The Dividend Cafe - Monday - September 15, 2025

Episode Date: September 15, 2025

Today's Post - https://bahnsen.co/3K56sWb Market Trends, Geopolitical Insights, and Economic Outlook - Dividend Cafe September 15th In this episode of Dividend Cafe, guest host Brian Szytel covers the day's market activity, noting minor gains in the DOW, S&P, and Nasdaq. He discusses the current cyclical versus defensive stock imbalance, historical trends in high yield bond spreads, and an uptick in small cap performance. Brian addresses geopolitical issues with key insights into U.S. and NATO sanctions on Russia, and the impact of ongoing inflation on consumer goods. Additionally, he explores labor market shifts post-COVID, anticipated Federal Reserve rate cuts, and the potential changes in corporate earnings reporting frequency. The show concludes with a preview of upcoming meetings with asset managers in New York City, offering a glimpse into the strategies and analyses shaping future investment decisions. 00:00 Introduction and Market Overview 00:50 Market Cyclicals and Defensives Analysis 02:14 Credit Market Insights 03:27 Geopolitical and Public Policy Discussion 06:09 Inflation and Employment Market Update 08:12 Federal Reserve and Interest Rates 09:01 Energy Sector Highlights 09:49 SEC Reporting Changes 10:55 Annual Manager Meetings in New York 12:05 Conclusion and Upcoming Events 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. Well, good evening and welcome into Dividend Cafe. This is Monday, September the 15th. And obviously, Brian Saitel is with you here today. David is traveling on a flight here out of LaGuardia to Houston for some meetings. And so I'm going to hop in here today on the video for you. On a pretty rangebound day on the market, We didn't get a lot of movement. We basically traded from start to finish right around fair value. The Dow ended up closing up 49 points, which is about 11 basis points from a percentage perspective. The S&P was up about 4 tenths of a percent, NASDAQ was up about 9 tenths of a percent on the day. So modestly positive across the board. Bond rallied a little bit too.

You had the 10 year down, two basis points we closed at 404. So we've got a longer form around the Horn on Dividedin Cafe. I'm going to go through some of the other topics here and just walk through them with you. On the market side, capital market side, it's just interesting to note that historically you've got about two-thirds of the market that is in cyclical sectors, about one-third is, and more defensive. And just with the bifurcation of what has rallied and what market caps have grown the most, you now have 80% in cyclicals and only 20% in defensives.

And historically, that would be really far out of whack. and it either means one of them is quite overvalued or one of them is quite undervalued or a combination thereof. The other thing I'll note is of the MAG7 names, only two of them are at three-month highs, whereas if you look at equal weight S&P 500s, you get this broadening effect, some of the value sectors have performed better. It actually is at an all-time high. So you're getting some relative outperformance there. We had communication services were up by far the most, over 2%, two and a quarter percent and then you had staples that were down 1%. So again, goes perfectly part and parcel to the comment I made earlier. The defenses are underperforming. Some of the more cyclical stuff

tends to be outperforming. I assume that that reverts back to the mean at some point, but the timing of that is always very difficult. The one thing I'll say is as far as markets go and will there be some big sell-off? And that's a question that we get all the time. Of course, everyone would want to know that. And the real answer is nobody knows when. But yeah, at some point, markets will sell off. But if you look at in the credit market, which is always the much bigger underlying sign of market stability or a market stress, you've got high-yield bond spreads now at the tightest point that they've been the entire year. So just historically, going back 10 years, we're at under 300 basis points wide on high-yield spreads.

So that's a level that basically is indicative of the opposite of any credit event, I guess would be the way to describe that credit market. markets are working just fine. But on the disparity of different parts of the market also, you've got the Russell 2000, which is the small cap sector. We talked about it underperforming for a long time. It's not playing a little catch-up. A lot of that has to do with interest rates coming down. Remember, small caps are much more sensitive to interest rates. And frankly, to their credit, you know, the ones that have gone through this period of high rates are in pretty good shape. But that said, there's a much higher percentage of outperformance in some of those

companies that aren't making any money. So that's not a great sign. That means some animal spirits are getting ahead of themselves here a little bit with some exuberance. Ultimately, profits really should drive the stock prices. And otherwise, it's basically just speculation. Geopolitical on the public policy front, there's probably the most in today's Davida Cafe here. And I want to touch on this and see if I can do it justice. But our lead political analyst, Renee and Aeneo, who's a dear friend. We've had many long dinners together, in New York, love the guy and always has smart comments and is very connected and thoughtful in what he says. He did post a quote from President Trump on Saturday, and I think it is

important enough to read to you. We've got it inside a dividend cafe, but the best as I can to keep everyone's attention here, I'm just going to read this. I'm ready to do major sanctions on Russia when all NATO nations have agreed and started to do the same thing. And when all NATO nations stop buying oil from Russia, as you know, NATO's commitment to win. has been far less than 100% and the purchase of Russian oil by some has just been shocking. It greatly weakens your negotiating position and bargaining power over Russia. I'm ready to go when you are. I believe this plus NATO is a group placing 50 to 100% tariffs on China to be fully withdrawn

after the war of Russia and Ukraine ends will also be a great help in ending this deadly and ridiculous war. China has a strong control, even grip over Russia. So the point into putting this in here is a quote is that, you know, whether you you like the current administration or don't, the war that is ongoing here is a huge loss and tragic loss of life. And so there's a need to hopefully bring it to an end. And one of those ways to do that is by leverage. And so if you think about Russia's only real income stream being energy and oil and you think

of NATO wanting more financial sanctions from the U.S. on Russia to help stop the war, really you can't do that unless the European nation stop buying the oil from Russia. So they're their largest customer, one of them. China being on that list is the largest customer as well. And so if you get a combination of NATO nations agreeing to stop buying the oil, then you get sanctions from U.S. and the financial side of things. And then you also get a tariff hike on China that goes away if the war ends. That's a big incentive for things to go the right way.

And so I think there is a point there on as far as wanting the U.S. to do a lot on the sanction side, but then still having countries buy the oil from Russia. I'd even go farther and say there's a sub-benefit to that, which is since Europe still needs to consume energy and the U.S. has a lot of it too. I think there could be a solution that ends up being a win-win better to buy oil from a friend than a foe. Secretary Bessent was in Spain with Greer and negotiating a TikTok deal that looks to be more eminent and was also in part of that public policy news on the day. there was comments out on inflation from our friend Peter Book for.

He's a great analyst that we are friends with and pay attention to a lot. And whether you believe inflation is there or not, obviously the numbers on CPI and PPO, we've talked about a whole lot that come down. But if you look at what most people buy and just look at the prices that have gone up the last four months, coffee is up 28%, bananas up 14%, floor coverings up eight, window coverings up six, used cars at 3.7, so on and so forth, jewelry up 14, camera equipment up 13. It's interesting that a lot of these things are wants and not needs, you know, when you look at some of the expenditures, you know, the luxury items in other words. But nonetheless, they're large inflation

numbers. So the CPI and PPI mean not capturing what a lot of people are just feeling at home. Our comment in there today was about the employment market and the labor market. We've talked about the 21 to 24 period, and as a business owner and as a business, we can attest to this, there was at one point 12 million job openings and only about 7 million unemployed, huge imbalance in the labor market, much more favor to the worker than the employer back then. And back then, it wasn't just the jobs were open. It was that they were skilled jobs that were needed to be filled and there just wasn't enough skilled workers to fill them.

And that was a phenomenon post-COVID and during the pandemic. following that particular position. A lot of that had to do with the leverage that workers had on being able to work from home and different salaries and all of those things. Now that said, you've got a situation now for the first time since 2021. There's now about 7.4 million unemployed people and only about 7.2 million job openings. So you have some start to some slack in the labor market. And it's hard to argue that that isn't real.

You've got jobless claims that have sort of ticked higher. You've got the unemployment rate that has ticked a little bit higher, and then the number of jobs just in both ADP and the non-farm payrolls have been disappointing now for two months in a row. So that'll segue into the Fed comments. Again, their mandate, obviously, is full employment and stable prices. Stable prices is arguable, okay, because I just went through a lot of that stuff like coffee and used autos and those things that people buy. But that aside, the employment picture being soft, we've got an FMC meeting this week that will conclude on Wednesday. And there's a 94% chance they're going to cut rates by a quarter. There's only a 6% chance.

They're going to cut rates by 50 basis points. But there is now a 77% chance. There's three full rate cuts priced them before the end of the year. So we'll call that 75 basis points. And we'll call that taking Fed funds from four and a quarter to four and a half down to the 3.75 level, something like that. Again, it's a range, 350 to 375. On energy, there's not a lot out.

WTI closed at 6334. It was up a percent on the day. You've got midstream that was up about a percent and a half on the week. And again, the Seacorpson, the Canadians are really leading the way. Some of the mass delimited partnerships are lagging here a little bit. But obviously, there's been a big move in the stock price of Oracle and that's been in there. They're spending plans related to CAPEX and a huge power demand that is behind a lot of those data centers. that have to fuel that. That's an ongoing theme. Some of our large asset managers, our alternative

managers, have made big bets on that data center front. But it all comes down to affordable electricity and abundance of electricity. And technically, some of those energy areas like Canada have a good abundance and a good price of it. Question in there today was about the recent comments as to whether SEC is going to vote or pass or enact the ability for companies to report earnings and every six months instead of every, every quarter. And are we worried about that as that change what we do? The short answer is that it doesn't. You know, ultimately, I enjoy getting the quarterly reports. Okay. If it moves to semi-annually, it's just a different period of time. And it's not a very large one in our opinion. Maybe it's smooth things out and people focus more in

fundamentals versus just what guidance always is. And it's a little bit of a non-issue for what we're doing on the dividend growth side. I suppose if we had like a high-frequency, trading apparatus or something that was much more momentum driven and we were trying to just trade around sentiment and things like that, it would matter to me more about the fact that we're going to own businesses and have a high conviction, we bottom up about them. It's unlikely that having a quarterly report or a semi-annual report is going to make much of a difference. That said, this hasn't even happened yet. That President Trump did come out and say he was supportive of it.

My favorite week of the year, believe it or not, not exaggerating. It's my every week of the year. That's up there with Christmas, I guess. But it'll be David, Kenny and I out in New York City. We meet with every single manager that we work with. There's 20 plus meetings scheduled for the week. It's one of our largest years ever as far as number of meetings that we're going to tackle. But it's just so much good information and fun to really get intellectual on all the different strategies that we're using. And some of them will be replaced. Some of them will be added to new ones will come into the fold. We get great information about marketing. and everything from this every time.

If you're interested in more information following that trip, it's the last week of September, first week of October. You can reach out and we can provide hopefully some background to it. This actually began 2006. So it's technically going on 20th anniversary year. And frankly, we did it during COVID, which was an interesting time since we were going into these buildings and these meetings and they were literally turning on the air conditioning

and the lights for the first time during COVID. That would have been first week of October. October roughly 2020. So that was called eight months after the pandemic started. I hope for any of those football fans out there, you know, as a Charger fan, David writes about the Cowboys, but he's not the one speaking today. So we'll start talking about the Chargers. They're playing the night. So I haven't seen the game yet. But I'm happy to see the NFL season heating up. And I know there's some good college stuff going on as well. But David will be out at Houston. He's got a client dinner and a speaking event to the Nashville and then back to New York and then back to California. I'll be with him and we'll

different meetings together the week of the 22nd. But with that, that's what I've got for you today. I know that was a big around the horn. Hopefully I was able to get through it enough, but I encourage reach out with questions either about today's dividend cafe or anything that comes up in the market at all and more than happy to answer them. But with that, I will let you get into your evening and again, enjoy your Monday night football.

But we will be back with you tomorrow on Tuesday with dividend cafe. Thank you very much. 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 or sell securities. No investment process is free risk. There is no guarantee that the investment process or investment opportunities referenced TIRN will be profitable.

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