Dear Valued Clients and Friends –
There is a very big focus today in the Monday Dividend Cafe on Public Policy and Housing, as there were a few different announcements (of varying degrees of formality and seriousness) from the administration late last week that are relevant to both categories. I spent a lot of time over the weekend writing about those things, and then Sunday night, we got word of a DOJ criminal investigation into Fed Chair Jerome Powell related to the Fed building renovations the President previously mentioned using as a pretext to fire him. We go around the horn today in all the categories we do each Monday because of the very types of things that have happened over the last few days … This is the kind of Monday that covers the things I want to cover, with it all reminding me why I do this Monday Dividend Cafe format each and every Monday.
Dividend Cafe on Friday was our annual Year Behind, Year Ahead commentary, wherein I do a deep dive to review 2025 and a deeper dive to analyze what we are looking for in 2026. It contains my annual report card of how projections for 2025 went, as well as new themes and outlook for the year ahead. The whole paper is here (with printable PDF), the video is here, and the podcast is here. I believe it is worth your time.
Off we go …
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Market Action
- Markets opened down -500 points this morning but immediately bounced off of that, and slowly rallied back throughout the day.
- The Dow ended up closing up +86 points (+0.17%) with the S&P 500 up +0.16% and the Nasdaq up +0.26%
*CNBC, DJIA, January 12, 2026
- The ten-year bond yield closed today at 4.18%, up 1.6 basis points on the day
- Top-performing sector for the day: Consumer Staples (+1.42%)
- Bottom-performing sector for the day: Financials (-0.80%)
- An interesting observation about that November market correction/rotation we recently saw (h/t Callum Thomas) … The S&P 500 was only down -5% in that peak-to-trough, which shouldn’t even be worthy of a mention. Yet, bitcoin was down -30%, semiconductors were down -15%, and technology was down -10%. The frothier things were impacted far more, and breadth in the market out of that turn has rotated in a very healthy way, with small-cap and many other S&P sectors catching a bid. The days of binary risk-off vs. risk-on seem long gone (for now), and rotations are far healthier market events than universal decline.
- The technology sector is a mixed bag right now. The Nasdaq has not gotten back to its late October high (it is close), and only about 60% of the names in the sector are trading above their 200-day moving average. This is not a colossal or imminent fear; it is a loose indication of lingering valuation concerns when stocks don’t (can’t?) go up despite good news. Q4 earnings season is going to be revelatory for the technology sector.
- Your reminder that “January effect” thinking and “what the market does here tells you what it will do there” stuff is called astrology.
Top News Stories
- Iran appears on the precipice of something big happening, from within, to change the authoritarian leadership they have suffered under. But we have seen this setup before, so for now, I am just waiting for it to play out. And praying.
Public Policy
- The President announced on Wednesday that he was going to seek a ban on institutions buying residential real estate, though he stated in his social media post that he would ask Congress to codify such, something I cannot possibly imagine would ever, ever happen.
- He also announced last Wednesday that he wanted to ban defense and aerospace companies from returning capital to investors, and set compensation limits on defense companies (both forms of quasi-nationalization). I have talked to several members of the administration who are “hoping he will forget he said this.”
- You will see below, under Housing, that he further ordered Fannie/Freddie to commence a $200 billion bond-buying program (essentially, a GSE (government-sponsored enterprise) quantitative easing effort geared towards reducing mortgage rates). More on this below.
- Friday night’s policy proclamation via tweet was that the President sought to ban credit card companies from charging more than 10% interest on credit card balances, mirroring the bill that Sen. Bernie Sanders introduced in the Senate last February (it did not go anywhere). Again, this would require legislative passage, and I will be shocked if it goes anywhere. But the financials today were down with banks that have credit card offerings and direct credit card companies leading the way (though perhaps not as much downside as it could have been if markets really believed this policy was going to be enacted).
Economic Front
- December jobs came in at only 50,000, well below forecasts, and the two prior months were revised downwards by 76,000. The labor force dropped by 46,000, which caused the unemployment rate to fall from 4.5% to 4.4% (not for the right reason). Manufacturing and Construction had net job losses. The monthly average from 2024 was 130,000 new jobs, and the monthly average over the last six months has been 43,000 – a meaningful deceleration.
- There was a lot of noise late last week about the trade deficit dropping substantially in October, but, as is often the case, Peter Boockvar provided some very important color. If you take out the flows of gold (which is not calculated in the BLS calculation of GDP and is really more of a monetary/currency item than goods/services trade item), and then look at the timing of pharma imports being moved from October to September due to tariff issues, you actually saw imports go up in October by +1.5% instead of dropping by -3.2% as stated in the report (h/t Peter – phenomenal analysis).
- The latest Duke CFO survey found that the vast majority of CFOs report no impact (yet?) on productivity, retention, customer satisfaction, decision-making speed, or on the time spent on value-added tasks from AI. The number who said they saw improvement of greater than 5% was almost indetectable.
- As we get ready for earnings season to launch tomorrow, we are not just listening for normal company guidance around revenues, costs, and earnings, but also – hiring plans.
Housing & Mortgage
- President Trump created a major stir late last week by putting out (on social media, of course) that he was “instructing [his] Representatives [at Fannie and Freddie] to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS” (the CAPS were his). This does not originate any new loans; he is asking Fannie and Freddie to use their balance sheets (which are under conservatorship of the federal government) to buy bonds made up of already existing mortgages. This creates liquidity for holders of the current mortgage bonds (banks, insurers), theoretically freeing them to originate new mortgages. It also puts downward pressure on interest rates (again, theoretically) as it introduces heavy buying pressure. The best way to think about it is what we refer to as quantitative easing, but instead of the Fed intervening in the mortgage market, it is Fannie and Freddie, at the instruction of the President. It should have some impact on the long end of the yield curve.
- When you get a non-price-sensitive buyer (whether it be the Fed or the government), one can expect the spread to tighten and rates to come down. History would indicate that addressing affordability with the cost of capital versus actual housing supply tends to feed the demand side more, and whatever benefit can be found from lower borrowing rates is offset by higher sticker prices, unless supply and demand find equilibrium.
- The latest data from Reventure shows 21.2% of all mortgages are now above 6%, the highest in over ten years (it was only 6% of all mortgages less than four years ago). Rates below 3% are now just 20% of all mortgages (they were 25% of all loans less than four years ago). The decline in those hyper-low rates comes from some of the low-rate locks expiring and some (not a lot) of those people selling their homes.
- Single-family starts are down 7.8% over the last year, and multi-family is right there with single at down -7.9%.
Federal Reserve
- The news that pushed futures from flat at the open Sunday night to down -350 points was the aforementioned news that subpoenas were issued as part of a DOJ criminal investigation around Chairman Powell’s Senate testimony regarding the Fed building renovations. Markets feared a pretextual lawfare move here, and Chairman Powell posted a video asserting exactly that. Fears around the undermining of Fed independence (and the escalation of just that) permeated markets today.
- A fair question is why the White House would do this or want this when it is so close to Powell’s term ending, anyway. My sources tell me that it has everything to do with fear that Powell may plan to stay as a Fed governor after his term as chairman ends. This is tricky territory. On one hand, his chairmanship ends in May, but on the other hand, his term on the Fed would have another 20 months remaining even when the chairmanship ends. He would be under no legal requirement to leave when his chairmanship ends, but it would be substantially outside of tradition. The last Fed chair to remain as governor after his term as chairman ended was Marriner Eccles in 1948. My sources believe this is a step from the White House to ensure Powell does not “pull an Eccles.”
Oil and Energy
- WTI Crude closed at $59.50, up +0.63% on the day
- President Trump met with executives from Chevron, Exxon, and ConocoPhillips at the White House on Friday. One development in the meeting’s aftermath was the President saying he would likely exclude ExxonMobil from being a part of the Venezuela rebuild, as Exxon held firm to reservations about the country’s governability and investability. The meeting did not result in the $100 billion of commitments from the oil companies that the President had requested.
- Oil prices were technically up +3.1% last week, which is funny, because I thought the biggest story in the oil world was how we were about to see tons of new supply come on to global markets because of Venezuela … The nuances there matter (namely, the challenge and timing and cost of getting that oil, as well as how it competes with other marginal producers).
- MLPs were up +1.3% last week, the U.S. midstream world was down -1.2%, and the total midstream world was down -2.1%. Why that big disparity for just one week? Because of my immediately preceding paragraph … Canada was the big loser out of Venezuela expectations, so far.
On Deck
- Clients will receive their Weekly Portfolio Holdings Report on Wednesday morning per usual, with earnings season launching tomorrow behind the early Tuesday release of Q4 results from JP Morgan.
- On Friday, Dividend Cafe will look at the world of media company mergers and what history has suggested about dividend growth and these various sagas.
Congratulations, Bears fans! He does know how to fight on, doesn’t he? And congratulations, Miami and Indiana fans … The playoff committee got this year right. And what a story Indiana has been. Okay. Back to following social media threads for the next market moves. Have a good Monday night.
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.
