The Dividend Cafe - Monday - August 17, 2026

Episode Date: August 17, 2026

Today's Post - https://bahnsen.co/4bTEA2m From Charlottesville, host David Bahnsen recaps Monday market action: the Dow fell 273 points (~0.5%), the S&P 500 also about 0.5%, and the Nasdaq about 0.3%, with energy the only positive sector (up ~0.9%) and communication services the worst (down ~1.5%); the 10-year yield ended near 4.73% as the yield curve steepened. He highlights a chart showing AI-driven capital expenditures as an unprecedented share of GDP and discusses risks tied to funding costs. Citing Strategas, he notes steepening periods historically favor energy and financials over tech/communications. On politics, he sees polling and prediction markets suggesting a potential Democratic Senate flip, with Michigan pivotal, though Republicans may have a post–Labor Day spending edge. Economically, July retail sales fell 0.6%, while large tariff refunds may be supporting activity; he also flags housing affordability issues and previews Jackson Hole and upcoming Dividend Cafe content. 00:00 Welcome and Charlottesville 00:44 Market Close Recap 01:36 AI CapEx and GDP 02:59 Yield Curve Steepening 04:38 Senate Polling Outlook 07:36 Retail Sales and Tariff Refunds 09:06 Housing Affordability Chart 10:17 Fed Signals and Jackson Hole 11:39 Oil Prices and Rig Counts 12:26 Upcoming Shows and Wrap Up 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. Well, hello and welcome to the Monday edition of the Dividend Cafe. I'm your host, David Bonson. We're going to jump right into it. I have just arrived at my hotel in Charlottesville, Virginia, and I want to bring you the trip around the horn. We'll cover all the normal basics. Market just closed a short while ago. first, if you missed the Friday Dividendant Cafe, it was a bit off subject, but it sort of explains

why I'm in Charlottesville, Virginia right now, wrote a letter to my daughter, Sadie. You have the video, you have the podcast, the written Dividentacet Cafe, all there, dividendcafe.com. If you are interested, I really appreciated the substantial amount of you that wrote with such nice and encouraging words that meant a great deal to me. As far as today's action, the market's futures, point to a downward opening the Dow, but up in the S&P and NASDAQ, and we opened that way. But actually, the Dow opened down about 100 points. But then all three indexes went to the negative after opening. The only sector that closed up today, there were 10 sectors that were negative,

the worst being communication services, the cousin of technology was down about 1.5%. But energy was up almost 1%. 87 basis points to the upside. The Dow was down 273 points on the day, about half a percent. The S&P was down more or less the same, a tiny bit more, half a percent. The NASDAQ was down about a third of a percent. So kind of across the board, nothing too bad, but everything down a little bit, other than energy. There's a chart I want to throw up real quickly that there is a lot in this chart that Bulls could point to and that bears could point to. there's a lot it says about how much our economic growth, that GDP growth presently relies on AI CapEx.

This is right now the largest contribution to GDP that any capital expenditure boost has ever had. And we're looking back over all sorts of major events and moments at which there was a big intensity of capital expenditures from railroads to obviously the telecom fiber moment of. the dot-com boom in the late 90s, early 2000s, and you see just how this current AI level as a percentage of GDP trumps all of it. And I think that the positives are obvious. The negatives may be less so, but not all that confusing. In terms of the risk that it represents to the broader economy, the heavy spend on compute has become massive for the overall economic picture. And then it calls into question what the cost of capital end up being and how the various funding mechanisms risk up this story as well. So I'll write a lot more on that whole thing in the weeks to come.

Another thing on markets before I move on to some of our other categories real quickly is this yield curve steepening that we're seeing. By the way, I should have pointed out the 10 year today closed at 4.73 percent, up three basis points. on the day. So you've seen a lot of steepening in the yield curve. The 30 years moved up well over 5%, the 10 year in the 4-6s, 4-7s, and then the shorter end of the curve, not as much. So that's what we refer to as a steepening of the curve, a widening of the gap between the short end and the long end, okay? And Stratigas research, I read a report over the weekend, looked back at the seven periods of yield curve steepening that we've had since the early 90s. You're

talking about over 30 years. And in that period, you see certain commodities do very well, oil, copper, and then others like gold particularly not do well. And on the equity side, you see tech communications not do well. And you see more value oriented, small caps, some of these rotational things. But the strongest performers, and by the way, there's very obvious reasons why and correlations that fit into it, but energy and financials. Financials certainly always love a steeper yield curve. So just an interesting historical anecdote. Now, this, I think, speaks to what you might expect with a steepening yield curve. I think the question some would have is whether or not we will persist in a steep yield curve now,

and that's a different story altogether. On the public policy front, I want to say that I do believe the current polling, my theory of it just being a really hard, perfect straight for the Democrats to end up flipping the Senate. You look at Cal She and some of these prediction markets, they're at like 50-50 now, and that was over 80 percent Republican odds of maintaining the Senate. And I think the polling that North Carolina is almost certainly going to flip. Ohio looks very difficult for the Republicans to keep. And there is significant trouble in the polling for Republicans in Texas. Now, Texas, you could say look historically in past races and whatever. I just, people don't believe it.

That's a perfectly legitimate theory of the case. But with the Democrats looking very, very likely to hold their Georgia seat and there's still possibility of flipping in Maine and Iowa, Alaska. I would say that when I look at Ohio and North Carolina and so these others, I kind of think that the Democrats will flip three and to get to four, which is how many they need to get a majority, because if it ends up 50-50, the vice president being Republican means the tiebreaker goes to the Republicans, right?

I think that this Michigan thing is really going to end up being the story. If the Democrats lose Michigan, I think that that will take away their mathematical ability to flip the Senate. And I think if they hold Michigan, even with this particular candidate that they nominated, you know, I think it looks far more likely that they end up flipping. So it's a very interesting environment here for the next, let's call it, six, seven weeks. The other thing I'd say, though, about the polls, approval ratings, I'm very used to people telling me they don't believe polls. The people that don't believe polls are always the people that don't like what the polls say. Some polls do end up being wrong. Vast majority of the time,

they aren't. You look for polling averages in places that are better polled than others to get a general feel. But there's a lot of indicators when you look at enthusiasm, when you look approval ratings. When you look across a wide array and not just one statistical spot, but when you look across a wide array of metrics, this is set up to be a blue wave. And yet, the other thing that my friend Mark Halperin keeps pointing out is Republicans have such a huge funding advantage, and that's not likely to really be evident after Labor Day. Now, sometimes you can spend all money in the world, ask Tom Steyer, ask Michael Bloomberg. That spending doesn't change everything. But I guess I just would say, yeah, my base case is this is a blue wave and then we'll see if a massive edge in Republican spending changes any of that in September, October.

I do not know the answer. Economically, retail sales declined in July 0.6%. It's fascinating that the bond market, bond yields moved higher, were not really impacted. And you had a series of labor market reports this month and now retail. sales, they were indicating a more slowing, negative, difficult, contractionary view of the economy. The bond market didn't really care. One of the things I want to point to is tariff refunds. I am blown away at the impact. This is having $25 billion in May, $50 billion in June. I believe it's $36, $37 billion in July, mid-30s. So you have well over $100 billion. It's come

back into the private economy that offset what could have been layoffs, that offset what could have been canceled projects, that went into new projects, that just essentially went into the more productive side of the economy. It was an unbelievable gift to the economy and the administration the Supreme Court gave. And that may be one of the reasons why the view of the economy is still so reasonably sanguine is that they're just push-pull factors in this tug-of-war that we've been see in all year that do not scream for a strong economy, do not scream for a weak one, but are leaving us in this spot that I think is causing a wise humility for some to avoid getting pulled into a overly excessive view of things one way or the other.

I want to put another chart up real quickly. This is one of my very favorite charts. I saw it in Ben Carlson's Walth of Common Sense over the weekend. It's from the Dallas Fed, but it just basically looks at the real, housing prices versus real disposable income and periods where house prices were going up at a higher rate than real disposable income was, and then where that reversed. And then now you see where we are where house prices have certainly outpaced real disposable income here over the last four or five years, hence the current talk of affordability. The period before that was a post-financial crisis period where house prices were spending, a lot of time recovering. And then the period before that was, of course, the famous financial crisis where they bubbled up above the growth of disposable income. There's a relationship

between these two that is fascinating and it's very safe to say that in the environment we are now, there's the textbook definition of affordability problem. And there's social, political, and economic ramifications to the relationship between these two lines. On the Fed front, I think think it's going to be interesting. Chairman Warsh will give a speech at Jackson Hole here at the end of the month. And I don't think it's interesting if he's going to say, oh, yeah, rates will go up or rates will not go up. I think it'll be interesting if he says one or the other. In other words, it's not what he says. It's if he even gives any indication. Because I'm not totally convinced he will. I believe that the chairman thinks, and I think he is right, that the uncertainty that is

currently embedded in the posture of low forward guidance, low signaling, low market indicators, is itself doing some financial tightening? And I don't think there's any dispute that it is. And I personally don't think there's much dispute that the chairman likes that. By the way, Beth Hammack, is a voting member of the FMC, the Cleveland Fed Governor, said last week that one rate hike will not be enough, not only implying there's got to be a rate hike, but implying there's got to be more. Now, it's only one person, and there's not a lot of Fed governors doing much talking right now. By the way, Fed market expectations, futures market came down a little last week. PPI and CPI, they were not above or below expectation. They were in line. You didn't get a bad inflation

number. You didn't get a good inflation number, but in line with what was expected. And then that caused Fed expectations for Fed rate hikes to actually come in a little bit. On the energy front today, oil was up almost 3% oil back to almost $85 on WTI. RIG count, by the way, which had been at about 650 plus change nationwide about four years ago. Is it 455 now? But it was in the low 400s at the beginning of the year. So the Iran War has brought over 10% growth in rig counts because of the desire for more production based on the profitability of current spreads and prices. But I also would just point out that with rigs, the account this low relative to where it was, it's because we're getting a lot more productivity out of less rigs online,

and then even with that said, higher prices have incentivized more to come online. So I will leave it there. Dividing Cafe coming to you Friday, where I will be beginning a two-part series, very focused on dividend growth investing as my new book, Profit from the Profit comes out next week. clients, you will receive your weekly portfolio report on Wednesday. Look forward to that. There are links and more to chew on at the bottom of today's Dividendon Cafe for those interested. And with that, I will get back to my business at hand here in beautiful Charlottesville, Virginia.

Thanks for listening. Thanks for watching. And thank you for reading the Monday Dividendon Cafe. The Bonson Group is a group of investment professionals registered with High Tower Security's LLC, member Finra and SIPC, and with High Tower 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 ourselves securities.

No investor process is free risk. There is no guarantee that the investment process or investment opportunities referenced TIRAN will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced TIRAN may not be suitable for all investors. All data and information referenced herein are from sources believed to be reliable.

Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary and does not constitute investment advice. The Bonsor Group in Hightower shall not in any way be liable for claims and make no express or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced here in. The data and information are provided as of the date reference, such data and information are subject to change without notice.

This document was created for informational purposes only, the opinions expressed, are solely those of the Bonson Group, and do not represent those of High Tower Advisors' LLC or any of its affiliates. High Tower advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client's individual circumstances and can change at any time without notice.

Clients are urged to consult their tax or legal advisor for any related questions.