Dear Valued Clients and Friends –
A normal trip around the horn in today’s Dividend Cafe…
Dividend Cafe on Friday was a little diversion from our normal weekly market and economic commentary. As I get ready to spend the next few days dropping off my daughter at college, I decided to turn the Dividend Cafe into a letter to Sadie. The written version is here (definitely my favorite, by a wide margin), the video is here, and the podcast is here.
Off we go…
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Market Action
- Markets opened down over 100 points this morning and choppily down more throughout the day.
- The Dow closed down -273 points (-0.51%), with the S&P 500 down -0.52% and the Nasdaq down -0.32%.
*CNBC, DJIA, Aug. 17, 2026
- The ten-year bond yield closed today at 4.73%, up three basis points on the day.
- Top-performing sector for the day: Energy (+0.87%)
- Bottom-performing sector for the day: Communication Services (-1.47%)
- There is plenty to say about this, and there actually is a lot in it for both bulls and bears. I intend to write more on what the GDP reliance on AI capex means, what the heavy spend on compute means for the future (not the present), and how the cost of capital and funding mechanisms will prove to be vital in this whole story.
- An interesting historical report from Strategas I read over the weekend… In the last seven periods of yield curve steepening (going back to 1990), best average performance in risk assets: Commodities like Oil and Copper, and equity sectors like Financials and Energy. Worst performers? Gold, and Tech/Communications sectors in equity.
Public Policy
- There are few political prognosticators I recommend people follow more than Mark Halperin. He made the call Friday that, short of a major reversal of fortunes, Democrats are headed to wins in the Senate races in Ohio, North Carolina, and Texas. The first two of those seem almost inevitable; obviously, based on history, the third one is more of a question mark, but Mark is aware of the history, too, and he believes it is more than just a couple of polls that give reason to believe Texas is going to flip. That the Democrats are going to hold their seat in Georgia is even more firm than any of these calls for flips in these three states. Now, the Democrats would still need to flip Maine, Iowa, or Alaska to take a Senate majority, and even that presupposes that they hold Michigan. It is worth noting that the prediction markets now have the odds of Senate party control at 50-50 between the two parties (it had been 83% odds for Republicans holding control at the peak). David’s amateur prediction? The Dems flip four seats, and holding or not holding Michigan becomes the difference between a Republican majority and a Democrat majority. Reminder: 50-50 is a Republican majority since the Vice President casts tie-breaking votes.
- The polls, approval ratings, and nearly all public indicators reflect a pretty strong blue wave forming. It is most certainly my base expectation, despite knowing that sometimes things go differently than expected. The one caveat with about ten weeks to go until Election Day is that there is going to be a massive spending advantage for the Republicans in the final ten weeks, and it remains to be seen how that will impact things. But I cannot think of an issue or sentiment indicator that seems likely to reverse from current trends any time soon.
Economic Front
- Retail Sales declined -0.6% in July when an increase of +0.1% was expected (I thought my daughter alone would’ve moved the needle on the nationwide number). I suspect some of the disappointment was due to an unrealistically aggressive expectation after the first half of the year, where higher-than-normal tax refunds created stronger results than will prove repeatable in the second half of the year.
- One of the most underrated elements of economic growth right now – the gift the Supreme Court gave the economy (and this administration)… Tariff Refunds. $25 billion in May, $50 billion in June, and $35 billion in July. That is a LOT of money that has flowed back into the private sector of the economy, and a LOT of offset to potential layoffs, canceled projects, and other sources of contraction for economic growth.
Housing & Mortgage
- There are very few charts I like more than this one, which is to say, that I find more explanatory and significant than this one… Ben Carlson’s Wealth of Common Sense recently posted it (from the Dallas Fed), and I will just say that I think it tells several significant stories, all at once.
Federal Reserve
- I am not really that curious if Chairman Warsh will make clear to markets in his upcoming Jackson Hole speech if an interest rate hike is coming, or if it isn’t coming. It is not what he says (one way or the other) that interests me, as much as whether he will do either (i.e., provide clarity). I do not expect he will. I believe the chairman sees the uncertainty itself as helping to facilitate tightening, and I think this is by design.
- Cleveland’s Fed governor (a FOMC voting member), Beth Hammack, said last week that “one rate hike will not be enough [to tackle inflation].” Futures market expectations for rate hikes, though, came down after the CPI and PPI reports were basically in line with expectations (not better but not worse)
Oil and Energy
- WTI Crude closed at $84.73, up +2.83% on the day.
- U.S. oil rig count was up around 650 in 2022. It is 455 now. However, 455 is higher than the 400-410 we saw before the Iran war broke out. Two things are true in this data: (1) We are getting way more productivity out of way fewer rigs than we were, and (2) Higher oil prices have incentivized bringing more rigs online
*Boock Report, Bloomberg, Aug. 17, 2026
On Deck
- Clients will receive their Weekly Portfolio Holdings Report on Wednesday, as usual.
- Dividend Cafe on Friday will be part one of a two-parter on dividend growth investing. My new book comes out next Tuesday, the 25th.
More to Chew on
- Milton Friedman is alive and well.
- AI-generated content is … not hard to detect.
- The Buss family is fully out from Laker ownership. I bet they wish capital gains were indexed to inflation.
From Charlottesville, Virginia, I wish you all a wonderful Monday evening. Back at you in the Friday Dividend Cafe… Reach out with questions any time.
With regards,
David L. Bahnsen
Chief Investment Officer, Managing Partner
The Bahnsen Group
www.thebahnsengroup.com
The Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.
