The Dividend Cafe - Thursday - August 13, 2026

Episode Date: August 13, 2026

Brian Szytel reviews a broad market rally with the Dow up 69 points, the S&P 500 up two-thirds of a percent, and the Nasdaq up eight-tenths, alongside a modest bond rally as the 10-year yield fell three basis points to 4.65; WTI oil declined about 2.5% to $81. He highlights disinflationary data following a cooler CPI, with PPI coming in flat versus expectations of +0.2 and core PPI at 0.2 versus 0.3, putting core PPI at 4.2% year over year. Fed futures shifted, with September hike odds falling to about 32% from over 50% two days prior, while fundamentals remain strong despite valuation concerns near 22x. Weekly jobless claims were slightly worse at 209k versus 204k. He also discusses how inflation can erode sovereign debt burdens, risks of high debt-to-GDP (U.S. ~120%), and contrasts with Japan’s 204% given domestic ownership of JGBs. 00:00 Market Rally Recap 00:46 Inflation Data Boost 01:55 Rates Expectations Shift 02:26 Valuations Versus Fundamentals 03:08 Weekly Claims And Geopolitics 03:33 Debt And Inflation Playbook 04:54 US Debt To GDP Context 05:35 Japan Comparison And Scale 06:24 Wrap Up And Next Episode 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 Brian Saitel, your host this evening. On a rally day across the board in markets, Dow ended up closing up 69 points. The S&P was up two-thirds of a percent and the NASDAQ was up eight-tenths of a percent. So nice broad-based equity rally. You actually had bonds rally a bit too. The tenure was down three bases points and closed at 465. Pretty much across the board, good day overall in risk assets. Oil traded lower a bit.

WTI was down about two and a half percent and we're now at $81 a barrel. Yield curve continues to be a little steeper this week than it was last week and steeper than it was a month ago and certainly steeper than it was a year ago. So there's a lot of things underpinning the market that are positive. The news that we had today was really another read on inflation. Remember, yesterday we had slightly cooler than expected a CPI number. Today we got the producer price index number, PPI, also better than expected, and more meaningfully so than CPI was. The headline number was a flat unchanged zero.

We were expecting a gain of two tenths. And then if you strip out food and energy, the core PPI number was also a tenth better. we got a 0.2 versus a 0.3. And on core, that puts the year-over-year number now at 4.2. That's still higher than what we need to be, but we were expecting it to stick around 4.5. So the point of all this is just there's no victory lap here. There's more work to be done. There's more wood to chop. But technically, these reeds that we got this week are all disinflationary. They're pointing to that narrative. So what you're seeing is markets behaving better. I think just some of the alleviation of what if it's entrenched, what if it starts to ramp back up again as being taken off of the table.

Pretty consistently, we're seeing the numbers come down a bit. Those are all good things, obviously. And so you're seeing equities act a little better. We're not back to the highs, but we're inching our way back there. And rates aren't back to where they were. They're still elevated. Even on the short end, they're still up a little bit from where they were. What you are seeing is the Fed futures tend to keep trending lower. We're now at about 32. percent for a September hike two days ago. We were over 50 percent. So all that to say, expectations for higher rates are slowly drifting, the fear over what if inflation spikes again, slowly dissipating, and then risk assets are doing a little better. And what's happening is the market is just refocusing on what it should be focused on, which is the fundamentals,

and they're just pretty strong. There's really no way around it. The economic numbers and the earnings numbers have all been pretty good in markets. What's happening now is you're back to the good old tug-of-war between, yeah, there's some good stuff going on in the economy. That's wonderful, but we're trading it 22 times. It's just the valuation concern. That's not a bad tug-of-war. It means there's still going to be a bias towards the upside, even if it just trade sideways at this market. There's nothing wrong with that for a period of time. We've had four really strong years, so frankly, I'd be relieved if it traded sideways for one or two years, because I think that would be more normal. The other piece out in the news today was just our weekly claims number,

and it was a little worse than expected. We got 209 versus 204 on jobless claims. But all in all, I'm calling it a pretty good day. And actually, a pretty good week. There has been less noise about what's going on in the Strait of Hormuz, so I get to talk about a little less, and that's nice. But I'm not going to make stuff up here in this commentary when it's just kind of a quiet period, and that's really what I see here right now. There was a question or compliment about something I wrote, about a debt analysis and the rate of change, the growth of it. The question was as a percentage of GDP and the fact that with 4% inflation, it's kind of eroding the payback of weaker dollars.

And that's true. That's a playbook that has been around for 100 years or more in pretty much every sovereign debtor nation, which is slightly high inflation means that you're borrowing today and paying back with weaker currency later. And that's basically not a free lunch, but it's shifting the tab from the government to the saver and the bondholder as that happens. So yes, that's still ongoing. And I suppose if you did it at 2% and it was linear forever and ever, then maybe you can just keep kicking the can down the road. The problem with it is if you eventually do that and you get debt as too high of a percentage of GDP,

then theoretically you could get a weak currency out of it in a currency crisis, or you could get really high interest rates when the world would demand a higher interest from you to keep lending you the next incremental dollar. The one thing the U.S. does have going for, is that we have a printing press and we're the reserve currency of the world, but I don't think that should be taken for granted. So I've brought up the debt topic a few times today, and then clients in prospects and people that read us are just engaging on it. So it kind of keeps coming up. I don't mean to beat a dead horse over it, but I'm just going to give you some perspective. If you look at the U.S., we're now 120 percent debt to GDP, so that's the highest number that we had since World War II.

Remember when we had to win the war and all that? A couple different spots, Germany and Japan, the whole deal. So we borrowed a lot of money and we manufactured a recovery out of it because we grew the economy gangbusters from all the spoils of the victory over time. The 50s and the 60s were good decades. But then also inflation ran and then the money that we borrowed for the war was paid back with weaker currency later. That's fine. But now there isn't a world war. And we've had a strong economy. And yes, we've had some recessions, but that debt to GDP ratio has just kept creeping up. And that's what I've been talking about this week. And also, we're not the most indebted country here on the developed side. Japan obviously takes the cake. They're 204% of GDP. The one thing I'll say about that, though, is remember, Japan's government, JGB debt is owned by the citizens of Japan. So it's kind of like they owe themselves the money. That's why they've been able to get away with it like that and having financial repression for 40 years and deflation that they've dealt with.

It's a little unique there as compared to owing the money to actual other creditors, other countries. other pensions, so on and so forth. So that aside, though, the absolute dollar amount of $40 trillion is just pretty staggering. When you think about it, it's a larger tab than all of China, Japan, the UK, and France combined. So again, because questions keep reengaging the topic, I wanted to walk it all the way through. But I'm going to let you go for this evening. We will be back tomorrow in your inbox with the Friday Longform Dividend Cafe, so you can enjoy it over the weekend. And then I'll be back with you next week. In the meantime, watching a good evening and a good weekend. Reach out with your questions. Thanks for listening

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