The Dividend Cafe - Wednesday - June 4, 2025

Episode Date: June 4, 2025

Midweek Market Insights and Legislative Updates In this episode of Dividend Cafe on June 4th, Brian Szytel from The Bahnsen Group provides a market overview, discussing the uneventful day in equities, with minor movements in the Dow, S&P 500, and Nasdaq. He explains the rally in the bond market caused by private payroll numbers missing estimates significantly. Brian also reviews the mixed economic indicators from the May ISM services index and services PMI, noting one indicator in contraction and the other in expansion. He addresses the fiscal impact and revisions of a significant legislative bill, emphasizing the need for reduced spending, especially on entitlements. Additionally, he answers a question about section 899 of the proposed bill regarding tax rates for foreign investors in U.S. assets. He concludes by previewing upcoming data releases for the week, including initial jobless claims, productivity numbers, trade deficit, and employment figures. 00:00 Introduction and Market Overview 00:38 Economic Indicators and Employment Data 01:53 Fiscal Policy and Deficit Concerns 03:06 Foreign Investment Tax Proposal 04:19 Upcoming Economic Data and Conclusion 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, June the 4th. Brian Seitel with you. Here at the Boilts & Group, it was actually pretty uneventful in the equity side. The bond market ended up rallying in price, and so the 10-year was down about 10 basis points, which is a pretty big move on the day. But the equities Dow is down about 90 points. The S&P actually was

just slightly up half of one point, not 1% but one actual point move, so tiny move. NASDAQ was up 0.3%. That actually technically puts the S&P 500 up three days in a row. And we're now up about 19.8% from the low in April in the market. Couple of things in the economic side today, there was an ADP private payroll number that was largely below estimates.

And that's why we saw a rally in the bond market because employment on these numbers is starting to show some sort of cracks in the dam here. But you got a 37,000 print for the month of May we were expecting a hundred and thirty thousand so that's a huge miss the month prior by the way was also a mess if you remember we got sixty two thousand for April that was actually revised slightly lower to sixty we get the non-farm payroll number on Friday which is a more heavily watched figure than the private payroll number, which can oscillate.

And remember last month in April, you had the ADP private number miss, and then you had a big number on the, on the non-farm payroll. So we'll see what we get on Friday. The May ISM services index was out today and was below estimates. We got a 49.9 versus a 52.2. Numbers are arbitrary, but just remember anything below 50 is contractionary. And then separately from that, the services PMI number was out today and was just ahead of expectations by about a point. We got a 53.7. So one of them was in contractionary

territory. The other one was an expansionary. So I'll call that a mixed bag and is emblematic of what we saw in the equity market for the day. Estimates on the big, beautiful bill that are coming out as far as the fiscal impact on the deficit, estimates now from the CBOE are now at 2.4 trillion. This is still in the Senate. There'll be a lot of revisions to this thing. So we don't know exactly where it will shake out, but somewhere between 2 and 2.4 trillion as it looks like that will add to the deficit that's separate from any growth in the economy and

some other things that may work out to the upside. But on paper at first analysis, that's where we're at at this point. But again, until you have a harder stance on the spending side of the ledger, we're trying to raise revenue. We're trying to grow the economy. That's what this bill is trying to accomplish at least by broadening the tax base, which means making a more fair tax system. But that doesn't address the spending side.

We simply need to spend less money. There's just no way around it. And there's only a couple of big components you can go to. Mainly it's entitlements. We could touch defense as well, but that's a pretty important thing. They're all important and that's why politics is hard. But, you know, if we're not going to make hard choices on social security, on Medicare, on Medicaid, then I think we're going to continue on the spiral here for enhanced deficits.

But there you have it on that side. There was a question in there on a small section in the proposed bill. I actually got the same exact question, which was funny, and answered it in the same way that David did in his blurb today, but it was about section 899. It was essentially a tax rate that was gonna come on for foreign investors and US assets.

So think about a foreign entity in another country buying US stocks or US bonds. They pay a certain tax rate. The bill was proposing being able to increase that by about 5% over four years. So call that a 20% total increase over the four year period. And, but again, now this isn't on U.S. investors buying dividend stocks or anything like that. That was the context of the question that I got, but this is about foreign entities

and it's only foreign entities that have unfair or deemed unfair tax practices on the United States. So if there was a country that was doing something to basically disincentivize U.S. investment in their country, then we would reciprocate and do the same. That's what was in the bill. The problem with caring about it now is simply because it's going to get revised so much, I just don't know what's going to come through the final version of it for us to really sink our teeth into, but there's the answer for section eight 99 in the big B beautiful bill.

That's what I have for the day. Again, it was a bit of a choppy session on eventful. I would say tomorrow, which is going to be Thursday. I'll be back with you. We'll have initial jobless claims out tomorrow. We'll have some productivity numbers out tomorrow. There's actually a trade deficit number out. So a good amount of data. And then of course on Friday we'll have some productivity numbers out. Tomorrow there's actually a trade deficit number out. So a good amount of data. And then of course on Friday we'll have the unemployment rate, we'll have the non-fond payroll

report and average hourly wages, things like that to go through as well. So the week will continue to heat up. With that I'm gonna let you go for this evening. Reach out with your questions as you always do and I wish you well. We'll talk to you soon. Thank you.

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