Dear Valued Clients and Friends –
Before I get into today’s trip around the horn, I want to point you to a new section I am adding to each Monday and Friday Dividend Cafe, More to Chew On. See what it is about at the bottom of today’s Dividend Cafe.
Dividend Cafe on Friday looked at a school of thought that seeks to garner investment wisdom from a place that may not be the best place for investment wisdom. The written version is here (my favorite), the video is here, and the podcast is here.
Off we go …
| Subscribe on |
Market Action
- Markets opened mixed this morning, with the Dow up over a hundred points and the S&P and Nasdaq down. The Dow reversed to the downside, but not too much, and stayed flattish for the last five hours of trading. The Nasdaq was brought down by a down -4.77% day in semiconductors.
- The Dow closed down -138 points (-0.26%) with the S&P 500 down -0.79% and the Nasdaq down -1.55%
*CNBC, DJIA, July 13, 2026
- A weird paradox in the market is that everyone is talking about rotation in leadership, and there is no question that:
- Even-weight is beating cap-weight
- Small-cap is beating large-cap
- Value is beating growth, and
- Sectors have re-rated versus their rating last year.
So yes, the rotation case is clear as can be, for now. And yet, the paradox is that the “momentum” factor is outperforming other factors like yield, value, growth, quality, and volatility by a wide margin. We normally do not associate “rotation” with “momentum,” right? Well, the difference is that last year the “momentum” was in one thing, and this year the “momentum” has “rotated” to another. And so some might call this a “worthless” descriptor … But what I would say is this: The notion that what just got done going up is the thing that will next be going up, because it was just going up, is one of the dumbest things ever believed in the history of investing. Unfortunately, that belief has a lot of momentum right now. And it will continue to, until it doesn’t.
- The ten-year bond yield closed today at 4.63%, up six basis points on the day (in response to a nearly +10% jump in oil prices)
- Top-performing sector for the day: Energy (+3.16%)
- Bottom-performing sector for the day: Technology (-2.07%)
- Sometimes you see something (in an analyst report) that doesn’t just speak to the company it is written about, but to the whole investing world around you – and it really grabs you, without need for any additional comment whatsoever:
- “We forecast no FCF-positive year before 2035 and average external capital needs of roughly $84bn per year from 2027-2034. If debt markets cannot absorb this financing need, the company may need to issue equity, reduce growth investment, or slow deployment.”
Top News Stories
- Sen. Lindsey Graham of South Carolina shockingly died Saturday night at the age of 71 from a sudden deterioration in his cardiac condition (arteriosclerotic cardiovascular disease). The Senator has served in the Senate since 2002 and was in the House of Representatives for eight years before that. RIP.
- The escalation of strikes between the U.S. and Iran has once again escalated the stand-off around the Strait of Hormuz. But oil prices had mostly shrugged it off, until today. The U.S. blockade of the Strait is coming back in the days ahead, per the President, and we are told further military attacks are pending.
Public Policy
- Sen. Graham’s tragic passing leaves the Republicans down a Senator in various votes for now, but that seat will be filled by the Republican Governor of South Carolina in the days ahead. Sen. McConnell’s medical absence has also left the Republicans down a seat, but he appears on the mend after a fall and is not yet able to return to voting. Whether or not any of this will impact the vote on Todd Blanche to Attorney General (or other pending confirmation votes) remains to be seen.
- House GOP leaders and budget committee leaders are meeting today to discuss possibilities of a new budget reconciliation package.
Housing & Mortgage
- Existing home sales declined -2.4% in June, dropping in both single and multi-family sales.
- Ten years ago, the mortgage rate for a new home purchase was 3.5%. It is now 6.5%. The median cost of a new home ten years ago was $350,000. It is now $540,000.
Federal Reserve
- The Fed announced the members of the various task forces that Chairman Warsh has created last week. The Communications, Balance Sheet, Data, Productivity & Jobs, and Inflation Frameworks task forces are composed of economists, business leaders, academics, and bankers, and feature some names I am utterly thrilled to see involved.
- My dear friend, Rene Aninao, one of the finest macroeconomic analysts I know, remains highly convinced that not only are Fed rate hikes coming, but they are coming sooner than expected, and there will be more than expected. His arguments are that such a move would take the shorts of the long end of the curve out of the equation (and create a permanent credibility which erodes inflation premia), and then create maximum flexibility for the central bank into the future. I have definitely had a different take, but I do not enjoy being on the other side of anything with Rene. That’s all I have to say about that.
- Now, with all that said, whether the Fed should hike because of Iran and whether they will hike because of Iran are totally separate subjects, but odds are back to 90% that there will be some rate hike by the end of the year (odds = implied probability in fed funds futures).
Oil and Energy
- WTI Crude closed at $77.96, up +9.2% on the day (as the U.S. – Iran matter escalated and a blockade of Hormuz was reinstituted). I spent a lot of time talking about all of this in my opening section on Big Money Show today.
- Midstream was up about +2.2% last week despite natural gas prices dropping.
Ask TBG
| “I have the impression that midstream is of particular interest to TBG. Am I right, and if so, why?” ~ Joel M |
| Yes, we have, and have had for over fifteen years, a substantial investment in midstream energy, believing that the shale revolution in American opened up a massive need for increased pipelines to transport what is a substantially increased amount of crude oil and natural gas being produced in the U.S. We choose to discriminate substantially in how we get access to this sector, and believe the economic fundamentals and business dynamics can vary from company to company in the sector. But the secular growth story, the high dividend yields, the consistent growth of dividends, and the future opportunities embedded in U.S. export capacity all point to an investment thesis we like. And so, you all are stuck hearing me talk about it a lot! |
On Deck
- Dividend Cafe this Friday: Five Things I find to be legitimate concerns in the markets right now, and Five Things I Don’t.
- Clients will receive their Weekly Portfolio Holdings Report this Wednesday, per usual. Earnings season is now entering a big week, with financial companies launching their standard first-inning reporting.
More to Chew on
- It may be dying, but bipartisan grace and civility is not dead yet
- This 62-year-old woman knows the energy of NYC is infectious
- The legacy of Alan Greenspan unpacked
Comments and questions welcome … Have a great 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.
