The Dividend Cafe - Thursday - August 21, 2025

Episode Date: August 21, 2025

Market Overview and Economic Data Insights - August 21 In this episode of Dividend Cafe, host Brian Szytel discusses the modest market downturn experienced on Thursday, August 21, with all indices down by roughly a third of a percent. The episode covers a range of economic data, including higher-than-expected jobless claims, mixed manufacturing numbers, and better-than-expected home sales. Key focus is placed on the upcoming Jackson Hole speech by Chairman Powell, which is anticipated to hint at future policy decisions. Brian emphasizes the disparity between high-valuation tech stocks and more value-oriented sectors like healthcare, materials, and energy. He concludes with a thoughtful reflection on market fundamentals and how they will prevail in the long run. 00:00 Introduction and Market Overview 00:22 Economic Data Highlights 01:10 Manufacturing and Services Insights 02:11 Housing Market Update 02:52 Federal Reserve and Market Sensitivity 03:24 Sector Performance and Fundamentals 05:02 Conclusion and Upcoming Content 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 Thursday, August the 21st. Brian Sightel with you here on a modestly down day, all of the indices were basically down about a third of a percent. Not a huge move. Bonds actually sold off a little bit as well, and yields were up on. on the 10-year, about four bases points on the day. We closed at 433. So a little bit of a sell-off. There was a good amount of economic data that came out today,

and I'll go through that. There's been actually a dearth of data the last two days. And then tomorrow we're going to get into the Jackson Hole speech with Chairman Powell speaking on policy and potentially hinting at what they're going to do in September. So that's what markets are really looking at. On the day, though, you had the jobless claims number a little higher than expected. We got a 235 print.

We were expecting about 225. So that's inching a little higher. After last month's non-farm payroll report, these things are being paid attention to a little bit more. And this coming out the very day before there's a speech. I don't think any speech writer is changing the verbiage inside of the speech. But nonetheless, these things are going to be looked at every week as they head into the next meeting in September, which is on the 16th, 17th. You also had the Philly Fed manufacturing survey out today for August, and we were down 0.2%. I'm sorry, point two versus a seven expected arbitrary numbers.

Just put it in context, the manufacturing number missed in the region of that area there. And so you're getting some kind of fits and starts, like a little bit of manufacturing. For the most part, I'd say it's turned up, but you get a negative number like that today in a large manufacturing region. We had some flash services number in PMIs that were actually better than expected. We got a 55.4 versus a 55 flat for the month of August, anything above 50s expansion area, remember. So that's good on the services side. They also had the same flash number. Again, these are both from S&P on the manufacturing PMI number for August. That was at

53.3.3 versus 49.5. A beat on PMIs, that flash number isn't the permanent number. It gets revised. But a pretty good glimpse nonetheless there and again, both expansion territory. So that's good. I wrote yesterday about housing more on the permit side and they look forward. But actually, the new home sales earlier in the week and then now existing home sales today were better than expected. We had a little over $4 million. We're expecting more like a 3.9 number. So that's better than expected there on home sales. And it's good to see some inventory start to move a little bit. Again, it's built up to five-month highs here. The last thing in the economic side, we had a U.S. leading economic indicator that were basically in line. They actually were down a 10th, but that was what

was expected for the month of July. So across the board, I'd call that more good than bad. Jobless claims were probably a little on the weaker side. But the reason for the sell-off on the day had more to do with a little hawkish tilt on FedSpeak, which shows you how sensitive the market has become to this. We had the governor from the Kansas City, which is where the Jackson Hole speech is tomorrow. His name is Schmidt. He's a voter. Say that he was in no hurry for a September rate cut could see that not happening, basically citing inflation more than the employment figures is the more important side to their dual mandate. Again, we'll get a better read on that tomorrow. And either way, my comment today is more about fundamentals, which is where it always should be.

But what we've seen is the shiniest of the objects, so call it the higher valuation, the higher beta, the momentum. Most of the technologies, particularly the semiconductor names, have sold off the most. and most of the more value-oriented names that have the lower valuations that technically have had their market cap weighting in the index get dwarfed mainly by technology, but even get dwarfed relative to the actual earnings percentage in the index. So if you try to judge everything just by the actual earnings, the amount of price movement has been lower than what has declined there as well on a relative basis. And my point is just that when you look at sectors like health care, materials, energy, Technically, health care closed a little lower on the day, but they're all squarely in that category of the market cap waiting being below what their earnings otherwise should deserve.

And the quote that I put in there is from Benjamin Graham. In the short run, the market will be a voting machine in the long run. It's a weighing machine. The point is, you can get momentum and you can get people voting one way or the other, but at the end of the day, fundamentals are what's going to matter most, and you're starting to see that play out. I almost feel like it's the punch bowl for some of those sectors has been drained fully, and there's a hope that Fed will refill it to some extent. And every time you get a disappointment in Fed futures or them holding off on cutting interest rates or cutting them less,

it's like there's more cups at the punch bowl than they're willing to put more punch back into it. I just thought of that, by the way, take it for what it is. With that, I'm going to let you go for this evening. Love all the questions. I've actually got a backlog here. So I'll be working through those over the next couple of days and dividend. Cafe. Today's Thursday, which means we're heading into the weekend. And you'll have the long-form dividend cafe Friday in your inbox. We'll talk to you soon. Have a good evening. Thank you.

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