The Dividend Cafe - Tuesday - April 29, 2025

Episode Date: April 29, 2025

Market Dynamics Update: Consumer Sentiment and Tariff Changes In this episode of Dividend Cafe, Brian Szytel from The Bahnsen Group's Newport Beach headquarters reviews the market's performance on April 29th. Key highlights include a rebound in markets following an auto tariff easement announcement from the White House, a six-day rise in the S&P 500, and a detailed analysis of current treasury yields and interest rate expectations. Brian also discusses consumer sentiment, which has hit its lowest since early 2020, analyzing its implications for market behavior. Additional updates cover job openings, specifically the Jolts number, the Case-Shiller housing index, and expectations for upcoming economic data releases, including core PCE data, private payroll numbers, and Q1 GDP preliminaries. Lastly, there's a focus on earnings reports, emphasizing the forward guidance amidst trade uncertainties. 00:00 Introduction and Market Overview 00:47 Market Sentiment and Economic Indicators 01:53 Auto Tariff Updates and Economic Calendar 02:35 Consumer Confidence and Job Openings 04:22 Housing Market and Upcoming Data 05:02 Earnings Season Insights 06:03 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 Tuesday, April the 29th. Brian Sightel is with you here from our Newport Beach, California headquarters at the Bonson Group. On a day that started off even at best, we were actually lower at the start of the morning and then gained steam right around 10 o'clock or so

Pacific, our time here in California, when some auto tariff easement was announced from the White House. So that brought markets back up. Markets have been up now, at least on the S&P for six days in a row. So quite, quite an improvement on some oversold conditions. And I've written about that quite a bit when sentiment is so negative and positioning is so tilted underweight from an overweight that things can likely often sometimes get a little bit better than otherwise feared but all that

to say markets are cooperating here last week or really two weeks Dow was up 300 points S&P was up about half of a percent as was the Nasdaq. The Treasuries were former across the board in price meaning rates dropped a little bit. Ten year was down three basis points to 417. So a little bit of curve flattening here albeit it's still a very steep yield curve. The difference between two-year Treasuries and 30 is about 1%. So it's a decent amount of steepness, and that's usually technically a good sign for markets.

It's just that short end of the curve is what is still inverted, and so which means that the Fed is still overly restrictive, and that's why there's about a 60% chance that they'll start cutting rates in June. And what is priced in is somewhere between three and four rate cuts before the end of the year. So we'll call that about 1%.

So for at about four and a quarter to four and a half, that brings us to about three and a quarter to three and a half. That's likely near terminal, barring any economic data not changing much. That's about 1% above inflation at those numbers. There was also in line with the auto tariff easement, what they're basically saying is if there's other tariffs already in there, they're trying to avoid a stacking of different charges. So if there's a tariff on steel and aluminum, which is the main input cost and product for autos, there's no sense in tariffing again on the auto itself. And then they also wanted

to offset at least by 15% if the vehicle was made in the United States, if it was manufactured in the U.S S so they're attempting to bring those jobs back home, even though a lot of the build of those autos just happens in different countries, meaning that different parts and pieces maybe finally assembled one place, but part of it put together in Mexico and other parts of the world. There was a couple of things out in the economic calendar today. Consumer confidence was lower than expected. We got an 86 number out of 88, which is what consensus was.

Those numbers are arbitrary, so don't read into those. But the point was consumers are negative, so we get that. This is actually the lowest sentiment that we've seen since right after the pandemic, about summertime or early summer in 2020. The one thing I'll say is that it's actually a contrarian indicator. Okay. So, so I understand that people feeling lousy about the economy are likely to consume less on paper, but in reality, I don't find that to be true. I think people

are going to consume if they have jobs and if they have money to consume period, whether they feel good or bad about something that already just happened to them is one thing or another, but I don't find the prediction ability of consumer sentiment to be wildly forward looking. It's more of a lagging indicator. Speaking of those future expectations inside of that number of consumer confidence, there's a future expectations number that was actually the lowest since 2011, which was a pretty dire period of time after the financial crisis.

So again, I'll take the contrarian on this stuff. I think these numbers being low, I think that the sentiment being low is actually positive for markets, meaning that it can only get incrementally a little bit better. The job openings today were just under expectations. We got 7.2 million versus 7.5 roughly.

This is that Joltz number that we talk about. It's a weaker than expected. The higher in the fire numbers inside of these were about in line. They've been unchanged now for about six months. So I'll call it in line. That number was in line to me. I didn't get a whole lot out of that. You could look at some of the leisure and hospitality parts of it and say that there's some weakness showing up there and attribute it to tourism perhaps. Other than that, I'd call it pretty in line. On the housing front, you had the K. Schiller 20 city home index, which was also in line for the month.

We got a 0.4% increase and that brings us to about 4.5% year over year. So if inflation is somewhere close to that or just under, then there you go. That's what real estate often does. It tracks a little bit above inflation. Over time, at least. You'll have more data towards the end of this week. I'll be back with you tomorrow from the East Coast, but I'll be back with you tomorrow. We'll get core PCE data.

We'll have some private payroll numbers tomorrow's Wednesday. And then we'll also have a preliminary read on Q1 GDP. So there's a good amount of stuff to go through tomorrow. In the meantime, we are about halfway through earnings, a little less, about 40% through earnings, although by the end of the week we'll be almost two-thirds. So we're picking up some steam here in earnings. The expectations, as I've spoken about, have come down. We started the year something close to 275 in S&P earnings. We're now at 264, which is still 11% above where we finished last year. That's not all that bad.

And really, what has come through to markets has been more the forward guidance has actually held in better than expected, even with all of the uncertainty around trade. Either way, it really just depends on where that E comes in line, where earnings ultimately lie. So you can try to put a multiple on the market to see if it's expensive or cheap. If a recession happens, all bets are off. That there will be earnings declines

and you'll get likely a drop in earnings, in which case you'll have to get multiples to contract and you'll have to get markets to move lower. We aren't there yet, but that's on the table for an outcome. So all that to say, I will leave it there for this evening and be back with you tomorrow. I'd encourage you to reach out with questions. We get a lot of them lately and they're always really good, so please do. And with that, I'll let you go and have a good evening.

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