The Dividend Cafe - Thursday - September 10, 2026

Episode Date: September 10, 2026

Brian Szytel reports another broad market decline (Dow -316, S&P 500 -0.5%, Nasdaq -0.7%) alongside a sharp oil rally (WTI ~+7% to $102; Brent $107), with oil up about 20% over the past week and a half amid Middle East tensions and threats to key Red Sea chokepoints including the Bab el-Mandeb Strait. Markets are focused on CPI ahead of next week’s FOMC meeting, with discussion of a roughly 70% chance of a rate hike and political pressure from upcoming midterms; he frames possible policy levels using core PCE (3.3%) and current fed funds (3.50–3.75%). He cautions against trading headlines and says rate moves are being sensationalized versus 2000. He also discusses tariffs as generally inferior to free markets, often retaliatory and effectively a consumption tax, but sometimes justified for national security or to counter unfair foreign policies. PPI and jobless claims were benign and in line. 00:00 Market Wrap and Oil Spike 01:08 CPI Preview and Fed Bets 02:40 Core PCE and Terminal Rate Math 04:52 Why Not to Trade the Noise 05:23 2000 Bubble Comparisons 06:57 Bull Markets and Fed Risk 07:28 Tariffs Explained Pros and Cons 10:03 PPI Claims and Closing Thoughts Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividing Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Good evening and welcome back into Dividend Cafe. This is Brian Saitel with you here this Thursday, September the 10th. And another down day in markets overall. And meaningfully, although we closed off of the lows on the day, but the Dow closed down 316 points, S&P 500 down one half of a percent. NASDAQ was down two-thirds of a percent. And you had the bigger news, which is that WTI was up almost 7 percent. We closed or are trading currently still.

On WTI at 102, Brent is now at 107. And so the rise in oil has been about 20 percent or so the last week and a half. So big move higher in oil, again, all based around Middle East tensions and flare-ups and kinetic action and all that stuff. And there's more talk of the Houthi control over. the straight in the in the red sea there and that is the Bob Elmond Deb straight so there's two chokeholds where all flows through and both of them are under threat now and or diminished at least in some capacity as this thing unfolds but that's what's going on really in markets and so you've got stocks oscillating around that again this is like the fourth down day in a row here you also have

more notably two things happening one you've got CPI out tomorrow and so markets have been a little rudderless I really do think that they're paying attention to CPI because there's next week is the FOMC meeting. So you've got the Fed setting their policy rate. And with new information and comments around that, Warsh was exceptionally hawkish in his statements. And markets are coming to grips with that. And the move hired a day wasn't just about oil. It was part of that, but it was also coming to grips with now a 70% chance that they are going to, in fact, hike in the next week. Because you do have midterms in November. And so you're in do it now or wait until December mode. And most other or many other major central banks, including the ECB.

be have raised. And so there's a higher likelihood now, like I said, 70% that he's going to go ahead and go. And the question will be what kind of votes he can get. He needs, there's 12 voting members. So you need at least seven of them for a majority. But even if it was 7.5, that's not a real robust majority. And you also know there's a lot of political tension on this with midterms. So either way, I don't suspect that the POTUS is going to be highly supportive. In fact, it'll be the opposite of that. But anything other than cutting rates, in other words, is not going to get support. there's cooler heads and frankly more educated heads at the helm of the Federal Reserve than leading the executive branch in that regard. And so I'm glad he's there to set policy the way it

should be based on their mandate, which is having full employment, which we do and having stable prices, which we do not. And so in that environment, you're likely to set policy rate to be a little bit more restrictive. But what I wanted to unpack a little bit is if we think about one of the main criteria the Fed looks at, it's core PCE, technically Warsh set of Jackson Hole he's looking at headline, but I'm taking that for what it is grain of salt, and just historically it's been core PCE, which kind of makes sense. Headline's going to include the volatile energy stuff around Iran, and supply chain shocks like that just historically have not been a precedent to set policy rate that is more lagging in effect.

It's hard to have a supply shock that can end in three days with a deal. Wouldn't that be great? But that is possible in set policy that can adjust over the next year and a half. So you tend to take those things out. But my point is just Core PCE 3.3%. If you assume that a terminal Fed funds rate is somewhat aimed at a 1% real rate, so 1% over inflation. Core CPI is technically only 2.5. So that puts you at 3.5 on a 1% over.

And Core PCE is 3.3, and that puts you to 4.3. So my point is, that's basically where we are now in futures. That's 50 basis points. You can think about it from where we are now. Remember, Fed funds is a range of 350 to 375 right now. So if they raised it up by 50 bibs, that's going to get it up towards that 4.3 or 1% over core PCE. None of this is perfect math. Okay, I'm just giving you ranges of things and the ways to look at this and to frame it.

And ultimately, what may be used as a convincing tool inside of the chamber and FOMC to get the committee votes that is needed. This number has been elevated now for years, not just a short period of time. This is coming out of the 22 era. So they need to get a handle on it. It's not a foregone conclusion. Midterms do make this difficult. Having enough dissenters makes it politically untenable too for the fit chair. In either way, Warsh is sticking his neck out there if he does something like this because

he's going to be the one in the scapegoat Hotsie, both if it's received poorly by markets, which it may well, or it's received poorly politically in midterms, or both. And he's doing that because he believes it is right. And I respect him for doing that. we all have to see here. We've got a week to go. But that's what's kind of going through markets. There's just a lot to chew through when you think through all of that.

As far as what that does to the market and how you should try to trade around it, frankly, you shouldn't, because it's not tradable. First, second, keep in mind, like, 10-year yields going up 80 basis points. I know the media is making that a big deal. I keep hearing the words, you know, blowing out and someone texted something about a dumpster fire because the two-year was up. Look, guys, I'm just telling you, in our lifetime, rates move a whole heck of a lot more than this. So we're not in an era of a volatile rate environment. We just aren't. The media stuff is just a little bit sensationalized.

Remember, the last time we had a blow off top in equities, and then a three-year bare market was in the year 2000. And then what we had right after 2000 was not only just a crumbling NASDAQ because of the lack of any positive earnings from all of the high-priced Internet stocks. but you also got hit with September the 11th, and that anniversary is tomorrow, and we will never forget. There's more on that topic coming in Dividend Cafe for you that I will let David unpack in a much more robust and elegant way than I possibly can. But the time period was different, in other words, but just keep in mind, back then, rates rose from four and a quarter to 6.7. So that's three times more than they've increased this year, and we're dealing with the war with, which is the really main culprit. Also, just remember, like, the NASDAQ was up 130%.

That's 130 from January of 99 to March of 2000. Okay, the NASDAQ this year is up 12%. And also, remember, the multiple has compressed this year, not expanded, it's compressed. My point is just this market is, yeah, it's gone up four years in a row, but I'm not looking at things like I am in the year 2000, and rates have not moved like they did in the year 2000. And one of the ways oftentimes you know that markets are really running away is when it just drags up interest rates and growth expectations and inflation expectations with it. And you can't really say a 10 year up 80 bibs is doing that in a way it is, but just not in a blowoff way.

So keep that in mind. The last thing I'm going to say is the old Wall Street adage, the bull markets don't die of old age, so four years should mean nothing. They get killed and murdered by the Fed. That's history. That's what the adage is and that's what the saying is. And this time around, if we're talking about 50 bips, I don't see the similarities to 2000 when they raised almost 200. And I don't think 50 basis points is enough to necessarily kill this market necessarily in and of itself. War breaks out, expands, lots of things can go on geopolitically to change that tune, but that's what we're looking at now.

Questioning there was about tariffs. Are they good? Are they bad? And when can they be good? Things like that. So the short answer is they aren't better than the free market. Okay. But that just presupposes the international global trade market is actually free to begin with.

Technically, it is not. Countries will set policies to manipulate currencies, to manipulate different trade and businesses, to protect their own national security interests. And so when we're talking about a tariff and what this administration had set out to do, and this isn't a comment pro or for or against, but they're just trying to level the playing field on other country's policies. They're trying to set it as an equal. When you have a trade imbalance, what's supposed to happen is,

the imbalanced or the country that is buying more than it's shipping has a currency that weakens, and then they end up shipping more because their stuff gets cheaper, and then it corrects. And that's a natural way of trade. When that doesn't happen for 30 years, one has to scratch their head in wonder, I wonder if there's policies being implemented overseas that is intentionally keeping currency weaker than dollar, number one, and or number two, that is incentivizing certain industries or putting other industries that are non-domestic for them at a disadvantage. And that's, of course, what is happening and happened.

And so tariff is a final sort of retaliation. The reasons why I think that they're an exercise in futility is one, just like what I just said, they invite retaliation. So you do this to Canada, they're going to do it back. And that's just the way things work. So that's not very productive, number one. Number two, a tariff is a consumption tax on us, the people that buy the stuff. So that just means that we're eroding the benefit of a lease.

getting cheaper goods, our flat screens are 500 bucks these days instead of 5,000. There's a benefit to that. The other money that I'm saving, I can invest, I can buy other things, I can consume, I can start a business. It's not all bad, in other words. And then it doesn't change the mass of rich countries exporting their currency to buy more stuff or consume more stuff than they produce. That's what the U.S. does.

We're a debtor nation because of it, and we flood the world with dollars, and the dollars is the reserve currency as a result. So I'm just being Deadville's advocate. It's not all bad to be a debtor nation. When done within reason, it is bad when it gets to an excess, and it's the same thing with tariffs. They're good when they can protect national security interests, and they're bad when you say, everybody who gets 100% tariff, you get one. That's not the right way to treat them.

It's not a monolithic approach to raise taxes, and it's supposed to be done to level the playing field on things that are inefficient, and there's other policies overseas counteracting the natural way of things. Two quick things on that economic calendar. We had PPI today important. We got a 0.4% on headline, which was slightly cooler at 0.2 versus 0.3. So look, they revised July a little bit up. Those numbers are for August. So take that with a great assault.

That's very much of a benign number. That's about what markets had expected. And then you had jobless claims today right in line. So, gosh, a lot of chew through there today. And it's certainly a longer podcast than I usually send. But I hope it was helpful because there's a lot going on. There really is. So if you have questions, I encourage you to reach out during this time and we'll fire back

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