The Dividend Cafe - Tuesday - September 23, 2025

Episode Date: September 23, 2025

Market Insights and Economic Updates - Sep 23, 2025 On this episode of Dividend Cafe, Brian Szytel reports from Newport Beach, covering down markets with the DOW, S&P, and Nasdaq all experiencing declines. There was a notable rotation between growth technology and value names, with interest rates moving lower. Flash PMI numbers for manufacturing and services were discussed, both indicating expansion but with slight drops from the previous month. The Richmond Fed Index saw a significant decline. The episode also delves into the AI investment story and its impact on valuations. Looking ahead, several economic indicators are expected, including new home sales data, durable goods, wholesale inventories, GDP estimates, and initial jobless claims. 00:00 Introduction and Market Overview 00:35 Interest Rates and Fed Expectations 01:38 Economic Indicators and PMI Numbers 02:33 AI Investment and Market Valuations 03:27 Passive Investing and Market Dynamics 04:23 Upcoming Economic Calendar 04:49 Conclusion and Sign Off Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome back to Dividend Cafe this Tuesday, September the 23rd. Brian Saitel with you here from our Newport Beach, California office here at the Bonson Group. On a bit of a down day in markets, the Dow was down 88 points, S&P down 5 tenths of a percent. NASDAQ was down a little over nine-tenths of a percent. So it's a much bigger selloff today in some growth technology names and relative outperformance and some of the value names. The equal weight S&P 500 outperformed the cap weighted by about, looks like 70 basis points. So it's a decent rotation day.

And interestingly, it was a day in which interest rates moved to lower. We've seen that correlation between the opposite, which is lower interest rates means all the shiny stuff goes up more, like technology and crypto and this stuff. Today was the opposite tenure, was down four basis points on the day. We're now back to 411. If you remember intraday on Fed announcement day last week, we broke 4% and rallied up towards call it 415, something like that, and are now kind of slowly moving back lower. The expectations on Fed rates for the end of 25 are actually right now 40 basis points lower before the end of the year. So we'll call that two rate cuts. And then also out on some of the different Fed speak, there's another roughly 75 basis points priced and lower through the end of next year. So some decent dubs out there, comments from different Fed presidents to the low side, citing the labor market risk is more important than the inflation risk. Time will tell. We'll get some more numbers and some more data in the meantime. We had an economic number or two of them out on the PMI number.

So these are flash numbers, meaning they're kind of a preliminary read. But the Flash Manufacturing PMI Index was basically in line. We got a 52 on manufacturing, and then the Flash Service's PMI number was also roughly in line, give or take a tenth, at 53.9. So both of those numbers are actually in expansion territory, meaning anything above 50 is expanding. So I suppose those things are good, although both of them were just marginally in line and down a little bit from the month prior. The September Richmond Fed Index dropped a little bit more than expected. quite a bit more actually. This was on dismal new orders and new shipments. We got a negative 17 versus

negative 4. There's a whole dedicated component to the Tylenol issues that are going through some of the newsreels right now in tomorrow's weekly portfolio holdings report. One of them is affected by this news and tension. So I'll leave that for tomorrow. But in the meantime, the tension in markets still reverts around this AI story and both the extraordinary capital expenditure that's going into AI is being investable. And that's on one side of the trade. The other side is that all the companies, of course, will benefit from the productivity gains within AI, but that there wouldn't be any necessarily need for calculable monetization numbers that come out as far as revenue comes from the story. At some point, I believe that you'll have to see those numbers.

And if you don't, then I think some of the valuations are just out of hand. And that's really the primary takeaway. The AI story is real and it's there. And there's a KAPX story behind it. And that's investable. That's very long in the tooth that tree. trade. Behind that, though, there needs to be some actual revenues that come out of it. Otherwise, that CAP-X was not well-spent dollars and margins would drop. And I think that's the tension

right now between where valuations lie in markets. The question in there today was more about the index side and the passive side and the popularity causing inefficiencies in capital markets in the United States. And I think it's cause and effect. I think that the fact that we've got this long now extended up market, bull market, has made it easier to just on the index and have it work out pretty much year in and year out. You've had years, again, the pandemic in 2020, the downturn of 2022 are two notable drawdowns. But other than that, since the financial crisis, you've had a pretty extended period of generally speaking passive investing working pretty well. And I think that's a victim of its own success. And I think

that the opposite will be true. When we get into more of a barrow market territory, or you get more rotation from some of those larger cap-weighted positions within the index that may underperform relative to everything else. So that's what we have to say about that, at least for today. We have some decent amount of economic calendar out tomorrow that I'll be able to go through with you. We'll have some new home sales data and then some different Fed speakers out that we'll be able to talk through. And then Thursday, we get a whole lot more. We'll have durable goods. We'll have wholesale inventories, but then we'll have an estimate on GDP for Q2, along with initial jobless claims.

So I'd say Thursday is the biggest bang for our book from the economic calendar. But until then, we'll be back with you on Daily Dividend Cafe. Reach out with questions, as always. Have a good evening. Thank you. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with High Tower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC.

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