The Dividend Cafe - The Dividend Cafe Thursday - August 15 2024

Episode Date: August 15, 2024

Market Rally Insights: Cooler Inflation and Strong Consumer Data Fuel Optimism In this episode of Dividend Cafe, recorded on Thursday, August 15th, Brian Szytel reports from Palm Beach, Florida, detailing a notable market rally with the Dow rising over 500 points. Despite a slight bond market sell-off, key economic indicators, including cooler-than-expected PPI and CPI numbers, and robust July retail sales led to this positive movement. The episode also touches on stronger-than-expected initial jobless claims and the impact of a cyber attack on the auto sector. Seitel discusses the potential benefits of adding bonds to portfolios amid declining interest rates and previews upcoming consumer sentiment and building permits data. 00:00 Introduction and Market Overview 00:30 Inflation and Growth Numbers 01:11 Employment Data Insights 01:49 Federal Reserve's Influence 02:11 Portfolio Diversification with Bonds 02:53 Upcoming Economic Indicators 03:10 Conclusion and Final Thoughts Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome to Dividend Cafe this Thursday, August the 15th. Brian Seitel with you here from Palm Beach, Florida. In what was really a nice day in markets, the Dow is up over 500 points on the day, 522 roughly. Both the S&P and the NASDAQ notched their sixth straight session of up days in a row. And the bond market sold off here a little bit. We were down about 10 basis points on the 10-year yield. So the reason for the rally in risk assets and the sell-off in some bond prices was, aside from the PPI number on Wednesday and also the CPI number, were both cooler than expected on inflation. We got some stronger than expected growth numbers today, at least on the consumer side. July retail sales were up 1%.

We only thought there would be about a 0.3% increase. Some of this is some rebound, at least in the auto sector, which was the biggest attribution for the number. There was a cyber attack last month that caused some of those sales to bleed into the following month. And so take that for what it is. But nonetheless, July retail sales were robust, and that speaks to a strong consumer. And that fueled some of the markets today on the rally side. We had initial jobless claims that came in at 227. We were expecting 233. So a little bit better on unemployment. And also continuing claims were a little bit better than expected. So again, there was some fears allayed, at least on the growth side of the equation. Now that we've seen the inflation side

continue down that disinflationary narrative. There was a couple of pieces outside of that good news, I guess, which was we had the Philly Fed Index, the Empire State Index, and an NAHB homebuilder sentiment number that were all weaker than expected on the day. But some of that stuff just really gets overshadowed. I mean, what the market is looking at is what's driving the Federal Reserve and what's driving the Federal Reserve is their dual mandate, which is employment and inflation. And so that's what's trumping all the other sort of, I call it noise or on the margin data that's coming out that may or may not be mixed. bonds to a portfolio in this time with rates set to decline. And my comment is essentially, if your portfolio is devoid of fixed income completely, and you desire some form of diversification, this isn't necessarily a comment to any one person, but just generally speaking, fixed income can be a benefit there. And of course, with declining interest rates and yields now in the, call it fours and fives, it makes some sense to have some income and some diversification benefit from the asset class in general.

And aside from what was a big sell-off in 2022 and tough bond market last couple of years, I think that you'll have more of a tailwind essentially than a headwind in the asset class, generally speaking. So for whatever that is worth for listeners. But tomorrow we have some consumer sentiment numbers that'll be out. Again, those are always lagging indicators. So take it for what it is. We don't pay a lot of attention to it at TBG. Nonetheless, we'll have them. And then you'll have some building permits number on the real estate side. So we'll also, it's Friday, so we'll have the long form dividend cafe for you, as we always do. And I encourage you to reach out with your questions. Thank you. 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

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