The Dividend Cafe - Tuesday - April 22, 2025

Episode Date: April 22, 2025

Market Bounce Back: Analyzing Key Market Movements and Tariff Impacts In this episode of Dividend Cafe, Brian Szytel reports from West Palm Beach, FL, providing an update on the stock market's recent performance. Following several negative sessions, the S&P 500 and Nasdaq have broken their losing streaks with significant gains, driven by a lack of new negative news. The episode delves into the impacts of tariffs on the economy, noting that they can affect short-term prices but are neither inherently inflationary nor deflationary. Additionally, Brian touches on the potential geopolitical impact of a China-Taiwan conflict and provides a brief overview of the day's economic data and market analyst predictions for corporate earnings. 00:00 Introduction and Market Overview 00:37 Trade Developments and Market Reactions 01:14 Currency and Bond Market Insights 03:02 Earnings Season and Corporate Guidance 04:11 Impact of Tariffs on Manufacturing 05:15 Inflation and Tariffs Discussion 06:00 China-Taiwan Relations and Economic Calendar 07:00 Conclusion and Upcoming Data 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 Tuesday, April the 22nd. Brian Seitel with you here from our West Palm Beach office here in Florida. On a nice day of green, at least on my fact set screen here, following yesterday's sell-off, we've had three of the past four sessions on the S&P 500 be negative. Today broke that trend. The NASDAQ has seen four sessions in a row negative, and so it broke that

even longer trend of red here. So we got some green on the screen. Dow was up 1,016 points, of red here. So we got some green on the screen. Dow was up a thousand sixteen points and S&P was up two and a half percent. NASDAQ was up two point seven percent. And the big news on the day that drove this pretty dramatic move up, call it two and a half plus on the markets was, wait for it, not much of really anything, frankly. Not a lot of negative news, I suppose, is the new positive news on trade. There wasn't a whole lot going on there as far as new developments. There was some positive comments, at least on Politico, about a possible deal with Japan and India. But then also over the weekend, China said that countries that do trade deals with the US that negatively impact China will be retaliated upon itself. I think some of the stuff is getting a little silly.

But that's all fine. The yields on the day, so one of the things the market has been paying attention to is the strength in the dollar or frankly the lack thereof. Dollar has been trading a little lower here recently. Of course, media and economic writers and any sort of pundit likes to sensationalize things but the dollar is down marginally over the past year, but is roughly the same here over the past five years. So not a lot going on there.

Same thing on the 10-year. If you look at treasuries, not a lot going on over any reasonable period of time, even over the past 12 months. But nonetheless, the dollar was up on the day 0.7%, and both 10s were down about one basis points, and 30s were down in yield about four basis points, which means the bond prices were higher.

A little normalcy there in currency and in bond land. Less talk I guess on trade there and then you had a nice up day and it's funny because if you look out say over a 10 day chart and there's some weekends involved in there, but 10 trading days takes us back to April the 8th. So if you remember that day, it was a real big down day in markets, call it 5%. And then the following day was the huge up day, one of the sharpest bear market rallies that I've seen since the financial crisis and also since COVID, those two periods. But the market that day was up 7, 8%.

So that was the April 8th and April 9th. But then if you just stretch it out till today, the S&P from that was the April 8th and April 9th. But then if you just stretch it out till today, the S&P from the date of April 8th to today is exactly the same. So I know there's volatility and it's real and markets are going up and down. They were down late yesterday and they're up today, about the same amount. But we're essentially trading sideways here for the past 10 trading sessions for what that's worth. And again, markets are trying to digest a lot of things that are just hard for it to understand because it's hard for anybody to understand and how things will actually play out here. One of the things that has been positive though,

and I think we'll get more of this, as you get into earnings season and it's heating up right now, you have companies that are coming out with their guidance for next quarter and they're calculating and all of their economic models. And there's a lot of smart people in these corporate boardrooms working on how tariffs may or may not affect their businesses from an import and export perspective. And so they're updating their guidance levels. And so far, most of them have either affirmed guidance levels, have been marginally higher, marginally lower, but there hasn't been a dramatic shift lower on expectations

slightly, but not dramatic. And I think that's positive for markets. I think you'll see more of that. And it just goes to show the ingenuity that corporate America has and the way that these businesses are run. You'll see margins come down and I may write about that a little tomorrow. Fine. You'll see earnings per share come down slightly, yes, but those two things aren't end-of-the-world

type of scenarios and I think markets will feel relieved I suppose that it's not worse than otherwise feared. So there you have it on the earnings front. So as far as a couple of comments we had in there today about tariffs and how they affect things that we import, just remember about 40% of the things that we import from other countries across the world, 37% of which are from China, are intermediary parts. They're essentially things that we're importing to manufacture other finished goods in the United States. So if you're taxing something that you're importing in order to manufacture it in Indiana or something and sell it to the rest of the

world, it's a closed loop. You're having a higher input cost on your widget to build the finished good and then having to pass it through on the other side and then export it. So there isn't a one winner and one loser thing here. It's basically an equal lose-lose situation. And then what we've said before is if tariffs helped manufacturing, it would still hurt importers and it would still hurt consumers with higher prices. Well, in this case, if you think about that 40% being parts essentially coming into manufacturing, it doesn't even help manufacturing is my point. I think that's a pretty good point on how tariffs can work and not work in the economy.

Two questions out today. We had asked DBG about whether tariffs are inflationary or deflationary. At the end of the day, they're neither. Inflation is a broad metric of prices moving up because there's more dollars chasing less goods and services. So that's how inflation works. Tariffs aren't that. They can affect short-term prices on one good, but that just means less money in the rest

of the economy to spend on other goods. And so it's neither inflationary nor deflationary. But the reason why it can be inflationary is because it ruins or hurts productivity overall and that means that there's less in goods and services. So if you held the currency supply at a similar level and you took goods and services offline, then that would mean more money chasing fewer goods and services, so higher prices. There you go on the inflation talk. The other question was about the invasion or potential invasion

of from China into Taiwan. Look, nobody knows if that will ever happen or when, but aside from that, as far as whether it is probable or not, just remember it's just, there's just too many things that make it not in the best interest of China itself to do that. They've spent too far and too long trying to get people to trust their markets, both the capital markets and the export led economy that they're trying to build and turn into a consumption based economy for them to just unravel it on the Taiwan deal. Anything's possible.

So maybe they'll do something not in their best interest, but that's the way that we're looking at it. The economic calendar on the day was actually really quiet, which is funny on this update, but the Richmond Fed Manufacturing Index did cool, and it was on some weaker orders and shipments in that survey. There was a couple of Fed speakers that spoke today, but honestly didn't say a lot, so I'll save you the time. We'll get into tomorrow and into the remainder of the week where we do have some more data

to chew through. But for that, I shall let you go for this evening. Thank week where we do have some more data to chew through. But for that, I shall let you go for this evening. Thank you for listening and I'll talk to you soon. 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.

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