The Dividend Cafe - Thursday - February 5, 2026

Episode Date: February 5, 2026

In this episode of Dividend Cafe, Brian Szytel provides a market update from West Palm Beach, Florida, on a down day for major indices including the DOW, S&P, and Nasdaq. He discusses stronger-than-expected growth numbers, employment data disappointments, and sector rotations, particularly in tech and value stocks. Other key points include Bitcoin's significant decline, a shift in interest rates, and the impact of AI on software services and asset managers. Szytel notes that despite some negative sentiment, there is still value to be found in the market. 00:00 Market Overview and Indices Performance 00:34 Economic Indicators and Market Reactions 01:13 Employment Numbers and Market Impact 02:47 Sector Analysis: Software and AI 03:17 Asset Managers and Credit Markets 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. Welcome to Dividend Cafe this Thursday, February 5th, Brian Saitel with you from our West Palm Beach, Florida office here on a down day. I'm actually sending this to you a few minutes here before the close, but most of the broad indices, the Dow, the S&P, and the NASDAQ are all down more than 1%. So it's a little bit more broad-based. there's still some rotation where tech is selling off a little bit more than some of the other components of the market, particularly the Dow. The S&P on the year now is negative slightly. Dow is actually still positive by about 2% after the first month of the year. But the narrative changed a little bit today. You actually had stronger than expected growth numbers. Remember,

we had Warsh get nominated by the Trump administration, and markets actually reacted fairly positive from that news. But then you had a positive PMI, a positive ISM services, positive ISM manufacturing. Those are all good growth numbers. You just had this rotation going on in markets. There was trading kind of weird, really. You had these value names really perform not just well, but really well. And then more of the overvalued and the higher flying momentum stuff has just really sold off. Bitcoin is down 40 plus percent from its highs. Gold is pulled back, silver. So it's an interesting dynamic now. But today you had a shift in some of the vibe, I guess I would call it in the market. You had employment numbers start to really somewhat

consistently across a few different mediums, disappoint. You had ADP private payrolls yesterday disappoint. We got 22 out of instead of 45,000 for the month. So there was that. But then today, you had the jobless claims numbers missed. You had 231,000. We were expecting closer to call it the low 200s, 209, 211. And so that was a bit of a disappointment, although those are weekly numbers. And so they can be somewhat up and down, volatile. But then you had this new job openings number, the Joltz number, that we often reference significantly underperform. So we were expecting $7.1 million and we got $6.5 million. So that's a lot less new jobs on the market.

It is more of a forward-looking indicator. It means employers are listing a lot less new positions open for hire. You also had some layoffs to get reported as well. So those are some cracks in the dam on employment, meaningfully so. What that does on the narrative in the market is it shifts it a little bit. you had interest rates pull back on the short end more than the long end. So the yield curve steepened. That's tilting the cap to a Fed that is likely and has more ammo to lower short-term interest rates. You saw that in Fed futures on the day as well. So rate paradigm shifted a little

bit. And then the rally that was really more selective turned into a little bit more broad-based. To put it in perspective also that new jobs number at six and a half million was the lowest since September of 2020. So that's coming right after the pandemic. We've talked a little bit about this, about different parts of the market, particularly the software services sector getting hit quite a lot. And this is in line with the theme that we have, which is not all AI names can win equally at the same time. I think there's productivity gains. I think there's great things to happen. But the software services companies are deemed to really have their lunch eaten by some of what AI can do to take over their market share. And I don't know that the market should be shocked, that there won't just be only winners, but winners and losers. But that's what we've seen ongoing. as well. So the question that we had in there today was regarding a move lower in the asset managers. I've just spoken about some of the software companies, but it's interesting because some of these private credit managers and alternative asset managers have really fallen out of bed too. And the reason is that software was a huge sector that they lent money to. And so if those businesses,

if those top line, not just earnings, but revenue is going to be hurt because I can take over market share, then that's obviously not good to service the covenants and service the interest on the loans that have been made. So you've seen some of those asset managers sell off. We actually did some tax loss harvesting and some of them towards the end of 2025, but we did rebuy them a few weeks ago into January because we see value in the space. The reality is all of that stress is true and there's some sentiment that's negative in the space. Those things can happen. But there isn't a high yield credit spread that is blowing out at this point. Credit spread. Credit spread. are still very tight. There's no indication that this is a broad-based credit contraction or sell-off at this

point that may change. And so if we go to the most of the remainder of 2026 and you get, I'll call it somewhat normal things in credit markets, not anything falling out of bed, credit spreads aren't blowing out, economy is still growing and expanding positively. We don't have a recession, all of those things. Then it's likely that some of the sell-off is a little overdone. And so we do find value in the space and I would I would hang on to it. There are some increase in non-accrual rates with some of the loans. There's a concern over pick, which is payment and kind. But those things have existed for quite some time. The other side of it, and the last thing that I'll make on the asset managers and some of the private credit managers is that with Warsh coming in, or even if it was Pall Stang, you do have a

tendency to have rates come down. There's about 50 basis points priced in before the end of the year. And so if you think about margins of private credit managers, as rates come down, they get squeezed a little bit. be one thing if rates were going back to zero, and I just don't think that's the case. All of those things to say, negative sentiment, and let's talk again in four months, and I believe that some of that stuff may have abated a little bit, at least in the asset manager space. But that's what I have for you today. I hope you enjoyed listening. I hope you enjoy your weekend if I do not speak to you, and keep emailing questions.

They're really good. With that, I'll let you go. And thank you for listening to the Dividend Cafe. The Bonson Group is a group of investment professionals registered with High Tower Securities LLC, member FINRA and SIPC 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.

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