The Dividend Cafe - Thursday - August 7, 2025

Episode Date: August 7, 2025

Mixed Market Movements and Economic Indicators on August 7 In this episode of Dividend Cafe, Brian Szytel discusses the mixed movements in the stock market on August 7, with the DOW down 224 points, S&P flat, and Nasdaq down slightly. The 10-year yield rose by two basis points to 4.24%. Brian reviews initial jobless claims, noting a higher than expected number and a rise in continuing claims, suggesting a softening labor market. Despite this, the likelihood of a recession remains low at less than 20%, down from 60% in April, partially due to a de-escalation of U.S.-China tariffs. Additionally, Brian discusses the historical context of market performance in September and October, advising against short-term market timing. He underscores the importance of focusing on long-term returns, dividend growth, and compounding benefits. 00:00 Market Overview: A Mixed Day 00:41 Economic Indicators: Jobless Claims and Productivity 01:53 Recession Odds and Tariffs Impact 05:09 Historical Market Trends: September and October 07:08 Final Thoughts and Upcoming Events 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 7th. Brian Saito with you here on a bit of a mixed day overall in markets. The Dow is off 224 points, which these days means about a half a percent. S&P was essentially completely flat. down five points, and the NASDAQ was down about a third of a percent on the day. A lot of that oscillating around different earnings that came out from different sectors in the stock

market today, but all in all, a benign, sideways day. The 10-year yield was up two basis points. We closed at 424, so we've been just hovering around these 4-20s on the 10-year for a couple of weeks here. A couple of pieces of news in the economic calendar day, nothing earth-shattering, but we did get another read into the initial jobless claims numbers. We got a 226 figure. We were expecting 219, so that's a bit worse than expected, but still in a normal range, I suppose. The part of it that I think we should pay attention to is the continuing claims,

which keep slowly but surely edging a little higher. We're actually now at the highest continuing claim number since November of 2021. So these are people staying on unemployment benefits for longer. You can call that having a difficult time finding a new job, or whatever you want to attribute it to, but nonetheless, it's a slight sign of a weakening labor market on top of the jobs report we got last week. In addition, we had a Q2 productivity report with a better than expected increase on the quarter. We got 2.4%. We thought it was going to be closer to 1.9. And that's certainly better than first quarter where it was a decline of negative

1 and a half. This is important because it's right around the start of Liberation Day in Q2. If you remember, that was in April. And so this is positive to see productivity still very positive during that quarter of more volatility and significantly more volatility. Some of the thoughts that I wanted to talk about were basically around tariffs and the odds of a recession in the country, because I get a lot of this stuff, especially since the last employment report that was very weak. There's been more economic writers and certainly more media headlines around whether unemployment is deteriorating too fast and whether we're going to go into recession at this point. But the reality is we were about a 55, almost 60 percent of odds of a U.S. recession a year ago.

That came down a bit as we started the new year. And then it ramped all the way back up to 60 percent in April with Liberation Day and how tariffs were going to affect global trade and ultimately the economy and employment and all these things. We're now less than 20 percent. So that's less than half of where we were. And that's even with the jobs report of last week, the jobs report definitely moved up the expectations for a Fed rate cut in September and a few other things. And it shifted the focus of what their mandate is from pretty mixed on inflation and employment to really just focusing on employment at this point. But nonetheless, the odds of a recession itself are still pretty low.

And I think there's a couple of reasons for it. One, the worst of what was considered horrific outcome is off of the table, basically. That was when the U.S. and China met in Geneva and came to terms with, agreeing to be constructive with one another and not just ratcheting it up 100% plus tariffs on each other. These are the two biggest economies in the world. That was the biggest news. Since then, we've also seen different periods where extensions have been granted and deadlines have been moved in order to ease market tensions from the administration. And so market has been more comfortable with that stance. No question about that. And not just in the U.S. but globally.

The other thing that we've got to remember, though, is tariffs are a partial consumption tax. And so if you're going to impose a $300 billion tax on the economy, that's a big number that ultimately will stifle economic growth and jobs and all those things. And so they've offset that or sterilized or neutralized it or neutered it or whatever term you want to use with things like the OBBB, which was a pretty large tax in San Evan tax cut. It didn't just extend current tax rates, but it also allowed for very aggressive business expensing designed to stimulate the economy. And partisanship aside. But if you think about trying to equalize trade in some fashion, there can be pros and cons with that. And I'm 100% a free trader as far as how I look at the best thing for the

economy. But if you think about the attention of that, which is good, and you think about the intention of incentivizing business capital expenditure through an expense structure like that, I think that can be pretty universally agreed to be a good thing for the economy. You can like this administration. You can not like them, but there isn't a lack of logic behind some of these tools and tactics being employed. And I think markets are becoming a little more comfortable with that. There's a rhyme to the reason, in other words, or method to the madness, where I think at times, especially in April, I don't think that was the case. I think we were all pretty unsure. Frankly, I don't know that we are all completely certain at this point either,

but I think there's some more semblance of a normalcy there, nonetheless. So there you have it. some thoughts on my mind for the day. There was a Q&A session in there. Someone asked about September and October and them being perilous month for the stock market. Do I believe in that? So the short answer is no, I don't. And I don't think anyone else should either. Historically, there was some interesting context back in the day. This is over 100 and some odd years ago and really before the Federal Reserve, where those months happened to be precarious just based around the money supply and how things function back then and largely related to an agricultural financing facility that existed. But aside from those history lessons, there's also been some

huge crashes in the months of September and October. The great crash of 1929, which started off the Great Depression as one of them. Black Monday when I was a kid in 1987 was another. The market dropped 20% in a day and was global. That wasn't just the U.S. And this was the start of the savings of loan crisis back then. If you remember, as I recall, I would have been about 10 years old. So I was thinking about baseball cards and the values of those more than I was about my stock portfolio, even though I believe those two things are similar to one another, looking at statistics and assigning a value to it. But I digress. That aside, there are things like the October effect or the September effect, the Mark Twain effect, all those things are around certain historical context.

So I'm not going to discredit that completely. You also have a September historically that actually has an average rate of return of negative half a point. Now, when I say the word average and emphasize it, it's because you've got to remember some months that are negative, and some of those Septembers are hugely positive. So the reason why I wouldn't put a lot of credence into that stuff is because it just doesn't matter. You shouldn't be focused month to month anyways. We focus on long-term returns. We focus on dividend growth and the rising share prices that come along with that over time, the compounding benefit that we get from reinvested dividends, all those great things. And then just keep in mind, last September, we were up 2% in the market, closed at all-time highs, trying to time yourself around.

the farmer's almanac or the calendar, I think, is not a good use of your time. And I wouldn't do it. So with that, I'm going to let you go. Tomorrow's going to be Friday, obviously. So we've got long-form dividend cafe for you in your inbox. I hope you have a wonderful weekend. I'll be in Newport Beach Sunday through next week. In the meantime, reach out with questions. I hope you're well, and I'll talk to you soon. Thank you again. The Bonson Group is a group of investment professionals registered with Hightower Security's LLC, member FINRA and SIPC with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC.

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