The Dividend Cafe - Thursday - September 3, 2026

Episode Date: September 3, 2026

Brian Szytel recaps a strong Thursday rally in risk assets after a modestly positive prior session, citing improved market breadth, dovish comments from Fed Governor Waller, slightly lower rates, and reduced September hike odds from 68% to 50/50 amid a split committee, easing inflation, and a normalizing labor market; he also notes political sensitivity ahead of November midterms. The Dow rose 624 points, the S&P 500 gained 1%, and the Nasdaq rose 1.4%, with strength in mega-cap tech and semis. He highlights wide sector dispersion (88% of financials above the 200-day vs. 94% of semis down 20% from highs), low volatility and shallow drawdowns, and historically positive 12-month periods after midterms. Economic data were solid: jobless claims 206K, ISM services 55.4, and a slightly narrower July trade deficit. He addresses a question on Trump Media’s Truth API, arguing it’s ethically questionable but not a major market needle-mover for long-term investors, and signs off ahead of Labor Day weekend. 00:00 Market Rally Recap 00:26 Fed Talk and Rate Odds 02:30 Sector Dispersion Signals 03:04 Volatility and Midterm Patterns 04:28 Economic Data Scorecard 05:00 Truth API and Trading Edge 06:53 Wrap Up and Weekend 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 with you. This Thursday evening, September the 3rd, on a follow-through update, we had a modestly positive day overall in equities yesterday. We had a more robust day today, and the internals were much stronger today. I mentioned how weak they were yesterday. But advances to decliners, breadth was solid. It was just a strong all-around rally day and risk assets. And it was really attributable to a few things. One, Fed Governor Waller had dubbish comments. He basically just said that if CPI came out and showed progress,

that he'd opt to holding rates as they are rather than raise them. Odds for the Fed futures actually came down. We were to 68%. Chance for a rate hike in September on Tuesday, an hour of 50-50. I think markets are just digesting. The reality is, There was three dissenters last time, but it's a split committee at this point, even if Warsh wanted to get it done, and my comment really is, if you think about what's going on

with the split committee, to begin with, inflation numbers that are moving in the right direction, arguably slower than they'd like, but they are moving in the right direction. And then an economy that is resilient, but a labor market that is good, but showing at least some signs of normalization and, I guess, normalness, quit higher rates are both lower, things like that. There's an argument to be made that we're coming out of this Sturmish in the Middle East and inflation pressures. I've already hit the consumer with higher oil prices. Inflation's moving in the right direction. Why hike into that and cause more weakness? And so there's just this debate going on. But aside from those things,

remember, this is midterms coming in here in November. And so it's politically untenable to hike rates right before midterms and not get a lot of heat over that. Now, Warsh may not care about that. I suspect that he's an extraordinarily smart individual and is aware of all these things and is likely doing it the best of you can to job on financial conditions a little tighter in the meantime without having to actually do that because it's an uphill battle to get a split committee to go in a direction during an untenable political time to do so. So there's just a lot at stake and a lot going on. But on the day, you had the Dow close up 624 points. So good rally day. You had the S&P up a percent, NASDA, a couple of little more, up 1.4%.

So it was just a broad-based return on some of the MAG-7s, some of the semis, pretty much across the board. And part of the reason, again, his interest rates came down, tenure was only down a basis point, but the rest of the curve shipped it a little lower. The comments that I also wanted to make aside from those things is the dispersion inside of sectors in the market right now is pretty vast as far as performance. You have 88% of financials above their 200-day moving average. That's quite strong.

And at the same time, you've got 94% of semiconductor stocks in a bear market down below 20% from their highs. So it's just an odd thing on the semis to be able to say you've got a mini bear market within the largest semiconductor bull market, and you're still basically near all-time highs. So interesting times indeed. The other interesting thing about this year is volatility has actually been low. I think if you polled most market participants, they'd say that it's been up and down year, but that's technically not really that true. You did have volatility around February

March with Iran, but the max drawdown was only 8%. The average drawdown in history is about 14% a year. Now, we may see that before the end of the year, frankly. But if you chalk it up to also midterm years, it's actually a larger drawdown of about 18% on average. So for all that is, really hasn't seen much volatility, and it's the continued sort of benefits and story behind the economic productivity gain and spending that's occurring inside of CAP-X for AI.

But the other thing, more of a historical factoid, but technically, it is interesting that this is 19 out of 19 times. Every single 12-month period following midterm elections has been positive since 1950. Again, I wouldn't call that a prediction. And if anything, as a contrarian, I'd say there's some flip side to that where maybe this is, in other words, it won't be the 20th this year. But I don't take a lot of stock in that, pun intended. But what I do say is it's factoid nonetheless. And then also, again, when you think about what actually kills bare markets, they don't die of old age, remember?

They die because the Fed murders them. That's a very old and longstanding Wall Street adage. Initial jobless claims, I'll chalk it up to good. They were in line 206. ISM services also good. They beat expectations at 55.4. And I'll say that's two out of two for good. And then he had trade balance in July, came in slightly narrower with the consensus, but still $88 billion.

But I'm also going to call that good relatively speaking to what was expected. So a three out of three day on the economic side, some rate reprieve, a couple of things on the market that were positive. And then voila, there you have it. Question in there today was about this truth API launched by Trump media and being able to post data about Trump's administration's truth social accounts available to investors for up to $100,000 a month. It's basically front running market news that's going to hit the wires about a second before it actually does. You can subscribe and pay for it if you want that information and potentially trade around it for the one second, the advantage that it will give you. The question is if that destroys the level playing field, look, aside from whether I think it's ethically right, which I don't. So aside from that, though, but can hedge funds profit for a one second advantage for a payment that they subscribe to?

Sure. Do they already do that? Absolutely. And millions of dollars they spend on this stuff. So they've got satellites looking at traffic in China to see if there's certain activity. They can look at electrical output and how much light is coming out of Australia in the middle of the night to see what's going on from an economic standpoint. They can look at shipping.

They can look at all these different global factors all the time. They can have as much money spent on data collection and an advantage as they can ultimately afford, which is a lot because they're profitable. But this is just another one of those pieces of data points. So as a needle mover in that broader landscape of what hedge funds and high frequency traders already do, I do not believe so. Is it something that we're going to subscribe to? Absolutely not. And do I think it matters for long-term investors, which is those that need their money to compound over a long period of time to build wealth? No, I don't think it matters at all.

And for those that are day trading, more power to you. If you think that gives you an advantage, I just don't subscribe that it does. And certainly don't believe it changes the underlying market in a meaningful way. I guess a silver lining that people may miss sometimes is the more market actors trading and the more information, that's making the market more efficient, not less. So it sounds a little evil, but really there's a benefit of liquidity and price discovery and all those things. Markets are very efficient already. It was a good question. I appreciate it. But I'm going to let you get into your presumably coming up a three-day weekend starting tomorrow afternoon. We've got Labor Day. So I wish you well and have a good weekend. Reach out with your

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