The Dividend Cafe - Monday - January 26, 2026

Episode Date: January 26, 2026

Today's Post - https://bahnsen.co/49VPZNr In this Monday edition of the Dividend Cafe, David Bahnsen discusses the current weather conditions affecting the US, market performance for the day, sector winners, and the impact of the recent storm. Key market indices and sector performances, including emerging markets and communication services, are analyzed. The episode also covers the US dollar's weakening, bond market movements, energy sector updates, and AI versus non-tech capital expenditures. Additionally, David touches on public policy, a potential government shutdown, durable goods orders, and the upcoming Federal Reserve meeting. Behavioral aspects of market gamification and their impact on investor strategies are discussed, with a focus on maintaining sound investment principles amidst the noise. 00:00 Welcome to Dividend Cafe 00:55 Market Overview and Performance 02:44 Mid-Year Market Drawdowns 03:48 US Dollar and Emerging Markets 05:10 Bond Market and AI CapEx 06:16 Public Policy and Economic Indicators 07:19 Federal Reserve and Future Predictions 08:23 Energy Sector Insights 09:46 Gamification of Markets 13:13 Concluding Remarks and Sports Shoutouts 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 this Monday edition of the Dividend Cafe. I am not going to tell most of the country that it is 64 degrees and sunny here in Newport Beach. But I will say, because of course we have offices ourselves in a lot of these cities, that what a winter wonderly. and in some cases, it's just outright storm it has been. We do hope everyone is all right, staying warm, staying safe. But a very odd storm in that it runs diagonally through the country from Texas, up through the south, into the northeast.

And over 20,000 flights canceled now. And it does appear that some of the worst of the storm is over, but the aftermath and just the freezingness of it continues. So I don't want to ignore that. I know it's a big deal out there and we'll do our best to keep things going as functionally here as possible. And in terms of market day, it was a reasonably normal day. You had markets opened up 100 points, moved steadily higher throughout the day. There were a couple of big cap names that led the way, but the Dow did close up over 300 points, which is over half a percent.

The S&P was up exactly half a percent. The NASDAQ got just a little less than half a percent. And that's a little odd, by the way. top performing sector was communication services was up 1.3%. And so the NASDAQ was not the top performing index, but with that communication tech space being the highest performer, but it was just about which stocks were up and which ones weren't. And sort of the dispersion of results was spread in a way that it was interesting. January still has tomorrow, Tuesday, through the Friday end of the week. We have four trading days left. So who knows what will happen in the next four days.

But far in a way, the big winner out of the gate so far as far as global asset classes has been emerging markets this month. I mentioned that communication services today was top performing sector. Consumer discretionary was down. 71%. So you had a big delta in between there. What else is worthwhile noting about markets today before I move into some of our other categories? I do just as a kind of general reminder want to point out, you know, the drawdown last Tuesday, the Dow ended up, I think, down 875 and at one point was down 950. I don't think it ever hit down 1,000.

And you had the NASDAQ down over 3% on the day. The market made a lot of that back throughout the rest of the week. So that week doesn't necessarily reflect, but that Tuesday day itself was one of those pretty severe market down days. But I just think any chance you get to be reminded that the average, the actual average of a market downturn in the middle of a year is 14%. And I agree that the way mean average and median are calculated, that median is a better indicator than mean in this case. but the median indicator is down 10% on a given year in the market. So what is not normal is having any year that doesn't have that kind of drawdown.

And the vast majority of years, I've been professionally managing money for 26 years. We have studied this for over 100. And I will just tell you that some mid-year double-digit drawdown in the broad stock market. is very common. And I say that, including years where the market ends up a bunch. There's usually still some peak to trough pull down. And I thought it was worthwhile mentioning that. Speaking of drawdowns, by the way, the U.S. dollar, which had weakened about 9% against a basket of trade weighted currencies last year, has continued that same direction here in January. I mentioned before emerging markets being the winner out of the gate. That is very connected

to the weak performance of the U.S. dollar. And I would just say that besides the fact that commodities have rallied, I mentioned emerging. By the way, U.S. multinational companies that have a large export business have done well, too. But eventually, whether or not it leads to some sort of decline in foreign appetite for U.S. stocks and bonds, that does not guarantee to be the case. But if it were to continue, it very well could become. that, and I would also say that what it means in terms of overall trade flows. It's a little too early

to intelligently comment on it. I'm as aware as anyone could be about the inherent volatility of foreign exchange. And so to jump the gun and say, oh, this move here or there means a particular thing of broader macroeconomic consequence or ramifications and other asset classes, I don't like to do that prematurely. And yet this dollar drop is at a point. where it may be worthwhile, and so we're keeping our eyes on it closely. Okay. What else? The bond market was up today. The 10-year dropped 2.4 basis points. The yield closed at 4.21%. I will tell you, there's a chart at dividendcafe.com. And I don't even know where to begin. There's so much in it. But it basically shows AI CAPEX spending just absolutely exploding. It shows total technology

and communication spending XAI also up. And then it shows, and this is over a 12-year period, no and in fact slightly negative growth in non-tech, non-AI capital expenditures. I think that non-tech is the big question mark for the economy in 2026 and whether or not some of the pro-business provisions in the new tax bill will incentivize greater capital investment. We may be over capitalizing on AI and undercapitalizing everything else. And boy, that is not the first time that has happened in history. So in terms of public policy, I do suspect a partial government shutdown is forthcoming. Some of it may prove to be more theatrical. Well, they're always theatrical, but some may be just almost like for the purpose of making a point and then moving on.

But enough Democrats seem to have said that they will go ahead and withhold funding as part of a kind of protest or statement about either reducing or eliminating the funding of immigration enforcement. And we'll see how some of those things get worked out in the days ahead. On the economic front, durable goods orders were up 5.3% in November. And I was loving reading that. It was about a 4% growth that was expected. And then I saw that the vast majority was related to commercial aircraft orders.

And that counts. Those are real-life orders and durable goods, but that is very, shall we say, lumpy and volatile within the durable goods data. So X transportation, particularly commercial aircraft, it was much more muted. We're 100 days away to the day from the last day of Chairman Powell's term as the Federal Reserve Chairman, the Fed does meet tomorrow all day, the Federal Open Market Committee, rather, and then on Wednesday will make their public pronouncement. The futures are at basically 100 percent, that there will be no change in the rate this meeting. And then Chairman Powell

will do his normal presser, which is always a good time. And then we go on. I am surprised the president has not named the successor. The 100 days to go, you normally would at this point. and I actually thought he'd be even early to precedent based on wanting a kind of shadow Fed chair there. The future, excuse me, the prediction markets have skyrocketed around Rick Reeder of BlackRock, who's the CIO at BlackRock. I still am very skeptical. He will go that way. But the prediction markets have moved quite a bit.

And so we will see, I expect that announcement should be coming soon enough on the new Fed chair. to replace J-PAL. On the energy sector, oil was down a little bit today, less than half a percent, but it's still sitting up around the $61 level. It had been around the $58 level for quite some time. Midstream energy was positive last week, and it's up more than 5 percent since the new year began. The overall energy sector is the top performer so far this year. Natural gas prices have flown higher, but of course, a lot of that is just sort of transitory around this big winter storm spike, while see where things settle from there, you get massive increase very suddenly in heating demand when you have a storm like what so much of the nation is seen, obviously.

But the midstream sector saw one of its big constituents. There's a Lincoln Diving Cafe about this, but Kinder Morgan released results last week, and now you have a slew of the big companies following suit. But again, not only was a pretty strong performance, but it's just reiterating across the sector here, which is my focus, reiteration of natural gas demand. and then where that is coming from, still being very connected to that LNG and LNG export theme. And so that's a big reinforcement for those of us who are midstream bulls across the whole energy spectrum, not just midstream. The over 50% of energy stocks are now at three-month highs.

So you've had a lot of internal improvement in the breadth of the sector. The Dividend Cafe on Friday, as we get ready to close up, talked about the gamification of markets the cultural uns seriousness that has taken hold. And in some cases, recklessness or irresponsibility, in other elements of social life, that is bleeding into markets and making us more vulnerable to an improperly delineated video game view of markets and serious capital allocation view of markets.

And then also making us more vulnerable to grifters that come around in those situations, taking advantage of the moment. You just see various stories, even in the media, get covered in a way. And sometimes coverage of something that shouldn't be news becomes news because it was covered.

And like today, I was watching one of the news networks, I won't say which one, but they had a very long piece about the fact that a hedge fund trader who kind of shut down his hedge fund, who's a famous guy who had been portrayed in the big short movie. And he announced that he was buying a bunch of guys,

GameStop stock, which was the meme stock thing from five years ago. And it was like a huge story. And that's all a byproduct of this lack of seriousness. Yet, again, if it gets covered, it becomes serious to somebody, I suppose. Well, the reason I bring it up is that a very thoughtful question that came in to ask TBG over the weekend, inspired by Friday's Dividy Cafe that addressed this subject. And I wanted to know if this is a behavioral problem for investors getting lured into some of this, or is there a regime change happening in portfolio construction, in which case, even our beloved dividend growth methodology may fall prey, are there structural tools that can help remedy if we were going through a total paradigm shift of the way markets fundamentally work

because of this gamification. And my view is it is not remotely a regime change in the fundamentals of portfolio construction. It is a cultural problem, and it will behaviorally lure people in. It already has. And that is the source of the warning to generate additional levels of caution, but the immutable laws of investing do not change. And the essential truisms that we believe in, around dividend growth do not change. And fundamentally, profits profit growth and the return of profits to minority owners of businesses, so we call dividends to shareholders, these things are unimpacted by bad behavior of others. The fact that the fundamentals do not differentiate from this bad behavior in real time, it's never done it in real time. I mean, markets are always influenced by sentiment.

It's just that sentiment is right now perhaps more influenced by antics than it has been in the past. But the fundamentals and the underlying seriousness of real capital allocation does transcend the rest of this through time. So the warning is not to markets becoming fundamentally reordered. It's to people making bad mistakes. I hope that's helpful to Carl's question. It's there at AskTBG on the homepage at Dividingcafe.com. Fed Day coming up Wednesday. I'll be with you each day in our daily recap as always,

or if I'm not, Brian will be. And I do want to say congratulations to the New England Patriots fans. And congratulations to Seattle Seahawks fans. And congratulations to the great city of San Clemente just to our south here in Newport Beach, where the one and only Trojan San Darnold heralds from and now will be in the Super Bowl after some teams decided to leave him for dead.

Some people fight on. Thanks for listening, watching and reading the Dividing Cafe. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free risk.

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