The Dividend Cafe - Tuesday - July 14, 2026

Episode Date: July 14, 2026

Brian Szytel recaps a mixed but positive market day with the Dow up about 45 points, the S&P 500 up 0.4%, and the Nasdaq up just under 1%, helped by a broad financial-sector rally despite somewhat mixed large-bank earnings. Oil rose with increased Middle East tensions and volatility around the Strait of Hormuz. The main story was a better-than-expected CPI report: headline CPI fell 0.4% versus expectations for -0.1%, and core CPI was essentially flat (-0.02%) versus a forecast of +0.2%, bringing year-over-year core to 2.6% and pushing the 10-year yield down about 3 bps to 4.58%, with Fed futures repricing to lower odds of hikes. He notes one print isn’t a trend, highlights a stronger NFIB Small Business Optimism Index, and explains why deflation is worse than modest inflation, citing Japan’s long period of minimal growth. 00:00 Market Wrap and Earnings 00:45 Oil Jitters Middle East 01:01 CPI Surprise and Rates 02:39 Fed Talk and Futures 04:12 Small Business Optimism 04:26 Inflation Versus Deflation 05:35 Japanification Case Study 06:34 Wrap Up 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 back into Dividend Cafe. This is Brian Saitel here, your midweek host on Tuesday, July the 14th, on somewhat of a mixed day, although biases to the upside. We actually close positive. Dow is up about 45 points. S&P up about four-tenths and NASDAQ up just under a percent. about 95 basis points on the day. So positive across the board, you did have some different earnings come out, particularly in some of the large banks and the financials. Largely, they were good.

Most of that sector was really up today. So there was a financial sector rally pretty much across the board. Some of the bank earnings were a little mixed, so I wouldn't call them knocking it out of the park necessarily, but stocks were up and that tells you enough of what the markets thought about it. Other than that, we had increase in kinetic energy back and forth in Middle East. East last night. And so oil was up a little bit on the day. You had WTI up a little under 2%, and also some just rise in volatility around the back and forth around the Strait of Hormuz. That said, what the big news really was a drop in CPI on core. This is the most important part of it because we know headline includes food and energy, and we know energy has been quite

volatile since February when this thing started in the Middle East. So when you move that out, What we saw last month was a rise in core, and that's not a good thing as far as where Fed funds has to go. This time around, we got headline that actually moved 0.4% lower on the month. So it was a decline. That was better than expected for a decline of 0.1%, which is what consensus had. Obviously, that was much better than the may increase of 0.5. So good news across the board on headline. That said, we already knew that because oil has come from 95 to 75 at the time of the end.

of June. So we knew that was going to happen on headline. But when you move out energy, the more significant number was core. And we got a flat number. It was actually just a little bit down for the month, 0.02%. But it was flat. The forecast was for a 2 tenth of a percent increase. So that's meaningful. We got a flat number. Obviously, if you annualize that, you get a flat core reading on the year. What that did on the year numbers, it brought it down to 2.6%. So that's a good thing. It's not all the way back down to two, but it's much closer in that direction and a very positive development overall. And so with a weaker core number who had interest rates that moved lower, tenure was down about three basis points. We closed at 458. So that's a bunch of numbers they

threw at you. But basically, better than expected inflation numbers, that's good. There's been a lot of hawkish rhetoric around different Fed officials. Waller yesterday was saying that a rate increase was needed. Even today, Warsh was at the House Finance Committee meeting on Capitol Hill and was really quite hawkish. Wanted to be just resolute about higher inflation being unacceptable and that was his main goal and his new regime at the Fed is going to do that. What he said at Centra in Portugal a couple weeks ago at the ECB conference was that he did think there was a progress made on inflation, but that it was too early to take any sort of victory lap or anything like that. So anyways, today's number reinforces a positive direction, and ultimately you saw Fed futures

start to reprice in a lower chance for Fed rate hikes this year. What Warsh has described is essentially for the next meeting, there'd be a good family fight, quote unquote, where I know some officials want to hike, some want to hold, at least one wants to decrease rates, but all that to say, this number should reinforce some of those that want to hold, and ultimately, if I were a betting man, which I'm not, I think that's what they will do, and ultimately not just at the next meeting, but through the remainder of the year. One of these prints doesn't make a trend. We need multiple months in a row to reinforce that you have the core number moving back in the right direction. We know the Middle East stuff

is volatile. We know it can change overnight. It's hard to even really talk about. All I can tell you is that the energy market and the futures market are pricing me in an end to it at some point in the near future. The other piece of economic data that was out was the NFIB small business optimism index was better than expected. Pretty meaningfully, two points above last month. That's a positive thing on optimism and small business owners. But the question that we got in for today was also about inflation. It was about for all the talk of it being too high and what we're going to do about it, what's worse? Inflation being too high or what if it's too low? Because he's heard that's also debatable and bad, which one is worse? Seems like it's a tough moving target to get right. The 2%

target seems like an arbitrary number when a little bit below that is bad and a little bit above that is bad. So a tough thing to achieve. So here's my answer. The short answer on this is that deflation is worse than a modest amount of positive inflation. And that's why they set the 2% target that way. There's a buffer to it. Those numbers can be off by about 1% in either direction. So if you have a slightly positive direction and prices, it encourages investment in consumption today to a slight amount. and that avoids the spiral of deflation, which can be even worse, because you have a decrease in prices, which creates a decrease in demand, which creates a decrease in prices. That's harder for the central bank to get in and stop. They have tools.

They can go zero on rates. They can even go negative. They can start buying assets. The best case study of all of this is Japan and Japanification, as we've called it. And what happens when you have that deflationary environment, you got zero percent real. growth in Japan for an entire generation. And you can say, I went to Japan and it still seems really nice and they have a high standard of living. And I'd say that's true. But they were also a dominant world player back in the 80s and they are literally not that anymore. And while still a sizable world

economy, no longer that same status that it once has, it just lost its competitive edge through a whole generation, call it 30, 40 years of no growth at all. The rest of the world kept growing, in other words. I think the debate over whether the inflation rate of 1% is too low or 3% is too high is a fair one. In other words, where is the porridge just right in that Goldilocks type of debate? But I don't think the debate over whether a small amount of inflation and negative prices, which one is better or worse is very debatable. It's very clear. So there's my answer and question for you today. I appreciate you listening. I will let you go and get back into presumably what might be a World Cup watching evening.

here on the semifinals, but if there are any soccer fans listening. With that, I'll let you go. Have a good evening. I'll be back with you tomorrow on David & Cafe. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with High Tower 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 ourselves securities. No investment process is free risk. There's no guarantee that the investment process or investment. opportunities referenced Tyrion will be profitable.

Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities, reference Tieran, 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 express or implied, representations 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.

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, the opinions expressed, are solely those of the Bonson Group and do not represent those of Hightower Advisors LSC 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.