The Dividend Cafe - Monday - August 3, 2026

Episode Date: August 3, 2026

Today's Post - https://bahnsen.co/4yUosr7 David Bahnsen reviews a “bizarre” July in which long-term yields rose, the Iran ceasefire/MOU collapsed, semiconductors fell sharply, and the yen hit multi-decade lows—yet the S&P 500 finished flat with improved breadth—and notes a strong early-August rally led by mega-cap tech while oil fell and energy dipped. He highlights massive hyperscaler capital expenditures and the key market questions around ROI, timing, financing, and systemic exposure. Bahnsen discusses shifting Iran headlines, policy items including the Todd Blanche AG nomination, the low odds of the Save Act and another reconciliation bill, Michigan’s Senate primary dynamics, and a multi-state lawsuit over Section 301 tariff rationale. He covers Q2 real GDP at 1.5%, stronger July ISM manufacturing, elevated mortgage rates, Fed chair Warsh and balance-sheet effects, Treasury’s reported yen buying, and midstream/MLP performance. 00:00 Welcome and Setup 00:23 July Market Recap 02:22 Monday Rally Snapshot 03:04 Big Tech Capex Questions 05:03 Iran Headlines and Oil 05:39 Washington Policy Update 07:50 GDP and ISM Readouts 09:01 Rates and Housing Impact 09:49 Fed Chair and Yen Move 12:45 Energy and Midstream Returns 13:10 Wrap Up and Next Episode 13:39 Disclosures and Disclaimers 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. Hello and welcome to the Monday edition of Dividend Cafe. I am your host, David Bonson, and we have a lot of fun things to go through today. I hope everyone had a wonderful weekend. I want to ask you a question because we are through the month of July and we have now today started into the market month of August. and if at the beginning of July, I had said to you that the long end of the yield curve was going to blow out the way it has with the 10-year and 30-year moving that much higher, if I had said to you that in the midst of July, that MOU and ceasefire and peace deal or whatever you want to call it with Iran was going to blow up and basically be exterminated, if I had told you that the semiconductor index was going to drop 17% for the month and, in fact, was actually down much more a couple of days before the end of the month. If I had said to you that the yen was going to make multi-decade lows in terms of Japanese yen

vis-a-vis other currencies, when you look at that combination of factors, would you have taken an S&P 500 that was flat on the month? would you have taken a breadth in the market that at the beginning of the month had 62% of its constituents across the S&P 500 that were at or above their 200-day moving average, and at the end of the month, it was 69%. In other words, you had more stocks above their own 200-day average by the end of the month than you did at the beginning, despite all those significant. significant challenges. It really was a bizarre month. And quite a bit of deterioration in the NASDAQ,

the S&P flattish, some downside and some small and mid, but then a whole bunch of things that rotationally were up on the month. So a very interesting period as we now come into August and then markets rallying today. The Dow was up 693 points, which was 1.32%. The S&P was up 1.5%. The NASDAQ up a little over 2%. You had mostly a big rally in the mega-cap tech names, particularly some of the hyper-scalers, your Googles, Microsofts, Metas, Amazon's. Surprisingly, Apple was actually down on the day, but you had big moves which caused the communication services sector to be up on the day, 4.5.4.5. 3%. Energy was down with oil prices dropping 5%, but energy was only down 1.2%. So, again, a pretty robust rally across the board. There's a chart I want to describe to you right now that I think

sums up some of the biggest questions in the market. We mentioned some of these big cap names. And here you see some of these hyperscalers known as such for their just monumental amount of capital expenditures. And you see here on your screen, capital expenditure total that is quarterly. That's literally what has been spent in one quarter, something in the range on the low end with meta $30 billion and the high end of the Amazon, $54 billion. But I would suggest that there's a series of questions that represent the biggest issue in all of markets right now. Amongst this spending orgy that you see with these major spending names. Who is spending wisely? Seems like a fair question. Will all of the spending be overdone? Will some of the spending be overdone? Will some

rationalize a return investment and some not? If there is an ROI, if there is a payoff, how quickly will it come because the cost of capital has to be regained before assets depreciate? How will it be paid for? And if some of that answer is debt, which it certainly is, what will the cost of that debt ultimately proved to be? You can understand why all those questions represent a major aspect of the risk profile in markets right now. And there could end up being some real happy endings to some of it and there could be some

not. But it is not merely a question about those four companies that are doing the spending. It's a question across the entire market spectrum. Those that are receiving the money, those that are spending the money, those that are adjacent to the spend, the tentacles are spreading, and therefore, the sort of systemic exposure moves as well. Moving out of markets a little bit, the news of the day is that President Trump had said over the weekend we're going to go blow them up. It's going to be big. We're going to take Iran out. We're tired of this and then announced kind of last night, early morning.

No, Saudi Arabia has asked us to hold back or going into some kind of negotiations. They're begging us to talk and it's all going really well. And so we'll see. So then oil prices dropped and futures went up and then we see where things go. So I don't really have much else to say. I know it sounds like I've said that 50 times, but I'm just quoting others. On the policy front, I think that the big. biggest news over the weekend is not actually going to be in our public policy section. I'm going to

talk about the Treasury Department's interventions with the Japanese yen in our monetary policy Fed talk in a moment. But on the policy front, it does appear that the Todd Blanche nomination for Attorney General has been salvaged. It remains very unlikely that the Save Act is going anywhere. I don't want to say that there's no path for a budget reconciliation bill, but I still, just for the life of me, don't understand how there is. I don't see the votes. I don't see the political math adding up, but I do know, and I'm talking to several people that really are trying to get another reconciliation bill done. I know the president's asking the Senate to kill the filibuster. That is certainly not happening. We do have the primary in Michigan tomorrow night, and at this point it looks all but over. that this Democrat Socialist of America fellow El Saeed has a big double-digit lead over his primary challenger.

And so all at once, that sort of reinforces a pretty strong position for the energy level, at least in a primary season of some of the kind of far-left socialist Marxist constituency. But then does that open up the possibility of the Republican Challenger winning in November? I don't know if it does or not in Michigan, but if it does, it certainly takes away the math for the Democrats in the Senate at a time when they're looking really quite good in the polls in Texas, in Ohio, less so in Maine. I think both North Carolina, which is a pickup in Georgia, which is a hold, are almost certainly going Democrats. So this Michigan thing is just fascinating to me because you could end up seeing the Democrats

take back a majority of the Senate and they might very well undermine it in one of their own states they already had. By the way, 25 states filed suit over the Section 301 rationale for the tariffs. I imagine the Trump administration knew this was coming, and I assume that will end up going to the courts, and we'll see what happens. So the news economically that came out late last week was the Q2 real GDP number came in at 1.5%. So it was always annualized. It was estimated. It was going to be 2%. But the nominal GDP number was actually around expectations. It's just that the deflater from the inflation by which you get to the math of the real GDP number was higher. So the inflation impact was bigger. Consumers were fine. They'd do what they do.

Data center construction was up 15.2% year over a year. That's driving all the business activity. XAI investment GDP growth would have been about half. That was kind of the takeaway from the GDP number. And it's going to end up being. subject to revisions in the months ahead. Today, the July ISM manufacturing number came, and it was up nicely. 55.6, we were expecting about 54. It's the seventh month in a row of manufacturing expansion globally, not just limited to U.S. And it's actually the first month in almost three years that there was some modest expansion

and manufacturing employment. On the housing front, the only thing I want to say is I don't mind a five plus percent 30-year treasury yield. I think if nominal GDP growth were we wanted it to be, and especially of real GDP growth where we wanted it to be, you'd want something with a five in front of it on the 30-year in a healthy economy. And I feel the same way about a 10-year at 4.6 to 4.65 percent. You know, that range doesn't bother me. But a 30-year mortgage at 6.83 percent, it had been down near six, and we were talking about trying to get into the fives as a means of unfreezing housing, 6.83% is not going to do that. And that's what one of the

consequences is in the mortgage rates is a byproduct of the higher long end of the yield curve. On the Fed front, I devoted Friday's Dividy Cafe to a pretty comprehensive breakdown of what Chairman Warsh did and didn't do in the FMC meeting last week, his second press conference as Fed Chair. I encourage you to check out that link in Dividendon Cafe. I remain rather confident. confident in the direction that the chairman has. I was optimistic about Doge and I was wrong. I recall drained the swamp rhetoric. And so I'm well aware of the fact that sometimes you can get your hopes up on certain things in a reform mindset happening that don't come together. Washington is not an easy place to reform. But I'm not negative on the intentions of Chairman Warsh and I make that case at Dividon

Cafe and we'll see what happens. But again, some people believe that he does. not have control of the committee. And if that is the case, then I think a lot of those reform intentions will go away. So we want to continue to watch that. I mentioned the Treasury Department intervening for the yen. I think you first of all need to know that the way we found out about it is Secretary Bessett wrote a note in a cabinet meeting at Cam David by yen and put a number. And a reporter took a picture of his scratch paper or doodling, which I find to be very funny. I don't think that they are buying to support the yen.

I think that they're supporting the yen to keep Japan from selling treasuries as Japan supports the yen. And so it's a backdoor way of trying to limit any impact to treasuries. Either way, it's not a headline I think the administration wanted, but forced selling in the long end of treasuries,

don't think is what the Treasury Department wants. So here we go with a kind of, you know, adjacent element in financial markets with the U.S. now buying Japanese yen. And it's certainly been successful, a massive reversal in yen since all this began. To my point, by the way, about the Fed not raising rates and there being other motives behind that or other explanations than some of the ones that meet the eye. Stratigas research had a report this morning that basically the Fed's expansion of balance sheet this year is equivalent to a quarter point in the Fed funds rate. So to me, if people say, why not hike rates a quarter point for the purpose of tightening when you've already done a quarter point worth of easing with a

different lever, I think it's entirely plausible that you'd rather add that point back, the point you've taken out from the Fed funds effectively in terms of liquidity in the marketplace. with the balance sheet before you mess directly with the interest rate. And I do suspect that's exactly what the federal end up doing in the week's months, quarters ahead.

WTI crude closed a little over $80, down 5.3% of the day. Midstream, interestingly last week, was down 2%, but MLPs within the mid-stream category were up about 1% with yield and July was up across the board, which is the third positive month in a row.

The year-to-date returned for the overall midstream spectrum sits at about 27%. So I'm going to leave it there. As always, there's more to chew on in dividend cafe.com where we have a few different links you may want to check out, and of course, the Ask TBG. So enjoy your Monday nights. I look forward to being back with you in the Friday Dividing Cafe this week,

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