The Dividend Cafe - The Dividend Cafe Wednesday - September 18, 2024

Episode Date: September 18, 2024

Fed Interest Rate Cuts and Market Reactions – September 18 Update In this episode of Dividend Cafe, Brian Szytel from Newport Beach office at TBG headquarters discusses the Federal Reserve's decision to reduce interest rates by 50 basis points, forecasting another 100 basis point cut by the end of 2025. He gives a detailed analysis of the interest rate trajectory, market reactions including Dow's closing, and bond market trends. He also highlights the August housing starts, which exceeded expectations, and upcoming economic indicators like jobless claims and manufacturing data. Brian invites questions and looks forward to the next update. 00:00 Introduction and Welcome 00:11 Federal Reserve Meeting Summary 01:32 Market Reactions and Analysis 02:19 Housing Market Updates 02:47 Upcoming Economic Data 02:59 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, September the 18th. And Brian Seitel with you at Newport Beach office here at TBG headquarters on the Fed Day. So today we had the conclusion of our Federal Reserve two-day meeting, and the Fed reduced interest rates by 50 basis points, which is what Fed futures had priced in the last week or so. And there's another 50 basis points priced in of rate cuts before the end of the year, meaning 100 basis points total for 2024, and then another 100 basis points for the year of 2025. And if you do the math, that would bring us from currently 5.25 to 5.5. Now, as of today, we're at 475 to 5 on Fed funds. And if you reduce that by another half point, you're going to be in the four and a quarter to four and a half range by the end of 2024. And if you reduce that again by another 100 basis points,

you're somewhere around three and a quarter to three and a half by the end of next year. And as we've spoken about a few different times, if you think that the appropriate neutral rate, which is not restrictive and not stimulative to the economy, somewhere around a 1% real rate, meaning 1% above inflation. That 3% handle is around the number that will probably get us there. The question is just whether anything falls out of bed in the meantime. And I have to say so far, so good in this endeavor, as far as that soft landing that the Fed is hoping to manufacture. So there you have it for Fed Day. On the market itself, the Dow actually ended up closing down 100 points. Following the news that came out around 11 Pacific where I am in Newport Beach, markets were up initially, but they were hyper volatile. There's a picture of it

in Dividend Cafe for you to look at on the chart of the Dow for the day. But essentially, as I would have thought, the shine tends to wear off a little and it's the buy the rumor, sell the news. When you get the actual happening of what was good news already priced in, then there's a little bit of alleviation on what was ahead of itself. And that's what we saw in market selling off a little bit on the day, but fairly benign for what it was. Ten-year yields today were up about five basis points, closed around 370 on tens. So again, the bond market was a little ahead of itself as well, not a lot. We also had August housing starts for the month up 9.2%. We were only expecting five

and a half, so that's better. And then we had new building permits, which is more of a forward looking indicator up ahead of expectations as well. They were up about 4.9%. Inside of some of those numbers, single-family starts were up over 15% on the month. The housing market is seeing lower interest rates in the future, and some of this action is starting to pick up a little bit. Tomorrow, we'll have existing jobless claims. We'll have some manufacturing data on the Philly Fed Index. And we'll also have some existing home sales to add to today's new housing starts. So with that,

I'll be back with you tomorrow, which will be Thursday. Appreciate your questions. Send them as always and have a good evening. Thank you. 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. There is no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance Thank you. 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

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