The Dividend Cafe - Thursday - May 21, 2026

Episode Date: May 21, 2026

Brian Szytel recaps a positive market turnaround from Miami Beach after Hightower leadership meetings, with the Dow up about 280 points, the S&P up ~15 bps, and the Nasdaq up ~10 bps; year-to-date, the Dow is up ~5%, the S&P ~9%, and the Nasdaq ~13%. Rates were little changed with the 10-year around 4.56%, and WTI oil was slightly down amid reports of a potential Saudi-linked development in the Iran conflict. He discusses persistent core inflation across CPI, PPI, and PCE as demand growth outpaces supply growth alongside rising money supply, while maintaining the thesis of a 1% real Fed funds rate but with higher inflation expectations (now ~2.5–3%) implying a higher terminal Fed funds range. Economic data included slightly better housing starts (~1.5M), in-line jobless claims (209k), strong flash manufacturing PMI (55.3), and slightly softer services PMI (50.9), and he explains why markets focus on results versus expectations. 00:00 Welcome and Updates 00:52 Market Close Recap 01:44 Inflation and Fed Outlook 03:32 Today Economic Data 04:30 How to Read Data 05:33 Wrap Up and Thanks 05:53 Disclosures 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 Brian Saitel, your host here with you this evening from Miami Beach, Florida, where David, Trevor, and Joe have all been here with me in a slew of different Hightower meetings with the leadership team that have all gone just tremendous. It was time well spent and a lot learned and a lot of camaraderie built. wanted to thank the leadership team of Hightower. So Larry, Dan, Doug, Randy, Patrick, Scott, thank you very much. I appreciate it. And we're all heading back out to our respective offices. I'm up in Palm Beach here, recording just a few minutes before the close. I know David is up to New York office. And then Joe and Trevor back out to the California office. But let's wrap up the day here.

Positive day and turnaround, frankly, in the market. The Dow is going to close up 280 points on the day. S&P is going to be up about 15 bases points. NASDAQ is up about 10 bases. is points. So much more of a blue chip value oriented core market move on the day in stocks. And on the year, now you have the Dow up about 5%. You have the S&P up about 9 and you've got the NASDAQ up about 13. And this is not halfway through the year here. So we're doing just fine as far as risk assets, I guess, in the year of 26. Rates on the day didn't move much. I'll call that good. And we're at 456 on 10s. And then oil was down a little bit on WTI. There was a news real out of Saudi that there could be a deal eminent this afternoon in the conflict in Iran. Take that

with a great of salt. We'll see what plays out there. But that's my little market recap for you on the day, generally a positive one. A couple of things I wanted to note today. One mainly is about inflation. I've spoken about that yesterday as well, but the slight and modest re-rating of what terminal fed funds will ultimately be as Kevin Warsh comes into that chair. The economy is strong. And so what you've seen is the rate of change of demand, the growth of demand, outstrip, the rate of change and the growth of the supply and goods and services. So that in and of itself isn't going to cause prices to rise. But when you couple that with the rising money supply, then that's what we're seeing here.

We know that because if you strip out food and energy from all of the components. So if you look at CPI, if you look at PPI, if you look at PCE, all of those numbers are elevated and all of them in the core space. So that's what's going on. In a free market economy, all impediments removed. I call those impediments things like over-regulation and over-taxation. Removing those, you get a market that will ultimately meet demand, and I'm not overly worried about it.

There's no reason this market is any different. So I think the increase in goods and supplies will end up meeting that demand. But for now, we're seeing the anomalies in the inflation numbers. And then, of course, if you get a reopening of the Strait of Hormuz, that alleviates a lot of pressure on inflation. But all that to say, it isn't that we're changing our fees. on a 1% real Fed funds rate, that's the same. The difference is simply that the goalpost has moved because inflation was deemed to be two to two and a half and now it's looking at more like two and a half

to three. That puts Fed funds rate slightly above where it is now at 350 to 375. So if you end up at a four handle, so be it. I don't personally view that as necessarily a bad thing. Remember, that's a good thing for risk assets. First off, generally speaking, it's a positive environment for the overall economy and it's frankly where we had fed funds for our entire lives until the zirp period here the last 20 years so take that for all what it's worth here it isn't all that bad okay so let's take a quick look here a couple of things we have four pieces of economic data we've got housing starts i'm going to call them in line but they were just a little bit better than expected that's a 1.5 million unit a number out there on housing start that's pretty good we'll take that jobless claims we're totally in line we got a 209 number

they continue to be healthy forever we were in the 225 range and we've just driven lifted lower to the low 200s. That's good. And then we've got a flash manufacturing PMI number today that was pretty positive. We got a 55.3. That's a robust number. We were expecting 53.7 already a robust number, but this blew through that. Again, it goes back to what I'm saying about demand and the economy and CAPX and all of the things that are driving it. And then on the services side, and this is actually, believe it or not, a pleasant surprise to me, but it was actually a little weaker. You had a 50.9 versus a 51.5. And I say that as a slight positive because if you get goods inflation and then services that can come off a little bit, those two things can equal out.

And frankly, services is two-thirds of the economy. And it's a little bit more powerful there. The question in there on Ask TBG that I answered was about why we would cite all these numbers versus expectations. Why don't we just cite them versus the prior period to sort of depict a rate of change or a trend? Yeah, I'm all for that. And when it's relevant, we do do that. But the problem with it is that there are so many anomalies and these can be just things. They can be seasonal. Simple as that. It could be weather related. Could be all these different things. Of course, geopolitical events that just cause anomalies.

So if all you're citing is a rate of change, it doesn't capture what's really going on in the world. And really, it doesn't tell you if it's good or bad. So it doesn't give you direction on markets or what to do or any of that. So if you cite things versus rate of change, but then more important, I cite them against expectations. You're taking into account a lot of those things, which is more important, number one. And then number two, you also have to realize that markets have already priced in expectations. And so it's important to just just, just, judge numbers versus what markets are already expecting so that you know which way markets are

likely to move and how they're going to react and what to do. So it's a good question, but I think it's a clear answer. I hope it is. And any follow-up on it, just let me know. But with that, I'm going to let you go. Again, I just want to give a quick shout out to the High Tower leadership team. So Larry, Dan, Doug, Randy, Patrick, Scott. Great couple of days and meetings. You guys really deserve the kudos. It was top-notch. And we appreciate it very much. With that, I'm going to let you all go. Have a good evening. Reach out with questions. We love them. Thank you. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC,

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