The Dividend Cafe - Monday - March 16, 2026

Episode Date: March 16, 2026

Today's Post - https://bahnsen.co/4lFUmle The episode recaps a broadly positive market day with the Dow up 388 points and all 11 sectors higher as tech and consumer discretionary led, while the 10-year yield fell to 4.22%. It notes that 43% of S&P 500 companies hit a 20-day low amid war-driven volatility, highlights extreme index concentration that could worsen if major private firms go public, and questions default fears given high-yield spreads near 3.17%. On Iran, the U.S. conducted targeted strikes while leaving energy infrastructure intact, and the Strait of Hormuz remains the key risk as oil closed above $94, with China potentially involved in reopening efforts and a Trump–Xi meeting delayed. Economic updates include Q4 real GDP revised down to 0.7%, flat durable goods orders, modest industrial production growth, and expectations that major central banks hold rates while guidance drives markets. 00:00 Welcome and Resources 00:47 Market Rally Recap 02:35 Index Concentration Risks 03:33 Private Credit Reality Check 04:42 Iran Strikes and Strait Risk 07:03 GDP Revision and Growth Drivers 08:14 Consumer and Industry Signals 09:35 Central Banks and Energy Outlook 10:52 Week Ahead and Sign Off 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 Dividend Cafe. I feel like I have not recorded from our Newport studio for some time, but we've had a very full day here. And I want to go around the horn with you quite a bit around war, of course, other updates with markets and our normal Monday activities. First, I do want to say that at Dividend Cafe.com, in today's Dividendin Cafe, you will find a link to a short hit I did on Varney-Fox Business this morning. You will also find at Dividendacet.com Friday, a more extensive coverage of everything going on in markets, the five major themes that have already unfolded in early 2026. Of course, as always, there is the written Dividendon Cafe along with a link to the video and podcast. So with that said, today markets opened up 300 points and stayed up basically throughout the day.

There was a little zigging and zagging around that baseline, but closed up 388 points, almost 1% on the Dow. The S&P was up 1%. The NASDAQ was up 1.2. You had a kind of inverse of what the market has been for most days this year. Top of the pack was technology, consumer discretionary, bottom of the pack was energy and consumer staples. Now, when I say bottom of the pack, they were all positive. So you had a day where markets weren't up that much, basically 1%, and yet 11 out of 11 sectors were up. But the things that have been leading the pack were at the bottom today, things that had been struggling a little more were at the top today.

There is a few market comments I want to make. Let me go ahead and first finish up today that 10-year bond yield closed at 4.22%. So the yield was down six basis points on the day, a pretty good little rally in the long bond. 43% of S&P 500 companies coming into today were at a 20-day low. That is not that bad. Considering the elevated volatility we've seen in the last two weeks since the war began and oil prices shot up, you would need a much higher percentage of companies to be at a 20-day low than 4%. 43% it's worth sharing.

Now, it's entirely possible that you end up not seeing this worsen, but that would really represent a pretty benign geopolitical sell-off to only see less than half of the market even hit a 20-day low. Interesting comment. I, of course, have talked for quite some time about the elevated concentration level in the S&P 500 with 10 companies representing 40% of the index and how a historical that is compared to the way things have been most of the last 50-plus years.

But it's interesting to point out that that is the current state of the S&P 500, that actually if OpenAI, if Anthropic, if SpaceX, and there's a Lincoln Divida. Cafe about this, all companies are discussing public market offerings in 2026. If all three of them were to go public this year, you could very, very, easily see the top 10 out of 500 companies equaling 50% of the S&P 500, that concentration is just monumental to even think about and drastically changes the risk-reward profile. Speaking of risk-ward profile, of all this piling on about private credit, I just can't tell you how surreal it is to hear all the conversation about imminent defaults.

and just all this problem, while spreads in the high-yield bond market sit at 3.17%, which is a little bit higher than the historical lows that had been at, but I mean still a very tight, very comfortable range. Spreads around 3% in junk bonds, and we're talking about an imminent explosion of defaults. I mean, it could happen, but it does, I guess, seem improbable. we're watching those spreads for a worsening of credit conditions. There has been a decrease in prices in the levered bank loan market. But again, the private credit data, I just want to continue to make clear when people

are talking about default issues there, they are prophesying. They are not describing. And maybe they're good profits, but that is not in the data as of yet. Okay. What else do I want to highlight here? Let's move on for markets get to the around. on stuff, the U.S. did end up bombing Kargai Island over the weekend, but it was a very targeted bombing and didn't have, it was not intended to go take out their oil infrastructure.

So what it did was essentially leave a lot of critical energy infrastructure in place, but targeted certain military targets. And I continue to believe that the administration is doing that on purpose because there is hope that there is going to be some successor in Iran that they want to have the infrastructure in place, a permanent hit to Iranian energy capacity. changes the succession options quite a bit. The Strait of Hormuz continues to be the major story in Iran. Much of the analysis that I am reading continues to focus on a safe reopening of control.

We understand it needs to be sooner than later for markets to feel good, but that it may not be possible without a willingness to incur casualties, that it can happen. And in fact, if it needs to it, it eventually will happen. but the question is what commitment in trade-off to life are they willing to make? And I think that that's a very difficult situation. But I want to quote from my friend Renee Anna Nowf Corbaud. In theory, and I am reading verbatim, in theory, a military solution to the Hormuz Strait problem,

but in practice, a political logistical constraint that impedes mission execution on the timeframe consistent with market requirements. That's the tension we're seeing in the Strait of Hormuz that has left oil prices into the 90s. close today, above $94, down several percent from where they'd been. They creeped up again back near 100 over the weekend, closed in the mid-90s. That's not cheap. But again, trying to see this not boost up into the hundreds is, I think, what markets are hoping for and certainly the administration's hoping for.

I think China is going to end up being a role in the straight reform of renew solution. I certainly believe the administration wants that. The president did announce after market hours today that they've asked China to delay. the pending meeting with President Trump and President G for a month. And there does appear to be a lot of back channel communications about where China has some incentive economically to play a role in the Strait of Hormuz reopening. So more on the around war at the written dividend cafe.com. I'm going to move on to the economy because we got a downward revision in Q4 GDP. We already been expecting two and a half percent annualized real economic growth in Q4. And it had come in in the

first Q4 number a couple weeks ago, 1.4%. Now it was revised down to 0.7%. So it had gone from 2.5 to 1.4 to 0.7. And what happens is when you're measuring the real economic growth, it is deflated by the inflation. And the PCE number being higher was part of it. But on a nominal GDP basis, where there's no discounting for the inflation rate, the nominal GDP growth was reduced by 0.6% itself. So you end up getting a total year over a year, 2025, real GDP number of 2%. Not terrible, but not what many had hoped for. And per Peter Bukvar, data center buildouts alone represent half of last year's GDP growth. Other economic news, new orders for durable goods have started the year completely flat.

That's not really pointing to this new supply-side capital investment boom we're hoping for. Orders were better if you're excluding a big drop in defense aircraft, but just total durable goods, pretty flattish on the year. The increase in gasoline costs for American consumers is 65% higher than the amount of tax refunds American consumers are going to get. for the month. So let me make this clear. A lot of argument people are making for this stimulus coming in the economy is that people are getting bigger refunds than normal because the withholdings and the actual taxable events of 25 were not paired up and there was going to be excess money coming back. Most of that is true. But it appears now that a lot of that is going to be absorbed by excess gas cost. Now, you could say, okay, that's a glass is half empty interpretation because the

glass is half full interpretation is, hey, a lot of the excess gas cost problem of the Iran war is being absorbed by tax refunds. So you can cut both ways. Industrial production up is 0.2% in February. Decent decline in utilities output, a decent increase in mining, and then manufacturing was just barely up at all. So it's a Fed week, but they're not doing anything. Futures are at 100% of no Fed change in rates. But you have the Fed. announcing this week, the European Central Bank announcing this week, the Bank of England announcing this week and Bank of Japan. I expect actually most of the central banks of the developed world will be sitting tight this week. On the energy front, WTI, again in the mid-90s, midstream last

week was down 0.6%. Now, again, the S&P was down 1.6 last week. The midstream had been up the week before. The S&P was down 3% the week before that. So midstream continues to be very contrary to markets. Now, I want to be clear on both midstream and upstream, that if there ends up being some resolution in Iran, I think the whole energy sector at this point could very well see a repricing, but where reprises would still be higher than where it had been before, that there is an elevated risk premium that is becoming more structurally entrenched, and that is one of the defensive benefits to investing in the energy structure. Speaking of which the energy sector is 26% above its own 200-day moving average. It's in a 95th percentile of its historical relationship

to its own 200-day moving average. So what do we have this week? We have more coming and going every single day with Iran, more coming and going later in the week with the Fed and Central Banks. And it's not about what they do on the policy rate because they're not going to do anything, but it is about their announcement, their language, their tone, all the normal things with forward guidance. And then you know what else we have at the end of this week is March Madness. Thanks so much for listening, watching, and reading the Dividing Cafe. The Bonson Group is a group of investment professionals registered with High Tower Securities LLC,

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