The Dividend Cafe - The Dividend Cafe Thursday - November 14, 2024

Episode Date: November 14, 2024

Market Recap and Economic Insights: November 14th Edition In this episode of Dividend Cafe, Brian Szytel provides a market recap for Thursday, November 14th. Stocks had a generally negative day with the Dow down 207 points and the S&P and Nasdaq down around six-tenths of a percent. The bond market remained flat. Comments from Jay Powell suggesting a cautious approach to cutting rates contributed to some late-day selling pressure. Economic updates included inflation figures with the PPI showing a 2.4% year-over-year increase and initial jobless claims at 217,000. The episode also discusses the impact of shelter costs on CPI and touches on property tax assessment issues relevant to California residents. Tune in for more insights and stay informed about the economic landscape. 00:00 Introduction and Market Recap 00:30 Federal Reserve and Interest Rates 01:02 Economic Indicators and Inflation 01:43 Job Market and Economic Growth 02:05 Shelter Costs and CPI Calculation 03:32 California Property Tax Assessment 04:11 Conclusion and Upcoming Content 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. Good evening and welcome to Dividend Cafe. This is Thursday, November the 14th. Brian Seitel with you here for your market recap here on Dividend Cafe. recap here on Dividend Cafe. And what was generally a negative day, I guess, in stocks, the bond market was essentially flat. So the 10-year closed at 445 unchanged. The Dow was down 207 points. S&P was down about six-tenths of a percent, as was the NASDAQ. So a little bit of a down day. We actually closed more or less at the lows on the day. And the reason that we had some selling pressure just into the close, which wasn't much, was because Jay Powell gave some comments that were perceived to be a little bit more hawkish. He basically just said, all else being equal,

what we're seeing right now is that we don't need to be in a hurry to cut rates too fast. So they know they're going to bring the funds rate down. And the trajectory of that is TBD. There's still about an 80% chance they're going to cut another 25 basis points before Christmas. And so that's what we have it on the Fed side. On the economic side, we had some more read into inflation. We had a PPI number out today. This is the producer price index number out. Remember, we got CPI out yesterday that was largely in line across the board. Same thing on PPI today. We got a two tenths of a percent increase for the month of October. That puts us at 2.4 year over year on

headline PPI. So pretty close to two. If you strip out food and energy, which has come down, both of them have, then you got a 0.3% and a 3.5% year over year. But that's on the core side, so core PPI. So there's another read into inflation, another look on the input side on the producer price index. We also had initial jobless claims that were in line. So we're still in the 220 range. We got 217 today. So job markets hanging in there fine. Economic growth, like I wrote about yesterday, has been stronger. Earnings have come out slightly better than expected for the quarter. And the economy is moving along here. We're growing. I did write

something in there about CPI and what goes into it. And one of the things that we've written about a couple of different times is just the shelter cost. It's the owner equivalent rent number that was a 0.4% in that number that we got yesterday. It represented over half of the move for the month. And so I think it's important to just show people what I'm talking about in a picture. So I put a chart in there that shows what is going into CPI calculation, which is a longer back-tested year over year rent number that goes in there at about a 4.9%. So that would still be a high inflationary number. Rents actually aren't growing at 4.9% anymore. If you look at a six month chart from the Zillow rent index, it's more like three, I'd say even two and a half to three. So it's quite a bit lower. And if you were to swap

those two numbers, the point is just we're already back to the 2% target here on Fed funds. Now, things can change, and they probably will change. Markets might heat up, economy can heat up, inflation has every ability to go higher. So I'm not saying that it can't. I'm just saying all else being equal, if those other inputs stay about the same and we just get the chart, the blue and the red line between those two things, what's going into CPI and what is actual reality, if those two things converge to reality, then we're back to target already. There was a question in there that I answered that may be more or less only relevant to California clients and readers, but there's enough of them where I

still thought it was relevant. And it has to do around some of the property tax assessment situation in the state. Real estate is a big part of most people's balance sheet. And so you can read that. It talks about some of the different props, things like 13, 19, 30, and I'm sorry, 60 and 90 in there about transferring a tax base when you move. So less market related and a little bit more housing related today, both on the chart in there on the equivalent rent, and then also on the ask TBG question for you on the day. So there you have it. I'll let you go for this evening. I appreciate you listening. As always, tomorrow will be the longer form Dividend Cafe on Friday before you get into your weekend. And so with that, I wish you well. Talk to you soon. The Bonson Group is a group of investment

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