The Dividend Cafe - Thursday - October 30, 2025

Episode Date: October 30, 2025

Market Recap: Market Decline and In-Depth Analysis of Financial Trends In this episode of Dividend Cafe, Brian Szytel provides a market recap for October 30th, detailing a downturn with the Dow closing down 109 points, the S&P down 1%, and the Nasdaq down 1.5%. Key factors include interest rate increases post-Fed meeting and disappointing earnings from some social media companies. Brian discusses benchmarks for investment performance, advocating for goal-based evaluation over market comparison. He also covers the midstream energy sector, emphasizing a strategic approach using active ETFs to optimize returns and tax efficiency. Additionally, Brian touches on a temporary trade truce between the US and China, projecting long-term benefits for both economies through gradual decoupling. The episode concludes with a brief on market headwinds due to earnings reports and rising interest rates. 00:00 Introduction and Market Recap 00:30 Interest Rates and Fed Policy 01:26 Choosing the Right Benchmark 03:20 Midstream Energy Investments 05:20 US-China Trade Agreement 06:42 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 into Dividend Cafe. This is Thursday, October the 30th. Brian Saitel is with you here to go through your daily market recap here on a bit of a down day. The Dow ended up closing down about 109 points. S&P was down 1%. Nasdaq was down 1%. Nasdaq was down 1.000. and a half percent. So you had some mag seven related names have some good earnings today and then a couple of notable. The social media names have some disappointment. And so the NASDAQ ended up being down more than the other indices. The other thing you're seeing in markets right now is interest rates since the Fed meeting ended have started to creep back up. So 10 year treasury was up

two basis points on the day closing to 409. We had been in the high 390s for a while. So rates have crept back up and Fed futures have also crept down indicating the December rate cut is a less likely scenario. But I think as the end of quantitative tightening continues to work itself through markets, which is basically a de facto rate cut in the sense of an easing financial condition and also as more data starts to come out, remember the government is still shut down. So there isn't a lot of data coming out. I think markets will understand that the likeliest path is towards a lower Fed funds rate. And the target that we've always talked about is about a 1% real Fed funds rate. So something over inflation. Of course, there's a variable on what

inflation will ultimately settle out. But that's my take on what's going on. I wrote something just Evergreen today. And it was really just about a question that comes up a lot. And during different periods of time, you could have markets be very good. Technically, that's where we're at. We've had three up years in a row of double digits in the S&P 500. And so sometimes this question is rooted in kind of a FOMO idea of fear missing out, but it's which benchmark should I use to compare how I'm doing? It's a fair question, and I think generally a good one, but the answer isn't that you should siphon out your value stocks and to pair them against the value index and your growth stocks and the pyramid gets the growth. I think it depends on each different

advisors approach. Maybe they are using this sort of old school style box approach where certain percentages in small cap, mid cap, large cap, so on and so forth. It's just not the way we approach it at TBG. So the real benchmark of the way I would measure whether we're doing a good job or not is really against what your actual goal is. Okay, so if the goal is a 4% income stream and significantly outperform inflation, so call it an 8% total return over time, including tax efficiency and including a downside risk target that is palatable for you to sleep at night, that's the goal.

That's the benchmark. So markets are up 30. maybe your portfolio is of something slightly less than that. But what will happen over time is your goal will be achieved, and that's the benchmark that matters. And on the downside, you'll be more protected. So yeah, when things are the way they are in this environment, I think it's important to just sort of let go of the shiny object de jour. That's not realistic. You couldn't have out all of your money in Bitcoin anyway, or gold for that matter. It couldn't live on that. There's no income. There's too much volatility. So just take you for what it is. I hope it's helpful. It's kind of an

evergreen obvious, I guess, sort of principle, but nonetheless, you'd be surprised. So if you have questions on that or want some more real life context, please give me a call. I'd be happy to walk you through it. Question in there today came in from a reader, a client, and a good one about midstream energy and our approach to it. Yes, we use an active approach inside of an ETF. We use specialists that are involved in that space that know it in and out. There's a lot of nuance to it, not just on the commodity side in the commodity complex, but within those partnerships and then within the differences between U.S. C-Corps and partnerships and also Canadian exposure. So our approach is to generate a more active result inside of the space for clients in one ticker symbol versus say

six or eight, it's to avoid having six or a K-1 statements could send out to people. But then more importantly than that, qualitatively, the result is a better combined total return given the exposure to each of those things because they're all different. Canadians have Canadian names have had more capital expenditure. They've expanded more. They've opened their markets to more global opportunities. That's been a benefit. Those stocks are up more. The C-Corp complex inside of the United States is actually outperformed for the last couple of years. It fetches higher multiples because of a larger ability to spend on capital expenditure. They also have lower income yields. And then U.S. partnerships, of course, have a bigger income yield. And they produce a K-1. And so the

income is returned to you as a return of capital. That's attractive because it means it's not taxable in that current year, but it's lowering your cost basis as it does that. And one of the points was that a lot of times there's a notion that that means that it's all capital gain, which actually isn't true. When that MLP partnership is sold, there's a depreciation recapture that is often noted on the final K1, and so there's some ordinary income tax with it. I still like those investments. And the whole point of the answer to this person was that we're all on the same page as far as loving the space. Our approach is a little unique and I think differentiated than just owning a couple of the big partnerships itself. So I hope that's helpful. Again,

if you have other questions about that particular space, let me know because it's one of interest to us. There was a expected trade agreement or truce, which is really just a postponement for 12 months between the U.S. and China. Both sides agree that it's in their best interest to get along and to not tarnish their ability to grow their economies. So the U.S. basically lowered some tariff levies and China said that they would stop the curb of export controls on rare earth minerals which is what the U.S. needs to build all of our cool gadgets. The truth of this is both countries do rely on each other for different things. The U.S. buys a lot from China. China benefits from all the technology from the U.S. needs rare earth minerals and has benefited

from an export of inflation to their less expensive manufacturing class. That said, these negotiations are designed to have each country decouple over time. And ultimately, I think that will be a good thing. It's in the U.S. best interest from a national security standpoint to have supply chains more close to home or even onshore and also to be able to produce its own raw minerals to produce itself iPhones and such. I would call it by the rumor, sell the news. Okay, markets have already ran up and they were down a little bit today because these things were expected. I think the real news as to why markets are having a little bit of a headwin. One was earnings and then two was just that interest rates have crept up here a little bit. And that's

natural for equities to pull back. So that's my synopsis on the day. There was a lot to chew through there. Again, reach out with questions. If I don't speak to you, have a great weekend. And I'll be back with you next week on the Dividend Cafe. Thank you. 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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