The Dividend Cafe - Tuesday - June 30, 2026

Episode Date: June 30, 2026

Brian Szytel recaps markets on June 30, the last day of Q2, noting a strong first half for the Dow and the best Nasdaq quarter since 2020, with tech leading as the Dow rose 136 points, the S&P 500 gained 0.8%, and the Nasdaq rose 1.5% while the 10-year yield increased 8 bps. He highlights the Japanese yen at its weakest versus the dollar in over 40 years (~162), describing the yen carry trade and warning that BOJ interventions (about 11 trillion yen) and rate hikes could trigger volatility like August 2024. He also discusses rising system leverage, with margin debt up 54% year over year to about $1.4T and the risks of triple-leveraged single-stock ETFs for retail investors. Economic data included weaker consumer confidence, stronger JOLTS openings with steady quits, lower Chicago PMI, and softer Case-Shiller home prices (down monthly, +0.7% YoY). 00:00 Market Wrap Q2 Finale 01:32 Yen Weakness And Carry Trade 02:40 BOJ Intervention Risks 03:47 Leverage Rising In Markets 04:22 Margin Debt And Leveraged ETFs 05:51 Economic Data Roundup 06:48 Closing Thoughts 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 to Dividend Cafe. This is Brian Sightel, your host this evening here on Tuesday afternoon, June the 30th. So literally the last day of Q2 is upon us. And the second half of the year begins tomorrow. Crazy how time flies so fast as these years keep ticking by. But that's where we are. On the day the market was up, and it was actually one of the better starts to the first half of the year in the last five years, at least for the Dow Jones Industrial Average, so that's good. For the quarter, this was the best quarter for the NASDAQ since 2020. Robust markets all around, a lot of it, CAPX driven in AI, and we had the Iran war start in early spring and then dissipate here, and markets have felt a little bit better about that. interest rates that were set to decline when we started the year are now set to remain the same

slightly rise. So the market has digested all those things quite well. But on the day, the Dow was up a little over 100 points, 136 points, S&P was up 8 tenths of a percent, NASDAQ was up 1.5 percent. So this is a rotation the other way. Tech led the way today in the market. You also had interest rates move up a little bit. The tenure was actually up eight basis points. Oil was down a little on WTI and up a little bit on Brent, but marginally, and we're at about $70 to $73 between those two things and the energy markets. But the one thing that was on my mind today was about the Japanese yen. This is a currency that has weakened substantially. The yen is now the weakest against the dollar since I was in second grade. So that's over 40 years ago to date myself. And while I was

more trading baseball cards back then than I was trading stocks and paying attention to what the yen was versus the dollar, there was something called the Plaza Corps, and this was a multi-country consortium with an effort to try to weaken the dollar and strengthen the yen and back then the Deutsche Mark to settle currency markets down foreign exchange markets. Now what you have is just the Bank of Japan, the BOJ, going it alone. They've got a weakening currency, and what's happening is you can borrow yen at low rates and invest in treasuries in the United States, and you get the benefit of a rate arbitrage borrowing at, say, two or three, and getting a foreign currency. And getting a percent yield, that's a point or 0.2 points or so in the arbitrage there. And then you also get

the borrowed money in Japan gets paid back with stronger dollars. So it's a double whammy of benefit. That's a funding mechanism. It's a form of leverage because you're using a borrowing power to do it. And when the central banks intervene and strengthen a currency overnight, which they tend to do, that unwinding can cause a lot of volatility. We actually saw that in August of 2024, if you remember. The NEEC was down in one day, 12%. Our markets were also down in that summer, and you had volatility pick up a lot. Vicks hit about 60 or so back then. And my comment isn't about predicting markets are going to follow suit here and just sell

off for the sake of it. But the B.O.J already has intervened. They've intervened by about 11 trillion yen. That's about $70 billion. And they've also raised interest rates. They've raised interest rates because inflation has been higher in Japan, but also rising interest rates tends to support currency as well. Now granted, they're only up to 1% and our treasuries are in the fours. So hence the carry trade. But I'm bringing it to light because I do believe

there'll be some action in the coming weeks and or months in this regard. And I don't think that the yen will stay quite this week. It's something like 16 to 2 to 1 here at these levels. So I wanted to bring that to everyone's attention just to keep an eye on it. For us, using borrowed money to create rates of return is akin to renting returns and using cash flows to buy other rising cash flows like dividend stocks to me is much more like owning those returns over time. And today's dividend cafe really is a lot about leverage in the system because the AskTBG question in there was just that. It was about an article in the Wall Street Journal. This is a client that I just met with technically that asked the question. It's very thoughtful.

I wanted to put it in Dividend Cafe because leverage has increased in the system substantially. it's up about 54% year over year. So margin debt is now about $1.4 trillion. Granted, the underlying assets themselves that have appreciated the stocks are up a whole lot too, but nonetheless, it doesn't matter how you slice it. Leverage is up in the system, and that's not necessarily a good thing because it means risk is also up. And you also have now the advent of these triple leveraged exchange traded funds on single stocks. So like an ETF on Nvidia that is three times the reward of in video or three times the decline of it. Those things unfortunately end up hurting retail investors because they are chasing momentum and they think it will keep going in one direction and when

it doesn't, then they get blown up. And I don't want to see that happen to good people. On one hand and on the other hand, I suppose I wouldn't have a business if everybody just inherently knew that fear and greed and Proverbs 1618 and those things were all very true as to the human condition. But the human condition is hard to unlearn. It's just food for thought on that. That is what I'm seeing in the system. And again, those things are risks. And if you look back in 2000, which is akin to that same type of setup, you had the defensives and the value stocks and the dividend growers really perform for the next 15 years.

And the SMB500 went sideways for that kind of lost decade and a half. It's not me talking my own book. It's just the reality. More leverage, more volatility, four years in a row of double digit returns. What can go wrong, right? Okay, four pieces of economic data out in the calendar on the day. First, you had consumer confidence lower than expected. Always a lagging indicator, as TBG puts it, often, so you know that. We don't pay a ton of attention to it. Nonetheless, it was lower. You had the Joltz report. This is the new job openings beat in May. This is a forward-looking indicator and a good number.

So there's more employers looking to hire more employees. That's good. And you also had quit rates that were unchanged. I would also call that good. You had a Chicago PMI lower than expected, and then you had the S&P K Schiller Home Price Index that was actually down for the month and just up 0.7% year over year. So if inflation was somewhere between 3 and 4%, and your home price was only up 0.7 over the last year, then it technically lost some value there in nominal terms. But that's my around the horn. Those are the four economic points. I'd say half of them were good.

Half of them were meh on the day. But if you have more questions, or want me to walk through any of this, please do reach out and you always enjoy them. And with that, I shall let you get back into your evening and have a good one. Thank you so much. 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.

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