The Dividend Cafe - The Dividend Cafe Wednesday - August 14, 2024

Episode Date: August 14, 2024

Mid-August Market Update and Tax Efficient Portfolios In this edition of Dividend Cafe, Brian Szytel offers a market update broadcasted from the new West Palm Beach office. The Dow closed up 242 points, S&P up by a third percent, and Nasdaq flat. The 10-year bond yield is slightly down. Key discussion points include the recent CPI data showing disinflationary trends, market expectations of a September rate cut, and inflation rates over the past three and six months. Brian also addresses strategies for tax-efficient portfolios, emphasizing tax-exempt interest, qualified dividend income, real estate positions, and loss harvesting. The episode wraps up with Brian planning a team dinner and announcing David's return for the next session. 00:00 Introduction and Market Update 00:35 Inflation Data Insights 01:18 Federal Reserve Rate Cut Predictions 01:55 Analyzing Recent Inflation Trends 02:57 Tax Efficient Investment Strategies 04:05 Conclusion and Sign Off 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 Wednesday, August the 14th. Brian Seitel with you here from our beautiful new West Palm Beach office in Florida. Coming to you with a nice little update in markets following yesterday's. So some follow through. We had the Dow close up 242 points on the day. The S&P was up about a third of a percent, a little more. The NASDAQ was about flat. And the 10-year bond yield was down just a basis point. We closed at 384 on the 10-year yield. Follow through day, fairly positive. And some of

the reason behind that was the new read on inflation. We got CPI data out today, which was largely in line, although just slightly better than expected, meaning a little bit lower. For the month, we had a 0.2% increase for July for headline CPI, which puts year over year just below the 3% estimate at 2.9%. Headline, a little bit better than expected year over year, right in line on the month. And then core, if you strip out things like food and energy, was right in line with expectations at 0.2% for the month and is now 3.2% year over year. So this is basically what the market wanted to see. It's followed through on a disinflationary narrative. The Fed futures are still pointing to a rate cut in September, basically with 100%

assurity. It is now about a 62% chance of a 25 basis point cut and a 38% chance of a 50. So as of now, my read on this is that they probably will do 25 basis points, at least as of today. As far as will they or won't they, we have a good amount of data before then to go through. So it's hard to really say, and these numbers will change. I would take the under on the inflation expectations though. And my guess is they'll end up with 25 for September, but we'll see and keep you posted. I did want to point out that if you look at just the last three months of where inflation has come out and you annualize it, we're at a three-month annualized inflation rate of about 1.57%. So three months is three months. It's not a year,

but still the trend lately has been actually lower than the Fed's target. And I know that they're looking at that. If you annualized a six-month number, we're still dealing with, quote unquote, what all the media love to call sticky. So there was some inflation still six months ago. We're only at a 2.8% on a six-month annualized number. So it's just moving into the Fed's target. In fact, some of it recently has been moving below the target. And so I know that they're ready to move. That's what's priced in. has been moving below the target. And so I know that they're ready to move. That's what's priced in. They're inside the numbers. We had things like restaurants that were up 4% and shelter is still a five handle on the percent year over year inside of that inflation number on CPI. And so some of these things coming back to normal, call it shelter of where it actually is, which is more flat. It

moves inflation quite a bit lower as well. There was a question in there that David walked through on the taxation of portfolios. And I understand people don't want to pay taxes. I don't either. And I don't want my clients to pay taxes either. So there's all those things. At the end of the day, taxes are taxes. It's what we're assured, death and taxes. There's going to be them. It's a matter of just making them the most efficient. So we build portfolios that'll have a portion of them are in tax exempt interest. Most of the dividend income that we use is qualified, meaning tax to capital gain tax rates. We can feather in things like real estate positions that have depreciation built inside of them for tax efficient income. All of these sorts of things will create a very tax efficient paradigm to keep you at or below

what capital gain tax rates are as best as we can. And then as we reposition existing positions, we have to be reticent of unrealized gain recognition and try to offset it with harvesting losses along the way. If the goal is to pay zero taxes, then there's also a nice 0% return that you can expect along the way, typically as well, at least over time. So that's not really a very good goal. We try to minimize as best as we can. So with that, I'm going to wrap it up for the evening, taking our new Palm Beach office crew, our new team here out for a nice dinner. David, we'll be back with you tomorrow. And with that, I shall let you go for the evening. I wish you all a good night. Thank you. The Bonson Group is a group of investment

professionals registered with Hightower Securities LLC, member FINRA and SIPC, I wish you all a good night. Thank you. 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 express 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. 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. This document was created for informational purposes only. The opinions expressed are solely those of the Bonson Group and do not represent those of Hightower Advisors LLC or any of its affiliates.

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