The Dividend Cafe - Wednesday - September 24, 2025

Episode Date: September 24, 2025

Market Recap and Economic Insights: Tariffs, Corporate Taxes, and Housing Trends In this episode of Dividend Cafe, dated Wednesday, September 24, host Brian Szytel provides a market recap from Newport Beach, California. The DOW dropped 171 points, S&P and Nasdaq declined by approximately 0.3%, and there was a minor increase in 10-year bond yields. Szytel shifts focus from daily market movements to broader economic themes, discussing the ongoing impacts of tariffs on the economy, corporate earnings, and tax revenues. He notes a $96 billion increase in tariff-related revenues but a $108 billion decrease in corporate tax receipts due to recent legislation. Additionally, there's an anticipated $150 billion in tax refunds, which could boost the economy. Szytel also addresses the performance disparity between U.S. and Canadian midstream energy stocks and the influence of corporate structures on investment returns. Finally, he reports a significant rise in new home sales and median home prices for August, while annual growth remains below inflation levels. 00:00 Introduction and Market Recap 00:58 The Impact of Tariffs on the Economy 02:51 Corporate Tax Revenue and Consumer Impact 04:29 Midstream Energy Stocks Analysis 06:04 Housing Market Update 06:42 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 into Dividend Cafe. This is Wednesday, September the 24th. Brian's I tell with you here from our Newport Beach office here in California. On a overall, slightly down day in markets, about a third of a percent overall across each of the three indexes. You've got Dow that was down 171 points, and S&P down about 0.3, NASDAQ down about 0.33. So you had a little tick-up in yields on 10-year, you had a 4-Bases Point move up, you had a 4-15 close on 10s. So there you have it on your market recap. But what I want to use these podcasts for more often than not is to talk to you about some things that I feel are more relevant and more important to each of the listeners that may be on this podcast today. And so I'm going to do a little less of day-to-day market machination because I really don't think that is quite as important, and I don't think it's as impactful to listen to.

And I want to talk a little bit more qualitatively about what I'm seeing. One of those things is a very big topic that we've talked about the entirety of 2025, which is the tariff talk, and whether it's going to tank the economy, whether it's going to hurt global trade, whether it's going to do this or that. And of course, there's a political overlay on top of that, whether someone is for or not, the current administration, I think. But aside from that, just the overall tariff experiment has been really one to watch. And now that we're what I've called rounding second base here, we're not quite to a point of being able to say that it's concluded or anything close to that. but we can start to see what it's doing from the standpoint of the economy, from the standpoint of corporate earnings, and from the standpoint of tax revenue into the Treasury. So how does the scorecard look?

What we've seen so far is corporate profits and the earnings that have come out have actually been just fine. So you've got some corporations that have absorbed some of the tariff amounts, some that have been less affected. We've definitely seen some supply chains start to shift around the world. That's been an ongoing topic since the pandemic. But actually, earnings have been okay on the corporate side. But what you have seen is that revenue into the Treasury has gone up on the tariff side. So let's call it about $96 billion has flowed into the Treasury, what is effectively a consumption tax. And that is, in some ways, either lowering corporate taxation or it's increasing costs and being passed through to consumers of the country.

So we're trying to find which parts to square that. In other words, what part of the economy is affected more than others. But so far, about $96 billion has been taken into Treasury. Corporate earnings have been okay. Global GDP was actually upgraded today, and that was on the OECD report. They took it from 2.9% to 3.2. So global growth seems to be intact, and revenue is coming into the Treasury. But what we're also saying is total corporate tax revenue into the Treasury is down by $108 billion because the OBB bill that was passed actually lowered the extended. current corporate tax rates, but they allowed for advanced expensing for corporations. And so there's

been some effective lower rates inside of the corporate tax world. So what you've seen is tax revenue come into treasury from tariffs and then tax revenue be depleted and not come into treasury because corporations are paying less in taxes. And that's some of the offset that you're saying. It's almost a total offset, not quite. I'd say it's a slight benefit to the economy and a slight decrease to treasury. The other part of this equation is on the consumer, side with that tax legislation. You had things like increased salt deductions, the child tax credit amounts. You're actually going to have a larger tax refund coming in first quarter than otherwise would have been estimated. We're now looking at about $150 billion of tax refunds

in Q1. That's historically a high number. And remember, tax refunds have come in and almost always historically get spent. That means they circulate into the economy. There's velocity of money, and it's overall good for the economy. So there's a little less revenue going into Treasury, a little bit more staying in the private sector. My comment at the end is just that I think that markets that have done so well, and a lot of people are scratching their head over it, including many listeners, part of it is that it's priced some of this in advance. Global growth not falling out of bed, the worst that could have happened with tariffs that is not being seen in the world is continuing to turn. So that's what I have on markets. Hopefully you find that

helpful. There was a question in there today, particularly related to midstream energy stocks. There is U.S. partnership names that trade. There is U.S. C-Corp names that trade, most of them that used to be partnerships. And then there's Canadian counterparts. On the year, the question is that there's a disparity of returns and why. So the Canadian markets generally have just performed better this year. There's that part. The midstream space in particular there has performed better. And part of the reason has been an expansion into international markets in Canada outside of the U.S. And those pipelines being opened has caused more revenue to flow in, production and increase, and then more capex to be spent on it. And so the multiples have expanded a little bit

there. On the partnership versus the Seacorp question in the United States, that's much more nuanced. I can give you names of individual companies in both a partnership format and a C corp format that have performed better or worse than one another, but largely speaking, the C-Corps have fetched a higher multiple. They have more simple tax structures from an ownership standpoint, so they're readily available to purchase inside a 401K plans, different types of ERISA-based plans where maybe partnerships aren't. And then on top of that, they can be included in the broad indices like the S&B 500. So you get a little higher multiple on that as well. The other part of it is because of that, a higher multiple. They've used their cash flow more

aggressively for capital expenditure. You get a lower dividend payout in absolute. payout yield component when you buy them, but then you get a potential higher growth of that dividend over time as the company performs. Two pieces on the economic calendar before I let you go, all related to housing. You had a much bigger than expected increase in new home sales for the month of August at 800,000, and the median home sale price was up a good amount in the month of August at 4.7%. That puts our year-over-year number, however, only at 1.9%, which is below inflation. So not a very good year-over-year number, but perhaps that is picking up. Housing can just be historically volatile month-to-month with some of these things,

especially can be affected seasonally. So take that for what it is. This is the end of the summer months being priced in. With that, I will let you go this evening. Thank you for listening, as always. I wish you well, and I'll be back with you tomorrow, Thursday on Dividend Cafe. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC with Hightower Advisors, LLC, a registered investment advisor with the SEC.

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