The Dividend Cafe - Monday - February 9, 2026

Episode Date: February 9, 2026

Today's Post - https://bahnsen.co/460ffB0 In this Monday edition of Dividend Cafe, we provide a recap of a relatively quiet market day following a highly eventful week. We discuss the significance of the DOW closing above 50,000 points for the second time, the major movements within defensive and software sectors, and the strong performance of the Japanese Nikkei index. Key insights include an analysis of market trends, software sector valuation changes, and economic impacts on smaller businesses. Additionally, we touch on the implications of quantitative easing and mortgage rate trends. The episode closes with a nod to recent sports headlines, including the Seattle Seahawks' Super Bowl victory and Pacifica Christian's basketball success. Tune in for a detailed breakdown of these topics and more. 00:00 Introduction to Dividend Cafe 00:16 Market Recap: A Boring Day After a Wild Week 01:01 Federal Reserve Chairman Kevin Walsh: A Deeper Dive 01:23 Monday Market Movements and Milestones 02:35 Historical Market Reflections 04:13 Sector Performance and Economic Indicators 05:23 Global Market Highlights: Japan's Surge 06:56 Super Bowl and Economic Insights 09:32 Quantitative Easing: A Critical Analysis 10:55 Oil Market Update and Fed Policy Speculations 13:03 Closing Remarks and Announcements 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. Hello and welcome to the Monday edition of Dividend Cafe. We are going to very quickly go around the horn to kind of walk through. It was a really boring day in markets, and I am saying that with so much joy. It was an eventful week last week. A lot of upside excitement in a lot of the defensive sectors. Downside in a couple sub-sectors of the market, primarily in the software industry. But overall, a wild ride in markets, mostly to the downside last week.

And then a huge update Friday. And then today, kind of a boring day in the aftermath of all that. Again, I say that is a good thing. Let me first say that anyone who missed the Friday at Dividendin Cafe, I would encourage you to check that out. whether your preferred medium is the written commentary at divinitycafe.com or a video like this, podcast like this, where I did do a deeper dive into the new Federal Reserve Chairman Kevin Warsh evaluating why it is I liked him as Fed Chair and what it is, I believe, the opportunity in front of him to be as it pertains to monetary policy. Check out Friday's Dividendon Cafe

when you get a chance. The market today, Monday, the day after Super Bowl Sunday, opened down about 100 points and very quickly, within the first half hour, got back to the even mark, then went a bit higher from there, and then really across all three indices by about an hour or so into the market open, just sort of stayed near that level for the rest of the day. So it ended up with the Dow being very close to flat. It was up 20 points. The S&P 500 was up a little less than half a percent, the NASDAQ up about 90 basis points. But the Dow closed on Friday above 50,000. It was up 20 points today. So for the second day ever, today, it closed above 50,000 points. I do believe it's a momentous event. I don't believe it's a technical

indicator. I don't believe it's a marketing appeal to draw more investors in. I don't put any meaning on it predictively whatsoever. I put meaning on it, refer to it as a momentous occasion descriptively in that the fact of the matter is 50,000 is an easier number to remember than 47,649. And I recall in the late 90s the first time the Dow closed at 10,000. I remember being on a trading floor when it happened and celebrating people, you know, high-fiving and so forth. And I remember just sort of thinking that was a significant event. And it was. And as my own career, professionally investing money over the next 10 years would ensue, we had a point about 10 years later where the Dow was at 6,500. And so the Dow was not then going from 10 to 20,000, but rather a decade later was

down 35% from where it had been when it first crossed 10,000. And yet, even with that, Here we are now at five times higher than where we were when we celebrated 10,000 for the first time. And it has not exactly been a smooth ride along the way. It's been very cruel to permabairs, no question. That's true of most of history, though. 50,000 may seem like a round number, but I think just the long-term significance of moving from 10,000 to 50,000 was so, many doubters along the way. I think it's a big deal and I think it reaffirms the importance of the human spirit. And sometimes the generation of future cash flows is one of the great ways to measure

what the human spirit does, at least in the few ways that it can be measured mathematically. So I talked about the route of the software industry last week. The PE ratio of the sector dropped from 28 times to about 23 times, still very frothy. And this is a good opportunity for a reminder that high valuation stocks and high valuation sectors are always the most vulnerable when a repricing kicks in. And that is a sort of tautological statement that by definition, the repricing is hitting the area is most susceptible to repricing. And if it wasn't, then it wouldn't be a repricing.

The 10-year bond yield closed today at 4.2%, basically flat on the day. Credit spreads, it's important to note that when you look at how weak software was last week, when you look at how weak private markets were, credit spreads do not show a lot of widening there, and that would be the better follow-up to even deeper severity. The bottom performing sectors today were consumer staples in healthcare. They were the top performing last week in the first five weeks of the year. Technology was the top performing today. It's been the worst performing of the year. By the way, speaking of top performing, the Niki, the Japanese version of the S&P 500, if you will,

was up a massive 4% yesterday, new all-time high. Investors loving the results of their election over the weekend where the prime minister of Japan, Sanya Takichi, won a landslide victory, including in basically their version of the House, the number of seats they picked up in their sort of parliament, if you will, and now they have really a full steam ahead broad mandate for their political legislative agenda. Japanese markets responded very favorably. What else do we want to hit on markets? Friday's big rally did see an over 5 to 1 advance to decline ratio. 5.4 stocks were up for every one that was down. So you had great breadth, which really reiterates that the area is getting hit or getting hit hard because more things are up than down. And yet it was obviously

a very volatile week. Dividend stocks, health care, defensives like consumer staples, energy, midstream energy in particular, have all been the market leaders so far in 2026. We'll see where things go from here. But only when I talk about the weakness in software, only seven percent of the software sector is trading above its 200-day moving average. So just a ton of technical breakdown within the sub-sector that we refer to as software. So I'll move past the news issues. I can get into a few other items and we'll close it up. But it wouldn't be recapturing the top news if I didn't mention that the Seattle Seahawks won the Super Bowl. I do not want to say it was in dramatic fashion. A lot of people thought it was a boring game, but it actually was a very

well-played defensive game, both sides of the ball, but it wasn't a big exciting offensive game. But that suffocating defense of the Seattle Seahawks and a quarterback who embodies what it means to fight on Sam Darnold leading the Seahawks to their second ever Super Bowl win, and I couldn't be more happy for Sam. Economically, only 18% of U.S. jobs. come from S&P 500 companies. It's been around that range for a long time. So out of 160 million jobs in the American Labor Force, only about 25 million of those come from companies

with more than 500 employees. So whether they're S&P companies or not, that large-sized company, you're talking about only 25 million out of 160 million jobs. If somebody tells you, you have a weak job environment for small business, then I'm telling you you have a weak job environment. The idea of having a good job environment, but it's weak for small business, it isn't possible.

It certainly isn't possible for long. And that is going to be the big test. Not how many people, Amazon's laying off, not even how many companies that are reporting from the big cap stock index are talking about where their planned job layoffs may be, but far more in the data will be the issues related to smaller business to get an idea of how the labor market is in the real economy. Speaking of the real economy, the average 30-year mortgage rate still sits above 6%. Now, it's around 6.2% right now, and that's meaningfully lower than the around 7%. It had been at for quite some time. But it's been here in the low 6es for a few months

now and not moving. Now, again, it's closer to six than seven, but it's still nowhere near five, let alone four and a half, four and three quarters, which is my guess as to where it needs to be to start clearing more of the market, or at least relieving some of the seller's strike. What the catalyst is going to be to get the mortgage rates down to, it's called five percent, I really do not know. All right, on the Fed front, because Friday's Diving Cafe did my deep dive into Kevin Warsh, and I talked about my own critique, much of which I believe he shares regarding quantitative easing and an expansionary Fed balance sheet. I found a very simple list that Straticus research had published over two years ago about the problems with a QE forever,

a high quantitative easing policy portfolio. And I just thought I would very briefly recap it. These are very short bullet points, but so helpful as a summative. of the problem with QE, number one, it is regressive. Number two, it leads to a massive misallocation of capital. Number three, it rewards financial engineering over capital spending, genuine capital investment. Number four, it changed the concept of risk for policymakers. Number five, it changed the concept of risk for fiduciaries and investors.

Number six, it damaged bank profitability. There's no question about that. And number seven, it created greater mistrust of political elites, of financial leaders, and so forth, as it really did enable asset holders to benefit as a result of the policy, well-intentioned as it may have been. So I thought that was a helpful summary. Deeper dive at Diven Cafe. Oil today, up 1.5% sitting at 64.43.

So a move higher in WTI, Crudeau last couple weeks that has so far held. Last week you had oil and natural gas down on the week. Midstream, though, was up another 2% on the week and now is up 10% year-to-date, still sitting here in early February. Strong earnings season results driving much of the return. Jason S asked me in the Ask,

How could Kevin Warsh reduce long-dated bonds on the Fed's balance? sheet without causing market disruption. And my answer is that a very plausible way to do this, it's not necessarily the way I think he will, but some form of a reverse operation twist, where previously Operation Twist, they were letting bonds roll off on the short end of the curve, and then they were buying more on the long end as a way of trying to control interest rates. they could very well let bonds roll off on the long end and replace them with bonds on the short end. That doesn't reduce the balance sheet, but it reduces the composition, in this case,

of longer-dated bonds being reduced as opposed to shorter-dated. They could also coordinate that with the Treasury Department. So when the Treasury is issuing new short-dated T-bills, they could be at the same time, not only a buyer of those, but then accelerating the reduction of the long end, and do so with sort of integration with Treasury activity that makes it much easier. I don't know that any of this can go without disruption because it is all pretty experimental, but I'm trying to throw out there some of the things that are far different than a shock and awe. We're going into market and selling long-dated bonds.

I don't think he can or will do that, and I don't think he needs to, and yet I do still believe he has a policy objective to reduce the Fed footprint in the economy via reducing the Fed duration in their own bond portfolio. All right, I'm going to leave it there here today, going into Monday evening. I fly out early tomorrow for Ford. I'll be speaking to conference out there for a couple of days and then heading back to New York City for a couple weeks.

So please do reach out with any questions you may have. Once again, congratulations to the Seattle Seahawks. Congratulations also to the Pacific of Christian Tritons of Orange County for their fourth consecutive men's basketball league championship. And congratulations to all of you that find some solace in sports at a time where the news is often unwatchable. Thanks for listening.

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