The Dividend Cafe - Wednesday - August 5, 2026

Episode Date: August 5, 2026

On Wednesday, August 5, Brian Szytel recaps a mixed market day: the Dow rose 263 points while the S&P fell 12 and the Nasdaq dropped about 0.8%, with financials, healthcare, and staples leading as tech lagged after the prior day’s momentum rally. He says markets are increasingly desensitized to the war and are more supported by fundamentals, highlighting Q2 earnings where 61% of companies have reported, 86% beat EPS (highest in five years), and 77% beat revenue. Economic data included a weaker ADP private payrolls print (44k vs. 75k consensus) and ISM services roughly in line at 54.1. He answers a question on why the Fed doesn’t let rates float, outlining the Fed’s evolution from lender of last resort to open market operations, yield curve control, and rate targeting, arguing reserve-currency status and global interconnectedness make free-floating impractical now. 00:00 Market Recap Mixed Session 00:53 Hormuz Headlines vs Fundamentals 01:56 Q2 Earnings Strength 03:14 Today’s Economic Data 03:52 Should Rates Float Freely 04:20 Fed History and Evolution 05:41 Reserve Currency Reality 06:24 Wrap Up and Tomorrow Preview 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. Good evening and welcome to Dividend Cafe. This is Brian Saitel, your host here this Wednesday, August the 5th. On a really mixed day in markets, remember yesterday we had that robust move higher. Internals were very strong. And the market actually closed, at least on the SMP in all-time high. Today, we got a rising Dow. The Dow was actually up 263 points, but the S&P was just slightly down by 12 points. And then the NASDAQ was down about eight-tenths of a percent. So almost the opposite of yesterday.

Yesterday had really all of the tech stuff, the AI stuff, the momentum, quote-unquote, stuff, really rally a lot. And a lot of the more blue-chip and value sectors lagged behind that. They were all up too, though. And then today, really, the only bright spot in the market was those financials, the health care names, and some of the staples, whereas a lot of the tech stuff really didn't perform or participate or was even down on the day. And this market is really still trying to price in what's going on. There's definitely an expectation for an imminent deal to open the Strait of Hormuz with Iran. So that's part of this thing. But that's not really what's driving markets back to these all-time highs.

It is fundamentals. And I wanted to shift gears on that. Because when this war first started breaking out in February and then really in March, the drawdown max in March was only about 8%. For me, that's just part for the course. That's not really much of a market to worry about. The average drawdown in our lifetime is around 14% a year. So I'm not saying that we should dismiss it, but that's not much of a drawdown. But that was the most. Since then, all of the subsequent drawdowns and then recoveries around the deal that starts and then gets put off again

have really been much shallower. And so the market has just become more desensitized to this thing. And I suspect over time, as I've said, for the last couple of months. It's continued to be that way. Eventually, it won't care, and we'll move on, and things will get rerouted, and so on and so forth. This time around, an imminent deal is more priced in, and that's what's expected. But underneath that, and more importantly, earnings for Q2, we've got 61% of companies now have reported so far. Of them, 86% of them have beat earnings per share. It's a big number. That's the highest in five years. That's robust, and it's

broad-based. But even more importantly than that, it isn't just EPS because remember, there's all those interesting and dynamic things that accountants can do to make the bottom line look good to hit a number when there's some manufacturing going on. And we've even seen that in some of the MAG7 names. They've started to change the use case for their data centers and the lifespan of some AI chips and different things. And that changes depreciation amounts and all that fun stuff. But aside from that, When we look at top line, 77% of companies actually so far have beat on the top line number. That's hyper-robust. You can't fake that number.

That's the dollar coming in the door. So that speaks to the sustainability of this rally and the robustness of it, the recovery, and to where we are. And that should give most, including myself, some comfort. Because if it was solely around a headline, a media, or what Bessent says as far as what can happen in the Strait of Harmoos, as the U.S. Treasury's Secretary, then I would feel less confident about it being sustained, but that's not what I'm saying right now. So those are good things. On the economic side on the day, a couple of things out. There was a private payroll number from ADP, was actually below consensus

at 44,000 versus 75,000. Take it with a grain of salt. Most of the employment numbers have really been quite robust, socialicality and seasonality behind some of these weekly numbers. But the other number was ISN Business and Services, and this was pretty much in, line. We got a 54.1 versus a 54.5. And just remember anything over 50 is expansionary. So I'm going to chalk that one up to being a pretty good number, even though it missed slightly. But that's what we had in the economic side. And then when I'm thinking about around the horn, on the question, I know that Warsh is a new Fed president. And so there was also a recent Fed meeting and one that was more paid attention to. So the questions have been more focused on it. But they're all very good and

they're all a little bit different flavors. This one was more about, instead of just not setting guidance, why don't we just not set the Fed funds rate at all and just let it float freely? So believe it or not, we actually did use to do that, and it was in my lifetime, and I'm assuming most readers and listeners' lifetimes. I just wanted to give some history first for people. The Fed was originally set up to literally just be a backstop so the banking system didn't collapse when there was a run-on banking systems and things. Remember, the FDIC came out of what started the Great Depression, but this was even before that, banks are levered institutions and so they need a lender of last resort when things get tight when credit conditions collapse. Even in the late 1800s and early into the early 1900s, the Fed was there and that's what it was designed to do.

Okay, lend of last resort, got it. Then we had the Great Depression happen and it started to realize that if it altered credit conditions, it can do so by bringing assets on to its balance sheet. So if it bought bonds from the market, it can inject cash into the bank's balance sheets and then they ultimately provide potentially room for them to lend. And so that was the beginning of open market operations. And then during World War II, there was a targeting of the yield curve and they were able to buy treasuries and basically finance the war by bringing all of the treasury rates down across the curve. That was called yield curve control. Then we had Bretton Woods shortly thereafter. The dollar did become the world reserve

currency just after that. And that's a big deal because in the early 1970s, the Fed then did start targeting and setting the interest rate. And most notably during those early 80s, Paul Volker years, if you remember them fighting this inflation issue with setting really high Fed funds rates to do that. But now that the world is counting on the U.S. dollar as its backbone as the reserve currency, it's a little different nowadays. There's a much more complex global financial market. That's why the Fed has evolved and rightfully. But with the rest of the world basically setting their rates based off of a reserve risk-free rate of the dollar, it indirectly, not directly, it indirectly affects the cost of capital globally and where those rates get set. And so it's very

complex. And so the idea of letting it flow freely, I just think that Jeannie is out of the bottle at this point. And the reserve currency status plays a part in that. And then also just the interconnectedness of global finance and central banking plays a part in that. So that's my answer there. A little convoluted, but as true as I can answer it for you. I hope that's helpful. and some interesting knowledge here for the end of today here on Wednesday, and I'll be back with you tomorrow. We'll have more economic data as the week goes on, too, to chew through. Look forward to that.

In the meantime, make it a great evening. We'll talk to you soon. Thanks for listening. The Bonson Group is a group of investment professionals registered with High Tower Securities LLC, member Finra and SIPC, and with High Tower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through High Tower Securities LLC. Advisory services are offered through High Tower Advisors, LLC.

This is not an offer to buy ourselves securities. No investment process is free of risk. There is 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 referenced Tyrion 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 Bonson 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 here in. 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.

Hightower 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.