The Dividend Cafe - The Dividend Cafe Wednesday - June 12, 2024

Episode Date: June 12, 2024

This episode delves into the significance and influence of the word 'because'. The discussion explores its role in communication, persuasion, and decision-making processes, highlighting how the simple word can have a powerful effect in various contexts. 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. It is Wednesday, June the 12th. And generally in updated markets, the Dow actually did close lower by about 35 points on the day. And it opened up higher than that on some better than expected inflation data and then drifted a little lower. But both the S&P and the Nasdaq were up modestly. The S&P was up 0.85%. Nasdaq was up 1.5%. So a decent day.

Bonds also rallied. Ten-year was down seven basis points to 433. So what caused all this? Ten-year was down seven basis points to 433. So what caused all this? We had earlier in the morning CPI data that came out that was better than expected on both core and headline, which is a good thing. Core was up 0.2% month over month. We were expecting 0.3.

Technically, that number is the lowest now in just about three years, August of 21. It puts the annualized number at about 3.4%. We were expecting three and a half. So better than expected on core. And then headline also better than expected. It was flat or unchanged versus an increase of 0.1%. That's the lowest since right at the onset of the pandemic, basically of May of 20. So you're getting some low month over month numbers in inflation. There's no way to argue with that. Those are good things. The core number, just keep in mind, there's a shelter component. We've spoken about this a few times, but there's a shelter component that is a longer term average, and it's capturing some of the increase in shelter costs back a ways ago. If

you look at something more recent, like just a current Zillow rent index, even the last six months, you're in the mid twos from an inflation standpoint on shelter. Okay. But inside of CPI, the number they're using, the calculation gets them to a 5.42%. So if you think about it, that shelter component makes up about 35% of the total calculation. So if you were to swap those two things and swap them for something more recent, like the Zillow index, for example, it would shave off a full percentage point on inflation. And it would basically bring us to about 2.38% year over year. The numbers are going in the right direction. That all said, we also had the conclusion of the Fed's two-day meeting today. And it was a more hawkish statement, but probably not

as much as I think some wrote about. Basically, it was mostly priced in. They changed their dot plots from showing 75 basis points lower in interest rates in 2024 to only 25 basis points. So basically, they're estimating a one cut type of deal for this year. They're still getting to the longer term interest rate where they want to be. They actually raised it a little higher on the long run, up to 2.8% versus 2.6%. From a dot plot perspective, the Fed was more hawkish. They're expecting a little bit higher interest rates, in other words, than they were before. That all said, the market's held in today because, and I wrote about this in Dividend Cafe, because the markets are looking at, it's a forward discounting mechanism. So it's

looking at what the data actually is saying. And you've got strong employment, you've got strong earnings, you've got strong GDP and strong employment, like I said, and that is more important than what the dot plots may indicate. Because historically, just for perspective for all of you listeners, the dot plots really almost, I wouldn't say never been accurate. They're projections based on the data that they currently have. It's almost like where the puck is versus where the puck is going. So take it for what it's worth. Powell actually alluded to that in his press conference following the statement, because obviously he was questioned on this stuff. So I'm going to chalk today up as a good day because inflation was lower than

expected. So there you go. Aside from what the Fed may or may not have said. All that to say, I will be back with you tomorrow, which will be Thursday, June the 13th, to go over a couple of different data points. With that, I will leave you to your evening. Please reach out with any questions. I'm here for them. And have a good night. Thank you. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and 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. Thank you. Past performance is not indicative of current 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. 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. Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based 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.