Dear Valued Clients and Friends –
A true around the horn with a lot to chew on in today’s Monday Dividend Cafe …
I was on Varney this morning for a few minutes answering Stuart’s question about what to expect from the market for the rest of the year based on this Iran war … Or did I answer it? Link here …
Dividend Cafe on Friday looked at the Iran war, the state of the economy, private credit drama, AI reality, and market rotation as the five key themes, so far, in 2026. 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 +300 points this morning and zigged and zagged a bit from that elevated point throughout the day
- The Dow closed up +388 points (+0.83%) with the S&P 500 up +1.01% and the Nasdaq +1.22%
*CNBC, DJIA, March 16, 2026
- One of the most bizarre things I have seen is the recent pile-on around “credit risk” in private credit, while spreads in the high-yield bond market sit at 3.17% (a tad off of historical lows but still in an extremely tight and comfortable range). The idea that spreads are around 3% in public sub-IG corporate credit and that somehow an imminent explosion of defaults is coming seems, well, improbable. Of course, maybe the media is right, and market actors are wrong. But what we have now is a prophetic event, not a descriptive one.
- Market events over the last two weeks have hit the rotation theme a bit, not because the “prior leadership” has done well (it has not) but because everything has sold off a bit.
- Risk appetite and money manager near-term market surveys have collapsed.
- The ten-year bond yield closed today at 4.22%, down six basis points on the day
- Top-performing sector for the day: Technology (+1.39%)
- Bottom-performing sector for the day: Consumer Staples (+0.07%)
- With all the talk about S&P concentration (ten companies being effectively 40% of the index), it should be pointed out that, based on the latest private market valuations for OpenAI, Anthropic, and SpaceX, all companies discussing public market offerings for 2026, that figure could easily reach or surpass 50%!! Not your parents’ index fund, indeed.
- It’s worth noting that only 43% of S&P 500 companies have seen even a 20-day low so far. If that did mark a market bottom in this moment, it would be one of the luckiest, most benign geopolitical sell-offs I have ever seen.
- Gold 6% below its January high, with a war breaking out, should help some to think through what does and does not actually impact gold prices.
Iran War
- The U.S. bombed Kharg Island over the weekend. It appears the targeted strikes went after military targets and not critical energy infrastructure (presumably on purpose, as the administration seeks to avoid a more permanent hit to Iranian energy capacity).
- President Trump announced over the weekend the White House’s expanded strategy to deal with the effective shutdown of the Strait of Hormuz. What much of the analysis I read over the weekend seems to indicate is that a safe re-opening of and control of Hormuz could likely be obtained sooner than later, if there was a willingness to incur casualties, possibly a significant number. I do not believe that cost is within the risk calculus of U.S. decision-makers at this time. There is “in theory, a military solution to the Hormuz Strait problem, but in practice, there are political and logistical constraints that impede mission execution on a timeframe consistent with market requirements” (h/t Rene Aninao).
- I think it is fair to point out the difference between the military objectives and the economic consequences as the operation continues, though for some, it is not good enough. For many, you have to say, “the military operation is a disaster, and the economic ramifications are worse,” to be listened to, and for others, you have to say, “this is the greatest victory in military history, and the economic ramifications are a nothing-burger” to satisfy them. The view that we may have succeeded (or are close to succeeding) in dismantling the entire Iranian capacity for ballistic missile manufacturing, while at the same time, left an uncertain prospect for commercial activity in the Strait of Hormuz, is just not polarizingly sweeping enough. God forbid there may be nuance and objectivity when it comes to something as trivial as war, right? Ay yi yi.
- Many have asked me when the point comes at which the continued shutdown in Hormuz becomes economically and politically catastrophic. Much like predicting what will happen, predicting when something will happen can be quite precarious. I suppose an over/under line of four more weeks is a reasonable line to believe that something must be much better by then to avoid sustained economic and political impact, but it could very well be much earlier than that. Iranian use of drones and mines to affect activity in the gulf is destabilizing, and yet what their capacity for continued harassment is cannot be fully known. The use of ground troops, occupation, and full on-the-ground regime change may very well stabilize the Strait of Hormuz issue, but would come at a cost that could be far higher than is understood.
- From the smartest geopolitical analyst I know (Corbu LLC’s Rene Aninao) … The four necessities for a “decisive victory”:
- A combat-ineffective Iranian military
- A reopened and fully functional Hormuz Strait
- A different regime in charge in Iran (regardless of their relationship to the U.S., not a theocratic or lunatic group)
- Measures in place to deter Iranian actions against regional stability
- The U.S. did, indeed, ask China to delay the forthcoming Trump/Xi meeting by a month due to the Iran war. If I were a betting man, I would say China becomes part of the Strait of Hormuz opening, or at least POTUS is working on them playing a role. More to come.
Public Policy
- The news that the federal government is receiving a $10 billion fee for “brokering” the TikTok deal to allow the Chinese-owned social media video site to continue has gone fully public and generated a lot of discussion about the extended private/public sector overlap and the government’s interest in and control of market forces.
Economic Front
- The growth rate for GDP in the fourth quarter was revised down to +0.7% (from +1.4%), which was itself meaningfully lower than the expected +2.5%. While the deflator of a higher PCE was part of the reason for lower real GDP growth, the actual nominal GDP growth was reduced by 0.6%, itself.
- This means that the total real GDP growth number for 2025 comes in at +2%. Data center build-outs represent half of last year’s GDP growth (h/t Peter Boockvar).
- New orders for durable goods have started the new year completely flat, not exactly pointing to the supply-side capital investment boom we are hoping for. The orders were better if excluding the big drop in defense aircraft.
- The increase in gasoline costs for American consumers is now about 65% higher than the amount of tax refunds they have been receiving (often heralded as a likely source of stimulative economic activity in 2026). On one hand, one could say that the gas cost increases are totally negating the positive impact of excess tax refunds (and then some), but on the other hand, one could say that (so far) the excess gas costs are being largely negated by excess tax refunds.
- Industrial Production increased +0.2% in February. It was a pretty boring month, but not a bad one. Utilities output declined, and Mining rose, with Manufacturing slightly up.
Federal Reserve
- Not just the Fed but the ECB, the Bank of England, and the Bank of Japan all make policy announcements this week. I know the Fed is doing nothing. That is the easy part.
Oil and Energy
- WTI Crude closed at $94.22, down a few percent from where it had been over the weekend.
- Midstream was down just -0.6% last week as the market dropped -1.6% in week two of the Iran War (it was up in the first week as the market was down -3%).
- I expect an adjustment to the whole energy sector when we get on the other side of these Iran issues, perhaps with prices (for midstream and upstream) lower than they are now, but higher than they were before this all started as an elevated risk premium becomes structurally entrenched.
- Why does releasing from the Strategic Petroleum Reserve (SPR) not work? Because (a) Markets know it does almost nothing to help with the short-term issues, and (b) Markets know that long-term those releases have to be bought back, simply putting upward pressure on the longer-term oil futures (flattening the backwardation curve). It risks sending a very different message than the administration intends.
- The Energy sector is 26% above its own 200-day moving average and in the 95th percentile of this historical relationship to its own 200-day average.
On Deck
- Iran
- Fed
- March Madness!!!!
Make it a great day and a great week!
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.
