russia and Saudi. So two real big OPEC players, and they're going to reduce production. Oil was up about 3%, 3.18% on the day because of that. Technically registered one of the warmest days or the hottest day, I guess, on record, which really just goes back to 1979 when they've been tracking this. So we've got some rising global temperatures. I think in the DC Today,

I wrote that 1979 is a long period of time in our life, in my life. That's, you know, I was two. So it's a long time ago. But it's in the scheme of tracking temperatures on the earth. I don't know that that's a real long sample set. I'm not saying it's good or bad. I'm just putting it in perspective. It's trying to, you know, track a direction of a portfolio result over a short period

of time is about as useful as well. So the other kind of news on the day, the Supreme Court on, I think this was on Saturday or sorry, Monday, ruled against using race for college admissions. This was part of affirmative action, if you remember that, been around for a long, long time. They also voted to not support Biden's plan to cancel or offset student debt for something like, you know, 20, 30 million Americans. They just thought that was exceeding his power to be able to do something like that. And I'll save my partisan comments for what I think of those two things aside, which is that I'm in favor. But all that to say, the day was quiet. It was low volume.

There was some news. UPS was down a little bit on the day of the stock. The company was down a little bit. There's a back and forth that they're dealing with with their unions and their drivers, and they didn't come to an agreement. So you saw some volatility there. All that to say, I'll let you get back to your afternoon. I wanted to give you this brief update here on kind of a quiet trading day. Again, markets were slightly lower. All to say, things are going just fine, and we're moving ahead with positive earnings on the year and into next year. But I'll let you go on the day. I appreciate it very much and I'll see you next time on DC Today. Thank you. The Bonson Group is a group of investment professionals registered with

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