The Dividend Cafe - The Five Major Issues for Investors So Far in 2026

Episode Date: March 13, 2026

Today's Post - https://bahnsen.co/40tWZg8 David Bahnsen reviews an eventful mid-March 2026 market backdrop through five themes: the Iran war and its impact on oil and volatility; the state of the economy after tariff changes; private credit; AI; and a rotation in market leadership. He notes large daily market swings driven by uncertainty, but limited net movement, and argues volatility is largely immaterial for disciplined investors. The key economic risk is disruption in the Strait of Hormuz as insurers and shippers avoid the waterway, lifting oil from the low 80s toward the 90s and potentially above 100, which would meaningfully compress consumer and investment activity if sustained. He sees evidence of economic drag (weaker GDP revisions, modest job growth) alongside tariff-driven goods inflation offsetting services disinflation. He criticizes conflating private-credit default fears with liquidity issues and stresses idiosyncratic underwriting, recovery rates, and coming opportunity. He attributes AI weakness to valuation and fatigue while warning against treating the theme as monolithic. He highlights a rotation toward energy, utilities, staples, and industrials. 00:00 Friday Dividend Cafe Intro 01:07 Five Big Market Themes 02:25 Iran War and Volatility 04:19 Oil Shock and Strait Risk 07:45 Economy After Tariffs 10:02 Private Credit Fears 12:40 AI Valuations and Fatigue 14:34 Market Rotation Winners 15:27 Chart of the Week and Wrap 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 Friday edition of Dividend Cafe. I'm your host, David Bonson, a wild week as things continue in Iran and market volatility remains enhanced. and yet with all of the talk about oil prices, the military operation in Iran, the enhanced market volatility, it occurs to me that there's more than just one thing to talk about. So what I wanted to do in today's Dividing Cafe is, yes, review Iran, review oil prices, the impact that is taking place for investors from all of those events in the Middle East. But also as we kind of get into the 10th week of the year as we're sitting here in the middle of March of 2026, I'm not going to

say anything going on is unprecedented because it is incredibly rare the things that happen in asset markets or the economy are ever unprecedented. The vast majority of what happens is precedented. And yet at the same time, shall we say, eventful right now. And I am going to today suggests that there are five different things that play into that right now as we look at the kind of year-to-date activity in markets and just throughout the economy. And so those five things that we're going to review and discuss are indeed the Iran War, the state of the economy, particularly in the aftermath of tariffs, tariff changes, Supreme Court, where do things stand with jobs and prices just across the economy? Number three, I think that the

private credit story and what's happening in the financial sector as getting an awful lot of oxygen in the media. Number four, the AI story, what that has done so far this year for good and for bad in markets and what it is meant for investors and where we stand in the kind of current state of the artificial intelligence contribution to markets. And the number five, the theme of a market rotation, the rather profound change in market leadership, as we thus far anyways, have seen a shift from various high growth sectors to what I will call real economy sectors. So let's take it up first with the Iran War. A week ago, I was in Nashville, and I talked about that first week after the military operations

ensued the enhanced volatility and that because you have unpredictable circumstances, you get an exacerbated volatility, and that's the way markets work. For as much as some investors don't like it, markets do a remarkable job at pricing in bad news and then beginning to discount whatever the future out of bad news may be. What markets mostly dislike is unpredictable outcomes, and it leads to a certain uncertainty that just creates a lot up and down movements, first of all, bad behavior, but also a lot of erratic behavior. And this week on Monday, there was a 1,200 point difference between the high and low price of the day, 800 on Tuesday, 600 Wednesday and Thursday. And as I'm

sitting here now, Friday, markets are up, but who knows where that goes. And so my point being that we've seen this enhanced volatility, we've seen it each day of the prior week. And it is understandable because there is a certain unpredictability. But I don't want to just leave where we stand now with a second week of information at the things are unpredictable, therefore volatile level. That is true and it will remain true until it isn't. It also is somewhat immaterial for an investor. But when you look at 3,200 points of up and down volatility in four days this week, but only 800 points of an actual directional movement, 1.6 percent, barely registers in the grand scheme of things, that volatility story is really pretty irrelevant to investors

who have no intention of acting stupid. The issue, though, that I want to point out in the real economy is this straight of Hormuz story, which, first of all, I think, is becoming increasingly clear that it was not anticipated. Of all the various things that were thought about, addressed, and preemptively dealt with from the military and geopolitical, strategic aspect, that right now what you have is a situation where economic actors understandably are afraid to act. And yes, the backwardation of oil prices still indicates that markets expect this to get resolved. And I most certainly do too, but the four-day resolution is off the table and four weeks increasingly looks off the table. But we're not talking about significant explosions or military escalations, the Strait of Hormuz.

You're talking about commercial actors that just in their own rational self-interest do not feel like operating. The insurance companies, the shippers, there's a lot of folks in the supply chain of activity there, and it affects more than just oil, but a lot of cargo movement. and I think that those with commercial interests don't want to operate in that waterway at this time and on the margin that does lead to significant economic impact. Now, short term, you get oil prices spiking above 100, then dropping to 83, then saying, oh, this is going on longer, it gets back up near 100, sitting in the 90s. The low 80s is higher than oil prices were before this began, but the low 80s would have a pretty minimal economic impact.

impact in my opinion. 90s, it becomes real. Over 100, it becomes very real. Now, not for a day, not for an hour, not for a minute. But for a month, there is a compression on consumer activity. There's a compression on investment activity that becomes real. And so I think that the ability right now for markets to get an idea of what exactly is going to end up happening out of the straight-of-horm moves is very important. I'm going to put a chart up right now that just shows you oil prices this week. Okay, if this were a chart over extended period of time, you could form some opinions on it, but this is a few days.

And that big spike up, big spike down, but then coming back up, again, not back to 115, but still sitting in the 90s, if the markets decide to recalibrate, reprice, and reset for an extended period of time, $30 higher than they were a few weeks. weeks ago, this is a story. And with the Strait of Armuse activity, frozen the way it is, that tail risk cannot be eliminated at this time. I don't encourage anyone try to predict exactly what will happen. And I really don't encourage anyone to bet against the U.S. military in this. But I do think that there's a lot of military and geopolitical things that can be done that help

with the overall conflict that don't necessarily force commercial. actors to reopen in the Strait of Hormuz right away. And so this becomes an ongoing story that until there is greater clarity, probably enhances and maintains the unknowns for a period of time. Now, speaking of the unknowns, the second issue I want to address is that one of the economy, where we came into the year believing that there were a lot of people who had this really bearish view in the economy and a lot of people had a very bullish view in the economy. And by the way, that is, I could give you examples of economists. I'm not going to say their names now in both camps that are in some cases very dear friends of mine

and very influential in my life and in my study. And they're on polar opposite issues of that. And I landed on the humility and agnosticism conclusion that there is no way to really know. That I would say, though, 10 weeks in that there is bigger. Evidences of a drag, the GDP number for Q4 was way less than a lot of the optimist expected, and then it got revised down again here this morning. And the jobs numbers, on one hand, weekly jobless claims are still staying low, and that's a good thing. But the BLS data has continued to show that we are not seeing robust job growth.

And then the price indicators in CPI and PPI are really hard to dispute. that you are getting disinflation where you need it with shelter and services to some degree that should have bought our inflation level from the high twos to the low twos, but goods inflation, particularly where there are tariffs, is pushed higher. And whether you're talking about home goods, certain food items, appliances, kitchen items, certain electronics, furniture, those are the things that have been impacted by additional price inputs and imported items. And so the goods are offsetting the services and the data. And that, to me, is still an important issue. Where capital expenditure and business

investment is, the push pull is still there. There are absolutely tax advantages this year to greater business investment, but we're not seeing it yet outside of AI. And I believe that that remains the economic issue of the year. The private credit story I dedicated an entire dividend cafe to two weeks ago, and there isn't anything in that that I would walk back or change two weeks later. I think that it is going to age very well. But what you have going on is not only the conflation of two totally separate stories that I criticized for being conflated two weeks ago, and that is, A, fundamental fears of defaults in private credit and be the issue of liquidity or a criticism of semi-liquidity

in the asset class, treating it as if it were a bug and not the feature that I believe it is, the completion of these stories that are very separate, but then also just the flat-out inaccuracy of the first part. Now, when I say an accuracy, I mean inaccuracy for now. Defaults could very well pick up. But the analogy I use in dividendcafe.com, today, I'm going to share with you here in the video and podcast is that if I had every single private loan in the world that classified as private credit, direct lending, middle markets, stirred up in one bull, and somehow we could know exactly what that default rate was, it would be utterly worthless information because it would not tell you what the default rate

was for your fund, for your strategy. And they are so non-monolithic and incredible, incredibly idiosyncratic within the asset class, that there has to be bifurcation between the good and the bad, the wheat and the chaff. But even if you knew the default rate exactly of your holdings, then you have to know the recovery rate. And that becomes very, very different for certain more seasoned operators versus others. So there is all at once just like four or five mistakes being made. And I think this is becoming a big story. I'm telling you, I'll tell you right now, I'm talking to private credit people, I'm talking to distressed credit people, I'm talking to hedge funds every day. And there are a lot of folks that would love to go by dislocation. And when the

sentiment gets like this, you do not want to go try to pick a bottom too early. But at the point at which the separation of wheat from chaff becomes viable, then all of a sudden I think a lot more clarity comes in. And I don't know if that's days, weeks, months. All I know is that these are just textbook situations where weak hands are going to make strong hands richer. The fourth issue on AI, I've talked about so much, I'm going to be dedicating a full dividend cafe.

I don't think I'm going to have time to do what I want to do with this subject in next week's dividend cafe. so it's likely going to be two weeks from now. But it is, people can be forgiven for seeing a certain incoherence in the year-to-date story in AI. I don't have any question as to why Nvidia has been dead money for about seven months now.

I don't have any question as to why companies like Oracle and Corleave, Palantir, are down a lot. There's valuation issues there. I don't have any questions as to why the MAG-7 is not monolithic and hasn't been a long time and a lot of those names are down or flat. There's valuation. There's just fatigue, things overstretched.

It's not really that complicated. But then the broader narrative, though, has somewhat turned into on one hand, people that are maybe in my camp of, yeah, this thing is a little overpriced, it's a little unknown, the risks are a little unappreciated. And then on the other hand, people are saying, AI is so big, so powerful, so much better than we know that then it's going to ruin certain things. So those two things can't be true at once. I think that in the end, you're probably dealing right now more with fatigue in the story for good reason.

And there's still an inadequate appreciation for hyperscaler spending risk for the spenders and, of course, the circularity of the funding, which affects both pick and shovel and scalers. There is a number of different things that linger. But in the meantime, I think you have to be careful right now. in private credit, in AI, in software, in any story, treating everything as if it's the same, it is never all the same. And this is where opportunity will come. Finally, rotating, not hyperventilating. These are just really phenomenal returns this year.

And energy, top performing sector up over 23%. And it was up the most before the Iran War began. utilities, consumer staples, industrials, real life, real economy type sectors, in some cases that have been laggards last year, like consumer staples, all leading the pack. Then you see some of the leaders last year, like financials that are down, you see real estate down, you see consumer discretionary down, and you see technology and communication services down a couple percent. And so the whole S&P has come down a little bit, but then the rotation and other things. has created good opportunity out of that rotation. It's a narrative of ours, and we'll continue to see where that goes. I'm going to leave it there for the week.

Let's put up the chart of the week here and just show you this impact on Strait of Hormuz. I mean, this is almost any require a chart to kind of see the graphic reality here, various categories of activity that come in and out of that particular waterway commercial activities that have now gone to virtually nothing. So that remains a big macro story, and it will get resolved. And I don't know when and I don't know how. And nor does anybody else. And if someone's on TV telling you when or how it's going to get resolved,

you have to believe me they don't know. And if they did, they wouldn't be telling you. Because they'd be working in the Pentagon. And actually, I could argue a lot of people in the Pentagon. Most certainly don't know either. Not going on. It's an important time for us. We're very engaged right now in markets.

We're doing what we do really 24-7, 365 at the Bonson Group, and it is the life we chose. And we're here for you if you have any questions. And if you are a listener, reader, subscriber, Dividendon Cafe, and you have questions, please reach out. Happy to either have you talk with an advisor or engage with you by email myself. And if you are a client of ours and have any questions, you know that we will literally go to the ends of the earth to make sure you have the confidence, you ought to. to have and what it is we're doing in these adventurous times. Thank you, as always, for listening,

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