MONDAY – December 1, 2025

Dear Valued Clients and Friends –

I hope everyone had a special Thanksgiving weekend, filled with a Cowboy victory, a Trojan victory, and, of course, lots of time with family (I defer to you all for the order of priority there).

Dividend Cafe last week was a special Thanksgiving edition, with the written version here (my favorite), the video here, and the podcast here.

I was on CNBC Friday talking markets, valuations, and all my favorite things.

Off we go for a classic Dividend Cafe Monday around the horn …

Market Action

• The market opened down -200 points today and zigged up, then down, then up again, then down again, before closing near the lows of the day.
• The Dow closed down -427 points (-0.90%) with the S&P 500 down -0.53% and the Nasdaq down -0.38%

*CNBC, DJIA, December 1, 2025

• Last week’s rally in markets helped the S&P to basically end the month flat (it had been down -5.2% intra-month and closed up +0.13%).  That makes it the seventh month in a row with a positive move.
• The Russell 2000 (small-cap) index was down -7% at one point in November, but rallied in the final week to end the month in positive territory.
• It is worth pointing out that both the Russell 2000 and the S&P 500 EQUAL-WEIGHTED ended the month at all-time highs.
• 62% of the stocks in the S&P 500 are above their 200-day moving average, not hugely robust, but nowhere near indicative of real internal deterioration, either
• A major story for 2025 is the persistence of foreign appetite for U.S. assets.  A Liberation Day hiccup to these scared markets, for good reason, but whether it be U.S. sovereign debt or U.S. risk assets, robust foreign appetite for U.S. financial markets is an under-rated story that U.S. markets have become very blessed by.  Its persistence is an important issue for 2026.
• The ten-year bond yield closed today at 4.09%, up seven basis points on the day.
• Top-performing sector for the day: Energy(+0.91%)
• Bottom-performing sector for the day: Utilities (-2.35%)
• One of the most interesting things about risk asset turmoil in November has been the disconnect between Bitcoin and the Nasdaq.  Long-time readers know that I have believed and said for many years (well, not so much said it, as empirically shown it) that Bitcoin, far from being an “anti-fragile” safety “asset,” was actually almost perfectly correlated with the most “risk on” parts of the stock market.  As Nasdaq and other liquidity-driven risk assets went, so went Bitcoin.  Lately, amid the recent 30% drop in Bitcoin, that correlation seems to be starting to break apart.  Heavy leveraged ownership of Bitcoin may be part of the reason.

• Commodities have been an underreported story, with natural gas prices surging, copper at a new high, and all industrial metals breaking out.
• Do rising Japanese bond yields signify a disruption to the Yen carry trade, and is this spilling over into crypto markets?  Is the reason Bitcoin fell off a cliff again today because many levered buyers are dealing with the unwind of their Yen borrowing position?  It is a theory, sure, but I am just always skeptical of any theory that becomes conveniently universal whenever any such disruption takes place.  My best theory of the case is that it doesn’t help, but it is not the sole explanation of all the hurt, either.

Top News Story

• The state of the Russia/Ukraine war and the vast efforts to negotiate some sort of an end to it remain a major unresolved news story, with nothing close to certainty where this is headed.  U.S. special envoy Steve Witkoff is headed back to Moscow today for more meetings with Vladimir Putin tomorrow.

Public Policy

• One of the more significant policy issues to play out in the weeks ahead is extending the Affordable Care Act’s subsidies.  There are a lot of ways this can go, and there is most likely to be divisions within the right and within the left on this issue, versus the obvious disagreement between the right and the left.  At stake are COVID-era subsidies that are about to expire unless Congress takes action.  My expectation is that the President will support extending some subsidies, subject to certain strings or provisions attached.
• A week from today, the Supreme Court will hear arguments in the case involving the President’s firing of his FTC (Federal Trade Commission) Commissioner.  This represents a significant case around the limits of executive authority and the relationship between the executive branch and various administrative agencies.

Economic Front

• The ISM Manufacturing index came in at 48.2, down from 48.7 last month, both indicating contraction and below 50 (the breakeven level) for 34 of the last 36 months.  14 of 18 industries were in contraction last month.

Housing & Mortgage

• Redfin announced this weekend that September saw the highest number of de-listings in over eight years, a +28% increase from the same time last year.  85,000 sellers pulled their homes from the market, unsatisfied with the market price they were seeing (or, in some cases, not seeing).  De-listings are often followed by re-listings, and not too often with “more favorable” price conditions.

Federal Reserve

• The probability in the futures market of another rate cut in December is now back above +85%, meaning futures have gone round trip from their ~90% probability down to ~30% probability back up near ~90% – all in the last month.
• I think it is very safe to say that Fed leadership has pushed regional Fed presidents in this direction, and that weaker/softer economic data has served to increase financial markets’ expectations for another cut.
• Just a reminder that December will be the final month of the Fed’s Quantitative Tightening (QT), its balance sheet reduction program that began mid-2022.  I suspect that, liquidity being what it is, the Fed may be increasing its balance sheet this month and next to avoid repo rates moving higher than its target.
• Though I am not thrilled to say this, the prediction markets now show a 79% chance of Kevin Hassett being named the next Federal Reserve chair.

Oil and Energy

• WTI Crude closed at $59.44, up +1.5% on the day.
• The U.S. total oil rig count is down to 407, the lowest level since September 2021.  Rigs peaked at around 650 in late 2022.
• Midstream was up around +2% last week in the holiday-shortened week but ended up being up about +5.5% for the month, the best month since last November.  The space had experienced three negative months in a row before November.

Ask TBG

On Deck

• Clients will receive their Weekly Portfolio Holdings Report, per usual, this Wednesday morning.
• The Friday Dividend Cafe will represent our longer explanation for why we own no crypto, Bitcoin, or other such fun, and never will

Looking forward to seeing many of you in San Francisco later this week.  Reach out if interested in attending our dinner event on Thursday night, the 4th.  In the meantime, welcome to December, the magical final month of the year.  And send questions our way, 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.