The Dividend Cafe - Wednesday - April 16, 2025

Episode Date: April 16, 2025

Market Reactions to Trade Tariffs and Economic Indicators In this episode of Dividend Cafe, Brian Szytel discusses the market downturn on April 16, highlighting the NASDAQ's 1.8% drop and the DOW's 700-point decline. Key factors include the impact of tariffs on the largest AI chipmaker, leading to broad market concerns about earnings season, forward guidance, and PE ratios. Despite the selloff, energy stocks closed up by 0.8%, with WTI rising 2%. Retail sales unexpectedly rose by 1.4%, while industrial production saw a slight decline. Federal Reserve Chairman Powell's comments on tariffs further fueled market uncertainty. The episode concludes with a discussion on tariffs' economic effects, including potential shifts in manufacturing jobs and the broader implications on the U.S. economy. Brian also addresses audience questions about inflation and the potential return of manufacturing jobs to the U.S., emphasizes the interconnected nature of global trade, and previews upcoming episodes. 00:00 Market Overview and Opening Remarks 00:31 Impact of Trade and Tariffs 01:30 Sector Performance and Economic Indicators 02:33 Federal Reserve Comments and Market Reactions 03:26 Q&A: Tariffs and Economic Implications 05:28 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. Brian Sietel Welcome to Dividend Cafe. This is Brian Sietel here on April the 16th, which is Wednesday, on a down day in markets. The NASDAQ actually opened up down about 1.8%. We ended up building on losses right around midday and value stocks were up earlier in the day. It turned into broad selling and we ended up lower, although off the lows for the day, the Dow ended up closing down still 700 points. The S&P was down two and a quarter percent and then the tech heavy NASDAQ was down 3% and all of it was regarding trade,

particularly around the largest artificial intelligence chip maker company in the world, writing down something over $5 billion and commenting on how tariffs and particularly China and their company will be affected by this. And the takeaway from that is, you know, what markets will perceive it going into other sectors because there's going to be another earnings season coming around the corner. There will be forward guidance that changes. There will be earnings per share estimates that get lowered. And when you think about a PE ratio or where market valuations lie,

all of those things really matter. We started this year with an estimate on the S&P close to about $275 a share in S&P earnings. Those have all come down to $250. And so now markets are digesting, is that the right figure or not? And what other guidance and what other write downs and what other effects will flow through to other businesses outside of just technology and chips. Energy actually closed up. It was the only positive sector on the day. Energy was up almost 1%, not quite 0.8% with WTI up 2%. The only bright spot was energy. Economic calendar, we had retail sales that actually beat expectations meaningfully. Counterintuitively, the tariff start of this, which is frankly only a few weeks old, has caused a lot of

advanced purchases. Companies wanting to import things and to purchase things ahead of potential price increases and tax increases, which makes intuitive sense I guess now. But retail sales were up 1.4%. We were expecting 1.2. That's technically the strongest number that we've seen in two years. Industrial production was lower, missed slightly. We got a negative 0.3.

We were expecting a negative 0.2 on the industrial side of production, and then capacity utilization, another sign for economic strength, was right inside, in line with expectations. So mixed bag on the economic front, but some of the sell-off that happened really later in the day was around Powell's comment at an economic forum in Chicago where he didn't do much to really call markets.

In fact, it was the opposite of that, which is he was noting the unknown effects on prices with regards to tariffs. And so they're in a tight spot as far as their mandates go and what they can do. And I suppose on paper in a presser and in an economic conference, that is what you have to say because it's the truth. But just understand the reality of that is I have less conviction on that actually being followed through. In other words, at some point they're going to ease to ultimately help the

wealth effect and the tightening of financial conditions, which has occurred and again today was that was the story. Stay tuned there. I wouldn't take what the Fed say today at face value. I would take it with a grain of salt. In other words, a couple of Q&A questions on the day that I thought were relevant. The question was around tariffs and are the inflationary because of course prices can be increased with the higher tax rate on importation or are they deflationary? The answer is inflation is an economic phenomenon.

This is about too much money chasing the same amount or less amount of goods and services in the economy. Tariffs are neither inflationary or deflationary. You could say short term there could be a price increase if importers are going to pass it to the cost to consumers. Of course they will do that. The question is how much, but ultimately taxes itself is disinflationary from the standpoint of lowering productivity.

It's taking less out of the private market and you get less goods and services. And so if you hold the money supply somewhat similar and you take less goods and services out, you've got more money chasing less goods and services. And of course that's where inflation comes from. Also, another question in there about will the effect be manufacturing jobs back into the United States? And what we can say to that is in 2018, granted the tariff talk and effect back then was much less than what has been put on the table now, but there was a move

of manufacturing out of China and it did go to countries like Mexico and for example, South Korea. So more of a nearshoring and there was a supply chain issue ultimately around COVID that is a result of some of that as well. Will it bring jobs back to manufacturing in the U S? I suppose I'm skeptical of that, but either way, you just have to understand that there's a give and take to that. You also have importers that are going to make less money. And so whether there's more jobs in manufacturing and then less jobs on, on imports, there's an offset to that.

Just remember too, the US is the largest exporter of services in the world. We also have never exported more goods at any time in history as well. So all of these things are tethered together. It's not in the world. We also have never exported more goods at any time in history as well. So all of these things are tethered together. It's not in a vacuum. You can't just affect one without the other, in other words. So I hope that is helpful to you today. Tomorrow is Thursday and David will be with you on the podcast and Dividend Cafe, and then even though markets are closed for Good Friday, we will also have

a long form Dividend Cafe in your inbox, simply just given the amount of questions and given the amount of market volatility so forth. So with that, I hope you have a good evening. Reach out with your questions as always, and we look forward to speaking to you soon. Thank you very much. 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 your end 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 referenced herein. 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.