MONDAY – October 12, 2026

Dear Valued Clients and Friends –

I believe I am well on record about how much I distrust those couple of days per year (like today) when the stock market is open, but the bond market and banks (therefore money operations) are not.  Money is managed in the context of broad allocation decisions, and the complexity that goes into this means that when a part of the global machinery is open, and a part is not, none of the machinery is “normal.”  So, Happy Columbus Day, and enjoy today’s Monday Dividend Cafe summary of all the normal things we write about here …  but I would not consider today a normal day (all the more so when a huge catalyst in stock market action lately has been bonds, and the bond market was closed today).  Off we go …

Dividend Cafe on Friday looked at the causes of recent moves higher in bond yields and the implications (good and bad) for investors.  The written version is here (my favorite), the video is here, and the podcast is here.

Off we go …

Market Action

• Markets opened up +200 points this morning and moved up and down a bit throughout the day.
• The Dow closed up +196 points (+0.38%) with the S&P 500 down -0.06% and the Nasdaq down -0.44%

*CNBC, DJIA, October 12, 2026

• Staying with the “breadth” theme, the S&P moved +0.8% over the last month.  The average stock moved 8.9% on the month, a delta of 8.1% that is among the highest we have seen in 30 years.
• We have the lowest percentage of stocks within the S&P 500 right now above their own 200-day moving average that we have had all year.
• The top five companies in the S&P 500 are right now equal to the bottom 434 companies in the index in terms of market cap.  This is the highest in history.  (h/t Michael Batnick)
• As mentioned, the bond market was closed today.
• Top-performing sector for the day: Energy (+1.48%)
• Bottom-performing sector for the day: Technology (-0.90%)
• The spread between bulls and bears is at an extreme level right now in the Investors Intelligence survey.  Contrarians can take note.
• If you are an index investor (cap-weighted as almost all are) wondering how the new earnings season will go and curious what will matter most, I would say one thing: Hyper-scaler talk about capex.  Because the so-called “earnings growth” percentages being thrown around are basically a few companies from one sector with a low “base effect” receiving massive purchase orders.  The future expectation there is, shall we say, important to this trade.  And it is a trade.
• I will close with a quote from Peter Boockvar on the issue of OpenAI revenue disappointment:

“Whatever the methodology and/or nuance of how OpenAI calculates its revenue figure and whether it matched up with investor estimates or not, I think the most relevant big picture point is that a massive chunk of the GenAI data center buildout is literally reliant on two companies and whether all the CapEx will be money well spent will be hugely dependent on the ultimate profitability, or not, of OpenAI and Anthropic. And to add, a large piece of the future cloud backlog of Microsoft, Oracle, Amazon and Google are these two AI model makers. For the sake of the economy and the stock market, fingers crossed.”

Top News Stories

• President Trump announced over the weekend that he had made a deal with Russia’s Vladimir Putin to increase diesel exports to the U.S. and other global markets.  Russia has been under sanctions for its attack on Ukraine.  President Trump also announced Saturday that he wanted Ukraine’s President Zelenskyy to be replaced.  On Sunday, he announced Russia and Ukraine had agreed to an energy ceasefire, though Ukraine said they were unaware of it, but added they supported the idea if Russia did.
• Intensified Houthi attacks on Saudi Arabia are adding to tensions in the region and increasing pressure for the U.S. to respond with military support for allies or quasi-allies (enemy of your enemy as your friend) in the region.

Public Policy

• For those watching the Senate map and the individual races that will determine the outcome of Senate majority after the midterms (which are now just three weeks away), a Mark Halperin cheat sheet …
  • Maine – advantage incumbent Collins (Republican) at this stage
  • New Hampshire – advantage Democrats
  • Michigan – too close to call
  • South Carolina – not enough solid polls to really ascertain if this is up for grabs or not
  • Iowa – too close to call, and will stay that way until the end
  • Ohio – advantage Democrats
  • Texas – unclear and hard to poll, and history says assume advantage Republicans, but most things about this race have indicated otherwise, so who knows
  • Kansas – advantage Democrats (my read on Halperin’s read is that he really does believe the GOP has lost this one)
  • Alaska – ranked-choice voting means we won’t know even on election night
  • Georgia – in the bag for Democrats
  • North Carolina – in the bag for Democrats
• A note on the above…  I did not say in one single race above who I am rooting for, or who you should root for.  I am reporting from what I consider the best political prognosticator in the country what his current read is on those states.  In some cases he may be right and in some he may be wrong, and in all cases facts on the ground could change.  But in no case am I offering commentary; it is current political analysis in the Public Policy section of a markets-oriented bulletin that necessarily intersects with policy and electoral realities.  Should any of the predictions upset you, either because they predict something you don’t want to be true, or because you disagree with the prediction itself, it need not be upsetting.  Unless I am lying about Halperin’s analysis (I am not), I am just reporting what a well-respected voice in the field has to say.  And since Mark’s view is the same as mine – that the Senate is too close to call and could break either way with the sheer math of it all – I am not quite sure how anyone hoping for either outcome could/should really be upset about this.  And yet …

Economic Front

• I continue to believe that the thing we are told is the best in the economy (“the consumer is spending – yay!”) is directly correlated to one of the biggest vulnerabilities in the economy (lowest savings rate in 18 years).  All at once, people are spending plenty, saving little, but then when the tax refunds came and other stimulative effects from 2025’s tax bill, it had a less robust impact than had been anticipated because savings were (and are) so low; it was needed for replenishment vs. productive activity.  I will do a full Friday Dividend Cafe on this crucial topic in the future, but it bears saying here now: Savings = Investment …  you can celebrate consumption all you want, but the bedrock of future growth, without which there cannot be future consumption, is production … and what pays for production is investment, and what funds investment is savings.  Always and forever, savings.
• With CPI coming this Wednesday, headline inflation is expected to be up +3.7% year-over-year and core inflation +2.4% year-over-year.  The large delta between the two is obviously related to the energy price spike we saw in September.
• Speaking of the consumer, the highly touted University of Michigan Consumer Confidence index fell to 46.3 from 48.1 last month.

Housing & Mortgage

• The median home price relative to median income in 1980 was 3.5x.  Today, it is 5x (a 43% difference).  So while interest rates were higher then than they are now, the relative economic cost and income are simply not comparable.  Today’s interest rates are lower than they were in the late 1970’s and early 1980’s, and much higher than they were most of the last 25 years.  But the sticker price on homes is monumentally higher than they were in any era, even adjusting for incomes that are well-inflated since those years.  

Federal Reserve

• We are down to a 21% implied probability in the futures market that the Fed will hike rates this month, but still at an 88% chance they will by the end of the year.

Oil and Energy

• WTI Crude closed at $93.21, up +1.48% on the day
• Midstream jumped +1.8% last week despite a couple of high-profile MLPs being slightly down on the week.  It was a strong week for gas pipeline corporations and Canadian companies.
• In my money manager notes deliverable from last week’s meeting (available upon request after this Friday’s Dividend Cafe), there is quite a bit of commentary on the midstream space from our extensive lunch meeting with our portfolio management team in that sector.

Ask TBG

On Deck

• The CPI number for September comes this Wednesday the 14th and may or may not impact expectations for the timing of the Fed’s next rate hike.
• The big banks move earnings season into high gear with reporting starting tomorrow and more coming on Wednesday.
• Dividend Cafe this Friday will be a recap of last week’s Money Manager Week here in NYC,  highlighting our major takeaways and action items.

More to Chew on

• That Georgia race was never really going to be up for grabs.  But South Carolina??
• We have lost our ever-loving minds, 2026 version

My Cowboys humiliated themselves Thursday night (one advantage to games on school nights past my bedtime is I miss the punishment), but my Trojans got it done in Penn State.  There was a lot in the college and pro football space this weekend to utterly perplex you if you were paying attention.  I mean, really bizarre stuff.

To all, a good Monday night.  Reach out any time!

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.