The Dividend Cafe - Thursday - May 15, 2025

Episode Date: May 15, 2025

Market Update and Economic Insights - May 15th In this episode of Dividend Cafe, Brian Szytel from West Palm Beach, Florida, covers the latest market trends and economic data for May 15th. He highlights the Dow's rise of 271 points, a slight decline in Nasdaq, and a modest gain in the S&P. The conversation delves into the unexpected drop in the Producer Price Index, implications on inflation and interest rates, and their impact on different economic sectors. Additionally, Brian discusses recent retail sales, jobless claims, and manufacturing indices, providing a broad look at current economic health. The episode also addresses trade negotiations, geopolitical developments, and their potential effects on the global economy. Brian ends with a note on anticipating future economic conditions and wishes the audience a pleasant weekend. 00:00 Introduction and Market Overview 00:31 Inflation and Economic Data Insights 03:11 Impact of Tariffs and Trade Negotiations 03:48 Viewer Question on Trade Negotiations 05:13 Conclusion and Upcoming Updates 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 15th. Brian Seitel with you from our West Palm Beach, Florida office here. And a modestly positive day overall in markets. The Dow ended up closing up about 271 points. NASDAQ was actually lower on the day by about 0.2%.

S&P was positive by about four-tenths of a percent. So you got a rotation from tech selling off a little bit and being the weaker player to more of the blue chips, some of the value names that are particularly inside of the Dow doing a little bit better. And there's a reason for that. There was a lot of economic data out today. Probably the most, honestly, I can remember quite a while. The biggest headline news was on the inflation front.

We had the producer price index. This is wholesale price inflation gauge. This is inflation measuring inputs of goods and services at the producer level before it gets passed onto the consumers at the consumer level. So it's a forward looking indicator indicator in that usually prices going higher on the front end will ultimately result in them going higher on the consumer side too, which flows into CPI. But the number today was quite negative actually. We got a negative 0.5% for the month of April.

Consensus was for a rise of 0.2% that's on headline. When you strip out food and energy on core, you were down four-tenths of a percent. So also quite a bit lower than the three-tenths expected on the upside. So what does that all mean? Look, we were expecting prices to go higher because tax, because increases in tariffs. So this is counterintuitive and it's opposite of what most people would have thought. But nonetheless, you had lower inflation expectations get priced in, which means lower interest rates get priced in, which means lower currency prices, at least on the dollar, get priced in.

And then some of those tech names that had got ahead of itself here just gave a little bit back from some of this move. The other news that we had on the economic side was fairly encouraging. It wasn't perfect because these data points are now getting into April and into May. You're dealing with a lot of the effects from liberation day on April 2nd, but you had retail sales that were in line with expectations. They were up a 10th for the month. That is not indicative of recession because retail sales is still holding in there.

You had jobless claims come in a little better than expected at 229. Again, not necessarily recession when you have employment that remains well anchored and balanced. And then you had the Philly fed manufacturing index that while it was still negative, it was down by four and we were expecting a slightly more negative number, I guess, in the month. Just remember the prior month it was down 26. So those numbers are arbitrary, but just take them in absolute terms.

It's a big snapback in the month in manufacturing in the Philadelphia areas in that region, at least. So that's a good thing on manufacturing. The empire state index number, which is a different region was about in line with expectations. And then finally, the industrial production number for the month of April was about in line with the expectations. We got a 10th of a percent gain.

So bake all that together. You got lower inflation. You got growth that of a percent gain. So bake all that together. You got lower inflation. You got growth that held in just fine. And that is more support for the market to go a little bit higher here. And that's why we're about almost 18 and a half percent or so off of the lows that we put in early April. On April 8th it was. There's an around the horn on a pretty big data day in the economic calendar. The effect of tariffs and also what

ultimately resulted in a freezing or a pausing of trade of capital expenditure in this country and then of global trade. It reminds me a little bit of deer in headlights at first, where there's a shock and awe of something big changing, everything freezes for a moment, and then you get prices that start to reset because there's a consumption tax that has been added. That rate is yet to be seen. And then you get some that start to reset because there's a consumption tax that has been added. That rate is yet to be seen. And then you get some sort of a semblance of growth after that. And so the question in the summer months will be, did that period of time, was it enough

to cause a contraction? That's not the data that we're seeing right now, but that remains to be the case in where we are. And it is a segue into a question that I had got actually a little while ago that I'm just now putting in here, but I think it's relevant. The question was regarding a statement that I had made about a sort of 30 to 60 day window of time in trade negotiations before they actually mess up the economy. Okay. That was what I was getting at. And this person was asking, was there some doom and gloom I was predicting? No doom and gloom. What I was saying is that if they can get it less worse than it was, which is the

U S at 145% tariffs in China at 125% tariffs, that's bad. That stops global growth and trade activity. If they can get it somewhere lower than that into a reasonable dialogue, then I think we can move forward. But if they take six months for that, then there's inevitably going to be a recession. Sure enough, it's been 30 days now and there has been a lot of progress made. And not just on trade, but there's been progress on the geopolitical front with Russia, Ukraine, and some other areas around the world.

There's been progress with earnings that have come out that have been better than expected and the world's still turning here and we have an open dialogue ongoing. There's been some trade deals. The UK is one that's notable. There's also been others with South Korea and talks with Japan and with India as well. So things are moving forward and markets have recovered because of that reason.

But to answer this question, I wasn't necessarily predicting some dire outcome. I was just saying that if we get a purgatory for too long, it's gonna be a self-fulfilling prophecy and that's not what we've seen so far. So I hope that's helpful for you. I will let you go as we get into your Thursday evening. If I don't speak to you, I wish you a lovely weekend.

We'll have the long form dividend cafe in your inbox as always on Friday and we'll be back with you next week. Have a good night, have a good weekend and I'll talk to you soon. 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.

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