The Dividend Cafe - Tuesday - October 14, 2025

Episode Date: October 14, 2025

Tuesday Midweek Market Update: US-China Trade Tensions and Earnings Insights In this episode of Dividend Cafe, Brian Szytel provides a midweek market update for Tuesday, October 14th. The day saw sideways trading following a significant sell-off on Friday and a rally on Monday, predominantly driven by ongoing US-China trade negotiations concerning China's export controls on rare earth minerals. Brian discusses China's dominance in rare earth minerals and the potential long-term response from the US, including strategic reserves and new mining developments. He also touches on Jerome Powell's comments on inflation and job markets, noting little change from the last FOMC meeting. Additionally, Brian highlights strong Q2 earnings reports, especially from major banks, as a positive market signal. He concludes with a perspective on gold as an inflation hedge versus the S&P 500, emphasizing the latter's superior long-term performance. 00:00 Introduction and Market Overview 00:17 US-China Trade Tensions and Rare Earth Minerals 02:12 Jerome Powell's Comments on Inflation and Jobs 02:31 Q2 Earnings Reports and Market Reactions 02:56 Small Business Optimism and Gold Market Insights 04:54 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 back to Dividend Cafe. This is Tuesday, October the 14th. And as always, midweek, it is Brian Saitel with you. Let's give you a daily update on a day that was really an up and down sideways trading day, frankly. As we mentioned, Friday was the big side. We've had a heat up and rhetoric between the US and China, particularly around China, putting export controls and approval processes in for the rare earth minerals that they produce. And when I say that they produce them for the world, they really do. They have over an 80% market share. It's not only where a lot of them are geographically located.

There are other deposits around the world, including the United States, but the abundance of it there is one thing. And then the second thing is just the time it has taken to get into a mining development stage and processing stage and refining stage out of the rare earth side takes many years. It's not something you can just turn on overnight, similar to an oil production facility. And so they really do have a stronghold in that arena. And it's what makes everything from cell phones to fighter jets to televisions to all the things that we use in our modern life. And so they have a leverage point there.

Just keep in mind, the whole part of a negotiation, the whole point of it, is that the two people that are negotiating are using different leverage points so that they can get a deal that is best for them. And so it doesn't shock me first off that China is using that. And I think it's part of a process. I believe over time what it will result in is the U.S. creating its own deposit of rare earth, both in the form of supply of them, like a strategic petroleum reserve, but in rare earth materials. and then just more partnerships in South America, potentially Greenland, different developments in the United States, that can bring up our ability to produce these from a national security standpoint. So I think that'll be the result of this over time.

In the meantime, it's about tariffs back and forth and how this will shake out, and the markets are oscillating around it. Friday you had a big sell-off. Monday, you got a big rally out of just better comments, essentially, in the negotiations, and then today you're a sideways movement as things continue to develop here. We'll keep you posted on that. There was comments later in the day from Jerome Powell around the picture on inflation and jobs, and I'll just tell you it's basically the same as the left FOMC meeting.

So there's really not much to talk about. If there is weakness, they're going to lower rates and end QT. And that's what he mentioned. And that's why markets seem to like that towards the end of the day. The other big part of what's going on here is earnings are now coming out for Q2. And as we're seeing them come out, they're much better than expected. So especially the banks, a lot of the big banks were up five, six, seven percent just in one day. That's a big move for a big financial company, just reporting earnings that have been better than expected.

So some good things happening on the fundamental side, some volatile things happening on the trade side. And then on the economic side, the only thing that was really notable today was the small business optimism NFIB survey that was out. And it did drop two points from the month prior. This is a pretty good forward-looking indicator from the same point of how small business is perceived, but at a number of 98.8, we're really just talking about it in line with long-term averages. There was an ask DBG question in there today about, did the gold bugs full vindicated at this point? In the short term, no question about it, and I'm frankly happy because I think most of them had held on to the precious metal for decades and decades without it going really anywhere. So to see it come up here recently, I think is great.

But if you look at an average since 1980, it's basically been about the same as CPI. So you've had an inflation average equal to where gold is gone. And the idea that it's a great hedge against fial currency devaluation and or inflation has been fairly well debunked. It seems to almost be somewhat random as far as price movement. Of course, that's really how asset prices tend to move. They're fairly unknowable just from the standpoint of something like a value of precious metal. But the other part of that that we've always found interesting was just that

The biggest decade in human history of monetary expansion was post-GFC. And you saw what the Fed did and how much money was created and put onto the reserves of Bing's balance sheets. And then you really had gold basically go nowhere but frankly lower during that period of time. It was pretty interesting to note. So what I'll say is this. Sure, happy that it's got up a lot. I don't know that it changes a lot for what I deal on a day-to-day basis. And just keep in mind that since 1980 with gold averaging about when inflation,

did, the S&P 500 is up 62 times. So from a standpoint of an inflation hedge, I bet you can tell which one I prefer over the other. I think one's a little more predictable with the ability to average and analyze income statements and balance sheets and get dividends along the way and all that sort of thing. So that's what I have for the podcast for it today. Again, it's a bit of a sideways market here as we get through machinations between the U.S. and China and trade negotiations. And we'll keep you posted on that. Tomorrow, I'll be back with you again on Dividend Cafe for this evening, I wish you a lovely one, and I hope that you can reach out with questions. Thank you. The Bonson Group is a group of investment professionals registered with

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