The Dividend Cafe - Wednesday - July 16, 2025

Episode Date: July 16, 2025

Positive Market Trends and Economic Indicators Update In this episode of Dividend Cafe, hosted by Brian Szytel on Wednesday, July 16th, the positive movements in the financial markets are highlighted, including a rise in the DOW, S&P, and Nasdaq, and a drop in the 10-year yield. The episode discusses the significantly cooler than expected Producer Price Index (PPI) for June, which aligns with favorable inflation targets and hints at potential reductions in consumer prices. Other positive economic signals include an increase in industrial production and optimistic comments in the Fed's latest page book. Additionally, Brian addresses viewer questions about the stability of New York City bonds amidst a potential declining tax base and the feasibility of replacing income tax with a consumption tax, providing detailed insights into these financial concerns. The episode concludes with a preview of the upcoming economic data releases for the remainder of the week. 00:00 Welcome to Dividend Cafe 00:08 Market Overview: A Positive Day 00:34 Producer Price Index Insights 01:50 Industrial Production and Economic Activity 02:31 Financial Sector Highlights 03:12 Q&A: New York City Bonds and Tariffs 05:19 Upcoming Economic Indicators 05:36 Closing Remarks 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 back to Dividend Cafe. This is Wednesday, July the 16th. Brian Seitel with you here on a nice Wednesday and generally positive day overall in markets. We had the Dow close up 231 points. S&P was up a third of a percent. NASDAQ was up a quarter of a percent. Tenure was down three basis points. So a bit of a rally in stocks, bit of a rally in bonds and price, which dropped the yield.

And all in all, a pretty good day. And it was another read after yesterday, the CPI data that we got. Today we got a producer price index, so the PPI number that was also meaningfully cooler than expected on both core and headline. So we got an unchanged number meaning 0.0 on both headline and core. On the PPI number we were expecting 0.2 percent gain for both. This is for the month of June. Now we did get a revision higher for the month of May by two-tenths of a

percent, but nonetheless this puts the annualized numbers on the producer price index really right about where the Fed is targeting. And remember the producer price index is a forward-looking indicator. It's basically the prices that sellers receive on the front end before they reach consumers. So call it the wholesale price level. And so that's coming down and that can be a precursor for ultimately the consumer prices coming down too. That said, we already got the cooler than expected CPI print yesterday anyway.

But this is more follow through on that number and it's why the rally today happened and also why yields on the 10-year dropped a little bit, but that puts the annualized number on headline at 2.3 and On core when you strip out food and energy at 2.6. So mid to low twos So some good news on that front industrial production was up 0.3 percent for the month of June That was ahead of consensus at zero. So we'll call it two positive comments and then around third base on three

positive comments here. I know this is baseball season for many of you baseball fans so I'll stick with that analogy. But as we round third base on the day into the feds latest beige book these are internal comments that the fed talks about and they get reports from different districts across the country. Overall, there was a positive uptick in overall economic activity. So I don't have much to tell you today that is negative. In fact, most things are positive. And then if you put on top of that, some positive results in some very large farmer names, one that we happen to own and have owned for many years, call it even over a decade. That was positive and a big Dow component. And then

you also had a pretty decent move up in a lot of the financials. I was on Bloomberg B&N yesterday talking just this and assuming the market was up based on my interview. But we had a positive move across the asset manager landscape, a lot of the alternative asset managers and the private credit funds and different things like that. Pretty good day across the board and especially for yours truly here at TPG and the dividend portfolio that we are managing for you. That aside, we had a couple of questions. There was one in there about the situation in New York City and particularly concerned about the credit quality of New York City bonds and should an investor be selling due

to potential acceleration of a declining tax base, meaning wherever you are in the political scale, take this for what it is. But disadvantaged or less ideal political party deemed in power means people are going to leave the state and the city. It means that the tax revenue that is backing a lot of the debt that built the city and secured it is going to be lower, not higher. And the answer to that is, no, that's not really ever happened before. The default on munis is basically zero. And so population ebbs and flows slightly, which is at best what it will do. If you think about states like California or New York, populations have just marginally decreased. But nonetheless, when you talk about the revenue behind most of the bonds, you're talking about schools and sewers and general obligation from the entire state.

Not much to worry about there. There was another question about tariffs and are they a consumption tax and can a consumption tax ultimately replace the income tax? And of course, way back when this is how it was. The problem now is it's not realistic. It's a regressive tax, not a progressive, meaning the wealthier people are and the more money that they make, of course, the lower as a percentage they tend to spend on consumption. So that defeats some of the purpose of a progressive tax policy, which most are in favor of. But anyways, to make it even remotely pencil, you would need basically 150%

tariffs on consumption on all goods and all services without any carve outs or exemptions, it's just 76 times the current tariff revenue. So it's just not going to happen to replace it. I think the answer will be both, that you'll have an income tax forever and that there'll be some form of a consumption tax here and there, but it probably a marginally smaller amount of total tax revenue will come from it. So there you have it on the Q&A around the horn on the economic calendar. And as we get in here to the remainder of the week, tomorrow will be Thursday. We'll have some numbers out like initial jobless claims.

We'll have a Philly Fed manufacturing survey out, some home builder confidence, and some different things to walk through. So actually this week is a nice one on the economic calendar to go through. But with that, I will let you go for this evening. I wish you a lovely Wednesday afternoon. Please reach out with your questions as always, and we shall talk to you soon. Thank you. RICK VALLEE The Bonson Group is a group of investment professionals registered with Hightower Securities

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