MONDAY – August 31, 2026

Dear Valued Clients and Friends –

We have a lot in today’s Monday-edition Dividend Cafe about the Fed chair’s speech in Jackson Hole a few days ago, about the state of the midterm elections, and about all the other normal things “around the horn” we cover every Monday.

Dividend Cafe on Friday represented the second part of a two-part series summarizing the dividend growth thesis we hold dear, coinciding with the release of my new book on the subject, Profit from the Profit.  The written commentary is here (my favorite), the video is here, and the podcast is here.

Off we go …

Market Action

• Markets opened down -300 points this morning and stayed in a tight range from there throughout the day
• The Dow closed down -374 points (-0.70%) with the S&P 500 down -0.33% and the Nasdaq down -0.12%

*CNBC, DJIA, August 31, 2026

• The ten-year bond yield closed today at 4.76%, up three basis points on the day
• Top-performing sector for the day: Energy (+2.1%)
• Bottom-performing sector for the day: Communication Services (-1.63%)

Public Policy

• Suffice it to say, I do not find the re-naming of a lake a market-impacting element of public policy.
• In midterm watch, I am becoming increasingly open to the possibility (and I really do think it is unlikely, but nevertheless more likely than it was two weeks ago) that the Democrats could lose Michigan and Maine, and yet still win the Senate majority.  I happen to think they will lose Maine, and Michigan I certainly think they should lose with that candidate, but that is still a tough pick-up for the Republicans in a state that has gone blue so long in these Senate races.  But if the Democrats lost a current seat (Michigan), and failed to pick up a winnable seat (Maine), how could they win the Senate majority?  They would have to win five of the contested races held by Republicans.  That is not likely, but it is more possible than it was two weeks ago.  North Carolina is almost surely going blue.  Ohio and Alaska appear headed in their favor.  But that would then still require Democrats to win both Iowa and Texas.  Of those two, I actually now think Iowa is the less likely to flip, though both would be challenges to flip.  I am well aware of all the arguments for how unlikely it is the Senate seat in Texas will flip blue, and if there were a gun to my head I would still predict the “Republican” wins that race.  But if I were placing a big, big bet with my own money, I would not do so with anything other than 50/50 odds.  As for the Iowa seat, it could go blue, but I think it is less likely.  Either way, holding Michigan for the Democrats still seems like the only way to pull this off, and even then they would have to win one of those two.  And taking Michigan for the Republicans still seems like the most likely way to hold the Senate, but even then it is not a sure thing.  So there you go.  As we get ready for Labor Day weekend and the final two-month stretch, the House is where we thought it would be all year, and the Senate is still likely staying red, but far more watchable than it needed to be.
• By the way, I am not a pollster or political prognosticator, and I barely even care about any of the things I am talking about in the above paragraph (my political junkie-ism has gone from a code red level 10 for decades to a “oh, there’s a ball game on while I am sitting in the airport” level of enthusiasm – at least for now). But the above paragraph is not my sharing of my irrelevant forecasts with you – something I would not waste your time with – but rather, my summary of analysis from three or four significant resources and true experts whom I do trust and have carefully vetted and discussed all this with.  And of course, they are fallible, too.

Housing & Mortgage

• The National Apartment List for August data showed a 0.1% increase in national median rent, and we are 0.8% lower than we were a year ago.

Federal Reserve

• Chairman Warsh’s speech at Jackson Hole Friday did not shock markets, push stocks around, or even really impact bond yields much.  But here are the things I would take away from the chairman’s speech:
  • His primary theme was price stability and curbing inflation.  He didn’t just emphasize that over full employment; he flat-out said that the job picture seemed quite healthy and robust right now.  He did say that inflation was not meaningfully slowing and that unemployment claims are near their lowest in many years.
  • The tenor and content of the speech did lift expectations of a rate hike in the September FOMC meeting (though only to 62% in the futures market, so still without any real high conviction from market actors). The odds were below 40% before the speech.  I should point out that we are at 88% implied probability of some rate hike by year-end.
  • He was adamant that the 2% inflation target would not be altered, and that the PCE would be the standard for measuring such.
  • He used rhetorical questions to demonstrate his focus on the next era of productivity (“will AI cause a sustained rise in productivity?” etc etc.).  All in, I counted nine rhetorical questions used to poke at the questions around AI and their implications for economic growth.
  • He explicitly pointed out that credit spreads were very low (a reference to financial conditions not exactly screaming “tightness”).
  • He did not back down from his repudiation of forward guidance as a policy tool.
  • I will also share what brilliant analyst Rene Aninao seems to be the only one to have publicly pointed out: Warsh laid out his case and made the points he wanted to make without being openly critical of his fellow Fed colleagues.  This strikes me as very important for building the consensus he needs to build
• Does this mean we will see a rate hike at the September meeting?  I do not know.  I am far more to open to the idea that he will do so than I have been, but also reiterate that having a committee majority behind such is not a given
• I want to reiterate a point that my friend, Brian Wesbury, made in his First Trust commentary today …  For those who thought less “forward guidance” would mean “less to talk about,” I would like to know who has talked more about, well, the monetary part of monetary policy, Jerome Powell – or Kevin Warsh?  Warsh has talked extensively about financial markets and commodity prices in evaluating financial conditions.  He discusses M2 money supply and issues around bank reserves (though his comments on QE and Fed bond purchases are reserved for now as the task force he has appointed on that subject works through the matter).
• Warsh’s “hall of mirrors” analogy (that in a “forward guidance” regime markets reflect the Fed and then the Fed reflects the markets) needs to hold in public thought, no matter what anyone else thinks about any other element of what Warsh is (or is not) doing

Oil and Energy

• WTI Crude closed at $85.91, up +3% on the day
• The United States announced a shocking deal regarding Venezuelan oil production over the weekend.  It is important to understand that whether or not you believe the U.S. should be taking this private investment role with public funds (my ideological views on this will be in my Capital Record podcast tomorrow), the possibility of getting oil out of the ground in these reserves is many years out (best-case scenario).

Ask TBG

On Deck

• Dividend Cafe this Friday will deal with the AI risk behind the AI story that is not being discussed enough.
• August is behind us, and September is here!  Did you know that September is my favorite month of the year (with the three months after it being tied for second place)?

More to Chew on

• And you want the government to be responsible for your health???
• I hear a lot that some new thing is coming that is changing everything.

To all, a good Monday night …  Reach out with any 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.