The Dividend Cafe - Thursday - September 18, 2025

Episode Date: September 18, 2025

Market Update and Fed Rate Impact Discussion - September 18 In this episode of Dividend Cafe, Brian Szytel from The Bahnsen Group gives a market update on September 18th, detailing the DOW's performance with a rise of 124 points following the Federal Reserve's interest rate cut of 25 basis points. He highlights the positive movements in the S&P and NASDAQ, and discusses the implications of rising 10-year yields. Sitel provides insights into the historical impacts of rate cuts on the stock market, explaining how short-term and long-term rates affect small caps and Main Street respectively. Additionally, he addresses the complex dynamics of the Fed's balance sheet and its broader economic implications. He concludes with key economic data, including a substantial Philly Fed Manufacturing survey and improved jobless claims, reflecting a positive market sentiment. Viewers are encouraged to reach out with questions and to look forward to another detailed analysis in the next Dividend Cafe episode. 00:00 Introduction and Market Update 02:19 Impact of Interest Rate Cuts 03:15 Fed Balance Sheet and Economic Indicators 04:44 Economic Data Highlights 05:20 Conclusion and 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 into Dividend Cafe. This is Thursday, September the 18th. Brian Saitel is with you here from our West, Palm Beach, Florida, office here at the Bonson Group on a rainy day here. An update overall at markets. The Dow closed up 124 points. We got some follow-through from some decent movement or reaction, I suppose, from the Fed movement yesterday, on interest rates being cut by 25 basis points. The S&P was up about a half of a percent. Decent move there, and then the NASDAQ was up about nine-tenths of a percent. Ten-year yields that crept up yesterday as well, a couple of basis points, continued.

They were up about four basis points that we closed at 411. Remember intraday yesterday, we did cross 4%. We got to $3.99, and now we're back to $4.12 here on tens. So modestly higher on interest rates, that's not necessarily a bad thing. It's the bond market telling you that there may be more growth in to come here in the future. I don't think it's necessarily related to an excessive amount of borrowing here, but time will tell on how that plays out. Again, I cited yesterday, both credit spreads remain very tight, and then on the long end of the curve,

It'll be interesting to see how the shape of the yield curve here develops over the next couple of weeks. In the meantime, I thought it was interesting to just look at the number of different large sell-side banks citing different historical periods of rates being cut in what that means as far as percentage terms in the stock market the next 12 months. Think of all the major ones. They all had something to say about it. For the most part, they were positive historically, so they were statistically citing things like that. I think that's all fine and good. certainly not one to say that looking at history is a waste of time. I think there's lessons

qualitatively that are very important, and that tend to be evergreen, and that tend to either repeat or somewhat rhyme in the future. But from a percentage rate of return, it's about as silly as saying that the month of September is assuredly going to be lower because of seasonality. The more you count on them, the more they'll end up coming back to haunt you. We'll have more with you tomorrow on Dividend Cafe as far as the Fed, and what it means to the economy and some different qualitative things that we'll go through with you as well. But the question on the day was about how interest rate cuts on the short end with Fed funds help small cap stocks and Main Street more than the Fed balance sheet, which helps the big guys.

There's definitely some truth to that. And so I unpacked it a bit. When you look at Fed funds rate, it affects every lending rate. So think of auto loans, think of credit cards, think of adjustable rate mortgages. Basically, most of what the consumer pays when they borrow money. So, of course, disproportionately from a disposable income standpoint, yeah, it affects Main Street, I suppose, a little bit more in that regard. Small caps tend to borrow, and they borrow on floating rate loans, meaning short-term interest rates that are floating. And so when rates rise, it affects them more, and when rates decline, it affects them more as well.

So I'm tracking the two first comments. The only thing that I wanted to unpack further, and I did the best I could to answer this particular person in a reasonable period of time, because I could go on and on about the subject. The balance sheet is a little more complicated. When you're expanding the balance sheet, you're technically moving bank reserve to banks, but you're not necessarily injecting it and increasing the money supply or M2. That money would have to actually be lent out. And so you're essentially providing grease to the wheels of the financial system, which otherwise would freeze and cause potentially massive amounts of unemployment. And I could go on and talk about the composition of assets that the Fed was able to purchase in different periods of dislocation and how that can convolut some of my comments here, but I'm going to save that for another time. My point is just the Wall Street mechanism in the Main Street deal when it comes to bureau people with jobs and paychecks that are living paycheck to paycheck to survive and provide for families. Those things are very interconnected. And then the comment on as far as the Fed balance sheet going lower because the rally continues, I'm all for it on both counts. I'm just not convinced that the quantitative

tightening program that we're on is going to be very lasting. And I don't think it will be linear either. I think once the genie is out of the bottle with the ability to expand that rapidly, I don't think that's the last time that we'll see that happening. I put a chart in there today on the delta on year-over-year change for credit card interest rates, 30-year fixed mortgage rates, and then 48-month auto loans to the first point on how that can affect, quote-unquote, what I've called Main Street, those consumer borrowers. And then there was two other pieces of economic data on the day. It was the Philly Fed Manufacturing Survey.

This was a huge blowout, much bigger than expected number for the month of September. And a lot of new orders were baked into it. So I call it good across the board. The consensus was only for a three handle and we got a 233. So a big beat there. And then we had initial jobless claims that were better than expected. We got a

231. Last week was in the 260s. We're starting to move back down to more of a normalized amount of initial jobless claims. We also had continuing claims that were a little better than expected to. So some better jobs data following the Fed action yesterday. And then an otherwise upmarket overall, which makes sense to me. So with that, I'll let you go. We'll have a very nice dividend cafe for you in your inbox for tomorrow. Reach out with questions. We get a lot. They're

always good. I appreciate them. And if I don't speak to you, have a good weekend. Talk to you later. 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 investment process is free at risk. There's no guarantee that the investment process or investment opportunities referenced TIRAN will be profitable. Past performance is not indicative of current or future performance and is not a guarantee.

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