The Dividend Cafe - Tuesday - August 19, 2025

Episode Date: August 19, 2025

Market Update and Economic Insights on Dividend Cafe - August 19 In this episode of Dividend Cafe, host Brian Szytel provides an update on the market activities of Tuesday, August 19. He discusses the mixed performance of major indices, with the DOW closing slightly up, while the S&P and Nasdaq experienced declines. Brian highlights a notable sell-off in technology stocks and mentions how value stocks outperformed. He also covers economic news, particularly around housing starts, and the complicated sentiment among home builders due to interest rates and affordability concerns. Additionally, he answers questions on the Federal Reserve's balance sheet and its impact on inflation, and the role of money supply and velocity in measuring inflation. Brian concludes with a recap of stronger-than-expected Q2 earnings, discusses expectations for Q3, and mentions the anticipated focus on employment figures and potential Fed interest rate cuts in September. 00:00 Introduction and Market Overview 00:59 Housing Market Insights 02:24 Inflation and The Fed's Balance Sheet 04:16 Q2 Earnings Recap 04:56 Looking Ahead: Employment and Fed Actions 05:05 Conclusion and Sign Off 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. Welcome back to Dividend Cafe. This is Tuesday, August the 19th. Brian Saitel with you here. Today, on a fairly quiet day overall in markets, in somewhat mixed, the Dow actually closed up just a little bit. It was up 10 points. SMP was down half of a percent. It's actually more closer to six-tenths of a percent. Nasdaq was down 1.46% on the day. Bit of a sell-off. S&P and Dow are both positive earlier in the morning and then lost some steam. And then this was a much bigger sell-off today in technology and some of those more overvalued parts of the market.

A lot of the value names really outperformed across the board. On yields, you had the 10-year down about three basis points that we closed at 4.31 on the 10-year. So again, interest rates have been oscillating between roughly 4, 20,000. 25 and 435, even through the employment figure that was a disappointment. And also through the numbers that we got both on CPI and also on PPI. Interest rates are fairly well anchored at this point. A couple of pieces of economic news out in the calendar we had largely around housing. So we had new housing starts for July, up better than expected. We got a 5.2% increase on the month. That's up to 1.428 million. That's ahead of about 1.31 million on the estimate. So a decent

amount and actually is surprisingly better in July for housing starts. You also had June get revised up a little bit as well. The reason why it was a surprise is because that's been the opposite and we know from home builder sentiment what's really going on in that market right now, which is prices are starting to be cut to get inventory to move and builders are sitting on lots and that market is just slowing down and mostly it's related to interest rates and affordability, as I've written about a few different times. And in fact, the second part of the number showed that because if you look at new permits going forward for July, they actually were down 2.8% for the month. So take the housing start number with a grain of salt here going forward. We've got permits that are lower. And that's

actually the seventh time in eight months now that we've had a disappointment on new permits. So that stuff is just going to flow through to actual housing starts. There's no way around that if permits are going lower. To my point about builder sentiment, we're now at 60% of builders saying that demand is lower than expected. That's up from 50% when it was measured in May. Deterioration there on the new housing side inside of the numbers. You also had two questions there today, asked TVG, mostly, both were inflation adjacent, I would call it. One of them was about the balance sheet on the Fed. Does that cause inflation? The answer is that it does not, since we know history has proven so, and we can look at quantitative easing one, two, and three through

the financial crisis and coming out of it, and understand that we took the balance sheet up some four to five trillion dollars, and we had some of the lowest inflation on record in this country. You can also look at the Eurozone during different periods of balance sheet expansion, and also particularly Japan, which is a whole generation long of an enormous bloated balance sheet continuing to expand and just sub one percent inflation the entire time. So indebtedness, as we've written about, is more of a deflationary and phenomenon than it is otherwise. But there is lots more to say about that. We've written about it.

In fact, if you want to Google the dividend cafe, it was called Japanification about a year ago. So that aside, second question now, also inflation related, was about that the government measures things like goods and services and the prices of them. Why doesn't it just measure the supply of money and the velocity? because that's what goes into that equation. The answer is that, look, the equation does contain all of those components. You've got money supply. You've got the velocity that's also in their prices. It's measuring the amount of how prices are changing,

and ultimately to consumers that drive the underlying economy. What monetary policy is attempting to do is increase the cost of money to hopefully spur demand or decrease demand. Now, they can't do that directly, and that's been proven. But since all these things are related, that's the indebted. ever anyway. So it's a good question, but ultimately since the inflation amount is tethered to both velocity and also the total supply, they're just all related is the answer. Last thing in there was just for recap on Q2 earnings. We got a $35 billion stronger than expected. That's a big

number on Q2. We also had 10 out of 11 sectors that were better than expected, 70% beat expectations. That's much better. Materials was the big laggard in there. And there was a variety of reasons around that, largely tariff-related. But the overall underlying theme continues to be very top-heavy, very overvalued in that particular technology sector. But across the board, it was very strong. As we get into Q3, I suspect earnings will remain good. The guidance looking forward is what will be paid attention to the most. And that's going to be some time from now. Until then, we've got employment that is on the radar and being looked at heavily. And then September, when the Fed is likely going to start cutting interest rates again.

So in the meantime, I encourage you to reach out with your questions. Please, as always, if I don't speak to you, have a lovely evening. And I'll be back with you tomorrow, which is Wednesday. This is Brian Saitel signing off. Have a good evening. Thank you very much. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors, a registered

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