The Dividend Cafe - Tuesday - July 21, 2026

Episode Date: July 21, 2026

Brian Szytel recaps a Tuesday market rebound led by momentum stocks and semiconductors, with the Dow up over 300 points, the S&P 500 up 0.9%, and the Nasdaq up 1.3%, while the 10-year yield rose to 4.63% and oil climbed to about $84 WTI and $91 Brent amid the Iran war, pressuring inflation expectations and rates. With no major economic data, he focuses on demand-pull inflation and the lagged relationship between money supply (M2) and CPI, noting M2 is up ~3.5% year-to-date and nearly 6% over 12 months, suggesting inflation could bias higher 12–18 months out despite a cooler June CPI. He discusses the Fed’s inflation-fighting rhetoric, an estimated high chance of a rate hike before year-end, and potential headwinds to risk assets from tighter policy and balance-sheet shrinkage. He also explains that point moves typically refer to the Dow for public discussion, while deeper market analysis relies on the broader S&P 500. 00:00 Market Bounce Recap 01:02 Rates and Oil Move 01:37 Money Supply and CPI 03:05 Fed Hike Risk Ahead 04:52 Dow vs S&P Explained 06:41 Wrap Up and Q&A 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 to Dividend Cafe. This is Brian Saitel, your midweek host here on Tuesday, July the 21st. We got a bounce back in markets. They had been negative yesterday and positive day overall in stocks. And it was actually the opposite of what we've talked about in rotation because you had most. of the momentum stuff really rally hard. And while that has been down, sometimes these, for lack of a better way to describe it, miniature bare market rallies can be quite vicious. A lot of the semis were up

5 to 10 percent on the day. There wasn't any meaningful economic data out in the calendar for today, so I'm not going to spend time there. But I'll walk through a couple of different themes related to inflation, interest rates, and then to market overall. The Dow was up just over 300, 85 points on the day. So the significant move higher in the Dow. The S&P was up 9 tenths of a percent. The NASDAQ was up 1.3 percent. So again, cap-weighted far outperforming the equal-weighted part of the market. Interest rates also trended a bit higher. You had the 10-year up three basis points. We're now at 4.63. So that interest rate on tens has just been creeping higher. Part of that does have to do with the war in Iran and higher energy prices. We did get to move up on WTI today.

about 2%. So we're now at about $84 a barrel on WTI and about 91 on Brent. So not back to the highs of what the highest point of the war was, but definitely trickling back up on oil that leads into inflation expectations that leads into interest rates. So there you have it. That's my around the horn quick market recap. But you know what I'm talking about today is more about what drives inflation as an economic phenomenon. This is more or less more money chasing the same amount of goods and services causing prices to go up. That's a demand pull inflation. But the correlation between the money supply and CPI is highly correlated. It's just there's a lag to it. So an increase in the money supply, in other words, doesn't affect inflation day one. It takes about 12 to 18 months.

So what I wanted to include is a chart that juxtapose those two things together, the supply of money, M2, on top of CPI, which is goods inflation in my comparison. And then I overlapped it by about a year and a half roughly. And you can see that. But what I wanted to show you is that money supply M2 has been trending higher here year to date. It's up about three and a half percent, but over the past 12 months, it's up about almost six percent now. So money supply has been growing. The Fed's balance sheet has actually been slightly expanding as they're providing liquidity to markets as well. And part of those two things are correlated. But my point is that CPI, as we got in June, was lower. We got a cooler number. But because there's that lag effect,

and because we know the money supply is growing a little bit, we could also expect some level of revival. I'm not touting that it's going to skyrocket. I'm just saying that the pressure for the rate of inflation to be biased to the upside about a year and a half from now is there with rising money supply. And it's something to be considered. And so when you're scratching your head

and wondering why the Fed would raise rates, they're looking at all these different things. They're looking at employment, which is basically full, and they're looking at some of these other factors, both with the heat up in Iran and rising oil prices, that of course feeds in a headline, but then also some of these other structural things, both a strong economy and some of these things like the money supply feed into their calculus. So just keep that in mind as you take a look at both sides of the argument. And we're still in the camp of taking the under on anything

happening this month. But from what the rhetoric has been with Warsh and also fed governors lately, it's been more or less one-directional. It's been very much about fighting inflation and squashing it. And if they follow through with that, then you can see a rate hike. There is about an 85% chance that we're going to see one before the end of the year. And I know it's something we bring up a lot, but when you see markets just, gosh, they're just priced to somewhat perfection in some of these sectors. Something that isn't expected like this, I think can change the direction of things.

And part of the volatility, I believe, that you've seen in some of the most heated parts of the market. We call the momentum because everyone else does, but it's just the stuff that's gone up the most, and it's the stuff that is most highly valued. Part of the reason I believe that it has pulled back, call it 20%, is because of the potential for some of these things, some of the punch bowl, in other words, to be taken away on the monetary policy side. You also have a commitment for them to really shrink the balance sheet as well, and they're already shortening the maturity of of treasuries inside of it now, but if you got one or two or both of those things, then I believe that would be headwin for risk assets overall. So take it for what it's worth there.

The question in there today was about really when we talk about markets, we're using the term broadly, but does it mean that we're talking about the Dow Jones? Does it mean that we're talking about the S&P 500 and Y? And astutely, he mentioned that there's overlap between the Dow and the dividend portfolio. I would say, well, and that's true, but just remember, there's also overlap technically in the names of the dividend portfolio inside of the ESMP. They're just more diluted because there's 500 names versus 30. So that aside for a second. Look, we use them in slightly different ways. So I get the question and the confusion because when we talk about the market being of 385 points like it was today, I'm referring to the Dow. And if you think about what most people quote in the market,

it is the point move on the Dow. It's just what is around the kitchen table when people talk about if the markets are up or down. So that's in one context. But where we're talking about things from an analysis standpoint, so looking at the metrics, looking at even technicals, looking at the underlying valuations, looking at the sector weights, looking at some more qualitative and quantitative screening things, we're really using the S&P 500 because it's a much broader barometer.

It's a much broader index. There's more names in it. Yes, it's, of course, overweight to where it has historically banned in technology stocks, but it still has 500 diversified names versus the dollar-weighted Dow, which is a little kind of clunky old way of doing it with the price of shares mattering as far as the movement of the index itself. That said, just historically I found it to be while clunky, it still works. It tracks the economy. It tracks the sentiment in the market quite well. But that's the distinction.

When we're talking about real heavy lifting on analysis, S&P 500 is better. when we're talking about what most people talk around the kitchen table, it's how many points the Dow went up or down on the day. I hope that makes sense and is helpful to you. But without more economic data to chew through, I'm going to end it there, and there's actually not a whole lot on the calendar for tomorrow either. So there'll be some more evergreen topics that I'm going to walk through with you.

But with that, I encourage more questions, and you'd have a wonderful evening. Thanks for listening to the Dividendon Cafe. The Bonson Group is a group of investment professionals registered with High Tower Securities LLC, member FINRA and SIPC, 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.

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