The Dividend Cafe - Wednesday - April 23, 2025

Episode Date: April 23, 2025

Market Trends and Economic Indicators - April 23rd In today's episode of Dividend Cafe, Brian Szytel provides a market update from the West Palm Beach office on April 23rd, highlighting two consecutive positive days in the markets. Key drivers include easing rhetoric on tariffs with China and the retraction of statements about ousting Fed Chair Jerome Powell. The episode discusses the impact of these events on major indices like the Dow, S&P, and Nasdaq, as well as the performance of the dollar and interest rates. Additionally, Seitel emphasizes the importance of sticking to fundamentals amid market volatility, especially as earnings season progresses with significant corporations reporting positive results despite tariff pressures. He also touches on the major upcoming focus on tax legislation, an unexpectedly strong new home sales report, and a bland Beige Book from the Fed. The episode concludes with responses to audience questions about the implications of firing the Fed Chair and the potential impact of tariffs on the budget deficit. 00:00 Introduction and Market Overview 00:31 Impact of Presidential Actions on Markets 01:48 Earnings Season Insights 02:37 Sector-Specific Performance 04:02 Economic Indicators and Data 04:51 Ask TBG: Market Reactions and Tariffs 06:37 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 Wednesday, April the 23rd, and Brian Seitel with you here at our West Palm Beach, Florida office on another day in markets that was positive. So this is two days in a row. Beach Florida office on another day in markets that was positive. So this is two days in a row and yesterday markets were meaningfully two and a half percent or so across the board today. Follow through Dow was up about a percent 419 points.

S&P was up 1.7% and NASDAQ was up 2.5%. Quite a few days here and I wish there were more meaningful headlines around it, but realistically what we're talking about is a step down in some rhetoric around the president wanting to oust the Fed chair, Jerome Powell. And he walked that back last night and said the media had taken it to a level he didn't mean. And then there was some softer tone around tariff amounts with China.

And just those two things sent stocks higher two days in a row. And the dollar higher today, dollar was up about 0.9%. That's the best day of the year. And the best two days in a row of the year so far on the dollars were essentially now sideways from a trading perspective versus other major currencies. You also saw interest rates calm down here a little bit. 10 year was only down a basis point on the day, but the long end of the curve is down a little bit more,

and you've seen that for a couple days in a row. And so again, some normalcy trading around fixed income and around currencies, and then risk assets have done a little bit better here. The comments I have in there are about more fundamentals here because the headlines, and I wrote about this a couple of weeks ago, but because it's so volatile around what one person can say

or change around taxation or tariffs or whatnot it's just impossible to try to second-guess the day-to-day movement of the markets and so it's important now more than ever to stick to fundamentals around asset allocation, around quality of what you own, things like this and as we get into earnings season which is now fully underway a lot of the big financials have already reported and they were all very good. And the interesting thing is that in tariffs and what has now come through many of the other sectors, there's two things.

One, we're looking at guidance. So how these companies are going to talk about their future expectations for earnings and how their businesses are going to change, that's going to be hyper important. So far, 68% of companies reporting have actually still beaten earnings estimates. So I'd say that's good. That's actually a lower percentage

than we've seen in the last couple of years, but it's certainly not anything falling off a cliff or anything like that. It's been actually pretty positive to see. There's definitely been some major companies saying that they're bringing manufacturing back to the United States and in different positive things as well. So it's actually not all negative here in earnings land, but financials have been

the one outlier just because they're a little more insulated from tariffs. And then if you think about their business, because the yield curve has steepened, meaning long-term rates have gotten higher and short-term rates have gotten lower. So that's a steepening yield curve. It actually boosts net interest income for those banks, which is a positive. And then you have huge trading desks that get more revenue around volatility. And so volatility has picked up. And actually that those two things occurring really didn't happen until

April, which is in Q2. And so the reporting in Q1 still being positive. Just keep in mind on the financials, you may actually get follow through and have another quarter of positive takeaways in that front. But that sector aside, almost all others, meaning nine out of 11 sectors have reported lower guidance and it's all related to the cost and exposure to tariffs. So all I can say around all this is that these things aren't likely to end anytime soon. It's a volatility is here to stay. And what hasn't even been really spoken about all that much yet is a very important tax bill that needs to get through Congress to extend the tax cuts that were put in place in the first Trump administration.

extend the tax cuts that were put in place in the first Trump administration and if they don't then they will expire next year and that's a very large tax increase in what is otherwise an uncertain environment. So I think that's going to be front and center here in the next month or so. The economic calendar we saw new home sales meaningfully better than expected. We got 724,000 on new homes. We were expecting 685. I wrote that's positive both economically, but also just it fuels supply into an undersupplied market and those things are good. The beige book out from the Fed today was a bit of a nothing burger really. They didn't give us any new information, just mentioned uncertainty around trade.

Most of the other data points were the same as the previous report. On the composite number, we got a 51.2 So a little bit below consensus, which was 51.5 But keep in mind that anything over 50 is expansionary and then also while services were a little cooler in that number Manufacturing actually did see an uptick and it was back in expansion territory. So I'll take that as a positive on PMIs There were two ask TBG questions in there. The first one was about why the market would care about the president wanting to fire Powell so much and didn't Powell make mistakes on rate cuts when inflation was higher anyways. The answer is the market cares because it's

completely illegal and also would go against what is written in the Constitution. There is a clause in there about the ability for the executive branch to remove the person in control of the Federal Reserve for cause. And I suppose there's a small amount of grayness on what that would be, but it certainly wouldn't be about doing a good job or doing things that were in the best interest of monetary policy, which is the only thing that could be argued with how Pallas acted. Whether someone agrees with it or not, or whether the president thinks it's good or bad is different. It certainly wasn't anything outside of the mandate of full employment and prices

as far as motivation. But the other part of it is, look, the deal with lowering interest rates during, while inflation was higher, was simply a matter of trying to be ahead of the curve. If you can't wait until inflation is 2% before you bring a very restrictive policy back to neutral, you have to start doing it beforehand. So I really don't think that criticism would be warranted. There was also a comment in there about tariffs. Would they reduce the budget deficit? And the answer is, essentially, that'd be wishful thinking. There is going to be a tax bill that tries to go through Congress and

hopefully what does go through to extend the tax cuts that are already in place before they reset. But the problem with the tariff revenue offsetting any sort of income tax cut from there would be that it isn't to be considered simply because it wasn't something that was legislated and it's not something that went through Congress. And so it wasn't something that was legislated and it's not something that went through Congress. And so it doesn't technically count in that reconciliation and that budget process. Tomorrow we'll have more data for you out and it'll be Thursday. I'll be back with you and I encourage you to reach out with your questions as always

and have a good evening. Thank you for listening. 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 herein will be profitable. Past performance is not indicative of

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