Dear Valued Clients and Friends –
I am always thrilled to go around the horn in the Monday Dividend Cafe, and I think this week’s packs a good punch across all our normal categories.
Dividend Cafe on Friday looked at bitcoin and the larger crypto world and laid out the case as to why we do not consider it an investible “asset class.” The written version is here (my favorite), the video is here, and the podcast is here.
I was on Varney/Fox Business this morning talking Fed, capex, and dividend stocks here. I will be on Bloomberg at 9:20 am ET tomorrow.
Off we go …
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Market Action
- Markets opened down over -100 points this morning and slowly worsened throughout the day.
- The Dow closed down -216 points (-0.45%), off of the low by a bit, wth the S&P 500 down -0.35% and the Nasdaq down -0.14%
*CNBC, DJIA, December 8, 2025
- The biggest news in markets over the last few days is the ten-year bond yield rising about 12 basis points. The yield curve is strangely shaped right now, with everything maturing in the next six months yielding more than everything from six months out to five years, essentially reflecting a policy error by the Fed: the short end of the curve is inverted for the next few years.
- An interesting component of all the volatility we have seen in equities over the last five weeks is that credit spreads are actually tighter than they were. More narrow credit spreads indicate less expectation and fear of default, which indicates better risk asset conditions … Both levered loans and high yield bonds have seen spreads come in a bit, where one would expect widening spreads (the difference between their yield and that of the risk-free yield of treasuries) if there was a broad risk-off environment materializing.
- Of course, one explanation for the above may be that we have not seen a risk-off environment materializing, but rather (a) sector rotation, and (b) re-pricing of one particular sector that is, (c) not really pertinent to credit markets …
- The ten-year bond yield closed today at 4.17%, up three basis points on the day.
- Top-performing sector for the day: Technology (+0.93%)
- Bottom-performing sector for the day: Communication Services (-1.77%)
- The post-financial crisis decade of 2010-2020 saw a small-cap equity index (Russell 2000) in which roughly 25-30% of companies at any given point had no earnings (i.e., negative profitability). That number has been between 40% and 45% for the last five years. This is, all at once, part of the downward pressure on the relative performance of small-cap companies vs. larger-cap companies in this time period, but also a major reason why selectivity in that asset class is so important.
Top News Stories
- President Zelensky of Ukraine is in London today, meeting with European leaders about the next steps on the proposal that has come out of talks between Russia and U.S. negotiators.
- The announcement Friday that Netflix would be buying Warner Bros Discovery, and then subsequent word that the White House had trepidation about the deal, and then the announcement today that Skydance was going hostile to launch a bid for the company (“hostile” means straight to shareholders rather than with the support of management), all represents a little corporate drama that will play out over quite some time.
Public Policy
- The most significant element in Public Policy hit this morning when the President said he will sign an executive order this week establishing “ONE RULE” on artificial intelligence regulation, basically eliminating state-level policies on the technology. My best guess is that much of this will be headed to the courts since our Constitution still has this thing called the tenth amendment in it, but the major intent is rather clear – an administration policy agenda that federalizes national artificial intelligence policies. Congress has not approved a federal regulatory framework, and a desire to give this industry a different lay of the land than, well, every other industry in our country seems to be a big priority for Silicon Valley.
- In other news, U.S. Trade Representative Jamieson Greer confirmed that China has been compliant thus far with new trade agreements and has vastly increased purchases of U.S. soybeans.
Economic Front
- I have argued in the Dividend Cafe for some time that the biggest question hanging over the U.S. economy right now is the real state of the labor market. But another debate within that debate is whether the pressures on the labor market (whatever they may be) are more demand-related (i.e., weak job opportunities) or supply-related. The latter is in question because if softening jobs data is more a by-product of tighter immigration, H-1B changes, and even governmental reductions, that alters how we understand the data to some degree. In other words, a demand causation becomes part of a broader narrative of a troubled economy; a supply causation, less so. I do not pretend to know the complete answer, but I am pretty open to splitting the baby here: small business hiring has dropped a great deal, and some (not all) of the weakness is related to changes in labor supply.
- With all that said, private-sector jobs in November were down 32,000 according to ADP, and the Challenger, Gray & Christmas layoffs report showed 71,000 layoffs in November and 1.17 million layoffs YTD, a 54% increase from the YTD tally a year ago.
- China’s trade surplus soared to over $1 trillion as its exports (globally) are clearly not being hurt by the U.S. trade activities. Exports are up +5.9% on the year, leading many to believe that the U.S. trade threats have not dented China’s export capacity as had been envisioned.
Housing & Mortgage
- A fascinating factoid that I did not know. New York City office vacancy is 10% lower than Chicago and 20% lower than San Francisco, yet New York’s office market is larger than both cities’ office market put together … (h/t SL Green)
Federal Reserve
- As the odds of our own central bank cutting rates this month get closer and closer to 100% (sitting at 90% now), an underrated dynamic in global rates is what is happening in Japan, where they are all but assured to be hiking rates at the Bank of Japan meeting on December 19. The state of their 2-year rate? Well, it is at an 18-year high. But what does that mean? It is at 1.05% …
Oil and Energy
- WTI Crude closed at $58.80, down -$1.27 (-2.11%) on the day.
- Utilities got hammered last week, and infrastructure stocks were generally down, but midstream was up +1.3% on the week (MLPs and Canadians less so, but corporates carried the day).
- Margins for LNG have come in as natural gas prices in the States have increased, but global liquefied natural gas prices have come down.
Ask TBG
| “Do you have any comment on the potential impact on U.S. stocks of the unwinding of the yen carry trade ahead? As higher rates in Japan force deleveraging, do you feel this could have a meaningful impact, early in the first quarter of 2026, on U.S. growth stocks, as perhaps we have seen with the correction in crypto? Do you feel it could result in the first meaningful correction since Spring 2025 for improved entry points to our dividend growth stocks, or do you think it would primarily impact the AI infrastructure sector?” ~ Gordon H. |
| I do not believe there is any scenario whatsoever where a Yen carry trade unwinds and becomes a catalyst for a stock sell-off if the unwinding of the Yen carry trade is known. The only times that has ever happened were surprise and sudden events, not predicted and expected. So in one sense, there are all sorts of catalysts I could see serving as a hit to U.S. growth stocks in 2026, but a prediction of a yen carry unwind is not one of them. I believe U.S. risk assets owned out a yen carry have already come way, way down over the years, and the yen borrow is a fraction of what it used to be. The peak period of yen funding is well behind us, and while I have no doubt carry still exists, and some of it may be unhedged, I am skeptical that it is a systemic risk, and is most certainly not timeable or foreseeable, anyway. As for dividend stock entry points, there are plenty of things that could allow good companies to go on sale, but a yen carry unwind is not one I have on my list. |
On Deck
- The Weekly Portfolio Holdings Report will be in clients’ inboxes this Wednesday morning, per usual.
- Dividend Cafe on Friday will be a somewhat unique commentary compared to normal, as I look at the specific ways that my dad’s life, my upbringing, and his untimely passing contributed to how I manage money and what I believe in terms of economic process and worldview.
I will be in the Newport Beach office all week and am looking forward to a whopping eight days without an airplane (as I return to New York City next Monday). I wish you all a great Monday night and welcome any questions you may have.
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.
