The Dividend Cafe - The Dividend Cafe Tuesday - July 2, 2024

Episode Date: July 2, 2024

Market Update and Economic Insights Ahead of July 4th Holiday In this episode of Dividend Cafe, Brian Szytel provides a market update for Tuesday, July 2nd. With a quiet day in the markets leading up to the 4th of July holiday, key highlights include a slight yield drop on tens, robust performance in the consumer discretionary sector, and job openings exceeding expectations, indicating labor market resilience. Fed Chair Powell's remarks on disinflation progress at the Sentra conference in Portugal were also discussed. Additionally, the episode delves into the dynamics between private credit and investment-grade credit, highlighting expansion trends and credit risk considerations. Brian also previews the upcoming economic data releases for the next day, such as ADP private payrolls, jobless claims, and factory orders, and announces the release of a detailed Dividend Cafe newsletter. 00:00 Introduction and Market Overview 00:27 Economic Indicators and Labor Market 01:02 Federal Reserve and Fixed Income Insights 01:39 Investment Grade Credit and Private Credit 02:56 Upcoming Economic Events and Conclusion 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 Brian Seitel with you today. It is Tuesday, July the 2nd, and what was really quiet today in markets overall, we've got the 4th of July holiday on Thursday. And so with the market closed, and I think that there's just traders heading out for the holiday weekend at this point, but things were quiet. We gave up a little bit of yield on tens, a couple of basis points after yesterday's run up, which was positive. And the biggest sector on the day

was consumer discretionary with the largest electric vehicle manufacturer being up meaningfully on the day, moved that sector higher over a percent. As far as economic news on the day, job openings or jolts exceeded expectations. So this is showing more signs of resiliency in labor. We were expecting 7.91. We got 8.19 there. And again, more employers are looking to add jobs and add employees. And that's technically a positive thing, although there is a supply and demand imbalance in labor. And the Fed is watching that stuff pretty closely at this point. We had Powell out at the Centra conference in Portugal with other central bankers around the world. He did mention the significant progress in disinflation, but also that more time was needed to gain more confidence. So basically more of the same message.

Fed futures didn't change much on the news. They've been hovering around that sort of level now for a couple of days. There was a couple of comments in there that I added on fixed income for the day, both in the difference between private credit and the expansion. It gets a lot of news. A lot of money has come into the space. The yields for investors are now double digits. And so it's attracting a lot of money. But when you look at it compared to investment-grade credit in the expansion since 2010, IG credit is up from $3 trillion to $10 trillion over the same period of time, a little less than that. That's eight times more than what has happened in private credit.

So private credit has grown about $800 billion in the space. And I say that is meaningful, at least on our end, because we're always looking at trades that feel crowded, meaning that there's a lot of investors chasing yield in a certain direction and what the risks can be. And some of these things just put it in comparative relative value versus some of the other parts of the fixed income market. It actually isn't quite as big in comparison in that regard. So it doesn't feel quite as crowded. The one thing that I'll say too on the investment grade landscape is really the expansion of that happened all in the lowest tier rung. It was the triple B space. The way that we're looking at this is being very cognizant of where credit risk actually lies, because you do want part of your bond portfolio

to certainly act and perform like it's supposed to if you get a credit dislocation event, in other words, a bad market. And so we're doing a lot of work like that internally at TBG, and we're starting to shift more towards that higher end, that sort of boring bond sleeve of fixed income to get those higher credit qualities, call it A-rated and better. Tomorrow, you have ADP private rate payrolls out. You've got initial jobless claims out. You've got factory orders. You've got ISM services. There's quite a bit in the economic calendar to go through tomorrow, although it's Wednesday tomorrow. And with the holiday on Thursday and markets closed, we'll actually have the long form topical format dividend cafe for you

in your inboxes so that you can read that for the holiday. And of course, I wish everybody a very happy Independence Day and reach out with questions as always. We appreciate them. Have a great evening. The Bonson 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 Thank you. or future performance and is not a guarantee. The investment opportunities referenced herein may 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 investment advice. The Bonser Group and Hightower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

Thank you. on the client's individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for any related questions.