The Dividend Cafe - Thursday - May 7, 2026

Episode Date: May 7, 2026

Brian Szytel reports a modest market pullback with the Dow down 313 points, the S&P 500 down about 0.3%, and the Nasdaq slightly lower, alongside a small rise in yields (10-year around 4.38%) and oil up about 1%, while year-to-date gains remain strong. He highlights the ongoing impact of stimulus via legislation enabling advanced expensing, encouraging corporate investment with lasting effects on profitability. Economic updates include initial jobless claims rising to 200k from 189k but still very low, Q1 productivity at 0.8 versus 1.4 expected, and construction spending up 0.6% in March. In Q&A, he explains high margins through index composition toward higher-margin firms, a shift to services, and operating leverage from productivity and post-COVID pricing power, and contrasts US economic advantages with Europe’s fragmentation and vulnerability to cheaper Chinese competition. 00:00 Market Recap Today 00:16 Why Markets Pulled Back 00:57 Year to Date Snapshot 01:09 Stimulus And Capex Boost 02:09 Economic Data Roundup 03:29 Q&A Margins At Highs 04:08 Three Drivers Of Margins 05:18 Europe Vs US Competition 06:13 Politics And Wrap Up 06:34 Final Sign Off 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 here from our Newport Beach, California office on May 7th. This is a Thursday. So you're almost to your weekend. We gave a little back overall in markets on the day. So we had a down day in markets. This was following two really nice up days here. So there wasn't a big catalyst to today's sell-off. This was most of the day. Mostly just, that's what markets do. They price things in, they go up, they go down each day. And this is still really close to all-time highs in the stock market. But on the day, you had the Dow give up 313 points.

S&P was down a third of a percent. NASDAQ was only down about 15 basis points. You did get a couple of basis points on 10, so interest rates went up here a little bit, as did oil prices recover just a small amount. They were up about 1%. So you got 10 year up about two basis points at 4.30. So across the board, sell off in both stocks and in bonds. That's what happens when the yields go up a little bit.

Bonds prices sell off. But overall, we're still hanging in there. This market is still pretty robust year to date. The Dow is up about 3.5%. S&P is up about 7.5. And NASDAQ's up about 11 or so on the year. So what I wrote about today was some more qualitative issues going on in markets. We've talked about the resiliency of earnings and how good things look.

And so the war in Iran and some of the energy prices have just been offset by. that resilience. But one of the other things that shouldn't be discounted is just the effect of stimulus. You had this OBBB legislation get passed, which allowed for advanced expensing from corporations. They were able to go spend money on durable goods, things like equipment, build factories, by property, expand businesses, and we're able to deduct that stuff. And so it did a couple of things that nudged them forward to invest in their businesses and then lowered the tax rate to pay for it essentially. And my comment in there is that does have a positive loop effect. You end up with larger businesses that are ultimately more profitable. That's a good thing.

And you may have been, like I said, nudged it forward a little bit with tax policy. But the lasting effect of actually having the factories and having the expansion is pretty lasting. That can last for some time. So I think that's a good thing to not to discount. The couple of things today in the economic side of the calendar, there was one, two, three things. One, we've talked about the labor market quite a bit. Initial jobless claims were at multi-decade lows. This was since 19, I think it was 69 last week. We got 189,000 jobless claim print. That's a very low number. This week we got 200. So up from last week, but still very low. The low 200s like that really is a pretty healthy environment for people that are getting laid off and filing unemployment. That's a low amount of people.

Then you had productivity for Q1 come in at 0.8. We were thinking it would be 1.4. That's a pretty decent. and miss on the productivity side. That's totally counter to everything I just said in my first paragraph about business is expanding and then productivity increasing over time. But these things oscillate. The productivity isn't a straight line. You have gains that we've known about from the advent of artificial intelligence, but it's not like that's going to be a linear paradigm. I take it for what it is. Then you had construction spending a little tenth better than expected. You got 0.6 for the month of March. So good to see housing, try to revive here, just a little. bit. Interest rates have obviously come down, but they're not back to where they were at zero.

Of course, they're at three and a half to three 75 on Fed funds, but any sort of revitalization inside of the housing front is welcome. Okay, so into the Q&A, this was a little longer one on the answer side from me today, but the question was, with margins at historic highs and not just in the AI in the tech sector, but broad-based, how is that possible with affordability on everyone's mind without triggering a slowdown. At the same time, Europe, for example, struggles with Chinese competition while the American consumer bears the cost of limited competition. And so it's multifaceted. And if you're reading this, then I would urge you to recommend take some time with the question. It was framed well, and it's thoughtful the way that there's different

parts to it. But I broke things down and just kind of took one bite sized at a time. This is my answer to it. When you look at the margin profile, it's three different things. Basically, you have the benefit of companies with higher margins gaining market share in a cap weighted index. So you have market cap growing in those businesses and then there are higher weightings inside the S&P 500. And then that drives some of the composition inside of the metric to make the margins look bigger in the overall index. You also have an economy really since the 70s that has shifted to making goods. So think of factories, producing widgets. So it's not making goods anymore as much. And now it's producing services. And services are, of course, higher margin businesses. They're asset,

light versus asset heavy. They're more intellectual property focused, and they just have higher margins to them. So it's economic paradigm and then a market composition paradigm. That's the first thing. Second thing in there is that there's operating leverage because productivity has worked its magic. We've invented things to make life easier, and we've been able to make more profits out of that. Technology does help. And then, of course, you had pricing power during rising prices after COVID, and those prices may have disinflated, but they certainly didn't deflate. And so the margins have been protected on that front. So that's my three-prong answer of why margins are higher. Other component to the question was about the difference of European

and in U.S. consumption, essentially. So yes, the U.S. has an advantage. There's a faster-growing economy, a more diverse economy, and it's one economy. The difference in Europe is that it's more fragmented and you have different jurisdictions. You have different things in different countries, aside from just the language, but there's just ways, different regulatory environments, there's different input paradigms with energy costs and things like that. And so you have a more susceptibility to a competitor like China producing cheaper things. And so all of those things matter and the difference between the two. But as far as why it hasn't triggered a slowdown, it's because of those other things. It's that the consumer has a strong balance sheet, that it is able to afford and absorb these higher

prices. And then there's a positive feedback loop with that positive economic phenomenon feeding onto itself. The last part of the question was about how politics might play into it. And I would say that it's on the margin. If you look at things like drug pricing or something and it's set with legislation and different political things, then I suppose that's a pretty big sector in that regard. But I don't know that drives the overall economic regime in either place fully. But take it from what it's worth there. But that's what I've got for you for today. That's my run-through of markets, the Q&A session, and some of the economic points. Like I said, this is getting into the weekend. So if I don't hear from you, have a good one. But reach out with your questions,

and we'll go back to you as soon as we can. Thanks so much. Bye-bye. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors, LLC. A registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors, LLC. This is not an offer to buy or sell securities. No investor process is free risk. There's no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced

Tyrion may not be suitable for all investors. All data and information referenced herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary and does not constitute investment advice. The Bonsor Group in Hightower shall not in any way be liable for claims and make no expressed or implied representation. or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced here in.

The data and information are provided as of the date reference. Such data and information are subject to change without notice. This document was created for informational purposes only that opinions expressed are solely those of the Bonson Group and do not represent those of Hightower Advisors or any of its affiliates. High Tower advisors do not provide tax or legal advice. this material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client's individual circumstances and can change at any time without notice.

Clients are urged to consult their tax or legal advisor for any related questions.