The Dividend Cafe - The Dividend Cafe Tuesday - September 17, 2024

Episode Date: September 17, 2024

Market Insights Ahead of Fed Decision - September 17 Update In this episode of Dividend Cafe, Brian Szytel provides a market update from the Newport Beach office on Tuesday, September 17. The day saw relatively quiet trading with slight fluctuations as the market anticipates the Federal Reserve's decision on interest rate policy. Key points discussed include better-than-expected retail sales and significant improvements in industrial production, particularly influenced by the auto sector. The bond market and potential Federal Reserve rate cuts are also analyzed, highlighting concerns about market pricing and corporate earnings expectations. The episode concludes with a look ahead to the Fed's upcoming policy meeting. 00:00 Introduction and Market Overview 00:30 Retail Sales and Industrial Production Insights 01:08 Bond Market and Fed Expectations 02:11 Market Pricing and Future Outlook 02:45 Conclusion and Upcoming Fed Meeting 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 Tuesday, September the 17th. Brian Seitel with you here in our Newport Beach office. Good to be with you as always. In what was frankly a pretty quiet trading day, we actually did touch our mid-July highs earlier in the morning and then gave way to some slightly negative markets towards the close. But really, it was pretty benign just because tomorrow we've got our Fed decision on interest rate policy and then guidance going forward, the dot plots and all of that. So somewhat of a quiet day in markets. Otherwise, we did have retail sales that were out better than expected. We got a 0.1% increase

versus a decline of negative 0.2%. So some better numbers there on retail sales. And then we had some industrial production numbers that were actually meaningfully better. We got 0.8% versus a decline of 0.2. Some of that, though, was around some volatility in the auto sector. So take that for what it is. It wasn't necessarily a real broad-based manufacturing strength in some of those numbers. Those are the two pieces of economic news on the day, largely, and markets were fairly flat overall. The 10-year was up a couple of basis points. We closed at 365. But as I wrote, at this point, a 60-40 is what's priced into Fed futures, whether we'll get a 50 basis point or a

25 basis point rate cut. So those numbers have shifted quite a bit. And the bond market, like I said last week, has really priced in this larger move to start. But again, I think it'll come down to more on guidance from the Fed and what they're looking at for some of those longer term inflation expectations and then longer term rate expectations as we go forward. All to say, we still think there's about a neutral stance of maybe 1% over inflation. And if we think that the three-month annualized number has been around 2% on inflation, which it has, that puts us to around a 3% Fed funds, which is something around a two and a quarter percentage points of rate cuts before the end of next year. So that's where we are there. I actually think that so far that they've done a fairly good job of timing and of

trying to land the ship here and give us our soft landing. But the issue isn't that. The issue is just where markets are priced. We're assuming that margins are going to keep at these almost near record highs in corporate America, and we're assuming that earnings growth is going to grow at low double digits for the next 12 months to warrant these 20, 21 times multiples. A lot of that soft landing or good news is already priced in. And when a lot of things are priced in for perfection, that gives us a little bit of worry. And that's why, again, I would focus being on really selective and what you're trying to position inside of markets, both in stocks and bonds. But all that to say, I'm going to cut it

there for the day, just because I think tomorrow we're going to have a lot more to go through when the Fed actually concludes their two-day policy meeting, and we can get into some of that tone and sentiment that they go through. So with that, I'll let you go. I wish you all a lovely evening. Reach out with your questions. Thank you so much. 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 services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk.

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