The Dividend Cafe - Monday - October 12, 2026

Episode Date: October 12, 2026

In this Monday Dividend Cafe, David Bahnsen notes the stock market was open while the bond market was closed for a government/bank holiday, which he считает distortive given markets’ sensitivity to yields, and points viewers to Friday’s bond-yield episode. He recaps markets: Dow +196, S&P slightly down, Nasdaq down nearly 0.5%, with energy leading (oil above $93) and technology lagging. He emphasizes weakening market breadth and concentration, citing an unusually large gap between average S&P stock moves and the index, a low share of stocks above their 200-day moving average, and that the top five S&P companies equal the bottom 434 by market cap. He previews earnings, focusing on hyperscaler AI/semiconductor spending expectations and OpenAI/Anthropic profitability risks. He covers weekend geopolitical news (Russia/Ukraine energy ceasefire claims; Houthi attacks), Senate race forecasts, low consumer savings, housing affordability ratios, and Fed hike probabilities. 00:00 Holiday Market Caveat 01:13 Bond Yields Recap 01:49 Market Moves Today 02:32 Breadth Warning Signs 04:39 Earnings Season Focus 06:28 AI Capex Reality Check 07:34 Weekend Geopolitical News 08:38 Senate Map Outlook 11:30 Savings Versus Spending 13:49 Housing And Fed Watch 14:45 Midstream 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 where I am going to do one of those caveats I do, I believe, a grand total of twice a year. And make clear that while today was a normal Monday and all the Bonson Group offices were open and the United States stock market was open, the bond market was not. is a governmental holiday, which means it's a bank holiday, which means money doesn't flow, which means it's a very bizarre day. I've always felt it's distortive. I've always felt that when the stock market is open, the bond market should be. And from the vantage point of what it does and the way asset allocators have to trade and just overall kind of fluid functioning of financial markets, it's a little off. And I don't know that it always

leads to some drastically distorted outcome, but I do know that it does things marginally that are just a little off. But I would say that right now, with the sensitivity, markets have two bond yields. It's probably even more heightened. So days like today sort of bug me a little bit, but with that caveat out there, we'll get into it.

Speaking of bond yields, that was the subject to the Friday Dividy Cafe, if you missed it. I appreciate all of the feedback. I've gotten. It was one of those weeks where I didn't get hate mail and I got some very kind and encouraging responses. I think that it is an important topic. And I think that we covered it well Friday in Dividy Cafe. I'd encourage you to check that out. There's charts. There's info. There's perspective. What caused bond yields to go higher? What did not cause bond yields to go higher? What

does it mean for you as an investor? The written dividend cafe.com. There's a video at the YouTube channel. And I hope you'll check it out. So today, let's get into the data for the day and we'll let you get on with your evening. Markets opened up 200 points, meaning the Dow, and it basically closed up 200 as well, up 196 points, which is 38 basis points for the Dow. The S&P closed down about six basis points. It had been down a bit more than that most of the day. The NASDAQ closed down almost half a percentage point.

Energy was the leader today up 1.5% oil prices to that effect. closed, the WTI closed over $93 up 1.5%. And technology, as you may have guessed, from the NASDAX response was the worst performing sector down at 90 basis points. I do want to stay focused on the breadth issue of markets that we've talked about quite a bit lately. I'm going to read you a data point here that stuck with me and I've been giving you more and more data points, all of them hopefully telling the similar story.

The average move in a stock in the S&S. last month was 8.9%. The SMP's move was 0.8%. That 8.1 delta between the indexes move, and it could have been up or down, and the average stocks move, which could be up or down, that 8.1% delta is the highest we've had in a month in 30 years. What we're getting at here, as well as a lot of the data points we provided last week, I'll give you another one right now, We have the lowest percentage of stocks in the S&P 500 right now that are above their own 200-day moving average that we've had all year. These are things that basically refer to the overall market appearing to do okay because of

two, three companies and the underlying market action not doing as okay. It speaks to a heightened vulnerability that exists inside of the market. There's another data point. This one's fascinating. a hat tip to my friend Michael Batnik. The top five companies in the S&P 500 right now are equal to the bottom 434 companies in the index in terms of the market cap. Five equal to 434. And if you track that, there's been times it's been high, but this is the highest we've seen. And it's almost high in a way you can't really believe it. So nothing to report on bond yields today

because of the bond market closed, we talked about the high and low sectors being energy and technology respectively. The spread between bulls and bears right now, at least measured by the Investors' intelligence survey, is at an extreme level, a lot more bulls than bears. That's a contrarian indicator for those of you who care about such things. I do think as we go into earnings season, which is about to kick in full effect, a lot of financials start to release tomorrow and more on Wednesday. and then you know what happens in the two weeks that follow. But if you were a cap-weighted index investor and you're wondering what to care about right now, I would suggest that what the hyperscalers say in this earnings season

about their future spend, somehow needing to outperform what are outlandish expectations for their spending plans going forward is pretty important to the broad index because this big earnings growth that is being talked about is really contained within one sector and just a few companies within it. And you won't be surprised to know there's semiconductor and pick and shovel AI companies. They're coming off of a low base effect.

But you know, that base effect is start to go higher. And what we mean by that is when you say 30% growth and last year it was much lower, that's one thing. But when you start saying 30% growth off of a number that was a lot higher because that number already had 100, 150% year over year growth. and now that becomes the base, getting that growth off of that higher base becomes a lot harder because of math. And this is where we're headed. So therefore, the pro forma expectation for hyperscaler spend on compute is very important. And a lot is writing on it in short term. And when

I say writing, I mean, in a trade. A lot is writing on it in a trade. And it is a trade. And so there you go. That's, I think, probably. top of the list for what folks might be paying attention to do for short-term movement up or down in the S&P cap-weighted this coming earning season. I want to close the market section with a quote from Peter Bookfar that has to do with Open AI's revenue disappointment and that concept last week about that they may have done 20 billion of revenue less than expected because I think he captures the essence of the matter and something that is akin to what I just said about the overall S&P a moment ago and the earnings season we're about to go into.

I quote my friend Peter, whatever the methodology and our nuance of how Open AI calculates its revenue figure and whether it matched up with investor estimates or not, I think the most relevant big picture point is that a massive chunk of the Gen AI data center buildout is literally reliant on two companies and whether all the CAPEX will be money well spent will be hugely dependent on the ultimate profitability or not of a very important. those two companies, which are open AI and Anthropic. And to add a large piece of the future cloud

backlog of Microsoft, Oracle, Amazon, and Google are these two AI model makers. For the sake of the economy and the stock market, fingers crossed. On the news front, I hope most of you're aware that over the weekend, President Trump first

announced that he was going to give sanctions relief to Vladimir Putin as it pertained to diesel fuel exports. The Russia's been under sanctions since their attack on Ukraine, and the president lifted that. And then announced on Saturday he wanted Ukraine's president Zelensky, Ukraine's president Zelensky, to be replaced. And then on Sunday, he announced that Russia and Ukraine had agreed to an energy ceasefire. Ukraine said they were unaware of that agreement, but they did say that

they'd supported if Russia did. And then the other big story of the weekend, of course, these Houthi attacks on Saudi Arabia adding to the tensions. in the region to put it mildly increasing pressures in the U.S. to respond. Military support. Saudi is sort of a quasi-ally ally in the region and the enemy of your enemy is your friend, kind of sense. And that is heating up, shall we say. On the public policy front, let me give my caveat first. I'm not about to refer to one race that I have a dog in the hunt for. I'm not referring to anything. I'm rooting for happening. And I'm not even actually, right, now making a prediction on anything. I'm just sharing because it's information that connects to public

policy, it connects to markets, what Mark Halperin's cheat sheet indicates, Mark being the political prognosticator, who I hold in the highest regard for his political prognostication skills. And so, if you don't like what the predictions are, that's very different than disagreeing with what the outcome could or could not be. I'm asking anyone to root for this. or against it. I'm just simply sharing Mark's forecast and sharing that I happen to generally hold Mark's forecast in high regard. He is stating, as he looks at the Senate map, where as you know, the Democrats need a net four pickup, which means they either have to hold all the seats they have now and then win four to get a majority of the Senate, or if they lose one, they have to pick up

and five to get to net four or higher. And he is saying that with Maine, he believes it's an advantage to the incumbent Republican, Susan Collins. New Hampshire, he believes it's an advantage to the Democrats who have the incumbent seat. He believes Michigan is too close to call where the Democrats need to hold the seat,

but they have a new Democrat candidate there. South Carolina, he says there's not enough solid polls to really ascertain if it's upper grabs or not. I imagine he would default to the position I have. which is unless there's just overwhelming evidence to the contrary or a blue tsunami type situation, I suspect that South Carolina you want to assume is still safely Republican. Iowa, Mark, believes, is too close to call and will stay that way until the end. Ohio, he believes, is definitely advantage Democrats.

Texas, unclear, hard to poll. History obviously says advantage Republicans, but most things. about the polling in this race has indicated otherwise, so who knows? Kansas Advantage Democrats, but my read on Mark's analysis, which I've done quite a bit of, is that he really does believe the GOP has lost this one, but we'll see. Alaska ranked choice means we're probably not even going to know on election night, Georgia and North Carolina in the bag for Democrats, Georgia being one they're holding and North Carolina being one they're picking one up. Republicans you talked to in those states would say the same thing. So in all of that, it's a very easy

answer. You can get to the math here real easily by going through all of it. The math is too close to call 50-50 on where the majority of the Senate will go. Okay. Economic front, I want to, I want to kind of reiterate something I don't do a lot in the Monday Dimin Cafe, which is a broader economic point. I would like to write a full Friday Duming Cafe in this subject at some point in time. But I think that what we are being told is that the best thing in the economy right now is the consumer is strong or spending a lot. You can ignore that University of Michigan consumer confidence survey from Friday, which was low. It had dropped in the month. But those consumer confidence surveys are just worthless and I've been saying that forever.

But then the other, if you believe that consumer spending a lot is good for the economy, it's correlated to the other relevant fact in the economy that I would consider. the most negative, which is a very, very, very low savings rate. Okay. And essentially, it's the lowest savings rate in 18 years. And why does that matter? Because you had a very positive thing in terms of tax refunds and other stuff like that from the big beautiful bill coming. But when it's coming in the face of a very low savings rate, people often have to replenish and are not turning that into the side that other people refer to. Now, I don't believe that the key driver of economic growth comes from consumption. I think it comes from productive activity from which consumption follows

doesn't lead. But you can celebrate consumption all you want. The bedrock of future growth is always in forever. And by the way, what this means is the bedrock of future consumption is production. But what pays for production is investment. And where, does investment come from, but savings. It's always in forever savings. So you have to take both of these things together. And if the consumer is spending, and you think that's great, but they're spending to the detriment of savings, an underlying capital formation from which you get investment, from which you get production, from which you get the economic growth you need, whereby by future consumptive and productive activity would come,

I just, for the life of me, don't understand why this is not taught in schools. All right. I've already talked about that consumer confidence surveyed. The medium home price relative to median income in 1980 was 3.5x. So three and a half times median income was the median home price. Now that number is five times, a 43% move higher. in that ratio.

So when people talk about how interest rates were in the late 70s, early 80s, remember the caveat. There's something Peter Bukfar wrote about over the weekend. And I think the sticker price on homes is monumentally higher, even adjusting for the very well-inflated incomes along the way. And that makes the interest rate comparison to that period utterly worthless. On the Fed front, we're down to 21% implied probability. in the futures market that the Fed will hike rates this month,

but we are still at an 88% chance that they will hike by the end of the year. Midstream, by the way, up 1.8% last week. A strong week for gas pipeline corporations and Canadians. I do have a lot on my meeting with our midstream energy managers that will be in the notes from my meetings last week, that deliverable for those who request it on the midstream energy meeting. but of course all the meetings are covered. Speaking of which, the Friday Dividy Cafe is going through

some of my main high-level takeaways from all of our meetings last week and what it's done to inform our perspective. That'll be in the Friday Dividing Cafe. I'm going to leave you there for your Monday night. There's always the Ask TBG in today's Dividy Cafe with questions I receive and my directly crafted answer. And the more to chew on with a couple of links

that may be worth checking out, Thanks for listening. Thanks for watching. Thank you for reading the Dividing 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. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy ourselves securities. No investment process is free risk. There's no guarantee that the investment process or investment opportunities referenced TIRN will be profitable.

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