The Dividend Cafe - Thursday - February 12, 2026

Episode Date: February 12, 2026

In this episode of Dividend Cafe, Brian Szytel discusses the day's market reversal, with significant drops in the DOW, S&P, and Nasdaq. He highlights the ongoing rotation and decline in tech stocks, and notes falling long-term yields. Key economic updates include initial jobless claims and a notable drop in existing home sales. Szytel explores themes such as positive economic growth, new Federal Reserve leadership, and AI productivity growth. He delves into S&P earnings expectations, margin analysis, and the impact of lower inflation on real sales growth. Finally, he addresses a question about political influences on Fed leadership, emphasizing the qualifications and impartiality of the candidate in question. 00:00 Market Reversal and Daily Performance 01:08 Economic Indicators and Market Reactions 01:36 Sector Analysis and Earnings Expectations 02:38 Volatility and Market Dynamics 02:58 Earnings Margins and Sector Disparities 03:58 Inflation Impact and CPI Anticipation 04:24 Political Influence on Fed Decisions 05:26 Conclusion and Final Thoughts 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. Good evening and welcome to Dividend Cafe. Brian Saitel with you today on a down day overall in markets. It was actually a reversal. We had an up-boring, at least on the Dow for a time, and then markets gave way through the remainder of the day and closed quite meaningfully in the negative territory. So we had the Dow that was down 669 points. SMP was down a percent and a half. Nasdaq was down two percent. Continued rotation ongoing, but everything until the downside just tech sold off more. And then rates across the curve moved lower on the day. And you actually had the curve flattened a bit. So long-term yields went down more than short term. But you had the tenure down seven basis points on the day. We're now at 410. So rates have actually moved quite a bit lower here over the past.

couple of weeks as we've gotten some of the labor data. Tomorrow we're going to get CPI, so we get a fresh read on inflation out tomorrow. The week on the market is down about 1% so far. Still up positively on the Dow on the year. We're up a little under 3% of both the S&P 500 and the NASDAQ or negative year-to-date in 2026. So what was going on today? So we had a couple of things on the economic calendar, but I don't think this is what moved markets. But you had initial jobless claims at 227,000 for the week. That was about in line with expectations. And then you had existing home sales fall off quite a bit in January. They were down about 8.4%. You got a 3.9 number instead of a 4.1 number on existing home sales. So those two things

are notable, although again, I don't think that's what's moving markets here. I think you're getting these cross currents that continue to flow through markets. And there's a lot of different themes underway. There's been somewhat positive economic growth that has come out. We've seen that in some of the manufacturing data that we've seen. You've got labor that looked positive the last couple of days. You've got new Fed leadership coming in and the idea of a smaller and more traditional approach to the balance sheet in exchange for lower short-term rate policy. And then you just have this continued back and forth, this push and pull between AI productivity growth and what we're expecting from it to how much money has been spent on it in the form of capital expenditure

and what kind of ROI is needed to support all of those things. But all that to say, you have the year for 26 an expectation of 14% earnings growth on the SMP. That would put you at $310 a share in earnings. And if you divide that by where we're at today, that puts us at 22 times earnings. So that's where you're getting this back and forth movement here in markets. The volatility index has moved up. We're now at a vix of over 20. So with more volatility, again, you're just getting back and forth in these different sectors and a weird dynamic in markets with reets up significantly today where technology is down so much, so on and so forth. But what I wrote in there today was about not just earnings, but margins that are driving those earnings per share, being at all-time

highs if you look at the S&P 500. Remember, the S&P is about 40% weighted towards tech and communication services. The margins on those businesses are more or higher. And so the average margin for the S&P of 100 is 17%. It's more or less at all-time highs. Whereas if you peel that back and look at an equal-weight version of the S&P instead of cap-weighted, you get some of the broadening of those other sectors that historically have had lower margins. You're at about a 14% margin, which has moved higher but is not back to highs. It's actually just where it was pre-COVID. But I guess my point to that is just as we move forward, I could see the disparity between those two different components of markets continue to broaden. And I believe that one of those margins can expand

and one of them will likely stay the same or maybe even contract a little bit. So we'll have to grow into the earnings that S&P is now anticipating at this 14% growth. In other words, the one thing we are saying, though, is with inflation coming lower, what you're saying is actual real sales growth. Sales growth ahead of cost growth, and so you're getting a net increase to net margins in that paradigm. And again, tomorrow we'll have that CPI read and it will tell us whether that's going to be lasting and ongoing or not. Bigger move than the indices without a lot of real news behind it. So take that for what it is. Question in there today was about Warsh and David's nice write-up in Dividendant Cafe last Friday. And the question was related to political cronyism and would Warsh be susceptible to having a more

hawkish stance if there was a Democrat in office or a more doveish stance if there's a Republican in office. And is that something that we feel could be the case? Remember, Warsh has been around at the Fed for 20 years almost, yeah, just under 20 years. So there's some track record. And I understand media will grab headlines and try to make a point to some of those political tilts. But the reality is absolutely not. We don't believe that is true. He's too smart, too high caliber and too calculated of a guy to just be pigeonholed in a political pawn. So I'd push back on that. And what we're really trying to message with him being our favorite pick was taking a more traditional approach to balance sheet management and what the Fed's role actually is, which is

stable prices and full employment versus the arbiter of what succeeds and fails in every economy and every market. I think it's a better approach. And we think he's the right man for the job. So that's what I have for you today on Dividend Cafe. I appreciate you listening. I wish you a lovely Thursday evening and a good weekend if I don't. speak to you. With that, I'll let you go. Thank you for listening to the Dividend 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

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