The Dividend Cafe - Wednesday - January 29, 2025

Episode Date: January 29, 2025

Market Reactions to Fed Policy Announcement In this episode of Dividend Cafe, Brian Szytel discusses the market reactions following the Federal Reserve's policy announcement on January 29th. The episode addresses the modest sell-off in the Dow, S&P, and NASDAQ, and the flat interest rates. Brian highlights the Fed's decision to maintain the interest rate and shift focus to employment risks over inflation. He argues that the positive correlation between interest rates and economic growth is currently balanced. The episode also touches on the record $1.2 trillion goods deficit in 2024 and provides insight into comprehensive wealth management services offered by Brian's firm. 00:00 Introduction and Market Overview 00:20 Federal Reserve Meeting Insights 00:49 Economic Indicators and Market Reactions 02:35 Trade Deficit and Economic Health 03:15 Q&A: Beyond Dividend Growth 03:34 Comprehensive Wealth Management Services 04:05 Conclusion and Contact Information 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, January 29th, and Brian Sightel with you in the last couple days here of the month. And already I'm going to say this year's flying by because it seems like it really is. We had a negative day in markets, although they were off the lows of the session. We were up most of the morning.

Today was Fed Day, so this is the conclusion of a two-day Fed meeting where Powell is going to set policy and so markets were up a little in the morning and then after policy was announced and then the press conference sold off a little bit, but fairly benign. The Dow was down 136 points. S&P was down 0.5% and so was the NASDAQ. So modest little sell-off. Interest rates were dead flat on the day. The yield curve did flatten a little bit with the two-year up a little bit more than the longer-term rates. But a pretty benign reaction to markets, which means a lot of this is priced in. And here's what they said. So holding rates the same was a hundred percent basically

expected in Fed future. So that part wasn't new. There's still a Fed funds rate unchanged at four and a quarter to four and a half. They did shift gears a little bit on employment being the bigger risk versus inflation to the economy. They moved back the other way. So the, this is a little bit more hawkish leaning sentiment. They said employment is fine.

Inflation is still elevated. And so we're going to take our time with interest rates. I think all that is fine too. My comment today was that we need to remember there's a positive correlation between interest rates and growth. That isn't always perfectly so. I believe it's fairly balanced at this particular time, which is what I like to see. In other words, higher interest rates is citing a higher growth in the economy as well.

And if you have rates policy that starts to move lower, it's because growth is starting to fade and that's not what we're seeing. So I think that's healthy. lower, it's because growth is starting to fade and that's not what we're seeing. So I think that's healthy. A positive real Fed funds rate of say 1%, which puts us somewhere in the three and a half to four range is healthy for risk assets rather than the contrary. You don't want markets distorted with central bank policy that is tethered to a zero bound to try to create certain outcomes.

You want markets to create those outcomes given the inputs that are forming naturally in the economy. So I don't view this as negative, I view it as positive. And I think there is a healthy balance between that positive correlation between growth and interest rates. So careful what you wish for on those low interest rate hopes. It comes with, with the price tag. All that to say in the economic calendar on the day, there wasn't a whole

lot outside of the Fed meeting. The deficit in goods for the calendar year of 24 completed today and showed a 1.2 trillion with a T full year deficit in goods, meaning we sure exported a lot less widgets than we imported. We sold a lot less things around the world than we bought. In other words, that's again separate from services. That's goods only. We sold a lot less things around the world than we bought. In other words, that's again, separate from services. That's goods only. That was a record.

The previous record was in 2022. So we've got a growing economy, decent GDP, high margins in corporate America. We've got a lot of positive things going on and interest rate policy that has come off about 100 basis points from where it was and still get these large deficits to consider. There was a Q&A session in there that was real in a conversation that I had back and forth with in a client meeting. Yeah, that was a combination of clients and then prospective clients.

And they were basically asking outside of dividend growth, what else you got? What else you do? And there's a very long list. This is a comprehensive full service wealth management firm. Everything from lending to risk management to financial planning, family office, in-house tax and CPAs. I don't know that I can say we do it all, but we certainly do a lot of things just having done it here for 20 years, 20 plus years for clients, for the

people we work with. It's all centered around a personal relationship, a one-on-one relationship with a private wealth advisor. The investment piece is just one component. Often it's the core component because it's the engine that gets us to the financial goals that we're planning for. Dividend growth is how we prefer to do that. So reach out with additional questions and I will let you go for tonight.

Thank you so much, bye bye. 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 toin will be

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