The Dividend Cafe - Tuesday - September 2, 2025

Episode Date: September 2, 2025

Market Performance, Tariffs, and Economic Indicators: A Post-Labor Day Analysis In this episode of Dividend Cafe, recorded on Tuesday, September 2nd, Brian Szytel reviews the market performance following Labor Day weekend. The DOW closed down 249 points, the S&P dropped by 0.7%, and the Nasdaq fell by 0.8%, with notable rotation from growth to value stocks. The episode discusses the current and future status of tariffs under the IEEPA and Section 301, as well as recent economic indicators such as ISM and PMI manufacturing numbers and construction spending data. Furthermore, Brian addresses the implications of the CHIPS Act and government stakes in private companies, highlighting concerns over government intervention in private enterprise. The episode concludes with observations on volatility and the performance of dollar-sensitive securities. 00:00 Welcome and Market Recap 01:02 Tariffs and Legal Battles 02:13 Economic Indicators and Manufacturing Data 03:25 Government Stake in Intel and CHIPS Act 05:47 Market Volatility and Closing Remarks 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 back to Dividend Cafe. This is Tuesday, September the 2nd. And I hope everyone had a nice and lovely Labor Day weekend with your friends and family. We're back here into the trading week on Tuesday after the holiday weekend to a downday. overall, although we technically closed off the lows by quite a bit, the Dow ended up closing down 249 points. S&P was down 7 tenths of a percent, NASDAQ was down 8 tenths of a percent, and you got more rotation from growth to value. Technology, for the most part, was down on the day, although also off of the lows, but you had relative outperformance in both energy and staples,

some of those more value names in there, and this is the lower session here in a row. So we've got two sessions in a row to start off. And of course, as everyone knew, September is a bad month for stocks, and that's why it's down. I kid, not to make light of a down day, but I wouldn't read a ton into seasonality here. The market has been higher here for five months. So, you know, we get some consolidation, and that's okay. What we're talking about today is the big ideas around tariffs and whether the current administration was able to use the IEPA to rationalize that executive declaration or not. You've got now the appeals court maintaining that Article 1, Section 8, clause 1 of the U.S. Constitution actually says, believe it or not, that Congress is the only power

that she'll have ability to impose duties and taxes and collect. So there you have it. The reason the market isn't carrying a ton here is just because you've got a period of time that's in the future. Tariffs are going to exist through October. Then there's another appeals process as it goes to the Supreme Court, and that will even push it out farther into the new year. And then on top of that, you basically have a full commitment from this administration to use a different version of the law, which is Section 301, if they don't get the IEEPA as their rationale approved by the Supreme Court or not. So all that to say, it's status quo as far as tariffs go. They're in place. They're going to stay in place for a period of time, and there's another way that the administration

can solidify their hand in that endeavor. There was a couple of pieces of economic news out. There was an ISM manufacturing number that was just under consensus, but barely, you got a 48.7 versus a 49.2. This is, again, for August. And I would chuck that up to a fairly good number. Remember, though, anything above 50 is expansionary,

so technically this is just below that. The final read on the PMI manufacturing number out of S&P for the same month of all. August was also a little bit weaker than expected, but just slightly we got a 53, and we were expecting a 53.3. And again, same thing. Anything over 50 is expansionary. So you've got two different reads on ISM and PMI with manufacturing. The construction spending for the month of July was down a 10th. We were thinking estimates actually ranged anywhere from unchanged to positive 4. So in any case, it was a miss on some construction spending. And again, you're just

seeing the stock housing market with higher rates continue to flow through to different things. We've talked about housing permits and just home sales being anemic, but you also seeing things like construction spending, and a lot of that's flowing through into the numbers. The question in there today was about the government stake in Intel, and the question was that under the Chips Act, the money was already due anyway, so what's so bad with having the taxpayer have a sense of equity ownership in the investment. And just keep in mind, the Chips Act was actually a bipartisan deal for the most part. Both the Trump and Biden administration supported it. And it was an idea from just a national security standpoint to bring the manufacturing of chips, more or less,

from Taiwan Semiconductor, back into the United States. So there was money awarded towards it. But there was still about $5.7 billion that was left to go into this as a grant. And what they did is revoke that and then change it into an equity stake in one company. So there's a lot of slippery slope involved in this here. So you've got government involvement in private matters isn't a very efficient tool for long-term prosperity. But the idea of doing it individual company by company, in other words, being able to pick the winners and the losers is even worse.

And so, no, it's not something that we're supportive of. And frankly, for companies that are involved in those things, and we've written about this. But for decades, we've looked at what is called a state-owned enterprise, and largely in the emerging world. So think of China or Brazil or India, where the government owns 20, 30 percent, or more of a particular company. They're become almost uninvestable. And the performance is in the stock, and you can see that play out over time. But it's a form of socialism.

It's a nationalism of these independent firms that would operate more efficiently otherwise. And for a long time, that was mainly related to big companies that were more commodity sensitive. Think of national security interests with oil, with different types of commodity steel, such like that. That was the endeavor of other countries, and we always avoided those as investments. The fact that we're looking at some of those that the U.S. is surreal to us, but also something that I think should be stared clear of. Now, you may say that that will just be this administration and the next will be different. nonetheless, it's a precedent that we don't think is healthy. The volatility index for the day was actually quite a bit higher.

So you're getting some giveback here in stocks. The VIX was up to about 17. It had gotten as low as, call it high 13s, low 14. So it's moved up here a little bit. Conversely to that, you've got things like dollar sensitive security. So think of gold, think of Bitcoin, think of oil, which is priced in dollars. They were all up on the day. Part of that is because of this idea of both government intervention and also an independent Fed,

and that's being questioned and challenged these days as well. And so you've got some interest rates that have moved a little higher. The 10-year today was up of about five basis points on the day. We closed at 428. So I'm going to wrap it there for this evening. Thank you for listening. Reach out with your questions, as always, and we'll talk to you soon. Thank you.

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