The Dividend Cafe - Monday - July 27, 2026

Episode Date: July 27, 2026

Today's Post - https://bahnsen.co/4yKPl0J The Monday Dividend Cafe reviews a volatile market session where early gains faded despite oil dropping on renewed Iran-talk hopes; the Nasdaq finished slightly down, the S&P flat, and the Dow up 0.5%. The host flags NVIDIA’s move to guarantee $250B in financing for an OpenAI data center and notes NVIDIA fell 5%, while highlighting widening CCC credit spreads as a developing risk signal. Sector performance showed rotation rather than broad risk-off, with staples up and energy down on the day, and notable dispersion across semiconductors and software. Policy coverage includes a six-month tariff extension shifting toward Section 301 (10–12%) with expected legal challenges, plus midterm implications tied to Michigan’s Senate race. Economic notes: durable goods strength largely driven by data centers; new home sales up modestly but down YoY with prices off peak. Ahead: FOMC under Chair Warsh, balance-sheet tightening possibility, and ongoing earnings season. 00:00 Monday Market Rundown 00:15 Oil Hopes Fade 01:30 NVIDIA Financing Shock 02:21 Credit Spreads Warning 04:00 Sector Rotation Month 04:45 Semis And Software Dispersion 06:21 Tariffs And Trade Policy 07:49 Midterms Michigan Bellwether 10:11 Durables And Data Centers 10:51 Housing And Mortgage Lock In 11:58 Warsh Fed Meeting Preview 14:32 Oil Move And Midstream 14:45 QandA Links And Wrap Up Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividing 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 Dividing Cafe. We are going to go around the horn a handful of things in markets. Definitely things talk about the Fed with public policy, with oil, all of our favorite categories for this Monday. It was a weird day in markets. I think markets got a little excited over the weekend at the... possibility of some breakthrough in talks with Iran and then oil prices dropping. The Dow opened up over 500 points. Both the S&P and NASDAQ were up. And in fact, oil prices did stay down,

but markets did not hold that lead. Nasdaq closed down 18 basis points on the day. The S&P basically closed totally flat and had spent quite a bit of the day underwater. And the Dow did close up half a percent, 263 points, but like I said, that was about half of what it had been earlier in the day. One thing I do want to point you to before we get too deep into today's action is the Friday Dividendon Cafe, one of the most important topics I've written about a long time and a treatment of the topic that I was very pleased with in terms of just unpacking this bigger picture question about whether or not we're entering and, inflationary or disinflationary regime, and the rule AI may or may not play in that. If you missed Friday's Dividy Cafe, whether it's the video or the written or what have you, I encourage you to check that out, obviously, at Dividycafe.com.

So today, in terms of markets, another announcement that came over the weekend besides this on again, off again, Iran stuff, was in video announcing. There's a link to this in Dividy Cafe that they were going to be the financial guarantor for $250 billion of financing for an Open AI data center. And we talked a lot in Dividing Cafe over what's now been well over a year, some of the circular financing where Nvidia is essentially in a lot of ways the financial risk taker or a contributor to the financial risk taking of its own order flow. This is a pretty extreme version of all of that. And at first, it didn't see my markets responding much. I read a lot about it all last night and thought it was rather

big. And yet then, Nvidia did drop 5% today. As far as the risk environment, which we find ourselves in as investors, I've written about credit spreads for much of my career. I became obsessed with the topic during financial crisis when I realized that both excessively tight credit spreads were often a very contrarian indicator of complacency around risk and that there were various moments where equity markets might seem healthy, but credit spreads indicating something different.

And so I follow the spread world quite a bit. This is an isolated case. I don't want to be guilty of data mining or cherry picking, but the triple Cs, which are the real bad, the real junkie, sort of high-yield corporate bonds, they started 2025 about five and a half percent wide to treasuries. And their spreads at the beginning of this year were six. and a quarter indicating that there was more aversion to risk, investors demanding more spread and more income to compensate for that risk. And it's sitting right now at 8.76%. That's 876 basis

points of spread. So it's a pretty big move in a pretty short period of time. It's isolated to triple C's. Spreads are wider across other credit instruments as well, but they haven't moved that much. But it's just something I bring up because I want to keep my eye on it. The 10-year bond yield closed today at 4.65% that was down three basis points on the day. So yields are higher in the risk-free assets, but not as high as they were last week. Today, the top-performing sector, a big day for consumer staples up 1.58%. But then you had energy down 2%, although it's been a heck of a month. And as a whole, I will bring up the rotational nature of markets this month is such that you had a pretty substantial move down and a lot of NASDAQ names and technology and communication services, which are the two worst performing sectors.

But then you see a lot of that has just simply gone into financials, energy, health care, industrials, particularly a lot of defense names and industrials. So it has not been a risk off a month. It has, when you look at the breadth of things, it has been a rotational month. The semiconductor space has taken on a lot of the downside of the month. And, of course, it had just been on that kind of crazy tear in the second quarter of 2026. But right now, you have names. I think it is what a dozen that we looked at today.

No, it might have been 15 names. It's 15 major names in the index that are down 40% or more. and in some cases 77%, 67, 65%. So the individual ingredients in a lot of ways are even worse than the overall index, still up a lot on the year, but there was just so much air blown into that tire and some has certainly come out. I would say that the action is kind of irrational enough

to not really command a great deal of confidence one way or the other. It's a very strange set of circumstances within the semiconductor space. We have a chart at Dividy Cafe looking at the software names. It is fascinating as people are talking about software is dead, AI has killed it, and then you look at certain elements, subsectors and software that are up a lot, some that are overall the sector is down but not that much,

but then there are certain elements in the application side down a lot more. I would argue not only to do these subsectors have a high dispersion of return and result from one another, but within the sub-spectors, subsectors, the individual names have a high dispersion as well. This has been my theme all year that people being lazy by painting it all with a broad brush are doing themselves, or if you're an advisor, your clients, a disservice. So we know that the White House has agreed for now to hold back on what President Trump said was going to be another big escalation in the war and there's more talking and this and that. Sometimes I feel deja vu and saying it all and it's okay because

there is a lot of repetition in the news cycle here. But I don't say that is a good or bad thing. I'm just saying if it feels like you've heard it all, we've seen all this eight times or 12 times. So far it's because you have. I think the public policy news of the weekend was certainly the administration announcing their six-month tariff extension that they had used when the spring court struck down, all the IEPA tariffs expired.

And then they announced their plans to move now to a section 301. rationalization where they're claiming, you know, labor practice problems with the trading partners. And then those tariffs had been somewhere around 10% and they're trying to keep them there anywhere from 10 to 12%. And it did invite certain countries that had not been part of it back in and whatnot. And then there's exceptions and waivers. And the whole thing is utterly bizarre. But lawsuits have been filed and I do think this thing will end up going back to the courts. And it's not at all clear to me that this is going to withstand legal scrutiny. either. But that was the news. And again, what you're basically looking at is potentially

$15 billion more of tariffs. There were $120 billion under IEPA. It went down to about 50 to 60. They're trying to get another 15 back on net net. I want to make a political point here that is just relevant from a market standpoint that while people are going to look at the whole Senate deal in the midterms, they're going to look at the whole House, who at what party has, ends up being in charge of the Senate and or the House matters, committees, appointments, approvals, legislative agenda. But to the extent that there's a broader narrative, like when you look at some of these DSA candidates, the Democrat Socialist of America, that have gotten nominated in a few real blue districts and then even in kind of more purplish-type state like Colorado, there

was one. There's also been plenty that have gone down. But I got to say that this, Michigan Senate race, both the primary next week and then potentially the general is a massive race for the political temperature of the country, both because of the ramifications if the Democratic establishment is able to stop this El Saeed, who's the more far-left socialist candidate running there. If that gentleman were to win the primary, then it speaks to where things may be within the energy of the party overall. And then if he doesn't, it speaks to the establishment's ability to stop some of these things and try to temper and moderate components within their own party. It also then has a big impact on the actual race itself, because I do

suspect that the Republicans might actually pick up that seat if El Sahed is nominated. I don't know that they will. But I do doubt. that they could pick it up if he doesn't. And there's just simply no math by which the Democrats could take the Senate majority if they give up a seat. Even if they hold the three contested seats that they're defending, they have a lot of work to do to go pick up four seats somewhere else. So giving up one would be a lost cause.

I bring all this up to just say, I don't know exactly what it means as just a bellwether for the party, a bellwether for the country. but based on all the ramifications of that seat, I think that represents a major one to watch and with a lot of market implications as well. All right, moving to economic news, the core durable goods orders up 0.9% in June. They're up 14% year over year. You would think this is a huge move, a big positive, but you got to remember the base effect of where it was a year ago was right in the aftermath of Liberation Day tariffs.

So from a math standpoint, the move higher isn't really that profound. And then within the math, it's almost entirely data center construction. Computers, electronics are up 18% in terms of order flow year over year. Electrical equipment is up almost 8% of machinery. So it's all positive. It's just not as broad-based as meets the eye. On the housing and mortgage front, new home sales, new construction, the volume increased 1.6%, the amount of transactions that took place in June, but are still down 5.6% from a year ago.

The median sale price of a new home is down 13.5% from the 2022 peak, and that's with the square footage of the average price up 3.7%. So you have a even bigger move down in the price per foot. Now, why is there more volume activity on new home sales and much less on existing? It is just purely and clearly a byproduct of existing homes, often being owned by people who have really advantaged mortgage rates and don't want to part with them, where by definition, a new home can't have an advantaged mortgage rate because the last time we were in that very, very low rate environment, it was 2020 to 2022. and new homes are now coming to market with the higher mortgage rate environment.

Speaking of mortgage rates and interest rates, the Fed, I would consider this the first real FOMC meeting under Chairman Warsh. There was one in June, but he had been the Fed chair for about five seconds. So now having had the, let's call it six, six, seven weeks to kind of get acclimated to where the coffee is, appoint these different task forces, build rapport and conversation with his call. colleagues, there's a possibility of some real fireworks this week. The futures market thinks there's a small chance of one rate hike, but a predominant chance of nothing happening at all. That remains my view. The fact that one of my favorite macroeconomic advisors believes there's a 95% chance that they will hike, including a 40% chance of 50 basis points of a hike, is sobering to me. There's a chart in Divinity Cafe today showing the amount of T-bill issuance the treasuries are doing of one year or less. They are front-loading so much of their new bond issuance funding the federal government with hyper short-term bills that they're even more impacted by moves higher in the Fed funds rate.

It potentially adds significantly to the deficit. And I'm just very skeptical that the new chairman is going to come in and do this. There's arguments as to why he would. Some who believe he ought to because of oil inflation, I think I have to contend with the fact that we have oil volatility. And if the Fed is supposed to raise rates when it goes up $7 a barrel like last week, are they supposed to cut rates when it comes down $7 a barrel like today? Those geopolitical factors are very hard to anchor monetary policy to.

I would even add the same thing about goods inflation that we've certainly seen because of tariffs, but where monetary inputs are supposed to come in there is more complicated. Now, one thing Renee and I very much agree on is I suspect Chairman Warsh is going to put the gauntlet down about the Fed adding to its balance sheet. They've added $200 billion to their balance sheet with new asset purchases on a net basis since the prior chair announced the end of quantitative tightening. And I believe he's going to put a pause on any change in the balance sheet pending

the task force that he's assigned to come look at that. And so you may get some backdoor tightening a monetary policy just by stopping some of the liquidity enhancement you're seeing in the Fed's balance sheet. So oil down 8% today, back to about 82 bucks a barrel. Midstream, by the way, was up over 1% last week despite a negative market as oil was up 8%. And the whole midstream space has continued to do very well. AskTBG is on the homepage.com.com.com.com.com. Someone asked why the average Joe on Main Street should care about GDP. And my answer is there at dividend cafe.com. We have added our more to chew on section with a number of links of different things, I think may be of interest.

If they're not of interest to you, you can at least know that they were of interest to me. They will appear in every Monday and Friday Dividing Cafe, more to chew on. So FOMC meeting ahead, earning season continuing, and we will continue doing what we do each and every day. day. And my goodness gracious, are we ever blessed to do what we do for a living? Because I love this job. Reach out. Any questions whatsoever? Questions at the bonson group.com. And thank you for listening. Thank you for reading. Thank you for watching. Divening 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.

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