The Dividend Cafe - Thursday - April 24, 2025

Episode Date: April 24, 2025

Dividend Cafe: Market Gains, Trade Negotiations, and Treasury Revenue Insights In this episode of Dividend Cafe, Brian Szytel from West Palm Beach discusses the impressive three-day market gains, highlighting positive earnings reports and improved market sentiment. He analyzes the impact of trade negotiations and tariff revenues on market trends and the U.S. budget, noting significant increases in treasury revenue and budget surplus. Brian answers viewer questions about the Federal Reserve's balance sheet strategy and the limited efficacy of universal tariffs on specific issues like fentanyl trafficking. Additionally, he provides updates on economic indicators such as durable goods orders, jobless claims, and home sales. 00:00 Introduction and Market Overview 01:14 Market Sentiment and Positioning 02:08 Trade Negotiations and Tariffs Impact 02:51 Economic Indicators and Revenue 03:46 Spending and Budget Deficit 04:39 Economic Data Highlights 05:17 Q&A Session 06:54 Conclusion and Final Thoughts 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 here from our West Palm Beach, Florida office. And it is Thursday, April the 24th on yet another day of gains. So this is the third day in a row and actually not just gains but gains of over 1%. That's the first time this year that we've been able to do that in markets. Obviously it's been positive. Interest rates have pulled back here a little bit. Ten year was down

six basis points but the Dow closed up 486 points on the day which is about one and a quarter percent. S&P was up about two percent. NASDAQ was up a stunning 2.74 percent. So a big robust day. Not a lot of direct news related to this. You basically had three days in a row of gains because there wasn't a lot of bad news that was shouted out into the media headlines. Some positive, or at least beginning of some conversations on trade negotiations helped. Q1 earnings have been largely pretty darn good. We knew they would be because Q1 is in the review mirror, of course, but it was more the forward guidance for Q2 with regard to tariffs and potential economic slowdown if companies were going to reduce their guidance going forward.

And you've seen some of that. You just haven't seen it as much as was feared. And so that has been good for market sentiment overall. The other factor is just that going into this week, sentiment itself was really low, really negative, meaning not only just sentiment, but positioning had gone from a big overweight in US equities to an underway historical kind of fast move for that positioning move in inequities. And you were positioned well, meaning you were already negative and only direction was to go marginally higher from there coming into the week.

And so you were due for a little bounce there. And then you've got some better rhetoric around trade and some negotiations and all of those things together with earnings have led to this week's move higher. You're actually just technically under 10% from the all-time high, which was February 19th. So if you did 10% off of that number, you get to about 5481 on the S&P, technically we closed at 5484. So just under correction territory for whatever that's worth.

The other note that I put in there was we've spoken so much about tariffs and how they've been disruptive and the style of which day to day back and forth has not been helpful. Comments around Fed president and things like that have been tough for markets to digest. All that is true. But technically we're starting to see revenue come into the Treasury at this point and the real dollars. You can say that it's a large consumption attacks and that's bad for the economy. And I would agree with that on one sense. And the other side, I would say, because there's two sides to an equation to try to at least slow down the hemorrhaging of budget deficits, revenue has to be one side of the equation and also spending.

And the fact that revenue has been increased is a good thing in regards to attempting to balance that budget deficit. So far, $11.7 billion has come into the Treasury for the week of the 16th. Compared to last year, it was $5 billion, so more than double, clearly related to an increase in tariffs. And that was before the added 10% universal tariff went into effect. So you can expect that to expand. And frankly, since it's new, I don't know a number to give you at this point. We'll have to just keep checking the reports that come in from trade on revenue coming into tax collections. You also had, coincidentally, that same time period, it was April 15th, which is when the government takes in

money from tax collections. This year had a budget surplus for the month of April of 260 billion. It was 210 billion last year. So that's a $50 billion delta to the plus side, meaning into the coffers of the Treasury better than last year. So that would be considered good on that revenue side of the equation. But again, with spending up about $200 billion in 25 versus 24 so far this year, because Intotima programs have expanded and then also you've had an increase in interest expense. We're paying more for the amount of debt that we have and on top of having more debt.

So that expense hits the bottom line as well. So 200 billion more in spending makes the deficit for this year basically be neutralized from tariff revenue to the same as last year. So it's a sad truth. We were a little over 1.8 trillion last year and we're probably gonna be somewhere right near there. At least that's what the projections are last year. So it's a sad truth. We were a little over 1.8 trillion last year, and we're probably going to be somewhere right near there. At least that's what the projections are showing us.

We still got a long way to go. We're just not going to get there with one side of the equation, which is revenue. You need spending cuts too. And that hasn't happened. Obviously it's politically unfavorable to cut the big spending programs, which are entitlement spending, social security, Medicare, things like that. On the economic front, you did have a big surge in durable good orders. It was largely based around aircraft, but nonetheless, it was up 9.2% for the month of March.

Jobless claims were at 222,000 for the week. That was right in line with projections. Continuing claims actually were a little better than expected, but the labor market still remains in check at those levels, which is good. And then you had existing home sales slightly less than expected at just over 4 million. Remember, new home sales were better than expected earlier in the week. So there you have it. And around the horn on the day in markets, obviously some positive news to give you. I always appreciate your questions. And speaking of which, there were a couple of questions that I'll go through with you here.

One of them was around the Fed holding assets on their balance sheet is the idea of doing that to have a larger Fed balance sheet to try to keep rates artificially low. The answer is no, that isn't their intention. They're a provider of liquidity and obviously went through a quantitative easing cycle where they were buying a bunch of this debt from the open market, which infuses cash. And now the opposite is happening in quantitative tightening, where they're letting that roll off the balance sheet. As those bonds mature, they're not reinvesting principle.

They're letting it run off granted at a lower rate, but the balance sheet is shrunk by $2 trillion. So call it nine has gone to seven to give you average numbers. So, you know, that's what they're doing. And the answer to the question is no, they're not keeping rates artificially low in and of itself. Ultimately, you can speak to the level of debt indebtedness both in this country and globally and say that rates are bound to a lower bound.

And I would tend to agree with that. There was a question too on tariffs and the ethical moral side of a situation like fentanyl. It's one of those things when you do universal tariffs, you're adding taxes to things like Swiss chocolate and watches on top of autos and on top of everything else. It's hard to really say there's a benefit to lowering the fentanyl trafficking. So I think it would be a very blunt way to do it versus targeted there. But if there was a way to draw conclusions one way or the other, I'm all yours too. But that's the answer on that front there. So there's the two AskDBG questions for the day. That's the

around the horn. Reach out with more questions. I wish you well. Have a great 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's no guarantee that the investment process or investment opportunities referenced to your end will be profitable. Past performance is not indicative of current or future

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