The Dividend Cafe - Tuesday - January 20, 2026

Episode Date: January 20, 2026

Today's Post - https://bahnsen.co/3LVimmM In this special edition of Dividend Cafe, recorded on Tuesday, January 20th, David Bahnsen explores the significant market sell-off that occurred due to unusual political tensions and potential policy changes. The episode focuses on President Trump's controversial intentions regarding Greenland and the subsequent European counter-threats, leading to market volatility. The DOW dropped 870 points, with technology suffering the most. Bahnsen also discusses the performance of the 'Magnificent Seven' tech stocks, market broadening trends, rising bond yields, and ongoing uncertainties. Additionally, he touches on expected topics from President Trump's upcoming Davos speech, potential housing and mortgage policy changes, and updates on the Federal Reserve leadership. 00:00 Introduction and Market Overview 00:46 Market Sell-Off Catalysts 01:35 Market Performance Recap 03:01 The Magnificent Seven Analysis 05:27 Broader Market Trends 06:24 Potential Market Scenarios 09:31 Housing and Mortgage Insights 11:22 Upcoming Events and Conclusion 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. Well, hello and welcome to the special edition of Dividendon Cafe. I was planning to call it the Monday edition that we're doing on Tuesday because of the MLK holiday yesterday. But then even if we had not been in a Monday holiday week, with today's action, I probably would have done a special Dividing Cafe today anyways. So yes, today is Tuesday, January 20th, but we did have a big market sell-off I want to address behind one of the stranger catalyst to a market sell-off. I say all the time it's a very important lesson for investors to never forget the markets do not require a reason to sell off. They certainly do not require a reason that makes sense to you or me, but different catalysts

exist that can drive a market sell-off. And today's was the fact that you, that the president of the United States spent much of the weekend saying that he wanted to have greenland under U.S. control and that if the European countries resisted that idea, he was going to impose an extra 25% tariffs for American importers to pay. So then Europe responded by saying that we're going to retaliate. And so the prior deals that were announced are very. vulnerable or up in the air right now because if the president does this, then we're going to do that and everything sort of escalated from there. Let me give you the summary of what kind of

took place and then we'll get through our normal categories of the Monday Dividendon Cafe. There's a lot to cover. First of all, the Dow opened down about 700 points and then it did make a little effort very early in trading today to rally off of that and that didn't last long. And after about an hour into trading, markets hit their highest level of the day, which was still underwater, and then just proceeded to go straight down from there. We didn't quite close at the bottom, but we'd close pretty near it. So the Dow down 870 points, which is 1 and 3 quarters percent, the S&P down a tad over 2%, the NASDAQ down almost 2.5%. And so it won't be a big surprise that in line with that market index behavior, technology was the worst.

performing sector of the day down almost 3%. And consumer staples were actually up. So for a big market selloff to have any positive performing sector, that's kind of rare, but it was up by a whopping 12 basis points consumer staples. And so again, you had a pretty logical flow of the riskiest areas doing the worst and the safest areas doing the best or most defensive areas, if you will. But I want to address that. The Walshie Journal had a story came out yesterday. in which I was quoted. They interviewed me on Friday and put together a little piece. And some of the material that's covered in that article, the link to that article is in Dividing Cafe today, was stuff that I'd already been writing into today's DIVCaf myself,

which is that I'm not sure a lot of people are following what's happening within the magnificent seven. And I don't just mean by that the decorrelation of the names within it, which is itself a pretty big story. That you have a Google, which is up 67% over the last year. Invidia is still up more than the market, not as much as it used to. It's up 30% over the last year. That's a great return in any 12-month period, although it's down 15.5% from its high back in late October. But if you look at the rest of the Mag 7, going back a whole year now, okay, Tesla's down a tiny bit. Meta is down a tiny bit. Microsoft's up, but less than 7%. Apple's up, but less than 10%. Amazon's up, but only 3%. Substantially sub-market returns, and in two cases, negative, for five of the seven, Mag 7.

This is not a market that is living off of the Mag 7 at all. And the Mag 7 is not a thing when one company in a one-year period is down 1%, and another company is up 67%. That's not a very high correlation in one particular theme or basket. So year-to-date, it's not been very good here in the MAG7. I would add that it's down as a group 4%. Only Google and Amazon are up at all year-to-date. The other five are all negative. But the reason I bring it up is, first of all, there's relevance for index investors

when the top companies make up 40% of the market and only 25% of the earnings. But I also would say that there is a healthy broadening in the market, that everything I just said about Mag 7 has been true and that the market's done as well as it's done. And obviously, today was the sell-off day behind this soap operas. with the White House. But my point is that the MAG 7 is not carrying the whole market and the data has really become quite interesting in my opinion. Now, you talk about a broadening of the market,

the Dow Jones Transport Average, we're so used talking about the industrial average. It had hit an all-time high. It had been down for quite some times staggering around. It had an all-time high coming into today. You've also had very positive price action in emerging markets, industrial metals. global shipping stocks, I think that that all points to this global cyclical story,

reflating, being reinforced. But what you don't really see yet, although you had some of it today, but that could have been from the trade drama, is higher bond yields. Higher bond yields combined with these other areas of the market going higher is a big reinforcement of the pro-cyclical story. But what do higher bond yields do for expensive growth stocks? They pummel valuations. So there's a few things to play right now that have the potential to get very interesting in markets. I think that when people want to know my take of what happened today, I happen over the weekend. I continue to believe that the one day story, the two day story, the one week story, that is going to be where a lot of people are focused. It's not going to be where I'm focused.

I continue to very, very, very much believe in President Trump's incorrigible market discipline fear, whether it's stock or bond or both. at some point force his hand. And yet what I would suggest is that it's entirely possible that there's more escalation from here around his threats and then European counter threats. And that could lead to more short-term market volatility and uncertainty. I also believe it's entirely possible that as soon as his Davos speech tomorrow, that there could be de-escalation, there could be some sign of an off-ramp that allows prices to recalibrate. I also think it's possible that it's all the above, that maybe there's

additional volatility, pain, and then a capitulation that results in market stabilization. So I don't have a take as to when and what will happen, but I do believe that the questions of, does this now represent the moment in which all Western alliances are over as it pertains to economic market response. I do not. And I believe that that has everything to do with President Trump's pathology, despite the policy side that is at least being articulated. Secretary Besson did come out today and say, and I quote, I urge our European trading partners to take a deep breath and let it all play out. I assume that means, come on, guys, he doesn't mean it. But perhaps the president has to move a little further on some of this.

The other thing that I have to say about today is I'm not at all convinced that the only thing that push markets down, I definitely think the first half of the day was entirely absorbing what we had already seen in overnight futures action. Keep in mind, European markets, some of which were open yesterday, so we already saw some of this over the weekend. We just happened to have a market holiday yesterday for MLK Day. The market event today around trade tariff threats, Greenland, Europe, was not the only story because where markets took another few hundred points down was near the end of the day,

middle to end of the day, when the Supreme Court announced they weren't going to have a tariff ruling and it's going to be like late February. And first of all, just part of me is frustrated because I think this should have taken five seconds to rule in favor of the appeals court. But apart from me playing the role of judge here, why this will last another five weeks, it does exacerbate uncertainty. And I don't think markets like that. that at all. So that isn't going to get covered as much, but that was a big part of what happened in markets today. Let me wrap things up. There's a lot in the Dividing Cafe on housing and mortgage today. Some of the things are expected. I don't know President Trump's speech in Davos is going to cover this or

not. It sounds like now he's pivoting a speech to be entirely about Greenland and his expectations for European cooperation. Previously, he had telegraphed. He was going to talk about policy steps around U.S. housing at Navos. He may save some of that for the pending state of the union, but they're talking about relaxing capital requirements at banks, which would allow them to buy more treasuries and mortgage back, and that theoretically puts downward pressure on yields and does it organically without manipulation,

and I think that's a healthy thing. It's marginal for impact of housing, but it's not one of the policy things that bothers me, like some of the other issues. for example, the aforementioned plan of Fannie and Freddie being forced to buy $200 billion of MBS. Another idea, and my friend Steve Moore at an op-ed in the Wallsheet Journal about this a week ago, but there is talk within the White House about changing capital gain tax rules on primary residents, indexing it to inflation, potentially exempting first-time homebuyers, potentially both.

I think that that inflation index idea is brilliant and would be. a needle mover. Now, that will require legislation in Congress, and yet theoretically could probably be done in reconciliation. And then the idea about allowing people to use their 401Ks to buy, and then lowering tariffs, which is funny at a weekend where he's threatening all kinds of new tariffs, lowering tariffs on building products, which, yeah, I think that sounds like a very good idea, because the tariffs have hit construction costs, building products significantly. All right, Now, I don't know that they're actually talking about the last one, but I put it in my list. So with that said, we will see what comes out Davos tomorrow.

I will be writing for you in the daily recap what is the kind of latest and greatest as the saga goes on for tomorrow. More on the Fed, the fact that Kevin Hassett appears out of the running and Kevin Warsh appears to be in pole position for the new Fed chair and why I believe that's a positive thing. And a little update on energy too. but we're out of time here for the video and podcast, so I need to direct you to dividendcafe.com where you will find more in the written version and in your inbox as well. And I do thank you, as always,

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