The Dividend Cafe - Tuesday - July 15, 2025

Episode Date: July 15, 2025

Market Movements Update & Q2 Earnings Overview - July 15th Edition In this episode of Dividend Cafe, Brian Szytel discusses the market performance on Tuesday, July 15th, including a mixed day with bonds selling off and the DOW, S&P, and Nasdaq showing varied results. He delves into the impact of the latest CPI inflation data, noting a cooler-than-expected core inflation for the fourth consecutive month. Brian also touches on the starting of Q2 earnings season, emphasizing the reports from major banks and their mixed impact on the market. Additionally, he answers viewer questions about the 'One Big Beautiful Bill' and the dollar vs. Euro exchange rate, elaborating on its steady range since 2021. 00:00 Introduction and Market Overview 00:51 Earnings Season Kicks Off 01:58 Inflation and CPI Insights 02:58 Federal Reserve and Interest Rates 04:03 Q&A: OBBB and Currency Movements 05:09 Conclusion and Sign-Off 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 back to Dividend Cafe. This is Tuesday, July the 15th. Brian Seitel with you here today on a bit of a down day in markets, although somewhat mixed. We had bonds sell off in price, so we had yields up. Tenure was up five basis points.

And some of this movement was on an inflation read with CPI today that I'll get into in just a second. But on the broad indices, the Dow was down 436 points, which these days equates for a little less than 1%. S&P was down four.4%. NASDAQ was positive by about 18 basis points on the day. So a little mixed, mostly down, and it was a good day for technology names and a bad day for some value and more defensive type names, particularly some of the financials, which kicked off earnings season. And that was the other big piece of news. So we're starting to get into now Q2 earnings season.

We've got all the big banks or not all of them, but some of the big names that you'll know, some that we own as well, reported today. Largely better than expected as far as top line numbers and bottom line, but inside of those numbers, there was some sort of mediocre results and the market had just been pricing in a lot of perfection.

The sector itself, so if you looked at like the XLF, which is the select sector spider for the financial sector, it's up about 14% just this quarter. Most of those names are up about 20%. So a lot of good stuff was already priced in. And so some of the names were up nicely and then some of them are quite down. And the mix of that, depending on which one was located within the Dow, drove that indices down a little bit more, but largely the results were about in line where you got it net interest income fairly positive.

You've got trading that was fairly positive. Again, if you would think about the volatility that we had in early April, of course, that's good for a lot of these big banks. And then you had a pickup in some of the M&A and IPO activity. That's also good for especially some of the investment banking activity in there. We had CPI out and on headline, we got a third, three tenths of a percent. So 0.3% for the month of June. That was exactly in line with expectations.

But when you move out food and energy, the more volatile stuff, and you strip those out, you get a core number that was only up 0.2% for the month, and that was better than the 0.3% expected. So a little cooler than expected. That's actually the fourth month in a row where you got a beat on core inside of the inflation number, which is a good thing. Obviously the Fed pays close attention to this stuff. And inside of those numbers, the shelter number had moved down quite a bit.

We've been talking about it for 12, 14 months now that it would move lower. And of course now it is, it was at a 0.2% reading for the month, which is similar to what the Zillow real-time rent index is showing, call it two and a half percent rent increases, which again is right about where inflation is. That brings us on year over year numbers of 2.7% on headline and 2.9% on core. So pretty darn close to where the Fed is aiming and Fed futures today were marginally unchanged. So there's still about a 60% chance for a September rate cut and then another 60% chance for a December rate cut. Call it 50 bips priced in on a lower Fed funds rate before the end of the year.

So that'll bring us right around 4% or so in the range by the time we end the year. And if our target is at least it's our target to get to a Fed funds terminal rate of something close to 1% plus inflation. That's a 1% real rate. And if you think inflation is going to be somewhere near two and a half, then of course that's Fed funds at three and a half. And if we're at 50 basis points off in 2025, that leaves us with another 50 bips off in 2026 to get us around that number.

That would be the porges just right. And that would assume tariffs or geopolitical events or other economic factors don't play a part. I'd be surprised if that were the case. If everything worked in a vacuum, that's about where I'd see it. But there you have it on the day. On the questions for the day, there was a question about the OBBB, which is the one big, beautiful bill.

And aren't there some good stuff in there like bonus depreciation and some other business expensing that is good for the economy that might offset tariffs the answer is sure there's some good things and there's some bad things both of those things offset and there you have it on the bill there was a second question in there on the dollar versus the euro and I actually wrote about this a few weeks ago maybe a month ago the dollar is basically in a range. It's where it's been since 2021. So four years or so it's gone up, it's gone down, but it's essentially sideways.

So yes, it's come down recently, but if you look at any sort of real-time chart over the course of say five years, it's just been trading around the same level. No, I don't think that's a big mover of things. And also I'm a little agnostic, I suppose on exactly where the dollar trades to the euro But fundamentally if you look at the two economies both on diversification and on just demographics The US is the cleaner shirt and the dirty pile of laundry between the two indebted areas of the world So there you have it on the day. I'm gonna let you go for this evening There's a BBC hit that I was on, or a yesterday,

and then a BNN Bloomberg hit that I was on today. Hopefully they'll show up inside a dividend cafe for you to check out. And I can get into some more of those earnings for you live. With that, reach out with your questions and have a good evening. Thank you very much. The Bonson Group is a group of investment professionals

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