The Dividend Cafe - Wednesday - July 9, 2025

Episode Date: July 9, 2025

Market Recovery and Economic Indicators: Analyzing July 9th In this episode of Dividend Cafe, Brian Szytel updates listeners on the financial markets for July 9th, with the Dow rising 217 points and other major indices showing gains. He discusses trends such as tight credit spreads, high equity flows, and low volatility. Brian delves into the implications of economic data like mortgage applications and wholesale inventories. Additionally, he reflects on recent Fed minutes, and shares a comprehensive response from David addressing concerns about the long-term sustainability of market growth, emphasizing a tailored, long-term investment strategy. 00:00 Market Recap: July 9th 00:54 Economic Indicators and Market Sentiment 01:31 Tariffs and Market Desensitization 02:48 Fed Minutes and Mortgage Applications 03:29 Wholesale Inventories and Consumer Sales 04:14 Q&A: Market Predictions and Portfolio Strategy 06:18 Closing Thoughts and Upcoming Events 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 9th. Brian Sightel is with you here today on Bucking of the Trend here in markets, we actually had an up day here after two days of the lower numbers on the day we had the Dow up 217 points and the S&P up about six tenths of a percent, NASDAQ up about nine tenths of a percent with 10 year treasury off about six basis points on the day. And there was a 10 year auction today that was sizable that went better than expected. So that decrease in interest rates, all else being equal, meaning that earnings aren't out yet until next week. Tariffs are not in the front headline, I guess,

as of today. All in all, things generally positive. Markets recovered here after a little bit of a sell-off, which is nice to see. You actually had the market open, for the most part, at the highs, then sell-off back to fair value around 10 o'clock Eastern. And then we closed, not at at the highs but close to it.

It's all in all fairly positive. There was a couple of pieces of debt out in the economic calendar that I'll go through but before I do that if you look at things like credit spreads that are basically not at all time tights but very tight that's meaning that there isn't as much risk priced into the bond market into the credit market. If you look at equity flows, they're very high. So the equity flows are getting a little bit exuberant. There's some animal spirits stirring. And then if you look at the volatility index or the VIX back in the, say 15s, which is very low, all of those things are suggesting the market is positive,

which is why it's trading where it is. But none of those things should be surprising. In other words, yes, we have things like tariffs that are out there that caused a lot of volatility in April. But since April, the entire time, basically, Trump and the administration and the talk of tariffs has come and gone. There's been tweets, there's been different comments, there's been 50% that and 200% this, 10% across the board, extension here, extension there.

But all that to say, markets are essentially pricing in a desensitization to it and looking at what is more fundamental, which is what earnings are and where interest rates are going and some of the broad economic indicators in the economy, which is fairly strong. And so that's why markets have traded where they were. So there shouldn't be a big surprise to it, mainly because you shouldn't be trying to second guess short-term market movement anyways. There should be a tailored design to a portfolio that's based around client goals and these types of things rather than one week or one comment or tweet here and there. So it's just a good case study for those that unfortunately may have

gotten shaken out in the market in April and something that's reassuring for all of those that stuck to long-term plans and I've written about that before. Aside from the support of 10-year auction, there was strength in Big Tech. There was also a pickup in M&A activity and deal speculation. Those things are, again, what I called animal spirits in financial markets and tend to be positive overall for sentiment. We did have Fed minutes out for the month of June today, which wasn't surprising. All participants were essentially unanimous in consensus to hold rates steady last meeting.

There were, however, some talking about cutting rates as soon as July and others not wanting to cut until next year. So there's still a committee that debates back and forth. Nonetheless, rates were steady and that was unanimous. There was a pickup actually an MBA mortgage purchase applications today. They were the highest level in two years. I say that as a positive because rates have not come down. Long-term rates are about the same as they were. So your mortgage rates are still in the mid-sixes to the high sixes out there. So pickup and applications means positive things

for housing. It's a big part of the economy. And then last but certainly not least, probably the most important economic data for the day was wholesale inventories. This was unchanged from the first preliminary number of negative 0.3, which is a contraction, but somewhat counterintuitively, when you have wholesale inventories that contract, that's a positive sign and a bullish sign for the consumer. It's bullish for retail sales. It's essentially indicating that consumers are drawing down retailers inventories,

meaning that the demand is outweighing estimated supply, and so you get a shrinking of those inventories, and that's a forward-looking indicator on what will ultimately need to happen, which is an increase in rebuilding those inventory levels back up. Strong consumer sales is definitely a positive thing. There was a really good Q&A sesh in there that I usually don't do this, which is I usually interpret and say things on my own mind. And of course I have a lot of them, but in this case, I love David's answer so much. I really just want to read it verbatim. The question was essentially, is there a day of

reckoning within three to six years where stock prices and bond prices are going to come undone? And because the national debt and other things that are negative. So sort of a doom and gloom and three to six years, this particular person asking the question was concerned because he's 74 and doesn't feel like he has a lot of time to weather that storm. So let me read David's answer because I think this is important and I think it's evergreen.

We do not believe that the day of reckoning is very specific or actionable, or that three to six years is very helpful timeline. In fact, the difference between three and six years is enough to be broke for many people who decide to exit the right portfolio three years too soon. We do not agree that there are some specific singular looming event that can be timed, predicted or known. Rather, we believe there are dozens and dozens of various events that will most certainly happen because such disruptions to markets are a permanent part of the investing process.

Our aim is to have the right portfolio in place for each individual client, aware of the reality of these things, and to never believe that any perma bear or other forecaster can or does know anything about what exactly will happen or when. We design portfolios for the assumption that such negative things are assured, not merely possible. And if we do not exit a good portfolio that is designed for volatility because of volatility, we embrace it. Adjustments are made around macro allocation and composition holdings along the way in

conjunction to our investment process. In a lot of ways, the question could be answers about propriety or future debt concerns with a look at the past. The 89 national debt was 900 billion, the 10-year treasury yield was 9%, and the Dow was only 2,500. Today, national debt is 37 trillion, the 10-year yield is 4%, and the Dow is at 45,000.

It has not been the 35 years that such outlooks have called for, same as it ever was. Dividend growth is a blend of offense and defense coupled to a tailored asset allocation for each individual client that we believe in. This is Brian again here. I just love the answer so much. I wanted to kind of read it to you verbatim here on the podcast as well. I don't think it can be improved.

And as I said, I think it's evergreen. Tomorrow we'll be back with you on Dividend Cafe. Tomorrow will be Thursday the 10th. We'll have initial jobless claims out for you. On Friday, we'll be somewhat quiet too. There's a federal budget deficit number that we'll get. But other than that, I hope you have a good evening. Reach out with those questions.

We'll shoot back answers and we'll talk to you soon. Thank you. 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 in Tyrion

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