The Dividend Cafe - Wednesday - January 15, 2025

Starting point is 00:00:00 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, January the 15th. Brian Seitel with you from our West Palm Beach, Florida office. On a very nice update in equity markets and a rally in the bond market for that matter. We had the Dow was up 703 points on the day. That's 1.65%. The S&P was up 107 points. That's 1.8%. And the NASDAQ was up 466, which is almost 2.5%. So big move up in equities. Bond yields dropped significantly. We had the 10-year down, 13 basis points on the day. We closed at 465. So what caused all this?

Starting point is 00:00:50 Yesterday, I spoke about the producer price index being cooler than expected. And that can be, at times, a precursor just because it's the input. It's the wholesale input side of inflation on wholesale pricing. Today, we saw the consumer price index, CPI, better than expected, meaning lower, at least on core. On headline, we had a 0.4% move for the month, but a lot of that was driven by food and energy. So when you stripped out food and energy, you got down to a 0.2% number on core, and that was better than expected. And so year over year on headline is sitting at 2.9, year over year on core sitting at 3.2. And that was

Starting point is 00:01:34 just below what was expected, which was 3.3. So do I think that markets should have moved lower on the payroll report on Friday and then you know, and then did what they did today on some of this news. I don't. But, you know, markets are sensitive to these things and, you know, can move more than people give them credit for in most cases. So a little cooler on the inflation front for the day in the market and a positive day overall. We also had the Empire State Manufacturing Index that was meaningfully weaker than expected. It was a negative 12 versus a positive one. Those numbers seem kind of arbitrary, but just, you know, it's a manufacturing gauge. It was much weaker than expected. There was some optimism baked into

Starting point is 00:02:15 some of the survey results in there, so not all bad, but a miss there. We had the Beige Book from the Fed out today that was essentially in line. We basically said growth was modest across most of the districts, although the optimism was a little higher. We saw that yesterday too, when I mentioned that small business survey that I spoke about. People are looking more optimistically about the economic future of the year and in and of itself that can cause outcomes. People can act with the way that they view the future being better or worse. So there you have it, a pretty big update, obviously, all because of CPI and interest rates coming down. And of course, earnings are coming out right now too, and

Starting point is 00:02:57 particularly the financials. All the trading revenue from big firms and all these big banks are much better than expected because it was right around a quarter ago into before the election. And so there was positioning in the fixed income markets around some of those results and a lot of new trading revenue, some of the big banks. And that's a segue into the Q&A section in there today on Ask TBG. The question was around interest rates. This wasn't from today. This was from a few days ago. And the question was around the 10 year yield at 4.8. Was that about the highest that I thought it would get to, or was it going to breach 5%? And the comment is, you know, it wouldn't surprise me if it broke 5%. You know, again, this was written before today's move lower in yields,

Starting point is 00:03:40 but if it did hit 5% and went above, I don't know that it would last there all that long. That would be a little surprising to me. And since I view over time, any longer term interest rate paradigm is being tethered a little bit more towards the lower end because of global indebtedness. I do think it's a good time to add fixed income to portfolios as long as that makes sense, for the client and the goals. We were specifically talking about treasuries, the yields of them. Obviously, as you know, the price moves inversely to the yield. So prices have moved lower as the yield has moved higher. And today was the opposite, which was rallying in bond prices and to move lower in yields. But I don't think people need to get overly worried about whether it's 460 or 480 or

Starting point is 00:04:25 five. I think if you're interested in earning, you know, a very safe and tax efficient, technically, there aren't state tax taxation with treasury interest, then I think treasuries can make some sense anywhere near the four and a half and above. So that's my comment there. I don't think people need to worry about whether they're getting a perfect hit on the exact high print of treasury yields, because that part is unknowable anyway, just like it is, you know, trying to call the stock market or a certain currency or anything else, commodity price. You're never going to get a perfect. But if we think inflation is going to average something around two and a half over time, and you're getting something around double that in the form of a with no credit risk involved to lending money to the government and there's some tax efficiency, it's not necessarily

Starting point is 00:05:08 a bad idea for some savings. I wouldn't call it a grand investment. I would call it, you know, some prudent savings. So there you go. There's my answer. Nice day in markets. I'm going to let you go for the evening. Please reach out with your questions and we'll talk to you soon. Thanks again. 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.

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The Dividend Cafe - Wednesday - January 15, 2025

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