Dear Valued Clients and Friends –
The government shutdown appears headed to an end, with many people (okay, all people) wondering what it was ever about to begin with … We come off of the worst week for the Nasdaq and the AI space since April with a bounce … There is lots to say in Housing and Public Policy today … And of course, all the Monday topics are covered as I go around the horn.
Dividend Cafe Friday looked at all aspects of the U.S.-China trade deal, what it means for the United States, what it means for China, and what to expect going forward. The written version is here (my favorite), the video is here, and the podcast is here.
Off we go …
| Subscribe on |
Market Action
- The market opened up +250 points today, gave it back in the first 90 days of trading (even as the Nasdaq soared), then rallied in the last four hours to close near the day’s highs.
- The Dow closed up +382 points (+0.81%) with the S&P 500 up +1.5% and the Nasdaq up +2.25%.
*CNBC, DJIA, Nov. 10, 2025
- We are 75% through earnings season, and operating earnings of S&P 500 companies are up a stunning +19% year over year. This is the 11th straight quarter of sequential earnings growth, and it represents the highest trailing-12-month growth since late 2021, when it was largely a base effect from the low earnings of 2020 due to the COVID impact.
- To say the breadth of the market suggests a mean reversion is what some people refer to as an understatement.
- The ten-year bond yield closed today at 4.12%, up 2.7 basis points on the day.
- Top-performing sector for the day: Technology (+2.68%)
- Bottom-performing sector for the day: Consumer Staples (-0.34%)
- October was all about market beta and momentum. Thus far in the first week of November, beta has been the biggest source of market downside. Momentum has stalled in November, but not reversed to the degree Beta has. The two are not the same. Today reversed the reversal. Good luck keeping up.
- The sector most interestingly showing signs of life is the Health Care sector, where it now has the highest percentage of stocks above their own 200-day moving average in over a year. The sector has been reasonably resilient through some pretty unfortunate policy and regulatory abuses, and its internals have been steadily improving, all the while valuations look very attractive.
Top News Stories
- The Senate voted last night 60-40 in the procedural vote necessary to break the filibuster and essentially set the table for the end of the shutdown this week (the House will now have to vote, and then the President will sign). The compromise bill allows a Democrat bill to go up for a vote in December to extend ObamaCare subsidies. It reverses all the “permanent” layoffs administered by the administration during the shutdown. It provides full pay to all federal employees impacted during the shutdown. It funds the SNAP program for the next ten months. The 60 votes were obtained as eight Democrats crossed party lines to vote for reopening.
- The procedural things that need to happen before the government re-opens will take a few days, but this should be complete by the end of the week.
Public Policy
- I hate going down this path in Dividend Cafe because I end up getting half the people accusing me of being politically biased one way, and half accusing me of being the other way, and 100% of those people being wrong. But if I were to offer an objective, entirely unbiased commentary on what just got done with this procedural vote to end the shutdown, it would be:
- I don’t believe that Sen. Chuck Schumer and other Democrat leadership were actually against the “exactly eight Democrats needed” crossing party lines to vote for reopening. I think this was orchestrated to get the government reopened, to stop the game of chicken, and to allow most to save face and not have to say they gave in. In that sense, politically, this was a good outcome for the Democrats—get things reopened while still being able to post on social media that you were opposed to it.
- BUT I also do not believe the Trump administration will oppose extending subsidies under the Affordable Care Act next month. I don’t think President Trump was ever going to fight that – he just was unwilling to have it attached to the continuing resolution funding the government.
- In other words, when all is said and done, this roughly 40-day shutdown is going to end with everything exactly where it was before, and result in exactly what everyone wanted, with no indication of what either side got out of it whatsoever.
- Now, if THAT is partisan of me to say, you tell me which party???
- It needs to be said over and over that, regardless of what the Supreme Court does with the tariff case regarding IEEPA (the President claiming emergency economic powers give him the right to impose taxes without Congressional approval), the White House intends to use other tariff laws to try to rationalize and implement many (but not all) of the current tariffs. But if the IEEPA rationale is rejected by the Supreme Court (as it should be), the most “ambiguous and open-ended” rationale (h/t Scott Lincicome) is off the table, which is likely to reduce market uncertainty and volatility given the highly discretionary nature of current policy.
- I debated whether this should be in the Housing or Public Policy section because it came from the director of the Federal Housing Finance Agency, but for the life of me, I cannot figure out what this has to do with Housing. But Bill Pulte, director of the FHFA, announced late last Fannie Mae and Freddie Mac are looking at ways to take equity stakes in technology companies. That is to say, the federal government of the United States is (since they are the 79.5% owner and conservator of these two companies). That is to say, two U.S. government-run mortgage finance companies are looking to invest in tech companies. In a Republican administration.
- Speaking of a Republican administration, President Trump said over the weekend he wanted to do a $2,000 stimulus check to all taxpayers, but then Secretary Bessent clarified that it may be “future tax cuts on the President’s agenda.”
Economic Front
- October saw the most job cuts in any October in over 20 years (153k job cuts, per the private survey from Challenger, Gray, & Christmas).
- The November University of Michigan Consumer Confidence reading was at 50.3, down from 53.6 last month, and barely above the all-time low of 50 in June 2022. Current Conditions were down a great deal, and Expectations were down a tad. I have never believed consumer confidence surveys are predictive or indicative of anything, including actual consumer confidence.
Housing & Mortgage
- The announcement came over the weekend from President Trump that he is working with Bill Pulte of the FHFA on a solution that will make a 50-year mortgage option available to homebuyers (in the belief that this will create a lower monthly payment option). It is not an option I oppose in principle, given that commercial actors are free to do something so stupid (though I strongly suspect they will be attaching some government subsidy or stamp to all of this). But as for the idea that this will drive greater affordability, it obviously has nothing to do with the down payment issue that is biggest factor in affordability, it has nothing to do with new supply which is the lowest hanging fruit for affordability, and it forgets that a lower monthly payment gets efficiently priced into the sticker price of the house, negating that alleged benefit (a benefit the banks would love, by the way). I will cover more on this tomorrow at my Capital Record podcast.
- In other Housing news, the new NAR report shows that the median age of first-time homebuyers in the U.S. is now 40 years old. The MEDIAN age is FORTY for people this year buying their first home. It was 29 in the higher inflation period of 1981.
Federal Reserve
- The futures market for the fed funds rate implies a 64% chance of a rate cut at the FOMC meeting next month.
Oil and Energy
- WTI Crude closed at $60.15, up +0.67% on the day.
- As the S&P 500 dropped -1.6% last week, midstream energy was up +2.2% (or so). Oil was down -2.5% on the week, so the midstream rally cannot be attributed to commodity prices. Individual name results in last week’s earnings calendar were hit and miss, with a wide dispersion of results.
Ask TBG
| “The typical focus is on how massive structural deficits place a drag on economic growth. Some level of drag now and certainly more in the future. Or they focus on how massive tax increases to cover the deficits would place a drag on the economy. But what about how much of our GDP is actually being driven by this excess borrowing?” ~ Brian C. |
| That is actually measured very precisely in the data, and economists refer to it as the multiplier effect. It was the heart of Keynes’s argument – that the deficit spending would create corollary consumption that promoted growth. And the rebuttal to it is the heart of Lacy Hunt’s argument – that the DIMINISHING effect of such spending has resulted in a BELOW 1.0 multiplier effect … We are getting back less than $1 (to the economy) on every $1 we are spending (with borrowed money), PLUS adding to the national debt that has to be paid back by future economic growth (the drag effect you reference). There are numerous reasons the cutback of deficit spending should be gradual (social, political, moral), but the economic impact is a less compelling one, as the diminishing effect of a sub-1.0 multiplier effect has measured the toll to be significant for each deficit dollar we continue to spend. Hope this helps. |
On Deck
- As a reminder, the stock market is open tomorrow (Tuesday, Nov. 11), but the bond market and banks are all closed for Veterans’ Day.
- The Dividend Cafe this Friday will be a pretty comprehensive look at the bubble talk around AI and the largest investment theme we have seen take over markets in many years.
TBG is back from its Dallas retreat, and it was a time we will not soon forget. We are so blessed to have such a large group of such ambitious, gifted, driven, high-integrity people who are all so extremely mindful of our mission. I say a lot in Dividend Cafe: “to this end, we work,” and one thing is clear to me after our annual off-site: our people, up and down the organization, mean it!
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.
