The Dividend Cafe - Wednesday - August 12, 2026

Episode Date: August 12, 2026

On Wednesday, August 12, Brian Szytel reports a quiet, mixed market day as July CPI came in essentially in line with expectations, leaving stocks and bonds little changed (Dow flat, S&P up 0.25%, Nasdaq up 0.5%, 10-year unchanged). Headline CPI rose 0.1% month over month to 3.4% year over year, while core CPI rose 0.2%, with medical care, airfares, used vehicles, and shelter contributing. Fed September hike odds fell from about 50% to 42% ahead of upcoming PPI data and Jackson Hole. He notes inflation is moving in the right direction slowly, while employment signals are mixed (unemployment 4.1%, weaker JOLTS and slightly missed nonfarm gains). Addressing a question on baby boomers supporting children, he says wealth transfers are not money creation and are a “closed loop,” though lower labor force participation and skills could hurt productivity. 00:00 Market Recap 00:33 CPI Breakdown 01:43 Fed Outlook Ahead 02:30 Jobs And Softening Data 03:01 Boomer Wealth Question 04:07 Is It Inflationary 05:05 Wrap Up From Florida 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 Saitel, your host this evening here on Wednesday, August the 12th. On a bit of a mixed day in markets, pretty benign, really. There was some news, but not enough to really move markets. They were well priced for it. So we got an update on CPI and basically completely inline. with projections and it didn't move markets much. In fact, didn't move stocks or really bonds, but you had the Dow basically flat. You had S&P up a quarter of a percent. You had NASDAQ up half of a percent. You had 10-year unchanged. So a bit of a quiet day overall, but let me go through inflation with you a little bit here. We had headline CPI in line up one-tenth of a percent in July.

Okay, that puts it at 3.4 percent year-over-year. The number was actually for a three and a half year over year. So I guess I could say that's a slight beat. But really, this is in line. But I will say that a one-tenth of a percent, a couple months in a row, is really a benign figure on the inflation front. And so we're seeing that. And it's because on the headline number, it includes energy. And we know energy has come down. It's been volatile, of course, with Iran, but it has come down quite a bit from where it was. But when you look at core, if you take out food and energy, core CPI was also in line, but only up two-tenths of a percent. So if you take out the energy detraction, the rest of it is fairly benign. There was a couple of things that peaked up a little bit on the month.

Medical care was definitely an attribution to some of the gain, as was airfares, used vehicles, and then you also had shelter. Even it was only up 0.1%. It actually did move the needle a bit on the total numbers that you saw inside of CPI. But all that to say, I told you what markets did, which wasn't a lot. Fed funds went from a 50% coin flip in September for a rate hike to now just 42%. And so you're starting to see the odds of them needing to catch up in hike interest rates to stop runaway inflation come down, and that makes sense. Tomorrow we'll get some numbers on PPI, and then we'll get Jackson Hole, if you remember, before the next Fed meeting in September. So there's still data that can move this. But as of right now, we're just not seeing this ramp up. And if you think things are going to normalize in any fashion in the price of oil and what's going on in Iran, then there's definitely a case to be made that they aren't behind the curve.

that inflation is moving in the right direction. It's just doing it in a very stubbornly, in a very slow way, and slower than everybody would want, but it's always careful what you wish for. Getting outright deflation isn't necessarily a good thing either. And so the needle to be thread here is keeping employment strong and robust. Remember, the unemployment rate did tick down to 4.1%, but we are seeing some weak numbers lately. Jolt's number was a little bit lower, and then you had job gains on non-farm that also missed slightly. So those are some of the things. And for the porridge to be just right, there's a lot of boxes that have to get checked for that to happen.

So far, I like what I'm seeing, though, and we're moving in the right direction on it. Question in there today, a very good question was about the baby boomers tapping their savings to support their kids, basically, and is that a way of spending without causing inflation? So love the question and love the framing. The answer is this. There's definitely some of that going on. Look, the boomers are the wealthiest generation cohort this country and the world has ever seen. There's tens of trillions of dollars.

And, yeah, some of it is bleeding into other generations. You're seeing that because some of the abysmal labor force participation rate numbers is specifically in prime aged working men, 25 to 54, have been so disappointing. The labor force participation rate is now under 62%. It was 67% 15, 20 years ago. So that number coming down is a problem. societal problems with it, but just from a generational problem, what it sets things up for, it sets the stage for a less skilled and less experienced workforce later when they do have to

eventually join. And that's not necessarily a good thing for productivity. I guess you can make a case for disinflation with it. But to answer this question directly, the actual transfer of wealth from boomers to second generation or even third generation, meaning grandkids, isn't itself inflationary. So yes, it's a way of spending without causing inflation because what you're effectively saying is a baby boomer can sell a stock or a mutual fund or a money market fund and give the money to their kid to support them or just to set them up. But that isn't necessarily creating more money in the society and it's not creating any more velocity. All you've really done is have one person sell something and on the other side of that trade. Of course, someone else had

to defer consumption in order to buy the mutual fund that was sold. So it's a closed loop in that way. And then my point is the reason I don't think it's an ideal path for the next generation is because of the societal things that can happen over time where they're less skilled and then productivity suffers as a result. So I know there's a lot to unpack on that question, but I wanted to walk it through the best that I could for you on today's CPI read. But that's what I've got for you today, folks. We're down in Florida here in different client meetings. And David and I are down here visiting some friends in Naples. And with that, I'm going to let you go for this evening and keep it somewhat sure. short and sweet. We each out with your questions, as always. Thank you for listening to the Dibbidin Cafe.

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