The Dividend Cafe - Wednesday - February 26, 2025

Episode Date: February 26, 2025

Market Reactions and Legislative Updates - February 26th In the February 26th edition of Dividend Cafe, Brian Szytel discusses the mixed trading day, noting the Dow's decline, the S&P's flat performance, and the NASDAQ's modest increase. He explains how initial market optimism waned following the House passing a budget reconciliation resolution, which includes significant spending cuts and debt limit increases. Szytel also addresses a viewer's question about the Mar-a-Lago accord and its impact on investors, clarifying it as a negotiation tool for currency rates. Lastly, he touches on the disappointing new home sales data for January, attributing the decline to high interest rates. 00:00 Introduction and Market Overview 00:56 House Resolution and Market Reactions 01:30 Details of the Resolution 02:02 Ask TPG: Mar-a-Lago Accord 03:11 Economic Calendar and Housing Market 03:58 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 to Dividend Cafe. This is Wednesday, February the 26th. Brian Seitel is with you here. On a mixed trading day, actually somewhat of the opposite of the last two days, where the Dow was down 188 points. S and P was flat and NASDAQ was up a quarter of a percent.

So a bit of the reverse of what has been a rotation from growth and over valuation to more value oriented stocks came undone a little bit today, but really it was just a flat day overall. We were up earlier in the trading session and a lot of it was to do with the GOP passing a resolution in a budget Reconciliation last night that had markets up beat in the morning and then that sort of just fizzled for the rest of the day As the trading market went on the 10-year ended up closing down another four basis points of the day

So we're at four and a quarter on tens So a pretty decent move lower and yields across the board here the last three or so weeks So let's talk about this resolution that has gone through that the House of Representatives It still needs to go to the Senate. It was a very close vote in the house. It was 217 to 215 It was really only thought to be one vote difference And so they were able to sway a few others, but at least on the GOP side. The Senate however will be a little bit more challenging. So this is far from over and I think the market essentially priced in some good news in the morning and then

unpriced it in towards the latter half of the afternoon because this is still a very arduous process and far from being completed yet. But let's take a look at it. It features a one and a half trillion dollar floor for spending cuts, a four and a half trillion dollar ceiling on the deficit impact of the Tax Cuts and Jobs Act extension. So not making that permanent, but extending it. The Senate wants to see it permanent so that there'll be some of these sticking points. There was a $300 billion outlay for additional spending at the border in

defense and a $4 trillion debt limit increase in this. So off to the Senate it goes. More to come on that. I know David has written some about it and I'm sure we'll write more on it. That's his lane on the political front. But in the Ask TPG section today, there was a question about the Mar-a-Lago Accord and there was a nice answer in there again by David today about

what this means. The question was, is this something that is something to be concerned about for investors? The short answer is no, it isn't. And the short answer is also that it's essentially something from the Treasury Secretary to negotiate currency rates between countries, for example, China mainly, as a negotiating tool and a way to level the playing field a little bit. Trump is using tariffs in a similar manner right now. And so this type of deal or accord with a country like China, which is our biggest trading partner, would be significant from making American interests more competitive overseas. but ultimately it's another negotiating tool, just like tariffs related to currency instead. No, it's not something to be overly concerned about.

It's barely been talked about and there really aren't a lot of details anyways at this point, but if that's what it is meant to be, then we don't see a lot of harm in it. If anything, I think it would be a good thing for a trade for the country. So with that, there was only one last piece on the economic calendar for the day. There was new home sales actually missed for January, much worse than expected. They were down 10 and a half percent for the month. Although last month was revised higher. So volatility around this and the culprit,

it's going to be interest rates and so forth. So housing remains to be stuck. That's all I can say about it. It's an underbuilt environment, so there are not enough homes. And so they need to build more. But affordability is at all time lows. Interest rates are causing that basically. And with rates coming down, actually, on tenure and across the yield curve, you may get some alleviation inside of housing with mortgage rates that are ultimately tethered more to the long term rate, but that takes some time to work through the system.

So with that, I shall let you go for this evening. Tomorrow will be Thursday and I'll be back with you on Dividend Cafe podcast. And I wish you all a lovely evening. If you have questions, please send them in. We love them. Thanks so much. Bye bye. The Bonson Group is a group of investment professionals

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