The Dividend Cafe - Monday - September 29, 2025

Episode Date: September 29, 2025

Today's Post - https://bahnsen.co/3IxLuPt Dividend Cafe: Market Insights and Key Themes from Money Manager Week In this Monday edition of Dividend Cafe, the host discusses the extensive agenda of the first day of Money Manager Week. The conversation includes insights from several meetings with portfolio managers and asset management partners. The host shares an outlook on recent market movements, including the Dow's marginal increase, changes in bond yields, and performance in various stock sectors. Key points include discussions on market returns driven by earnings growth and multiple expansion, and the U.S.’s new tariff threats. Additionally, updates are provided on significant economic indicators like PCE inflation data, personal income, durable goods orders, and the housing market. The host also touches upon public policy topics such as potential government shutdowns and international trade deals. Lastly, the episode previews topics to be covered in the upcoming Friday edition of Dividend Cafe. 00:00 Introduction and Weekly Overview 01:45 Market Performance Recap 03:13 Sector Highlights and Oil Prices 04:07 Political and Economic News 06:44 Inflation and Economic Indicators 09:08 Housing Market Update 09:32 Federal Reserve and Interest Rates 10:34 Conclusion and Final Thoughts 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, hello and welcome to the Monday edition of the Dividend Cafe recording right now at the end of the day Monday after what has been a very robust schedule of our first day, Money Manager Week. We already enjoyed about four meetings with our taxable fixed income house and another four meetings with one of our alternative asset managers. And there's more going on still. And then, of course, we're going to face day two tomorrow of a week long set of meetings. So you may not care about any of this right now, but just want to give you kind of the explanation as to why we are fast and furious this week, why Friday's Dividing Cafe is going to be devoted to covering some of the major takeaways and key themes of the week and why I'm resisting the temptation to get into

some of the things already on my mind. But it is fascinating, lots to consider and look forward to sharing more as we get into it. Many of you who are a longtime clients know we've been doing this for 20 years, a devoted time of just meeting with various portfolio managers and asset management partners here in the world's greatest city that is New York. And I do believe that it is a very valuable time for us to not only do the due diligence and monitoring that we need to do as fiduciaries, but also have that sort of intellectual conversations, debates, discussions to help form our outlook and understanding and perspective and see where there's alignments, where there's opportunities, where there's perhaps overwadings, just

for us to really rethink what we're doing up and down all the different silos of our portfolio. More to come on all this. The market today was up. The Dow opened kind of flattish and it bounced around quite a bit throughout the day. I closed up 69 points, which is a whopping 15 basis points. The S&P closed up a quarter of a percent. The NASDAQ closed up half of a percent. One thing I wanted to share is that a lot of said, markets are going higher over the last several years because earnings growth has been so good. And that's certainly true. Earnings have been good in 23, 24, 25. However, earnings generally are up in non-recessionary periods. Free markets do create positive earnings growth the majority of the time. And so the

fact of the matter is that just mathematically, it's worth pointing out that about two-thirds of the return in the market in 2023 and about two-thirds of the return of the market in 2024 and about half of the return of the market in 2025 has actually come from multiple expansion from the valuation getting richer, all those things being on top of what has been good earnings growth. I think sometimes it's important for investors, particularly cap-weighted index investors to understand the composition of returns. The 10-year bond yield today closed at 4.14%. That was down almost five basis points on the day, so a little bit of a rally and bonds on the day. Consumer discretionary was the top-performing stock sector, and it was only up about half a point. But one of the only two

negative sectors on the day was energy, and it was down almost 2%. Oil prices, which I'll skip ahead, do, we're down almost 4% on the day, closing it just above $63 as there is. Once again, talk about OPEC plus perhaps getting ready to announce increased production. Final thought on markets is just that correlations amongst the stocks within the S&P 500 are at extremely low levels. And so not all stocks are created equal right now. This creates a lot of opportunity when correlations get this low. When correlations are very high, then, of course, it's very difficult for, let's say, an active manager to stand out from the broader index. But when correlations get this low, these create a very different investing environment. On the new side, they announced

that President Trump announced that Nik Nahu from Israel is signing on to the U.S. plan for a kind of peace arrangement in Gaza. What exactly Hamas has to say about that remains to be seen. And And current New York mayor, Eric Adams, who was planning to run for re-election as an independent candidate in a month and a week at this point announced on Sunday he's dropping out of the race. Whether or not that makes a difference to stop the frontrunner, Zora Mundani, the self-declared socialist candidate, I don't know, but that is worth pointing out as a news story. So that's what I'm doing. On the public policy front, certainly the talks about a shutdown are getting.

most media attention. There's a link in Dividendoncafe.com today to me talking about it on CNBC very early this morning before my meetings began. I don't think it is a very big story in terms of markets. I do think it's a political story and a pretty annoying one at that. But other policy issues I'll point out is that the president did go back to threatening additional sectoral tariffs on Friday, 25% on heavy trucks, 30% on furniture, 50% on kitchen cabinets and bathroom vanities, apparently. That's some sort of a thing. And 100% on pharmaceuticals, but then they announced they're going to carve out pharmaceutical companies that are larger. And so the markets have kind of shrugged it all off. But then today I did see another threat of a hundred

percent tariff on any movies that get made outside the United States, which I think is the first tariff he's threatened to do on a service, not a good. But we'll see what kind of comes of all that. So the other piece on these trade deals is I had been sort of of the mindset that there was an underappreciated risk since all the hubbub of earlier in the year that some of these trade deals that get announced or frameworks that get announced could go sideways and come back into the fray and rethreaten some of the stability that has obviously come back into markets. And it hasn't happened at any substantial level, but it is the first previously announced a deal framework that I've been reading report. is on shaky ground, not crystallized, not formalized, and that is our deal with South Korea. So we'll see what kind of comes of that. There is also talk that President Xi of China is talking about sweetening the pot of whatever China is going to offer the U.S. and the final deal if the U.S. will come out explicitly

against Taiwanese independence. So we'll see what happens there. On the economic front, the PCE inflation data that the Fed looks at traditionally much more than CPS, I would argue for good reason. Came out Friday exactly as expected, 0.3% of the month, 2.7% year over year. Look, it had been 2.4% year over year back in August of 2024. So there's something in this report for everyone because inflation has not gone higher, but then it has kind of stayed at a higher level.

And goods inflation, which wasn't 0% year over year, is now, up almost 1% year over year, and goods are obviously where the tariff focus is. So I would argue that there wasn't a real big takeaway one way or the other, but there was enough to give everybody their normal, desperately desired political talking points. The bond market didn't move much in the aftermath. And as a matter of fact, when it first came out, long bond yields actually dropped a little bit. What else? Personal income was up 0.4% in August. That was slightly more than consensus. Durable goods orders were up 2.9% in August. That was much more unexpected, but almost all of that came from commercial and defense aircraft. X transportation, the increase was, again, only about

0.4%. Some have speculated that there's an increasingly possible scenario. that the labor market's softness is related to immigration impact, that there are less hiring needs, some of that may be AI-related, and then less hiring appetite, trepidation around the tariff impact, but that the economy is hanging in there. And some have said, well, you can't have a weak labor market in a strong economy at the same time, and that is theoretically true.

It all depends, though, on what time period we're talking about. I think the labor market can soften as a leading indicator to future economic weakness, but that is not the same thing as a total overlap of timing. I do not expect GDP and payrolls to be disconnected for long, but there's a lot of moving parts. There's certainly volatile issues that are kind of one time around import, export impact on GDP. So we need a little more time to make sense of all this. On the housing front, new home sales contracts picked up quite a bit in August. They were 800,000 annualized.

They were expected to be 664,000. Home builder sales incentives have picked up dramatically. Existing home sales where you don't get home builder incentives, they continue to lag and year over a year, they're completely flat. The Fed is at a 91% chance of two more rate cuts this year. And if we look all the way to the end of 2026, not the summer of 20206, but the end of 2006, and this will move a lot. There's over a year to go, but right now in the federal funds futures market,

the chance of the Fed funds rate being 3% or lower is now at 64% odd. So that would imply another four rate cuts from the current level. So I mentioned oil down 4% on the day. I mentioned that oil prices that brought energy stocks down today. midstream was up substantially last week, about 3% on the week. And I really want to encourage people to read the Ask TBG on the homepage at Dividendcafe.com, where someone had asked if there was stuff the federal government could do to keep big home institutional home buyers from buying residential real estate

to help keep prices lower. And I have a answer that I think is very important there. So I'm going to leave it there for today, run to our dinner appointment. and look forward to a full day of meetings tomorrow. Reach out with any questions. We're in combat and loving it and look forward to the Friday Dividendon Cafe, as always. Thank you for listening.

Thank you for watching. Thank you for reading the Dividend Cafe. The Bonson Group is a group of investment professionals registered with High Tower Securities LLC, member Finra and SIPC, and with High Tower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through High Tower Securities LLC.

Advisory Services are offered through High Tower Advisors, LLC. This is not an offer to buy or sell securities. No investor process is free of risk. There is no guarantee that the investment process or investment opportunities referenced Tyrion will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced Tyrion may not be suitable for all investors.

All data and information referenced herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary and does not constitute investment. or advice. The Bonson Group in Hightower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date reference. Such data and information are subject to change without notice. This document was created

for informational purposes only that opinions expressed are solely those of the Bonson Group and do not represent those of High Tower Advisors' LLC or any of its affiliates. High Tower advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client's individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for any related questions.