The Dividend Cafe - Monday - June 22, 2026

Episode Date: June 22, 2026

Today's Post - https://bahnsen.co/4vxzpNy David Bahnsen hosts the Monday Dividend Cafe from Grand Rapids during the Acton Institute Symposium, noting a relatively quiet day that allows more market focus. The Dow rose 148 points while the S&P fell 0.37% and the Nasdaq dropped 1.33% amid weakness in communication services and mega-cap names. He highlights strong year-to-date energy performance, surprising small-cap outperformance, and argues much of the market’s gain is concentrated in AI/AI-adjacent and energy. Bahnsen cites speculative behavior in the SpaceX IPO, including extreme trading volume, limited float, and a sharp decline from recent highs. Bonds sold off with the 10-year at 4.51% and the 2/10 spread flattening to 28 bps from ~80 bps. He shares an anecdote about Allbirds rebranding to “Smartbird” to pivot to AI, covers UK political instability, Iran-US talks, pending US housing legislation, mortgage rates, Fed hike probabilities, Alan Greenspan’s death at 100, and oil falling to $75.19 as Hormuz uncertainty persists. 00:00 Welcome and agenda 01:24 Market close snapshot 02:19 Sector leadership and breadth 03:06 Small caps surprise strength 03:49 SpaceX IPO mania 06:23 Rates and yield curve shift 07:13 AI bubble anecdote 08:57 UK politics and US policy 09:59 Fed odds and Greenspan 11:08 Oil and energy outlook 12:06 Wrap up and reminders 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, hello and welcome to the Monday edition at Dividing Cafe. I'm your host, David Bonson. Coming to you from beautiful Grand Rapids, Michigan, where I will be in our office here for the week and speaking several times at the annual Acton Institute Symposium, which I believe this is my 16th year speaking here, very excited. to be here. Very excited to be with you in the Dividendon Cafe because, well, for one thing, it's kind of a boring Monday. And that's not to say there's not a lot going on in the world. There is. Keep in mind there always is. But it just occurred to me that as I was compiling some of the updates with public policy and the Fed and oil and energy markets and all the normal

categories that we cover, it didn't feel to me like there was an exorbitant amount and it enabled me to put a little more into the market section today. And I want to highlight some of those things In keeping with the theme we've had Friday's Dividing Cafe, I asked the question, is are we at the top? Is this a moment of vulnerability with a lot of froth that we see in risk assets and a little abnormal behavior? I'll let you go to the Friday Dividing Cafe for the answer to that question. But even the week before around the SpaceX IPO doing a Dividendant Cafe on IPO mania, what it reveals about certain investor behavior right now. I think there's some fair amount of things in markets we can focus on, but I'll cover the

normal categories that we normally do as well. The market opened the Dow over 200 points, and it kind of bounced around throughout the day. It got a little lower, a little higher, but it closed up 148. It sort of stayed in that range most of the day. So the Dow was up 29 basis points, but the S&P was down 37 basis points, and then the NASDAQ down 1.33%. But that is, largely a byproduct of communication services being down almost 4%. And that was a byproduct of just a couple of a couple sector names, MAG 7 type names that were down quite substantially. So the high market cap waiting names getting hit, and that has a disproportionate effect in market indices. And you can see that on given days. I happen to think you can also see it

in a more sustained basis at some point in time, but that has certainly not been the case. over the last several years. There's a chart I want to put up real quickly that shows you the first quarter. What you see is how well energy is done on the year. And then, of course, the first quarter is before the Iran War even started. And then energy hung in there. There was some volatility, but throughout the second quarter,

but then in the second half of the second quarter, you saw the tech trade come back. But then you look at this chart here showing you the S&PX, AI and AI adjacent and X energy. And the market is down on the year. So you have a double-digit gain in the total market. But how much of that has come just from the very tiny waiting in tech, excuse me, in energy, and then the higher on the AI side. Now, what is not suffering for a clarity, a leadership, breadth is small cap. And the way in which the Russell 2000 and small cap names have outperformed Big Cap this year is just unbelievable in how that has stayed.

Even when Big Cap made a comeback, the Small Cap Delta still stayed strong, which would not have been what I would have guessed. I've been very bullish on Small Cap coming into the year. It was one of our themes. And other analysts were as well. But that the Small Cap Delta would have stayed strong when Mega Cap was rallying was a surprise to me, but speaks to some of that internal valuation reality and just internal breadth and strength that we're talking about.

So I mentioned the Dividy Cafe wrote a couple weeks ago on IPO mania. And using SpaceX as sort of an example, some of these other very high profile, potentially trillion dollar valuation names have not yet gone public, even though they've filed or announced or looking to it, talking about things like Anthropic and Open AI. But first of all, I want to point out, like when I suggest that there might be some crazy stuff going on, it isn't that I want this to be the case. I'm being really quite empirical about it.

I'm speaking to actual data and activity. I think it's very hard to interpret any other way. But the trading volume in SpaceX in its first full week of trading was higher than the trading volume in all the indexes of S&P 500. In the indexes of NASDAQ, more people flipping in and out of one company than buying the entire index that represents trillions. of dollars of American investment. So, you know, if you don't think that's crazy, that's fine, but I think it's at least a data point we're sharing. And yes, I do think it's crazy.

Now, by the way, the average price paid going into today for people who have bought SpaceX after markets since it went public is $181.56. It did price at the public offering, 135, and its very first trade was in the 160s, and it hasn't looked, and every trade since then was above that, but it closed today at $154.60. So now all this activity, in and out, in and out, hot money, very, very of the amount that is floating, keep in mind, that represents 4%, a little less than 4% of the entire company's shares are even available for trading. But of that portion, you are talking about the price right now being down 16 and a half percent from the average price paid since it began trading, but down 31 percent

from the high it was at just a few trading days ago. And remember, there were only four trading days last week. We've had one here today. So counting the IPO day, you've had a grand total of five and a half trading days. None of this has anything to do where the stock is going. None of it has anything to do where it will be in a year, two years, 10 years. I'm just simply referring to what's happening now in the mentality of the people participating. This is not what I would look at as a fundamental market activity, but rather something far more dangerous, if you will. Okay, the 10-year bond yield today, up six basis points. So across the curve, bonds getting hit again.

The 10-year closed at 4.51 percent. Top performing sector today was real estate, up 1.38%. So you had bonds coming down, yields coming up, and real estate going higher. So just that's not very common in terms of market correlations, but it happened today. I already mentioned communication service is getting hammered today. The 210 yield curve. So what the two-year bond and the 10-year bond and the delta between them was as wide as 80 basis points. It's a very steep yield curve.

March, let's call it three months ago. It is today now 28 basis points. So an incredible flattening of the yield curve being one of the biggest stories in all of finance this year. I do want to share this anecdote with you because we don't have a ton to go through in some of our other categories. But one of the things I list out here in the written dividend cafe, when I talk about some of the silliness in markets, I'm not going to comment on this. I'm just going to read it and let you do with it what you will. But it was something I got out of a Bloomberg article I read over the weekend. And I think, yeah, it kind of speaks for itself a little bit.

All Birds Inc. the maker of once viral wool sneakers. So sneakers made out of wool, announced that they are pivoting to artificial intelligence and have renamed themselves Smartbird Inc. And hired a leader of a Danish AI infrastructure group to be their new CEO. They are among many struggling companies

have sought another lease on life by seizing onto the busiest trend, AI, in this instance. Such name and business switches were legion during the dot-com bubble. Newly branded crypto treasury company surged when that was all the rage. In February, a tiny karaoke company stock soared and triggered a sell-off across the logistics industry when it trumpeted an AI tool for trucking companies. Going forward, SmartBird plans to focus on the business of supplying AI infrastructure as a service, a field that's exploded in recent years, given the computing resource-intensive nature

of AI and models. Okay? So the wool sneaker company now in the AI infrastructure company, some parallels in history, and you do without what you please. So the big news today, Kirstarmer, the prime minister in UK, has resigned. Andy Burnham is widely expected to replace them in the coming weeks. United Kingdom having a very difficult time. I want to say this is the seventh prime minister in the last 10 years, but it may be the six. But I think the new one will be the seventh. That's a lot of political instability are there across the pond. The Iran, U.S. talks continue, Vice President Vance being the spokesperson there. There were some setbacks over the weekend. They thought things got better today. We'll cover something about that in oil markets.

The Senate is supposed to be voting here in the next 10 minutes on their version of the housing bill, and then if that passes, it's supposed to go to the House for a vote later this week. And talks are continuing about a potential reconciliation bill out of the House. I think it is extremely unlikely. The average 30-year mortgage rate sitting at 6.54%, not really very different from where it was a year ago, not really very different from where it was two years ago. Federal Reserve right now with an 88% implied probability of some rate hike

before the end of the year in the Fed Fund's futures' curve, there's almost a 20% chance of three rate hikes, a 36% chance of two, and a 34% chance of one. Now, again, the S&P 500 trading at 22, 23 times forward multiple does not suggest to me that stock markets believe these rate hikes are coming, but both things are in the market pricing as we speak. Speaking of the Fed, I'd be remiss if I didn't comment on the fact that the long time Federal Reserve Chairman who essentially took the position when I was in high school, entering high school, for that matter, and then had the seat for basically 20 years going in 2006, passed away today at the age of 100 Allen Greenspan. Lots I could say about his legacy,

lots of things out there, but for today I'll just simply say rest in peace. Obviously, tremendously profound and significant person in American economic history. Oil closed today, 75.19, down almost 2% on the day. The question I want to present is when you hear that Hormuz moving picked up a lot over the weekend, the Strait of Hormuz getting back to normal, but then halted Sunday when Iran was upset about Israel retaliating against Hizbollah and Lebanon, it may be that the Strait of Hormuz is basically open except for when it isn't. And then the optionality around that sits in the hands of Iran. So how oil prices price in that uncertainty will be more interesting than just this

immediate drop, which is, of course, come from 95 to about 75, still higher than the 65 we were pre-war. Midstream was down about 3% last week. Oil prices, though, were down 10%. And then as far as midstream goes and really upstream as well, but the JPMorgan Energy Conference is taking place this week in New York City, and there's usually a lot of information that comes out of that. All right. So, Divany Cafe Friday, looking to the Hope embedded in markets. I mentioned already, I'm here at Acton in Grand Rapids all week. I love spending up my time with the TBG team here in Grand Rapids, and look forward to a lot of meetings

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