The Dividend Cafe - The Dividend Cafe Thursday - October 17, 2024

Episode Date: October 17, 2024

In this episode of Dividend Cafe, Brian Szytel delivers a market and economic update for October 17th. The Dow showed a positive gain of 161 points, while the S&P and Nasdaq remained flat. Interest rates saw a slight increase, with the 10-year Treasury note rising 7 basis points to 4.09%. Brian reviewed the latest economic news, including initial jobless claims at 241,000—below expectations, positive retail sales, and the Philadelphia Fed Manufacturing Index showing improvement. Across the Atlantic, the European Central Bank cut rates by 25 basis points to 3.25%, citing slow, yet non-recessionary growth. Inflation in Europe has fallen to 1.8%, while unemployment stands at a historically low 6.4%. Brian also discussed the Phillips Curve's relevance and addressed a reader's question on credit card fees and their impact on inflation. He wrapped up with a reminder about forthcoming housing market data and the Long Form Dividend Cafe report. 00:00 Introduction and Market Overview 00:43 Economic Data and Job Market Insights 01:25 Retail Sales and Manufacturing Updates 01:55 European Economic Conditions 02:25 Inflation and Unemployment Analysis 03:40 Credit Card Debt and Inflation 04:48 Conclusion and Upcoming Reports 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 is Thursday, October 17th. Brian Saitel with you from our Newport Beach office. A bit of a mixed day in markets, mostly positive. The Dow is up 161 points on the day. S&P actually closed basically completely flat. It was up one point. And then the NASDAQ was also basically flat, up six points on the day. So two flat indices and one meaningfully or reasonably, I would say, positive on the Dow with 161 points. Interest rates have started to move a little higher. Some of the economic data and jobs data has been a little bit better. And so you've

got a little bit upward momentum with some interest rates. Ten-year was up seven basis points on the day. We closed at 4.09%. Economic news out today, we had initial jobless claims came in at 241 for the month, forgive me for the week, we were expecting 260,000 on there. And anything in that mid 200,000 range is on the Fed's radar. That would be at a point where the employment market would likely start to weaken a little bit, meaning unemployment would go up. The only thing I'll say here is just remember that both Helene and Milton were in the middle of the last two weeks. And so some of these numbers that popped up from say low 200s to 250s probably had something to do with that. Those are pretty big storms, but we'll let a couple of weeks go by

before we make any final judgment on the employment picture. So far, it's fine. We had U.S. retail sales a little better than expected. Positive consumer numbers here. We got a 0.4% number versus a 0.3% expected. So a little bit of good news there. And then we had the Philly Fed Manufacturing Index. Meaningfully, it was actually the mirror image of what we got on Tuesday from the New York Empire State Manufacturing Index. This one was meaningfully better. New York was meaningfully worse. We got a 10 handle on this one versus a three. So some mixedness inside of the manufacturing, not that uncommon. Some of the info I wrote today was across the pond. It was about Europe and they decreased rates today, 25 basis points. They're down to three and a

quarter on the central bank policy rate there. And Lagarde basically said that growth is slow, but it's not recessionary, at least as of yet. But they're sub 1% on GDP. Whether that sticks positive or not, we'll have to see. But the comment that I made was about their mandate being not just a dual mandate like we have in the US, where we're focused on both or our Federal Reserve, our monetary policies focused on both inflation and employment. They really just focus on inflation in the Euro zone as a mandate. They, of course, pay attention to everything, as we do. But my point here was that inflation has fallen all the way down to 1.8% in Europe, and it's still declining from here. But unemployment is at 6.4% in Europe. Now, that may sound high to most of our listeners

from our U.S. ears. We're used to threes and fours on our number. But in Europe. Now that may sound high to most of our listeners from our US ears. We're used to threes and fours on our number. But in Europe, in the Eurozone, a 6.4% number, at least going back 15 years, is the lowest it's ever been. So this is a historically low period of unemployment and rapidly falling inflation. And so if you thought about both what caused inflation, I think it's more a case for the supply side being affected through COVID, obviously. And then if you think about what the Phillips curve says, which is the inverse relationship between unemployment and inflation, we've called the dead for a long time. This is another one of those case studies where I think

you can say, yep, yeah, it doesn't seem to really work anymore. You've got falling inflation with low or falling unemployment. Those two things are supposed to be the opposite of one another as recorded by what was the Phillips curve. So a couple of pieces of data there for you. I had a Ask TPG question there from a reader that reached out about credit card fees and if that was part of inflation. Not the fees necessarily. I talked a little bit about how credit card spending can affect the velocity of money just because they're miniature loans. So you're borrowing money to put in the economy. And assuming those credit card balances are growing and not being paid

off every month, then okay, there's a little bit of movement on velocity, which can affect inflation positively. But that's on the margin. Total credit card debt in the country is over a trillion now. It's 1..14 so that's a big number it's up 5.8 percent year over year okay we've got it in relation to the overall consumer household debt number of 18 trillion it's small number one and the number two remember nominal gdp before inflation was up about the same amount three percent inflation three percent growth equals our numbers there and so you've got economic activity about the same and then also the money supply has been about the same more or

less so no i don't think the credit card spending in and of itself or fees was a cause for inflation it's just kind of baked in with everything else so there you have it i'm going to let you go and get into your your thursday afternoon if i don't speak to you have a. I'm going to let you go and get into your Thursday afternoon. If I don't speak to you, have a great weekend. Tomorrow, we'll have some numbers out in the housing market. We'll have housing starts and building permits, but we'll also have the long-form dividend cafe for you to read over the weekend. With that, I'll let you go. Have a good evening. Reach out with questions. Thank you. Swanson 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 Advisors LLC. This is not an offer to buy or sell securities.

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