Dear Valued Clients and Friends –
It may seem odd to some that the markets have gone up four days in a row as the rhetoric about the war has just ratcheted up and as oil prices have moved higher, but I assure you there is a reason … A full Dividend Cafe ahead!
Dividend Cafe last week looked at the energy sector for investors, reviewed some of the basics around how economic growth is created, and concluded that the Iran war is not the catalyst for a long-term energy investment (even if it is helping now), and a conclusion to the Iran war is not a catalyst for a long-term energy investment to stop. The written version is here (by far my favorite), the video is here, and the podcast is here.
I was on The Big Money Show on Fox Business today for an hour with a highlight reel here. For those interested, I will be on Varney tomorrow on the same network from 9 a.m. to 10 a.m. ET.
Off we go …
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Market Action
- Markets opened mixed this morning (the Dow down a tad and the other two major indices up a tad) and went higher after the first hour of trading. We zigged and zagged a little bit from there
- The Dow closed up +165 points (+0.36%) with the S&P 500 up +0.44% and the Nasdaq up +0.54%.
*CNBC, DJIA, April 6, 2026
- How significant has market rotation been this year? How substantial has the Mag7 correction been, and what has that meant to the market? Consider this: Every stock in the Mag7 besides Apple is in a bear market (and even Apple is down 14%), with Microsoft down 36%, Meta down 34%, Tesla down 28%, Amazon down 23%, Google down 22%, and Nvidia down 21%, AND YET, the S&P 500 is only down 9% (h/t Charlie Bilello). How is this even possible? Well, obviously (and mathematically), because while a huge portion of the things the market had been relying on have been dropping, the entire market has not … Rather, leadership has rotated to other areas that were not as over-valued.
- I saw a chart over the weekend where someone showed the last five major oil spikes, and how in each case the market fell about -10%, and then, after that, it either went up 20% the next 18 months, or down 25% the next 18 months, or somewhere in between. Very, very helpful, huh?
- The ten-year bond yield closed today at 4.34%, flat on the day.
- Top-performing sector for the day: Consumer Discretionary (+0.80%) and Energy (+0.77%)
- Bottom-performing sector for the day: Utilities (-0.42%)
- With all the talk of default concerns in private credit, the Direct Lending Index (which tracks ALL holdings of ALL BDC’s, traded and non-traded), shows a default rate last quarter of … wait for it … 1.27% – LOWER than the prior quarter’s 1.35%
- My generally bearish feeling about the really expensive big tech/AI-adjacent stocks is almost entirely valuation-oriented, but it has also been largely rooted in the contrarian view of how excessive positive sentiment has been in that space. That is one area that has moved as of late, though. The sentiment in Mag7/big tech/AI has not exactly gotten screamingly negative (which would be a bullish sign), but it certainly has dampened (which makes it less of a bearish sign, at least marginally). The valuations remain extremely high, and the fundamentals are the question (for reasons I write about all the time, including in this coming Friday’s Dividend Cafe), but the best thing that could happen for AI/tech bulls is for the masses to become AI/tech bears. It hasn’t happened yet.
Top News Stories
- Obviously, targets, timelines, and expectations have moved many, many times over the last five weeks, but where things stand now, we are told a significant bombing escalation will take place (including on Iran’s power infrastructure) if Iran has not opened the Strait of Hormuz in the next 24 hours. The President doubled down on that ultimatum in his press conference today, but stated that talks and negotiations are underway.
- The heroic rescue of a downed fighter pilot and crew member in the mountains of Iran was one of the great stories I have read in the news in a long, long time
- Attorney General Pam Bondi was the second Trump cabinet member to be fired in recent weeks. The replacement search is underway.
- Artemis II, as a lunar mission, has now set the all-time distance record for human travel from Earth.
Public Policy
- It’s not exactly standard domestic policy consideration, but I suppose one substantive public policy issue this week is (a) whether or not President Trump is serious about withdrawing the U.S. from NATO, and (b) whether or not he can, and (c) whether or not he will (if the answer to A and B were yes). 2023 legislation does require Senate approval for such a withdrawal (at a 2/3 level), but the President may do it anyway and allow the courts to sort it out, believing that this is in the executive branch’s sole jurisdiction.
Economic Front
- The monthly jobs data came out on the Friday holiday, reflecting 178,000 jobs created in March (higher than expected). January and February were revised a tad lower. Health Care and Social Assistance were the two categories with the largest increase. The unemployment rate ticked down to 4.3%. The reversal in data from the month prior to the nurse’s strike ending is a big part of the poor February and stronger March.
- With a h/t to Peter Boockvar, who has long pointed out that roughly half of our 2025 GDP growth number – HALF!! – was data center construction, we are seeing increasing reports of delays or cancellations in U.S. data center builds. Electrical equipment is not available in the proportion needed, imports have become too expensive due to tariffs, and we do not have an adequate grid to meet power demand. I have no doubt our brilliant market system will create solutions – it is what we do best – but the time ramifications and the impact on AI capex remain a big question.
- The trade deficit came in at $57.3 billion in February. Exports were up by $12.6 billion, but a big portion of that was gold, which is not included in GDP calculations. Imports were up by $15.2 billion. Total trade (imports + exports) is only up +0.9% from a year ago.
- ISM Services fell to 54 last month, down from 56.1 and worse than expectations. Business Activity dropped the most, but New Orders were slightly higher. Stockpiling oil products may explain some of this. All in all, it was not a terrible report, but it was not a good one, either.
Housing & Mortgage
- Mortgage rates are back near 6.5%, with the long bond yield having moved up the last few weeks, and just like that, mortgage refinances have all but totally stopped
- Active listings (people wanting to sell their homes) are up +8.1% versus a year ago, and national median listing prices are down. This combination generally bodes well for buyers as more sellers become more motivated and realize their desired price is not realistic. But many listings are going stale, indicating a high number of unserious sellers.
Federal Reserve
- We are still roughly in the same place with expectations for the federal funds rate reflected in the futures market – an 80% probability of no change by the end of the year, a 10% chance of a quarter-point cut, and a 10% chance of a quarter-point hike.
Oil and Energy
- WTI Crude closed at $112.44, up nearly +1%.
- Midstream finally had a week down as both midstream and upstream energy stocks were down about 3% on the week after a ferocious Q1 performance. Ironically, oil prices were actually up +12% on the week
- Some may feel that certain globally integrated upstream companies benefit from a longer war (I think that fails to account for demand erosion), but midstream absolutely does best in a good economy, not a bad one, and in a shorter, not a longer, end to the war.
- How much are markets expecting an end to the Iran operation sooner rather than later? While the front-end oil contract is a stunning $110 today, the current December price for WTI crude?? $71 – the same price of oil before the war began!
- A few takeaways from the Goldman Sachs energy report released over the weekend:
- Shipping through the Strait of Hormuz is down 94% since the military operation began
- Oil out of the Middle East is down 63% since it began (exports of oil from 7.4mm barrels per day to just 2.8mm bpd)
- How are even those 2.8mm barrels being exported? Because of a Saudi pipeline to the Red Sea
- But apart from total oil products, it is the refined products that have seen exports collapse. Fuel oil is down by 88%, jet fuel by 85%, and diesel by 55%
- The lack of access to such is hurting Asia the most (33% of global demand, with 50% coming through the Persian Gulf)
- What has kept things from getting worse? Storage supplies coming into the war. What could make things a lot worse? The depletion of storage supplies as the war continues.
On Deck
- Clients will receive a special Q1 Weekly Portfolio Holdings Report (with video) on Wednesday this week.
- UConn plays Michigan for the national title in men’s basketball tonight after two of the worst Final Four games in recent memory.
A good night to all. Reach out with any questions, any time.
With regards,
David L. Bahnsen
Chief Investment Officer, Managing Partner
The Bahnsen Group
www.thebahnsengroup.com
The Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.
