The Dividend Cafe - Thursday - October 16, 2025

Episode Date: October 16, 2025

Join Brian Szytel on today's Thursday Dividend Cafe as he navigates a modestly down day in the market. The DOW closed down 301 points, S&P by six-tenths of a percent, and Nasdaq by 50 basis points. With rising volatility back to May levels, Brian explains the factors behind the recent market movements, including larger bankruptcies and regional bank charge-offs. Despite mixed manufacturing data, real estate showed better-than-expected performance. Learn about the importance of credit spreads and their relevance to market stability, and get insights on upcoming Supreme Court discussions on tariffs. This episode provides comprehensive analysis to enhance your understanding of economic life and dividends in your portfolio. 00:00 Introduction to Dividend Cafe 00:22 Market Recap: Dow, S&P, and Nasdaq Performance 00:38 Interest Rates and Volatility Insights 01:40 Economic Calendar Highlights 02:19 Real Estate Market Update 03:21 Understanding Credit Spreads 05:45 US-China Trade Relations Impact 06:10 Tariffs and Supreme Court Discussion 07:02 Conclusion and Final Thoughts 07:14 Disclaimer and Legal Information 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 back to Dividend Cafe this Thursday, October the 16th. And as always, Menwick, Brian Saitel is with you here on another mixed, albeit modestly down day here in the market. We actually had the Dow close off of the lows, but we still close. down 301 points. The S&P was down 6 tenths of a percent. Nasdaq was down about 50 basis points on the day. The 10 year actually closed below 4%. We got a 398 closed on the 10 year. It was down six basis points, which is a decent move. Part of the reason you've seen interest rates come down here recently, and actually the

Volatility Index has started to rise quite a bit. We're back up to a VIX of 25. That's about the level we saw an early May just coming off of the Liberation Day April that we went through earlier in the year. Volatility had spiked up and it had started to fall, but we were still in the mid-20s in May and that's the level we're back up to. Part of the reason is there's been some reverberation around a couple of larger bankruptcies that we've spoken about in Dividend Cafe already. This has been ongoing now for the last 30 days or so, but the connectedness to them in the financial markets and also you've seen a couple of charge-offs today with a regional bank that was down about 10% on the day because of that charge-off on loan. So there's just

There's been some kind of cracks in the dam in the financial sector a little bit, and that's causing some angst, and it's causing volatility to go up a little bit, and then conversely interest rates to now come down a little bit. You also had on the economic calendar for the day, you had a fully fed manufacturing data number that was out much worse than expected with negative 12.8 versus a positive 10. Those numbers are bit arbitrary, but the point is that it was worse, and it's interesting because yesterday we had that Empire State manufacturing number that was much better. So a little bit of mixed bag here on manufacturing, largely both on Philadelphia and Empire State yesterday, the employment side has been fine. Some of the things that the market has been paying more attention to has been the prices paid have been both higher on both of those things. And then, of course, the shipments and new orders and things that they're tracking. But again, Philly Fed was worse than Empire State. You also had some home builder confidence data come out today that was better than expected.

For the most part, the real estate side of the equation recently has actually been a bright. spot, both in the meetings that we had in New York. By and large, real estate was looked at as a bright spot, and it wasn't just because interest rates were set to come down. There was some fundamental reasons as to why as well, particularly just that the replacement cost of what is being sold, for the most part, across the real estate market is higher than what prices are currently selling that. So the perceived idea there is that prices would move higher. But today you saw Home Builder Confidence Index that was better than expected for the month of October and also six-month future expectations were also better than expected. So a little bright spot in real

estate today. Prices have obviously calmed down here. They're essentially flat year over year. Initial jobless claims, the PPI data and retail sales, all of which are very important, by the way, and very market significant events all were delayed because the government remains to be shut down. So I don't have anything for you there. But there was an asked TPG question in there on the day about credit spreads generally. We talk about them, and I know some understand what we're talking about there, but many don't. And so I wanted to answer this question and include it today because I get it a lot, which is what are you guys talking about? You talk about risk and credit spreads. So what does that mean? And then how is it today? This is just the spread over a risk-free rate of treasuries that you're getting

to lend money to non-investment-grade borrowers. So if you think of a non-investment-grade borrower, not necessarily the junkiest of junk, but just some company that is below investment grade and compared to the amount of money you're getting paid to lend money to it over lending to the U.S. government, that's what we call by credit spreads. And the wider that they are, the more compensation you're receiving to lend money, that would mean the more perceived risk the market is assuming with that transaction. And so tighter credit spreads mean less risk, wider credit spreads mean more risk. And we watch them very closely. The bond market is technically bigger than the stock market, number one. Number two, what sets those spreads is extremely complicated. If you think

about analyzing the credit quality of a borrower and the solvency of a corporation and the collateral that's being involved and lent against, and you think about global liquidity, you think about global economic activity, global interest rates, all of those things come into play on how credit spreads will get set. In a very big market, it's always looked at as a little less fickle on the way that those spreads will move and a little bit more meaningful to how it's perceived as overall economic stability and change in the overall economic picture. And I view it that way. I view it as something that is more meaningful than what day-to-day stock prices will do. because they can be fickle, they can be more headline-driven, they could be more

sentiment-driven. I think that the spread of credit is less so in those ways and something to pay attention to. To put it in perspective, in the financial crisis, which was the worst of all credit blow-ups, right? Big liquidity crisis globally, a housing market that was over-levered, so on and so forth. Credit spreads blew out actually 1,800-wide. I wrote 1,500 in the letter to make it more reasonable. But that means that in order to lend money to a budget, below investment grid borrower, the demand was 15% higher than what treasuries were yielded at the time. So big risk in the market. Today, that same spread level is only 310. So much tighter and historically tight, frankly. My comment, though, is that since October volatility has picked

up, you've seen spreads actually come out a little bit. And what that means to me is that the rhetoric between the U.S. and China on trade is actually meaningful to markets in the economy. And so while the worst-case scenario has been taken off of the table, because this is heating back up, spreads are moving a little bit, and that's why we're paying attention to it. Anything below 300 on high-yield spreads, and I start to feel like markets are a bit complacent on risk, and that's also something that concerns me. So we'll keep an eye on it there. There was more comments on whether tariffs will be deemed illegal or not by the Supreme Court,

but just keep in mind what they're really talking about is the mechanism in which tariffs will be enacted. I don't think that there's much to say that they will be completely repealed. It's just a matter of which semantic ruling it will be, whether it's IEPA or Section 122 or Section, there's a few different ways that they can be enacted. There will be oscillation on rates as those things transpire, and I suppose there's traders trying to game that. I mean, I won't be one of them, but I wanted to just put that out there as to the reason why the market hasn't been paying as much attention to this tariff issue in the Supreme Court. There's an oral argument happening on November 5th, and that's right around the corner. I don't think that's a market moving event

so far. It's not insignificant, but just to give you some context on the reason as to why, okay? So with that, I'm going to let you go for this evening. I wish you well. If I don't speak to you, I wish you a great weekend, frankly, and I will talk to you soon. Thank you again. Bye-bye. 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.

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