The Dividend Cafe - Monday - July 6, 2026

Episode Date: July 6, 2026

Today's Post - https://bahnsen.co/4bvLEBZ In the Monday Dividend Cafe, the host recaps a post–three-day weekend market rally with the Dow closing above 53,000 for the first time, the S&P 500 up 0.72%, and the Nasdaq up over 1%, while the 10-year Treasury remained around 4.47%. He notes TIP spreads show reduced inflation expectations even as longer yields imply stronger real growth, arguing the market can’t simultaneously justify Fed hikes on rising inflation expectations and claim the market is wrong as expectations fall; he also discusses futures pricing that still implies mostly one hike. He highlights market weakness as rotational rather than systemic, with communication services and tech leading and defensives lagging. Economic discussion includes disappointing June job growth and downward revisions alongside a lower unemployment rate driven by falling participation. He flags Florida housing supply, price cuts, and loss-making sales as signs prices were too high, contrasts with prolonged China home-price declines, and reviews steady oil, strong year-to-date midstream performance, and upcoming client reporting and geopolitical headlines. 00:00 Welcome and Setup 00:46 Market Open Recap 01:34 Rates and Inflation Signals 03:31 Will the Fed Hike 05:40 Rotation Not Rout 07:29 Economic Data Check 09:27 Florida Housing Warning 12:28 China Housing Contrast 13:02 Energy and Midstream Update 14:40 Week Ahead and Wrap 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. Well, and welcome to the Monday edition of Dividing Cafe. We are really officially into the second half of the year now, and we have our normal around the horn to cover today. I'll first start by saying that if you have not yet seen Friday's Dividendin Cafe, I recommend you do so. really want you to get a full perspective on what has happened in the first half of the year, what it bodes for the second half of 2026, where I think the market mentality is and what some of the major issues are in the markets, and what that means for the various themes that we are acting upon and considering as well. So the dividend cafe from Friday available for all of

those purposes. In terms of today's action and markets, obviously we're coming off of the three-day weekend, markets were closed on Friday. And what you saw today was a Dow that opened 125 points. It kind of gave up that bead within the first 30, 45 minutes, and then it just spent the rest of the day kind of slowly but surely earning that back. The S&P and NASDAQ also opened up and never did give up their gains and closed up 72 basis points for the S&P 500. And the NASDAQ closed up over 1%. The Dow was up 156 points at the close, which was 30 basis points. It did close at all-time high, first time closing over $53,000 on the Dow.

I want to say, oh, the Fed needs to raise rates because of the inflation pressures that are there. One argument against that is that the 10-year is still sitting at around 4.47 percent. And so it's been there in that higher level around four and a half. And a lot of that was connected to higher inflation expectations when oil prices were going higher in the midst of the Strait of Hormuz's closure. But what you see now is inflation expectations have dropped. And again, we can measure this in markets with tip spreads. And the two-year is at 1.92%. The five-year is at two-and-a-quarter.

And yet the 10-year is still sitting around the same place, meaning that real growth expectations have picked up. And some Phillips curvers out there would say, well, all of that's a concern for inflationary pressures. But Kevin Warsh is not one of them. Now, he's very concerned with price stability, and he would be concerned for inflationary expectations, but he doesn't conflate real growth and inflation is one in the same, nor should he, in my humble opinion. So I would say this. The market may very well be wrong in the reduced inflation expectation that you see evidenced in tip spreads, but you really can't have it both ways. You can't say the Fed should hike

because inflation expectations have picked up and the Fed should hike because the market is wrong about inflation expectations going down. You sort of have to pick a lane there. Look, I want to finish up with a couple other market comments, but one of the things I want to say,

I'm noticing just on an institutional level I've been of the position that I'm not really convinced, regardless of what the futures market and the federal funds rate says, I've been of the opinion on record, very well documented, video, written, everything you can imagine for several months, that I was not really very convinced that Kevin Warsh would be coming in and raising rates based on what the expected catalyst to such a rate hike were alleged to be. And it's hard for me to go again. against what the Fed Fund's futures markets are implying, because that isn't something that kind of diverges very frequently.

But that is where my view is. And I just want to say that I'm now increasingly seeing some version of a consensus view becoming, oh, we have an out-of-consensus view that the Fed might not actually hike rates after all. Now, obviously, if it's a consensus view that one has an out-of-consensus view, that there's something contradictory there. But look, there are more institutions talking this way, and I have to say, in fairness to them, that the Fed Fund's market is still heavily implying, that there will be some degree of a rate hike later in the year. We're up to about 24% implied probability of no hike at all, but you are sitting at a 42% percent. probability in the futures curve of one hike, 27% for two, this is 7% for three. I can only say that this line of reasoning, I think compatible with what you see happening with tip spreads that if indeed

the bond yields are staying where they are on the longer end, as a result of real growth expectations having picked up, I don't think that sparks inflationary concerns from this Fed chair. We will allow this to continue to play out. And obviously, I'll be writing about it heavily. The first half of the year market theme of rotation, I'm not sure I can say how different a market feels, when certain areas that were leaders no longer are, but they're merely replaced by something else inside of the market, okay, a rotation from one space to another, it's just categorically different than the full on risk on versus risk off where everything sort of drops in concert. We've obviously experienced plenty of those moments in my adult life.

What I would say is weakness that is rotational is very different than weakness that is systemic across markets. And right now it does seem to me that where there are vulnerabilities, they're of a rotational nature, that's a better outcome than some of the alternatives. By the way, 68% of the S&P 500 is above its own 200-day moving average. There's now day-by-day various rotational things playing out, but just where we have been over the several weeks, the last month, et cetera, much aligned with what I talked about in the Divida Cafe on Friday. I think there are macro themes inside markets playing out where there is a substantive change in leadership underway. Ten-year bond yield closed at 4.47 percent. That was basically flat on the day.

The top performing sector for the day was communication services, which was up 1.6 percent. I think technology was second. So those two kissing kinds. leading the way. And then health care was the worst performing down 1.1 percent and all the defensives were reasonably down on the day. So on the economic front, the jobs report came out Thursday instead of Friday. And Brian addressed it in the daily recap Thursday, but I just think it is the kind of major economic news. I mean, we did get ISM services today. They expanded on the month, but at the same level as previous, it was in line with expectations. Business activity was down, but new orders had increased.

So it wasn't a bad report. It wasn't a good report, but it was in line with what was expected. But the data from the jobs report, I think it's hard for me to state how distressing it is to start seeing these downward revisions again. We had a really good April and May jobs report that really was turning me into more. more of a labor bull. And then to see these downward revisions, I think it was 43,000 for May and 31,000 for April to the downside.

And then the number for June itself coming in less than half of expectations, 57, less than half of what May's number was, 57,000 jobs in June. It just feels a little bit like last summer, where you started getting downward revisions that kind of repainted the narrative, but then also. So calling into question where exactly we are, and nothing looks terrible in the data. It's just that it was starting to look better. And you now sort of feel like are we back to this place where it's just very difficult to get a feel for the health of the labor market?

I will point out that the unemployment rate dropping from 4.3 to 4.2 percent because of a pretty meaningful drop in the labor participation force itself, that is the worst possible reason to see the unemployment rate going lower. All right, so I want to share a few data points with you on housing, and I know some of you that are listening or watching are in the great state of Florida. I may think I'm sharing this for reasons pertinent to Florida, but I'm actually not. It is, to me, a foreshadowing of things to come.

But listen to some of these stats regarding residential real estate in Florida. one out of every seven homes that is for sale right now in the country is in Florida. And Florida does have a pretty good population and a pretty good amount of housing stock, but they have 8% of the homes in America. That'd be equivalent to one out of 13. And yet one out of every seven homes in the country that is for sale is for sale in Florida. speaking to the supply issues that are at play there and the kind of excess that will need to be worked through.

45% of active listings in Florida right now have seen a price cut that is 6.6% higher than the national average. When you start seeing almost half of listings, have to take a cut to try to start moving the sellability of the product. That is, again, generally for shale. of more distress to come. By far, I think the biggest concern is that 10.3% of the closed sales this year of finalized transactions, over 10% of them happened at a loss for the seller, happened at a price that was less than the seller paid for the home. Presumably, those are

sellers that were selling from a reasonably short period of ownership, maybe three, four years. now Zillow's averages in some of the key Florida cities have prices down versus a year ago. 22% in Cape Coral, 18% Fort Myers, 14% in Sarasota, 12% in Naples, St. Pete, 7% for Lauderdale, 6% Tampa, 5% Palm Beach, 5% Orlando, even 3% down in Miami. So you say, well, wait a second, I thought Florida is a huge beneficiary of defectors from other states, and they most certainly are. And I thought Florida's is a really great state for economic and job opportunity, and it most certainly is. There's some of the best economic growth and job creation in the country in Florida. Why then would you be seeing

residential real estate price changes? Now, remember, they were up amongst the most. They had huge supply. They had all kinds of good things going. What is causing this particular moment? of all the four or five different data points I just shared. Prices were too high. That's it. And I think that ultimately to get to a place of affordability, you're seeing in Florida now where things were a little bit juicier than in other parts of the country, you're seeing it come to fruition.

By the way, there's a chart in Dividy Cafe today for China, less people say, oh, I'm concerned to see what's happening in Florida pricing. It's a good thing what's happening in Florida pricing to get to, an equilibrium between supply and demand. But if you want to see where it's real bad, look at the chart of China's at home prices, and they went into negative year over a year in 22, and then did it again in 23, 24, 25, now into 26. When you start getting a compounding of a negative price action, that adds up real quickly. Well, we've already talked about the Fed. I'll quickly see on the energy front. Oil prices were flat today, $68.70.

PEC Plus produced close to 19 million barrels in June, not quite. That is higher than it had been throughout the war months, but certainly still lower than it was pre-March. I want to point out last week that MLPs were up, but midstream corporations and Canadian pipeline companies were down. On the quarter, though, midstream was up despite oil being down 30%. Midstream was barely up, but it was up a tad, even at. as oil prices came down 30%. Now, Natty gas prices were up. But midstream is up about 24% year to date,

which is more than double the market. And I loved this line from Heinz Howard. I'm tempted to call my friend, but I've never met him, but I read him so frequently as a well-known midstream energy commentator, a portfolio manager at CBR, Eclarian. And he said, and I quote, let me read this word for word for you. We may get back to negative sentiment on midstream stocks again as we approach 2027 and potential oversupply. But natural gas demand and the swelling backlog of high return projects in the aggregate backlog should offset negative supply and demand sentiment for liquids to the extended returns. That's a mouthful there, but he captures it very well.

There's plenty of reasons things could get a little frothy there, but you have some fundamental elements in midstream that are very healthy right now. So I will leave it there. We have a fun week ahead. Clients will receive a big weekly portfolio holdings report, as they always do, Wednesday morning, but this time it will capture a whole first half of the year summary of various strategies and holdings within our portfolios. President Trump should be on his way tonight to Turkey for NATO meetings. So you have the possibilities of foreign policy news coming this week.

And then Dividy Cafe on Friday is going to look at one of the most common things I hear these days to rationalize a particular investment position. And I want to suggest that what that thing is is maybe not as great of a reason to take on an investment as some may think. I'll leave you in suspense and join you in the Dividendon Cafe on Friday. In the meantime, thank you for listening. Thank you for watching. And thank you for reading the Monday Dividendon Cafe. We'll see you throughout the week. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member Finra and SIPC, and with High Tower Advice. 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 at risk. There is no guarantee that the investment process or investment opportunities referenced Tyrion will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities, referenced TIRAN, may not be suitable for all investors.

All data and information referenced Trian are from sources believed. be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary and does not constitute investment or vice. The Bonsor Group in Hightower shall not in any way be liable for claims and make no, express, or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date reference, Such data and information are subject to change without notice.

This document was created for informational purposes only, the opinions expressed, are solely those of the Bonson Group and do not represent those of Hightower Advisors LLC or any of its affiliates. High Tower advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client's individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for any related questions. Thank you.