The Dividend Cafe - The Dividend Cafe Thursday - May 8, 2025

Episode Date: May 8, 2025

In this episode of 'Dividend Cafe,' hosted by Brian Szytel, the focus is on the recent positive movement in the markets driven by trade developments between the US and the UK. Key indexes like the DOW, S&P, and Nasdaq saw notable increases, while the 10-year bond yield also rose. Significant economic indicators such as jobless claims and productivity data are discussed, noting their implications on the overall economy. The episode also delves into central bank actions, highlighting interest rate cuts by the Bank of England and extensive monetary stimulus measures by the People's Bank of China. The episode closes by emphasizing the resilience and ongoing attractiveness of US markets despite short-term fluctuations. 00:00 Introduction to Dividend Cafe 00:20 Market Performance Overview 00:43 Trade Developments and Their Impact 01:27 Economic Indicators and Employment Data 02:22 Central Bank Actions and Global Implications 04:23 US Market Capitalization and Investment Insights 05:46 Conclusion and Upcoming Events 06:18 Disclaimer and Legal Information 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, May the 8th. Brian Seitel with you here today on a nice positive day in markets, we closed off the best levels of the day, but the Dow was up about eight tenths of a percent. S&P was up about seven tenths of a percent. NASDAQ was up a bit over 1% on the day. So positive across the board in green and also in yield. So bonds actually sold off a bit. Ten year yield was up about nine basis points. We closed at 437.

So all of this related mostly around trade developments that are to the positive primarily between the U S and the UK deal that was struck there and open negotiations to keep the 10% tariffs on the UK across the board. But there would be exemptions for different sectors like autos, plane engines, steel and aluminum. These things in exchange for the UK and UK companies making major investments in the US and different trade agreements and things back and forth to be positive on both sides of that equation.

So the other thing is that Treasury Secretary Besant is to head to Switzerland over the weekend and meet with the head trade official in China. And so both of those things were positive on the trade front and added to some of the move today you saw in markets. The economic side had a couple of pieces, but it wasn't the main topic. I would say on the day, the initial jobless claims came in a little better than expected at two 28. But the main point to that is just that the remaining anchored.

And so in all of this, you're not seeing that fall out of bed. Unemployment is hanging in there. And the non-farm payroll report last week spoke to that as well at 177,000 jobs. So some of that data is going backward. And you could say it was before some of the effects of decreased trade and transactions and shipping occurred with tariffs, but nonetheless, employment appears to be hanging in there. You also had productivity in the U S miss expectations on the day.

So it was down 0.8%. We were thinking it would be down about one 10th of a percent. So quite a bit more negative. And I suppose not that much of what was unexpected, but again, missed consensus. And that was the first negative print in three years. So the comments that I put in there today were about some of the central bank action, because we know that the Fed yesterday essentially said the U.S.

is healthy. Employment is hanging in there. Inflation data has been low. And so our tool mandates are being met. And so we're going to keep rates the same until the data shows us otherwise. And that's what they're doing. They're going to wait and see. That hasn't stopped other central banks for taking action though. Bank of England announced a 25 basis point preemptive rate cut today. That was actually expected. But the bigger story that I wrote about in there was the People's Bank of China.

So PBOC lowered rates yesterday. But it wasn't just that. It was to the extent that they just had broad sweeping monetary stimulus across the board. And it was everything from lower their repo rates to free up petroleum yuan to lowering bank reserves to the lowest in 19 years to other sector benefits on reserves, things like autos and financials cut to 0% reserve requirements. And then they have a couple of stock facilities in there, about 800 billion sort of sprinkled in.

My point to saying all that is they were already doing all of this. So some of it may have been added on because of trade uncertainty and what they're saying and already a slowdown at factories. That's true. But regardless of that, the point is that they were already dealing with deflation. You don't have 20, 10 year bond yields in China yielding 1.6% because that's an inflationary environment, It is the opposite. That is a signal of deflation and the devaluation of their property market is a big part of

that. The action of central banks shows two things to me. One that they're vulnerable. The economy is fragile if they're already dealing with deflation. So there's that. At the same time, I think it shows what they're willing to go through to either dig in heels or to just do whatever they have to on monetary side. They can do it.

It's communist country and that monetary, the central bank is a powerful one. It's the second largest economy in the world. So there's a lot of things they could do now for better or for worse, but the willingness to do them nonetheless, I think is very evident. In contrast, there's been plenty written about this, both the dollar declining, first off, if you look at a chart, it's down in the short term, but not over any couple of year period. It's been about the same here for a long, long time. And also just capital flows out of the US.

And so you've had some equity declines. And does that mean that there's permanent brand erosion, people don't want to do business with the US? And my point is two things. One, just keep in mind, 20 trillion dollars with the T was added to the U.S. equity market market cap in the past two years alone. This is from our friends at Gavkal Research, actually. So tip of the hat to them.

But if you think about that amount of money, it's the same market cap as all of Europe. OK, the entire continent and Japan combined. That was just added to what existed already of the market cap of US markets. So look, the overweight to US assets was already huge. I mean, it was the historical high. So if there's some recalibration happening, I'm not opposed. I think that's normal and natural and part of how free markets are supposed to work. And no, I don't think there's permanent brand erosion because I think capital will always flow to where it's freest, most transparent, most liquid, and where it's rewarded the most. That's how that works.

So, so long as the US is competitive in those ways, I suspect it'll be open for business and I suspect it'll be used as a mode of value as far as currency and reserve status, those things. So, that's my take on it. And with that, I'll leave you here for this evening, which is Thursday. used as a mode of value as far as currency and reserve status, those things. So that's my take on it. And with that, I'll leave you here for this evening, which is Thursday. There's frankly not a lot of data tomorrow in the economic calendar. There's about five different Fed speakers and different methods talking about monetary policy and things. So maybe there's some nuggets there.

But other than that, there won't be a lot in the economic calendar. There will be. And that's nice because it'll free up time for you to read our Dividend Cafe, be in your inbox tomorrow on Friday. So you can enjoy that over the weekend. With that, I shall let you go, reach out with questions. Thank you, and I'll talk to you soon. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, with Hightower Advisors LLC member FINRA and SIPC with Hightower Advisors LLC registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory

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