The Dividend Cafe - Wednesday - December 17, 2025

Episode Date: December 17, 2025

Market Declines, Fed Policy, and Strategic Dividend Investing - Dividend Cafe Update In this episode of Dividend Cafe, Brian Szytel discusses the recent downturn in the stock market, particularly in AI-related stocks and cryptocurrencies. Financial volatility and credit default swaps in major names are highlighted. Szytel also reviews ongoing discussions about the next Federal Reserve chair and the implications of potential rate cuts and balance sheet actions. He provides insights on dividend investing strategy, emphasizing yield sustainability and growth. Upcoming economic data releases are previewed, including initial claims, November CPI, December Philly Fed manufacturing, consumer sentiment, and existing home sales. 00:00 Introduction and Market Overview 00:21 AI and Cryptocurrency Market Trends 01:12 Federal Reserve and Economic Policies 03:27 Impact of Rate Cuts and Economic Stimulus 05:04 Dividend Income Strategies 06:59 Upcoming Economic Data 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. Welcome into Dividend Cafe. This is Wednesday, December the 17th. Brian Saitel with you here on the fourth actual straight decline in the S&P. So we've given some backs here in stocks. The market today was down. Dow was down 228 points. S&P was down. over a percent and NASDAQ was down 1.8 percent. So a bigger sell-off and a lot of the AI-related names and that CAP-X circularity that we've spoken about many times seems to be coming home to roost here a little bit, particularly with some credit default swaps movement and some of the big names in the space that have really invested heavily in that space in CAPEX around AI and hyperscalers and so on. Some of that stuff, that momentum is coming out of the market. You've also

seen the same thing in cryptocurrencies, pretty much across the board, Bitcoin and Ethereum. They're all down significantly 30 plus percent here with some of the largest of those AI names down in similar amounts. And in rotation, you've had more the value side of things outperform a little bit. That's why the Dow was only down about 0.4%. Everything else was down three times that in stocks. Rates were unchanged, frankly, in the economic calendar, there really wasn't any new data that was out. Tomorrow we'll get a whole bunch. There has been more and more talk about the Fed, about the next candidate, about independence, about what this administration wants as far as looser policy, so on and so forth. And today you had Waller out with some pretty doveish comments. He basically said that current

rate policy is about 50 to 100 basis points too restrictive and it should come down. He just also said that as a hedge to that, that they can take their time and there isn't a rush to that. But Remember, he's interviewing literally today and tomorrow with the administration again on the current Fed shirt. I assume that some of those things may not be coincidental in those remarks. That said, you have other frontrunners like Kevin Hassett and Warsh, and both are ahead of where Waller may be in running in that job. But honestly, there just may be a dark horse that we don't know about or aren't thinking of yet either. And it's this juxtaposition behind being able to nominate someone,

that is going to be competent, has to be competent, and the market needs to see him as credible and competent, and also independent. Otherwise, markets are very vicious and can react very violently. And I know that Treasury Secretary Besson doesn't want that. And so a fine needle to thread, because at the same time, they also want someone that Trump can trust and then ultimately can push their own agenda as well. And I just think those things are mutually exclusive. I don't think they can exist at the same time. If you get someone that is going to do the bidding for the administration that I think the markets are going to throw up over it. That doesn't mean that the three candidates that I mentioned aren't good choices. It's just that is the tension that

is happening right now with policy, this back and forth that we've been dealing with. The other thing, too, is if they pick someone too soon, you end up with more or less a decapitated Fed in Powell because he'll be like a lame duck president. The market will pay more attention to what the successor is going to say in press releases and comments to media, then he will. And ultimately, it hurts his ability to lead at the Fed and isn't an ideal situation either. That's not uncommon. There's always a period of time where the next Fed is named. We've seen that before. But just keep that in mind. If we do that six months in advance, remember, the new term doesn't start until after May. Either way, my comments were that 175 basis points of rate cuts have already happened. That's

going back the last year. That's a lot. And usually there's a lag effect between when rate cuts and looser monetary policy actually affect the economy. We're likely just seeing the beginning of that now. And I suspect the first couple of rate cuts were more or less a nothing burger as far as how they actually move the needle because we were starting at such a high rate of five and a quarter. And percentage terms moving down 25 or even 50 basis points on the front end of five handle yield isn't that much. When you start to get into the three, moving 25 basis points is obviously double the percent almost. So I think it becomes a little more meaningful.

The other part to that equation is they've started to do balance sheet action and they've started to actually provide liquidity to the market. And so those two things I think we'll start to get more priced into 2026. And at the same time, you have this massive amount of tax refunds that are going to hit in Q1. It's about 44% higher than it was this year to give you context. That accounts for about half a percent of GDP. That's a meaningful number, and both of those things will be stimulative, along with some financial deregulation and easing of capital requirements.

I don't mean to sound like a broken record, because we've mentioned this before, but a lot of that has been priced into markets. Markets tend to be forward-looking, and so those things are known. And so going into 2026, the combination of those things, and also this AI narrative that needs to continue to unfold, and the last couple of days has been unraveling here a little bit. on the question for the day was a common one, basically the higher the yield, the better from a dividend income perspective if you're living on it. There's just a balancing act with that. And we've done this for a long time, decades. You can get lucky. You can find the free cake and eat it

too. You can find that high yielding stock that isn't under distress and that has the ability to grow that yield and perform. And I remember a very large alternative asset manager that we bought at IPO that was just like that. And it has grown and appreciated into now a low yield over the course of ownership. But that was an example. I would also look at the midstream energy space and say that there's plenty that we like about it from the standpoint of a high single digit yield perspective, call it sevens, and also being able to grow the yield and have the underlying assets perform. But generally, we want to look at all of those things together. It's not just about current income. You've got to understand if it's sustainable, you've got to understand if there's

a distress in the business that has caused that yield to go up because share price is depreciated and what those risks are. Because oftentimes, more often than not, you end up with high yields on the start, but you end up with poor underlying performance, and your total return ends up something at or below what you're starting yield is at. So if you have a portfolio yielding 7 or 8%, you just up to understand the risk inside of it means that it'd be unlikely or unusual for you to have a total return that would be a whole lot higher than that. And I doubt of you even potentially lower. So what we want to look at is not just the yield, but the growth of yield, the sustainability, the corporate stewardship, and in the ability for this cash flows to increase over time,

because what happens is the underlying share price is tethered to that rise in cash flow stream, and you get a strong combination of performing assets, performing income, and all those things together. That's what we're after. You combine that with different asset classes, alternatives and fixed income and you're in business. That's the way I'm looking at it. We've got plenty of on-deck stuff. We used to do this a lot in these reports. But my on-deck section for tomorrow is we've got initial claims. We've got November's CPI that's going to be a fresh inflation rate. Super important. We'll have December Philly Fed manufacturing out. And then Friday we'll have some consumer sentiment and existing home sale. So there's more data to come down the pike here this week. In the

meantime, I reach out with your questions, and have a great evening. Thanks for listening. 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. No investment process is free risk. There's no guarantee that the investment process or investment opportunities referenced Turin will be profitable. performance is not indicative of current or future performance and is not a guarantee.

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