The Dividend Cafe - Thursday - May 1, 2025

Episode Date: May 1, 2025

Dividend Cafe: Market Updates, Earnings Highlights, and Economic Indicators In this episode of Dividend Cafe, host Brian Seitel provides an update on the market, noting that the DOW, S&P 500, and NASDAQ all saw gains with positive earnings from key technology companies. He highlights the unpredictability of market trends and discusses potential positive economic developments, such as the Federal Reserve possibly lowering interest rates and a new tax bill. The episode also covers recent employment data, manufacturing indices, and the impact of market sell-offs on liquidity and deleveraging. Brian concludes by addressing listeners' questions about where money goes during market downturns and previews upcoming non-farm payroll data. 00:00 Market Update: May 1st Overview 00:17 Earnings and Forward Guidance 00:40 Market Predictions and Trends 01:17 Federal Reserve and Economic Policies 02:13 Unemployment and Jobless Claims 03:12 Manufacturing and Economic Indicators 03:38 Market Dynamics During Sell-Offs 05:43 Conclusion and Upcoming Events 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, May the 1st. Brian Sightel is with you here today on another update here in markets, marginally at least. The Dow is up 83 points. S and P was up 0.6% in the NASDAQ was up one and a half percent. There were some good earnings out from some of the mag seven names. There's now four of the seven that have beat earnings here, not just beat

earnings, but Ford guidance on investment and capital expenditure has been better than expected as well. And so some of those really big high free cashflow businesses on the technology side, which frankly sold off enough to get more attractively than expected as well. And so some of those really big high free cashflow businesses on the technology side, which frankly sold off enough to get more attractively priced have started to recover here and that's driven the NASDAQ here last couple of days. But I don't think there would have been many people predicting that we'd have now eight days in a row of S and P 500 gains coming through the end of April to

start off the next month of May, which is supposedly the dreaded sell in May and go away month. Those things are a little silly really, but all that to say, I don't think anyone would have really guessed that. It just goes to show that markets are hard to predict, number one. And number two, they do tend to climb that wall of worry. And because they're forward looking, we still have positive things coming. I'll say that less bad things on trade is one of them.

I know that sounds a little silly, but likely there'll be some deals announced and markets are trying to price that in. You also have a Federal Reserve that's likely to start lowering interest rates again and starting in June, which is just next month. That's a positive. There's still a real chance after reconciliation that Congress can get through a tax bill even before the end of May and that would be positive and then there's still a deregulatory environment inside of Capitol Hill as well. So those things are positive. The first hundred days of this Trump administration is now passed as of yesterday and you could say good things

and bad things about it of course depending on which side of the aisle you might sit and how you feel about it. But regardless of that, he signed 142 executive orders. So that's the most ever of any president during the first 100 days. You can say a lot of things about whether it's good or bad, but as far as it being complacent, that probably wouldn't be one of the, one of those things for context. Biden administration signed a total of 162 during the entire term. So it's quite a bit different here. We've got unemployment that will come out at the end of the week, which is tomorrow. That'll be widely anticipated. We got

the private payroll numbers yesterday that were less than expected. We got 60,000 roughly, it was affecting 120 today. We had jobless claims come in at 241 versus a 225 expected. And I've said this for a long time, but anything in that sort of 200 to 220 range is healthy and normal and fine for markets to digest. Once you start getting towards 250 or certainly over 250, you do start to perk the eye or the ears of the Fed because that's employment telling you something. Continuing claims were also a little higher than expected as well here. They're weekly, so you gotta take these for what they are.

There could be weather related issues, there could be seasonality, spring break time, all of those things actually matter. So one week isn't to say much at all, but if you start to string together a few months of higher numbers towards the 250 level, then I do think you're gonna get a Fed that starts moving a little bit more.

Time will tell there. We had a manufacturing number out on ISM that was slightly better than expected at 48.7, although anything less than 50, of course, is contractionary. And then on the PMIs on manufacturing, you had an unchanged for the month, but it was 50.2, so slightly expansionary. So on the economic side today, I chalk it up to mostly good. Jobless numbers have caught my attention here a little bit, but we'll have to give that more time.

There was a question in there about where does the money go when there's a lot of selling happening? And it's a simple question, but it's a good one. Does it go into cash? Does it go into treasuries? Is it people shorting the market? What's happening is markets sell off. Now we've had eight days in a row of up markets

and markets have recovered from the lows in April. But in the beginning of this particular downturn, what I wrote is that every different downturn is different. I'm talking about a meaningful downturn here. So not like a 5% correction, that's par for the course. When you get something closer to the 20 level where there's actual pain happening in markets, when you actually have credit spreads that start to widen these types of risk

off type of environments like this one was in April, but first it's sell things that are higher, things that are up, things that have made you money. So that's why you saw a lot of technology stuff get sold in the beginning of this thing. And that's more of a repositioning. It's people taking chips off of the table, taking risk off of the table. It's somewhat orderly. As selling continues, it becomes sell what you want and to sell what you can,

because it turns into a deleveraging atmosphere. And what happens, there's leverage being taken out of the system. And in that case, you start seeing things like treasury is being sold. You start seeing things like staple stocks and things that have actually done well and held up well that are very liquid and easy to sell, that starts to come off. And we did see that this time around. You saw it in the great financial crisis. You saw it during COVID. When you get dislocations in like the municipal bond market or the Treasury market or really safe sectors,

it's because it's just debt being paid down at all costs and it's leverage being taken out of the system. You actually saw that this time around. And believe it or not, it's a good sign because the faster that happens, the quicker we can move forward and move on. That's a throw up moment. In other words, in markets before we can feel better and get better from there. But you got down to about a 37% net leverage ratio in the system this time. That's right near historic lows, indicative of bottoms.

We've built back from that a little bit because markets have been trading higher here the last two weeks. My answer, it's usually orderly and sell what you want in the beginning. It turns into disorderly and sell whatever you can. And that's a deleveraging sign. So there you have it for today. A little bit of around the horn on a generally positive day. Again, tomorrow it'll be all about non-farm payrolls.

The expectation is unemployment should stick around the 4.2 level. I wish I could tell you exactly where it's going to come in, but that'd just be guessing. So I won't do that. We'll be back with you tomorrow. We'll have the long-form dividend cafe in your inbox. In the meantime, reach out with more questions that are always great, 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 to you will be profitable. 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 Bonsall 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 reference teary end. 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.