The Dividend Cafe - Monday - May 11, 2026

Episode Date: May 11, 2026

Today's Post - https://bahnsen.co/3Resx8f From New York City, this Monday Dividend Cafe covers markets’ growing desensitization to Iran-related news even as oil nears $98.50, the 10-year yield rises to ~4.41%, and major indices sit at all-time highs. The S&P 500 appears expensive across valuation metrics, with dividend yield near a historic low (~1.08%), highlighting reliance on price returns versus cash income. The host argues earnings are currently driving markets, but notes a caveat: “other income” was 34% of net income, boosted by hyperscalers marking up private AI holdings. He reviews sector performance (energy best, communication services worst), policy items (possible reconciliation bill ideas like indexing capital gains to inflation; Virginia redistricting ruling; SEC exploring semi-annual reporting), economic data (115k jobs; weak manufacturing; low consumer confidence), housing trends, Fed leadership transition to Kevin Warsh, and rising longer-dated oil price expectations. 00:00 Welcome and Agenda 01:57 S&P Valuations Warning 03:56 Dividend Yield at Lows 05:53 Iran Risk Ignored 07:47 Earnings Driving Markets 08:23 Earnings Caveat AI 09:54 Geopolitics Headlines 10:32 Policy and Taxes Update 12:34 SEC Reporting Shift 13:00 Jobs and Consumers 14:21 Beef Tariffs Note 14:40 Housing Market Pulse 15:17 Fed Leadership Change 15:32 Oil Curve Backwardation 16:20 Ask TBG 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. I am in New York City and we have a full docket today. A lot of fun things to go through just kind of touching on all the topics that matter. And I will just get it out of the way up front that I really. don't think there's any topic more pertinent to what's going on right now than the desensitization of markets to news related to Iran. I mean, you would think that if there was a day that markets would have sold off saying, okay, it appears hostilities and some kinetic activities are going to be coming back into fray. Oil prices clearly are staying stubbornly high and going

higher bond yields have moved, even higher, getting back near that four and a half percent level on the 10 year. You would think that this would be the day. And yet, even today, we have all the market indices up a tad and all three market indices at all-time highs. So we're going to look into why that is and unpack that a little bit. And of course, do our normal coverage of public policy of housing, of the Fed, of oil and energy, of economic data, all the categories we always go through, and it is going to be fun. I'll first say, Friday's Dividing Cafe, if you missed it, is one I would really encourage you to check out, Dividendoncafe.com, where I look at the deal done between Fox and Disney in 2019, and ask the very simple question, what is in that transaction that

investors like us can learn from. I think it's a fun history lesson, but an even more fun investing lesson. So check out Dividing Cafe from Friday. Okay, first of all, I'm going to put a chart up on the screen right now that looks at a number of valuation metrics related to the S&P 500. And what I would suggest this shows whether or not you're looking at the forward PE, which I think is generally the most common and probably the most useful valuation metric, the price to earnings on what we expect earnings to be over the year ahead, the trailing PE, what the price to earnings is based on the last year's earnings, and various other metrics related to cash flow, to dividend yield, to the Fed model, all sorts of these various factors. And you can see that across,

across the board, the S&P 500 is either expensive in these various valuation metrics or very expensive in most cases. And so the one from that chart that I would have suggested is most interesting is dividend yield. And you say, well, why most interesting? Because I think the market's been expensive for a while. And I think the market is extremely expensive now. And I think the expensiveness of the market is largely concentrated in a few things.

things, and I think there's going to be a reckoning around all of it. And I don't have the foggiest idea when, and I never have had any idea when. And historically, valuation issues have been poor timing indicators. They've also been nearly infallible indicators of longer term returns. The point of entry over longer periods has had a huge impact in what expected rates of return. might be over longer periods of time, but that is immaterial to the way people are going to be talking about markets this week, this month, this quarter, and perhaps even this year. But the dividend yield issue is fascinating to me that we're essentially looking right now at the lowest dividend yield in market history, that if you take the price of the index now

and divide into that the actual trailing 12-month cash dividend. end of the S&P 500, you're getting a 1.08% dividend yield. So this is one of the reasons that dividend growth investors are able to be much more valuation agnostic because we're looking at a higher dividend yield from a more selective pool of companies, but that index investors obviously don't have that luxury. Is the S&P 500 a cashless investment at this point? Not literally. It's a 1% yield, but for something that is generally at a dividend yield in a much closer ballpark, if not higher than, in periods where it was really attractive, if not higher than the 10-year bond yield, to be this far separated and so incredibly dependent on price return and evaluation.

expansion and other things like that, I think it is surreal. But of course, some may say we don't care that it's cashless because if we need cash, we can sell. That is very true. It's just that one of the thesis that many people have is that you own great companies and you don't want to sell them because you want to continue to own them. And so having to sell the thing you love to monetize it is a key. differential in cashless investing to why we focus on things that have a yield.

Okay, this desensitization in Iran, no question to me is the biggest story of markets right now. The things that we were told were driving markets higher have not materialized. And the things that went the other way, markets have shrugged off. Crude, as I mentioned before, is in the high, high 90s. Markets don't seem to care. I think you have traders that will try to front-run headlines to get in front of certain things. And yet, you also are even apart from the trading impact of everything, going to have real economic impact at some point.

I don't know when, I don't know how, but it has to get absorbed eventually. What I can't tell you is when the market will care about the straight-of-form moves again, but I will tell you that it will. So it's entirely possible to care in a positive way because the next time it cares is when the straight is reopened and everything's back to normal. It's hard to envision where any of this is going exactly. But the point is that across the board, most of these things have gotten more uncertain, in some cases more negative, markets haven't cared. So is this just the market simply believing that it doesn't need to know how to work out,

that it will work out, the President Trump has a plan or that the, the, the, you know, The things that matter are baked in. It's entirely possible on all of the above. But I would say that the desensitization is a surprise. And that right now, I'm not sure that there is good news in Iran that moves markets higher. And I'm definitely not sure that there's bad news that moves a lower. Because right now, the combination of different Iran narratives and very high valuations have not moved market. down. Why? How? What is going on? I'm going to just tell you in one word, it's earnings.

Earnings have trumped everything else for now. And that could very well change. I'm going to give you a caveat about these robust earnings in a moment, but that is the environment we're in. So the 10-year bond yield back to 4.41% today as the 10-year yield moved up 4.8 basis points. Energy was the top-performing sector today up 2.63%. Communication services was the worst performer today down 2.33%. And this earnings issue before we move out of markets, I just would encourage you to understand that when you're seeing like, oh, earnings are up 27% year over year. There's a sense of which it's kind of true. And yet what you have right now, I want to get this number right here. As far as the percentage of earnings coming from other income for this last quarter, I mean, this is just crazy, but it was 34% of net income.

Other income was 34% of net income. And to what do we owe this big boost in other income? the massive multi-trillion dollar hypers marking up the value of big, huge private companies sitting on their balance sheets, your open AIs and your Anthropics and so forth is a big, big part of this. So to those who would say, well, I don't need to worry about froth and AI because earnings are rolling strong, yeah, that's okay, there's some truth to that. But to the extent that some of the the reason earnings are rolling strong is because of froth and i n a i not operating earnings but actual other income let's just watch this caveat shall we top news stories president trump president g will be meeting uh if it's not thursday it appears it's going to be friday there's a little ambiguity of the

exact date is that connected to some potential outcome for how the war you will end, we will see. And then I do believe that the big news right now, the ceasefire does appear to me to be ready to totally fall apart. And even President Trump, I think, kind of insinuated and it's hanging on by about a 1% thread. The outlook for current talks have been rejected. So we don't know where this is going next. On the public policy front, I've gotten more inquiries into whether or not a budget reconciliation bill is still on the table. There are still folks talking about it, and I remain a little confused where it is possible politically, based on what I understand of the math and the warring factions that exist within the House

GOP. But if there were to be a reconciliation bill, what are the tax cuts that would be a part of it? The only thing I've been able to get any word on that there are plenty who would like to push it through is some idea of indexing capital gain taxes to inflation. And if that can't happen across the board, indexing capital gain on primary residence to inflation, which already has a $250,000 exemption for singles and $500 for a married couple. It's a big deal for homeowners that want to sell. It may not be a huge deal, but it is something.

And as far as other things they want to put in, you may hear more and more talk about trying to get other components in a reconciliation bill, but you just have to remember that there's very tight rules on what fits within the budgetary criteria. There's a Senate parliamentarian who gets to vote on what is eligible, what is not, and I'm not sure that there's much that we're hearing on the political landscape that could get into a reconciliation bill. As for the Virginia Supreme Court ruling on Friday, throwing out the redistricting for procedural reasons that the Democrats had done, it really does look to me that instead of three to four House seats that the Democrats would

compete for, they're now going to compete for maybe two to three. That's still something. Those seats are by no means an assured thing for Republicans. But the worst case scenario in Virginia for Republicans got a little bit better, that's for sure. By the way, the other public policy comment I want to make is that the SEC did put out for comment and suggested change in rules going from quarterly reporting for companies, listed companies in the stock exchange to semi-annual reporting. I have gotten a lot more optimistic that this may end up happening. So there's still some procedural red tape in front of us,

but I think it would be a net positive for our markets. All right. On the economic front, the jobs report came out on Monday. Much better than expected. It wasn't great, but it was better than expected. 115,000 jobs created. The downward revisions for the last two months were only 16,000. So I had worried it might be a lot worse. Having the downward revisions be somewhat contained was a good thing. And then again, when you combine the kind of hanging in their numbers of the BLS data with the fact that the initial job was claims each Friday have definitely stayed in check, think that the jobs picture looks modestly better than I would have said it looked a few months ago,

and that's a good thing. Now, the manufacturing jobs are still going negative, and that doesn't appear to be moving in the right direction. Some would say the consumer confidence number is a big problem. It fell to 48.2 in April. I just want to say that consumer confidence speaks to what people say they're going to do spending money, not what they actually do. And I've never found consumer confidence to be a very material measurement of anything. In my business, we say, don't tell me what you believe, show me what is in your portfolio. And I think that when it comes to consumers, people say a lot of things, but you ought to look at what they do, not what they say. Oh, by the way, other economic data, the White House has responded to concerns about high beef prices

by announcing that they're going to lift the tariffs that are in effect on beef prices, on beef. You don't say, okay, housing, pretty flat-ish number for new home sales in April, up 0.2% on the month, which was totally flat year over a year. Days on market for when a sale does happen are up 10%. The transactions that are happening in single-finding, family residents. The percentage of those that are happening for first-time homebuyers is down

3%. The percentage that is happening for investors is up 6.7%. All of these data points seem to me to point one way forward looking, but that's where we are right now. Kevin Warsh should be approved by the Senate this week. Chairman Powell's term as chairman should end this Friday. Kevin Warr should take over by Monday, a week from today, the 18th, is a week from today. The 18th is the new chairman of the Federal Reserve. On the energy front, oil I mentioned, was up 3.2% of the day, closing at $98.5. Last week, you had oil prices down 7%, the S&P up 2.3. But I do have to say that right now, for the first time, this backwardation in oil prices

that I've been talking about for over two months, you're seeing the nine to 12-month element of this curve that had been hanging in there around 68 to 71. is now pushed up to 75-76. So oil prices are starting to get priced into a higher expectation, even into the future. Obviously, it's the short part of the curve that's been wildly susceptible to headlines around the Iran war. I'm going to leave it there.

I've gone on a little longer than normal for a Monday, but there's plenty to chew on in the Ask TBG. Somebody asked what to expect if the House and Senate do go Democrat majority going into 2027, and I'm always happy to talk a little bit of politics here in Dividend Cafe as objectively as one could expect. Clients, you will receive your weekly portfolio report on Wednesday per usual. And this coming Friday, the Dividendin Cafe, our special Friday Dividend Cafe, as always, I'm going to be addressing some very, very sober truths about the national debt.

I'm going to leave it all there. Have a wonderful Monday night. Reach out anytime questions at the Bonsendoup.com. In the meantime, thank you for listening. Thank you for watching. you for reading the dividend campaign. 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

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