Dear Valued Clients and Friends –
I want to remind everyone that today is one of two days (that ought never be happening) where stock markets are open but the bond markets (and banks) are closed. This means some activities in the market(s) that were opened are muted or skewed by the fact that other normal markets in which certain pairing or hedging activities may take place were not open. That said, normalcy resumes and evens out tomorrow. And I certainly have plenty of fodder to go around the horn today …
The huge sell-off on Friday and partial recovery today provide plenty of opportunity for more coverage, and I will have more to say throughout the week in post-market daily recaps.
Dividend Cafe Friday looked into the crucially important subject of investing in this AI moment. There are a few things I love doing more than evaluating a front page story with first principles in mind. The written version is here (my favorite), the video is here, and the podcast is here (as well as at all your favorite podcast streaming services).
Off we go …
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Market Action
- The market opened up +400 points today and went higher (in a choppy manner) throughout the day.
- The Dow closed up +588 points (+1.29%) with the S&P 500 up +1.56% and the Nasdaq up +2.21%
*CNBC, DJIA, October 13, 2025
- The market move on Friday (Dow down -879 points; Nasdaq down -3.56%, S&P down -2.71%) all represented the worst day for markets since the Liberation Day collapse of early April. It was caused by the exact sort of thing I had expected we would see more of by this point – little dramatic flare-ups in the fluctuating trade chatter with China. My own view is that both sides will seek to obtain leverage where they can along the way, and more of these communication strategies should be expected. They may very well enhance market volatility along the way, but President Trump’s threats of increased tariffs are less volatility-inducing than they once were for obvious reasons.
- The euphoria in the market is becoming a bad thing for contrarians. The surveys of bulls-to-bears are way overly weighted towards bullishness, and the Citi Panic/Euphoria Index is in screaming euphoria territory. Now, did 37% of stocks hitting a 20-day low on Friday wash out some euphoria? This seems like a good time to use the highly academic term, LOL.
- No bond action to report today due to the aforementioned bond market closing.
- Top-performing sector for the day: Technology (+2.47%)
- Bottom-performing sector for the day: Consumer Staples (-0.36%)
Top News Stories
- The biggest news of the day is, hands down, the freeing of the remaining Israeli hostages, all twenty of whom have been in torment since October 7, 2023.
- President Trump has said that, contrary to other reports, he has NOT canceled his meeting with President Xi of China, which is set to take place in a little over two weeks. The words he offered over the weekend about his recent tariff threat against China were that “it will all be fine.” President Trump’s tweet that he wanted to “help China” was one of the most de-escalatory things I have ever seen him do. The markets responded today.
Public Policy
- The fundamental tension in U.S. strategy with China is that the preferred tool of leverage for the administration (denying China access to certain high-tech goods we make) motivates them to go make these things themselves, enhancing their stature on the world stage and diminishing the leverage we have. The other preferred tool we have—making exports from China more expensive via tariffs —is also called “making imports into the U.S. more expensive,” and China knows this. This is not to say knobs can’t be turned and some form of negotiation had, but it is to say that the tension in all this is far more black and white or one-sided.
- The specific action China took last week regarding increased controls over rare earth exports was not escalatory; it mirrored the U.S. framework, but in an area where China has the advantage. The Ministry of Commerce and the General Administration of Customs (MOFCOM) in China sent a special notice clarifying that their announced policy last week is not a ban on exports of rare earth minerals, but rather a requirement for licenses (that they fully intend to grant).
- Announced tariff rates are not matching up to collections, and the only possible explanation is, to me, the abundance of exemptions that have been granted.
Economic Front
- China reported a +8.3% year-over-year increase in exports. Their exports to the U.S. were down by -27% but they increased substantially to Europe, Asia, and especially Africa.
Housing & Mortgage
- The average 30-year mortgage rate is sitting at 6.3%, more or less where it was right before and after the Fed’s quarter-point rate cut last month.
Federal Reserve
- Secretary Bessent has reportedly narrowed the list of Fed chair candidates (to replace Jay Powell when his term ends next year) to these five: Michelle Bowman and Christopher Waller (current Fed governors), Kevin Hassett (current NEC Director), Rick Rieder (current BlackRock executive), and Kevin Warsh (former Fed governor and Morgan Stanley economist).
- We are sitting at a 99% chance of one rate cut this month, and a 94% chance of a second cut (third if you count the September cut) in December.
Oil and Energy
- WTI Crude closed at $59.75, up +1.3% on the day, but down below $60 and into troubled waters if it dips to $55 for many upstream producers.
- It was an ugly week for midstream last week (down over 4% on the week) as the entire energy sector sold off on weak sentiment and dropping oil prices.
Ask TBG
| “Each week you say that the written version of Dividend Cafe is ‘your favorite.’ What does this mean and should I be reading the Dividend Cafe instead of listening or watching? I don’t really get what the difference is or why it is your favorite.” ~ Don H. |
| So first of all, I should clarify what they all are. The video and the podcast are the same thing in terms of audio content; only the video has a camera on me while recording the audio. With a face for radio and no real interest in being a camera talent, I don’t blame people if they prefer a different medium than the video. We post a lot of shorts and reels from the videos on social media, and the videos are preferred by the fans of that medium, which is great. The audio content on the video and podcast is NOT a recitation of the written Dividend Cafe – I basically have a few notes from the written version in front of me most of the time (sometimes nothing at all), but it is me more or less just doing a talk without a script on the same subject as the written Dividend Cafe. We do all three mediums because there are people who prefer each of them. But the reason I say I prefer the written is that it is what drives the others. I start by writing a Dividend Cafe, and then I turn that into a video and podcast. I don’t start with a video/podcast and turn that into a writing. Now, we have gotten better about taking the charts from the written Dividend Cafe and adding them to the video, but the written Div Cafe always has everything, and the video/podcast will always be abridged relative to the written treatment. Beyond that, it is just preferential. My dad was a reader and a writer, I am a reader (and I try to be a writer), and I see a lot of people whose attention span for the written word has declined as the popularity of more digestible mediums like podcast and video have taken off. Ultimately, all I care about is delivering useful and truthful content, but I do like adding my two cents every week, that, yes, the written format is the original flavor, and will always be my favorite. |
On Deck
- I am in the Newport Beach office today and tomorrow, back to New York Wednesday, speaking and meeting on Thursday and half of Friday, off to our Nashville office Friday evening through Tuesday, giving a speech in Orlando next Wednesday, back to NYC on Wed night through the rest of the week, then back to Newport Beach for a bit after that. Lots of moving around the next couple of weeks (and the past couple of weeks).
- Earnings season is launching with much more force in the days ahead, including with some major financial companies releasing results early tomorrow morning!
- On Friday, Dividend Cafe will look at the expected impact on jobs from this AI moment.
I want to thank all the Michigan fans who, after sending so many taunts and nasty notes last year in beating USC in the final seconds, this year sent so many nice congratulations notes after USC’s pummeling of them in the Coliseum. Wait, I didn’t get any such emails. Well, I am sure it was the thought that counted, and I know what the thoughts were. USC has a tough match this week with Notre Dame in South Bend. Fight on, Trojans!
And for all of you caught up in much less important things than this, reach out any time with any questions or comments. AI. China policy. You name it. To these ends, we work.
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.
