The Dividend Cafe - Thursday - March 6, 2025

Episode Date: March 6, 2025

Navigating Market Volatility and Economic Indicators In this episode of Dividend Cafe, Brian Szytel discusses the recent significant market volatility driven by uncertainties surrounding tariffs and trade policies. The Dow experienced multiple drawdowns and rebounds, with the S&P 500 fluctuating over six consecutive days—something not seen since November 2020. Economic updates include better-than-expected jobless claims and productivity numbers, but a dramatic increase in the trade deficit due to anticipated tariff changes. Brian also touches on the interconnectedness of trade, interest rates, and currencies while advising against timing the market, advocating instead for a balanced, income-generating investment strategy. Listeners are encouraged to revisit their asset allocations and stay engaged with ongoing market developments. 00:00 Introduction and Market Overview 00:12 Recent Market Volatility 01:00 Economic Indicators and Trade Deficit 02:02 Impact of Tariffs and Currency on Trade 04:11 Investment Strategies in Volatile Markets 05:38 Conclusion and Viewer Engagement 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 Thursday, March the 6th, and Brian Seitel is with you here again. On another volatile day, because that's what we've been dealing with here the last couple of weeks, we had a 600 point drawdown, another 600 point dry down Monday, Tuesday. A 500 point rebound on Wednesday. And then today a 400 point drawdown. Again, the Dow closed down 427 points, which is exactly 1%.

The S&P was down 1.8% and the NASDAQ was down a stunning 2.6%. So this is an ugly market. It's moving lower. So there's some steam coming out of stocks, but mostly it's just volatile because of tariffs. It's trying to figure out exactly what will come down the pike on trade. And every day and every hour that seems to change. There's tariffs that get put into place.

There's tariffs that get adjusted. So on and so forth. But this marks the sixth day in a row that the S&P has moved more than 1%. So that's the longest streak since November of 2020. And you probably remember what was going on back in 2020 as far as uncertainty goes in markets. A lot of uncertainty back then with the pandemic. There was some economic pieces out in the news today. There was initial jobless claims that came out better than expected. We got a 221 versus about a 240 or so on a consensus.

So that was better than expected on jobless claims on unemployment. We got productivity numbers for Q4 that were better than expected. They ticked up 0.3 to 1.5 total percent growth. That's a good thing. And then I guess to top it off with a negative comment, the trade deficit for the month of January exploded basically, because what you have is companies that are trying to get ahead of what will be a future tax increase with tariffs, and so they're importing a bunch of stuff now to get at a certain

price or at least a knowable price. And so the trade deficit widened by a stunning 34% to one of the highest ever. It's almost the highest. It's 131.4 billion for the month of January. So again, all of that was because of what could come down the pike in the form of tariffs. All in the total amount of tariffs that look like they're in place or set to stay in place, they're going to equate to something like $150 billion of revenue to the

government. So if you think about what that is to GDP, it's something about half of a percent off of it. And if you think about what that means to tax coffers at about a five trillion coming in the door, that's about a 3% increase in tax revenue. And if you try to equate that to a decrease in, or sorry, an increase in tax rates on the corporate tax rate, for example, or even personal tax rates, it's a modest increase. Effectively, the argument against it is that you're passing through those higher costs to consumers and that's inflationary.

Ultimately, it's push and pull. If you tax more of something, you tend to get less of it, certainly over time. But the point of it on the other side is to try to level the playing field on what's already in place across the world. Tariffs are all over the globe and there is a general feeling and a fed up-ness of trying to fight back and make things a little more level and just at least make them the same as what other countries are charging our goods and services around the world.

Part of our trade deficit has to do with this. There is also a big component of currency people need to remember on this as well. Weaker currencies technically are better for exporting nations because their widgets that they sell across the world are cheaper and they have a competitive advantage. Widgets are cheaper with lower taxes and widgets are cheaper with weaker currencies. So I get clients and readers and things concerned about inflation and high interest rates and things like this.

But just remember in a global trade war, there's a benefit to having a weak currency and so you end up with that component of it as well. And I want people to just be cognizant that all of these things are tethered together. Trade, interest rates, currencies, all of those things. So it isn't just one or the other and the black and white issue here. And I say that because the volatility in markets is trying to figure things out. And I understand that there's folks that are trying to figure out themselves. Should they be in the market or out of the market, or should they be more

defensive and these sorts of things. And I'm all for it. I think that it warrants a revisiting of asset allocation, of portfolios, all those things. I think you, you need to do that all the time anyways, but certainly in periods of uncertainty, but I definitely don't think, and neither does David, that it should be an all in or an all out or a timing game around this. You won't get it right.

And that's not the right way to do it. The strategies that we have in place are going to be more income producing and defensive and defensible to begin with. And I do feel comfortable with that posture versus overvalued parts of the market or biopic one-sided trades, one or the other, putting all money in long-term treasury, something like that, or taking all money and putting it in cash or even going the other way and being more aggressive and trying to buy the dips.

I would avoid all of the timing issues here. It's time in the market, not timing the market. And we can let these things play out. And ultimately, fundamentally, remember that the economy is still in pretty good shape here. We do have an Atlanta Fed tracker on Q1 GDP that's tracking negative, but that'll get revised a whole lot of times, and that's one quarter,

and it has to do with some of this volatility. For the year, as far as earnings go, all things considered equal, and we're still in an expansionary economy here and I wouldn't forget about that either. So I know that was a lot I threw at you there, but I wanted to go through some of this volatility a little bit and just give you my thoughts off the cuff, for better for worse. So with that, I'm going to let you go for this evening. I would encourage engagement with us. Reach out with questions, thoughts, feelings, concerns. That's what we're here for. With that, I'll let you go. Have a nice

evening. And if I don't speak to you, have a nice weekend. Tomorrow's Friday, we'll have the long-form dividend cafe in your inbox. And for you to enjoy over the weekend, I hope you have a good one. Thank you very 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 risk. There is no guarantee that the investment process or investment opportunities referenced

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