The Dividend Cafe - Wednesday - February 4, 2026

Episode Date: February 4, 2026

In this episode of Dividend Cafe, Brian Szytel from The Bahnsen Group discusses market trends from his West Palm Beach office. The talk focuses on the recent rotation in the market from overvalued components to staples, defensives, and cyclicals. Brian highlights significant performance discrepancies in the S&P 500 and notable declines in semiconductor and software sectors, partly due to AI's impact. He provides insights into recent economic data, including ISM services and private payroll numbers, reflecting a mix of positive and weakening trends. The episode also explores the resurgence of mergers and acquisitions, emphasizing the anticipated rise in private equity deals and its implications for capital markets. 00:00 Introduction and Market Overview 00:49 AI's Impact on the Market 01:58 Economic Data Insights 02:21 Labor Market Trends 03:17 Tech Sector Performance 03:35 Mergers and Acquisitions Outlook 05:10 Conclusion and Final Thoughts 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 to Dividend Cafe, Brian Saitel with you from our West Palm Beach, Florida office here at the Bonson Group. On a mixed day, again, really in markets that we've seen in further rotation from some of the more frothier and overvalued components of the market to some of the more staples, defensives, and cyclicals. This is the third day in a row of this. The equal weight, S&P 500 outperformed, the cap weighted by 140 plus basis points on the day. So that's a big disparity in performance returns as the market broadens out. So continued story ongoing. And you've seen continued weakness specifically in some of the semis and some of the software names continuing on here. And that was the case again today. The semis, by the way, and the software, actually both

are down about 20% year to date. So a pretty big move lower. lot of that has to do with AI that's coming into the space, and we've spoken about this, but AI or anything associated with it or any company that happened to locate its domain name in the island of Anguilla to get the country code of dot AI after it, all of those things are coming home to risk with the questions of where is the revenue going to come from to pay for the capital expenditure and what is the valuation that you're paying for it. And aside from those things, it's the idea that all of those companies, whether they're buying AI stuff or selling AI stuff, are all benefiting equally. That's not the case. And that's what you're seeing in some

of these software names that have sold off. You're basically seeing the market saying, hold on a second. AI actually might eat these companies lunch in some degree and what it can supplant on what they're used to charge for. AI can just replicate that. Now, my personal opinion is that these things will massage out over time and AI will be a productivity gain for, most likely both sides to that equation, at least on software. But all that to say, that's why you're seeing this volatility here. Not all boats go up and the tide comes in here as much anymore on the AI tidal wave. That's what the story was. You also more or less some positive economic data that has come out. You had an ISM services number that was a little bit above

expectations. We got 53.8. We were looking at 53.5. But this is the third thing in the row. You've had PMIs, ISM manufacturing, and now ISM services all above 50, meaning all expanding, and then all beating expectations. So we'll call that good. Employment number on the day. You had ADP private payrolls, print 22,000 for January. We were expecting 45, so that's half. And this is a trend that has now come down here in recent months. And so the labor market is starting to weaken here.

And then to put some specifics around that, the average over the last 12 months in labor, at least on the private payroll side, not the government reported non-form payroll, but this is ADP we're talking about, is 23,000 a month. That was down from 64,000 in 2024, and actually over 100,000 back in 2019, for what that's worth. But the top thing is that you've got BLS data that has been wonky and lumpy, and then you've had different government shutdown periods, and so you just have this sort of private sector reporting X and then government reporting Y with some oscillation around things.

So it's been a little tricky. we'll get some more government data here coming out here in the next couple days. That's what I've more or less had for you today, but it's this continued notion that you're seeing NASDAQ and some of the tech components of the market, just not make new highs when everything else is, especially small caps, especially the cyclical names and all of the energy complex. It's actually pretty fascinating to see. It's a little reminiscent of 2022 in that regard.

We'll see how it plays out. The question in there for today I thought was also a good one, It was about mergers and acquisition. So M&A, this was a theme that we predicted in the annual white paper. It was actually the second year in a row that we've talked about it. It picked up a little bit in 2025, but not as much as I would have thought. But I'm still thinking and looking at it, picking up more in 26. And I believe that we'll be right on that one, just because in the month of January,

not only are we seeing public information about this stuff, but just the amount of conversations that I have had with private companies looking at PE buyouts and different things. It's just, it's heating back up. And the question was, how do you play it? How do you own that? Is it the private equity? Is it the private names or just public markets? And the answer is all the above.

You can look at real big deals. If you look at the SpaceX and the XAI announcement of combining companies and going public, to smaller deals, to IPOs, private sales, there's just a slew of different beneficiaries and economic actors involved in ways to benefit. And obviously, the owners of private businesses that are selling them to private equity are probably the biggest beneficiaries, but then the PE firms themselves also will benefit from that arguably over time, and then the investment banks that process those transactions, the finance firms that leverage the buyouts, all of those things. Getting animal spirits back in activity

and mergers and acquisitions and IPOs, that's generally a good thing. It's generally a later cycle sign, but again, they have been left for dead, basically, since the 0% interest rate paradigm that ended in 2022. So it picking back up is really just a good thing for capital markets. There you have it on the day. I'm appreciative of you listening, as always. Reach out with questions, and thank you for listening to the Dividend Cafe. The Bonson Group is a group of investment professionals registered with High Tower Securities LLC, member Finra and SIPC, and with High Tower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through High Tower Securities LLC. advisory services are offered through Hightower Advisors, LLC.

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