The Dividend Cafe - The Dividend Cafe Thursday - September 5, 2024

Episode Date: September 5, 2024

Market Updates and Economic Insights: September 5th Edition In today's episode of Dividend Cafe, Brian Szytel reports from West Palm Beach, Florida, sharing a mixed day in the markets. The Dow closed down by 219 points and the S&P fell by a third of a percent, though the NASDAQ saw a slight increase. The 10-year yield dropped 3 basis points, while the yield curve remains flat. Employment numbers showed weaker-than-expected private payroll growth for August, continuing a five-month trend of declining numbers. Other indicators such as ISM services and initial jobless claims were slightly better than expected. Looking ahead, non-farm payrolls are due tomorrow, and market expectations indicate potential rate cuts by the Fed through the end of 2025. Seitel wraps up with cautious optimism and invites audience questions. 00:00 Introduction and Market Overview 00:40 Employment Numbers and Economic Indicators 01:58 Federal Reserve and Interest Rate Expectations 03:03 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 is Thursday, September the 5th, and Brian Saitel with you here from West Palm Beach, Florida again. And a bit of a mixed bag today, honestly, in markets. We had the Dow that closed lower by 219 points. The S&P was down by a third of a percent, but the NASDAQ was up about a quarter of a percent. So mostly lower on stock prices for the day. Slight rebound from yesterday's LF and tech on the NASDAQ. The 10-year yield was down three bips, three basis points to 373. And the 210 spread, the yield curve is still basically completely flat. We're at one basis

point between the two. We had some employment numbers out today. We had ADP private payrolls print at 99,000 for the month of August. We were expecting 141. So that's a pretty decent miss on that number. We also had July get revised lower by 11,000. These private payroll numbers are often different than what we actually get in the non-farm payroll numbers, but are still important to read and look at. And these are definitely weaker. This was the fifth consecutive month of them being lower in total. So they're trending lower. And this month was the lowest since January of 21. Like I wrote, you got to be careful what you wish for. The Fed set out to correct a supply and demand imbalance in the labor market. And that's exactly what's happening. And so I don't know why

these numbers would surprise anyone or markets. Frankly, I don't think that they are. We also had ISM services numbers today that were a little bit better than expected. We had a 51.5 versus 51. And then we had initial jobless claims. So new people filing for unemployment, slightly better than expected. We got a 227 versus 230. So all this to say, this basically is about the most orderly slowdown that I've seen. So I would feel good about it, not bad. The numbers are fairly mixed and they're fairly benign and we're just slowly trending back to these normal rates. Like I said, tomorrow we'll have non-farm payrolls out and that'll be heavily watched. It's at this point not necessarily obviously if, it's just a matter of how much they start with on

September 18th as far as lowering interest rates, 25 basis points or 50 basis points. But what's now been priced in over the past couple of weeks on Fed futures is a full 225 basis point rate cuts by the end of 2025. So call it, what is that, 16 months or so? And that technically would bring, if you assume that inflation will end up leveling off around two, could be slightly lower than that. But somewhere around there, if you've got 225 basis points for the cuts from now until the end of 25, that would bring you to a 3% Fed funds, which is basically about a percent above inflation or a 1% real rate. And that is what I view is a

pretty reasonable expectation. Of course, the question will be, what does inflation actually do? And then what are the dozens of other economic factors that get baked into that calculus along the way? But I think it seems logical, at least so far. That's what I have for you today. I'm going to keep this fairly short, and I'll let you get into your Friday tomorrow. Please reach out with your questions, as always. We appreciate them, and I wish you all a lovely evening. Thanks so much. Goodbye. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, with Hightower Advisors LLC,

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