Dear Valued Clients and Friends –
I hope everyone had a wonderful Independence Day weekend, saw one of the most beautiful fireworks shows I have ever seen, and is as excited for the week ahead as I am.
Dividend Cafe on Friday looked at the first half of the year in markets (good, bad, and just weird) and made suggestions about the path forward. The written version is here (my favorite), the video is here, and the podcast is here.
Off we go …
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Market Action
- Markets opened up +125 points this morning and dropped into negative territory within 30-45 minutes. They then spent the day recovering and closed at the day’s high.
- The Dow closed up +156 points (+0.29%) with the S&P 500 up +0.72% and the Nasdaq up +1.12%
*CNBC, DJIA, July 6, 2026
- The easiest case one can make for not raising rates is that TIP spreads are sitting at 1.95% (2-year) and 2.25% (5-year) even as the 10-year Treasury sits at 4.47%. This implies higher real growth expectations than we have seen in a while, and Warsh, a hater of the Phillips Curve to his core, does not see real growth as inflationary. Now, the market could be wrong in its inflation expectations, but hawks can’t have it both ways (“we must hike because market expectations for inflation have picked up,” AND, “we must hike because market expectations dropping around inflation are wrong”) …
- The best thing that can be said for those worried about market vulnerabilities is that all negative action has been in concert with other parts of the market going higher. That which is rotating up and what which is rotating down may vacillate, but thus far the whole year has been more about markets rotating within versus markets selling off across the board. Weakness being rotational is categorically different than a “risk-off” environment.
- 68% of the S&P 500 is above its own 200-day moving average
- The ten-year bond yield closed today at 4.47%, basically flat on the day.
- Top-performing sector for the day: Communication Services (+1.64%)
- Bottom-performing sector for the day: Health Care (-1.17%)
Top News Stories
- Fighting between Russia and Ukraine substantially increased over the weekend.
- The global shipping behemoth, Maersk, officially announced it will ship through the Strait of Hormuz for the first time since the war began.
Economic Front
- Certainly, the biggest economic news of the last few days was the BLS jobs report for June, coming in at just 57,000 (less than half of May’s number). But then the downward revisions of 31,000 for April and 43,000 for May bring back the PTSD of last summer, when downward revisions were calling into question all we thought we knew about the health of the labor market.
- The Labor Participation force fell enough to cause the unemployment rate to drop from 4.3% to 4.2%.
- ISM Services for June stayed in expansion mode at 54, in line with expectations. Business Activity fell, but New Orders increased.
Housing & Mortgage
- A handful of stats (h/t PARCL) I find fascinating, and also very useful in understanding where we are headed:
- One out of every seven homes that are for sale in America right now is in the state of Florida. Florida, by the way, has just 8% of the homes in America (1 in 13).
- 45% of active listings in Florida have taken a price cut (that is 6.6% higher than the national average).
- 10.3% of closed sales this year have been below what the seller paid for the home!
- Zillow has prices in Florida down -22% in Cape Coral, -18% in Fort Myers, -14% in Sarasota, -12% in Naples, -12% in St. Petersburg, -8% in Key West, -7% in Fort Lauderdale, -6% in Tampa, -5% in Palm Beach, -5% in Orlando, and -3% in Miami.
- So, isn’t Florida one of the biggest beneficiaries of defectors from other states, and one of the top states in the country for economic growth and job opportunity? You bet. So why these challenges? Because. Prices. Were. Too. High.
- China’s housing market makes one want to go to Disney World, though …
Federal Reserve
- The consensus view on what Warsh will do with rates seems to have gone from “he’s going to have to hike because of inflation” to “everyone thinks he will have to hike because of inflation, but we have an out-of-consensus view that they may not.” Now, the contradiction there is that if that latter view is really the consensus, the view embedded in it would not actually be out of consensus. It has been well documented what my view is for some time, but I am just reporting that I am hearing more and more and more people on the institutional side say, “We don’t really think he’ll hike.”
- Now, that said, the futures curve currently reflects a 23.4% probability of no hike, and a 42% of one hike (with 27% for two and just 7% for three) between now and the end of the year. So yes, “consensus” is still for hikes.
Oil and Energy
- WTI Crude closed at $68.70, flat on the day.
- OPEC+ produced nearly 19 million barrels in June, higher than the war levels had been this spring but still lower than pre-March levels.
- MLPs were up, but midstream corps and Canadians were down last week as the whole energy sector saw a mixed bag in the holiday-shortened week. For the quarter, midstream was up in Q2 despite oil coming down -30%, leaving midstream up +24% YTD (more than double that of the market).
- I thought this take from Hinds Howard, Portfolio Manager at CBRE Clarion and respected midstream energy commentator, was measured and solid: “We may get back to negative sentiment on midstream stocks again as we approach 2027 and potential oversupply, but natural gas demand and the swelling backlog of high return projects in the aggregate backlog should offset negative supply and demand sentiment for liquids, to the extent it returns.”
Ask TBG
| “Can you clarify on how share buybacks might or might not impact the dividend a company pays?” ~ Gus F. |
| A few of you were confused by last Wednesday’s Ask TBG. The question was not about the YIELD (which is the dividend divided by the stock price, and can go up and down based on the math of the stock price and/or the dividend paid out, regardless of “per share” mathematics). The question was about the DOLLAR DIVIDEND – the amount (in dollars) a company is paying. If a company is paying out X dollars in a dividend (hypothetically), and the share count is reduced, but the dollar dividend is not, the DIVIDEND PER SHARE MOST CERTAINLY IS increased – because of math. It is certainly possible some companies would desire to reduce the dollar dividend paid out after reducing share count, which would not result in an increase of dividend-per-share, but that is not what the question or answer addressed (and it also is not the standing presumption). The question was answered accurately, and the language used was used on purpose. |
On Deck
- Clients will receive their Weekly Portfolio Holdings Report per usual on Wednesday morning; only this week’s report will capture all the YTD activity in the portfolio, different strategies, different market indices, and more. As I do each quarter, there will also be a client video walking through all of the same.
- President Trump heads to Turkey tonight for NATO meetings this week, where the big focus is supposed to be: “Are European countries moving closer to 5% of GDP on defense spending?”
- Dividend Cafe this Friday will ask if one of the most common things I hear these days to animate an investment thesis is really all it’s cracked up to be …
Wishing you all a great 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.
