The Dividend Cafe - Thursday - July 16, 2026

Episode Date: July 16, 2026

Brian Szytel hosts Dividend Cafe on Thursday, July 16, describing a down market day driven by rotation out of tech and semis, with the Nasdaq down 1.5% versus modest declines in the Dow and S&P, and equal-weighted S&P outperforming cap-weighted by over 160 bps. He highlights ongoing housing weakness: existing home sales at the lowest pace since 1995, affordability pressures with mortgage payments rising from about $1,700 to $3,100 since 2020, and record home equity (~$11T) contributing to illiquidity as most homeowners have rates below current levels. He addresses financials’ July strength, noting they signal economic health but appear fairly to slightly richly valued around 2x price-to-book. Economic data was mostly positive (retail sales +0.2%, Philly Fed 41 vs 13, claims 208 vs 218) while housing data disappointed (builder sentiment down, pending sales -5.6%). 00:00 Market Wrap and Rotation 00:47 Housing Market Stuck 01:23 Affordability and Equity 03:08 Financials Sector Question 04:36 Economic Data Rundown 05:12 Housing Data Misses 05:37 Closing Thoughts 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 with you this evening, your host here on Thursday, July the 16th, and a bit of a down day overall in the stock market across the board. And it was one of those continued rotation days where you just saw a bigger selloff in tech and semis and things that. related to the NASDAQ more than the other indices. The Dow is only down on the day about 105 points. S&P was only down about half of a percent, but the NASDAQ was down one and a half percent. Bigger sell off in tech, and the equal weight SMP outperformed the cap-weighted S&P by over 160 basis points. So that's a huge delta, one of the larger ones that I can actually remember. But there was a whole lot of economic data out on the day, and I'll go through all of that with

you a little bit. I did want to shift gears and talk a little bit more about housing just for a second because out of all these numbers and today there was four pieces of news that came out. Two of them were housing related and both of those were negative, but it isn't just that. It's this has been ongoing now for many months and we're seeing this sort of housing market just remains stuck where actually if you look at existing home sales, they're running at their lowest pace since I graduated high school, which was 1995 for anybody that cares. But that's a long period of time. You can think about what the population has done since then. It's massively expanded.

And there's just no sales going on right now. And one of the reasons is simply affordability. Mortgage payments are higher. They've gone up from 1700 to about 3,100 just since 2020. That's a big, huge difference. It's far more than what incomes have risen over that period of time. And for those that own homes, it's fine because home values have appreciated. They've got up a lot over that period of time.

There's no transactions happening now. So whatever number everyone thinks in their mind, their house is worth is what it's worth. The market clearing price is probably quite a bit lower than that. But that doesn't change the fact that this is a record high amount of home equity in the housing market. There's about $11 trillion of call it tapable home equity for homeowners. And if you look at 80% of homeowners currently have mortgage rates that are below today's refinance or purchase rates, why would they leave? You have locked in property taxes. you have locked in lower interest rates on your mortgages,

and you've got this massive amount of equity. And so there's just a lack of incentive for people to move if they don't have to. And then for those that are trying to afford and buy and get into housing, it's tough to borrow, it's expensive, and it's hard to afford it. So it's just this conundrum. Record wealth in the housing market and record illiquidity, I would say, in the housing market. It's just some things to think through in a different topic that I wanted to go through outside of the hyperscalers or AI or outside of what's going on in the Middle East,

it doesn't mean it's bleak and terrible. It just means that prices are likely going to be soft for a period of time. And nationally, over the past 12 months, they're down about 2.5%. We're not talking 25%, 2.5%. Hard for prices to really depreciate dramatically when you've got so much skin in the game with so much homeowners with so much equity. Ask TBG in there today was about the comment that actually I had made about the financials being the best performing sector in the month of July. And if that was already

happened, if that was overdone, if they're overvalued, or is there still opportunity at this point? And the first thing I'd say is I really wouldn't worry too much about trying to choose which sector is going to go up next quarter the most. It's a tough thing to get right. And I really do focusing on businesses and then see what sectors they happen to be. And after you've done your research is a better way to go about it. We happen to have an overweight to financials at TBG. Yes. And so the fact that July has been good is great, but we didn't buy it because of that prediction or anything like that. And my point really was more about that the strength and the leadership position that we're seeing in financials is a good sign for the economy. The velocity of money is enhanced.

If you've got to pick up in lending and banking and these M&A transactions and in investment banking, and those are all very robust. But as far as the sector itself being overdone at this point, It's only trading it 16 and a half times earnings, but that's not really the best way to value a bank anyway. It's usually priced a book, and they're trading it about two times priced a book. So historically, I'd even call it a little richly valued at this point. So all the good stuff is basically baked in and priced in. I still think good things will come from those stocks, but I wouldn't suspect that they'd be runaway parabolic charts or anything like that. Okay, so that's my around the horn.

Let me go through the economic data on the day. Boom, there's four pieces. First, retail sales in line for the month of June. We've got to gain a point two. I'm going to call that good. Second, Philly Fed Index. This is the manufacturing survey in that region. Huge beat.

So we got a 41 number. We were only expecting a 13. That's the biggest number on Philly Fed manufacturing since the end of 2021 coming out of COVID. So that's a big number and a good sign for manufacturing. Then we had initial jobless claims better than expected. We got 208 versus 218. So that's the third. were three out of three here, about in a thousand of good for the day.

And then you got the two negatives that I talked about in housing. First, home builder sentiment was lower than expected. And then second, pending home sales were down 5.6%. We actually thought it was going to be flat for the month. So that's a huge mess. Pending home sales are just anemic. They're not happening. Tough on the housing.

Main takeaway on the day. Everything else in the economy seems to be going quite well. Big rotation day. That's my synopsis. All right. With that, thanks for listening. appreciate it as always and reach out with your questions if I don't speak to you because we're getting close to the weekend enjoy your world cup games go spain and we will talk to you soon thanks again

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