Dear Valued Clients and Friends –
Special thanks to Brian Szytel for doing the video and podcast for me today (I am on a flight to Houston for a couple of speaking engagements, including a big client dinner event tomorrow night). Today we have a full markets update and a normal trip around the horn (with lots in Public Policy)
Dividend Cafe looked at the economic nature of the 9/11 target and why our financial markets are vital to our free enterprise system. The written version is here (my favorite), the video is here, and the podcast is here.
A philosophy of investing has never been more important.
Off we go …
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Market Action
- The market opened up today and zig-zagged throughout the day, while closing slightly higher.
- The Dow closed 49 (+0.11%), with the S&P 500 +0.47% and the Nasdaq +0.94%
*CNBC, DJIA, Sept. 15, 2025
- Historically, cyclical sectors have averaged 64% of the weighting of the S&P 500 while defensive sectors have averaged 36%. Today, that split is 80% cyclicals and 20% defensives.
- With that said, note that only two of the seven “Mag 7” names are at a 3-month high, whereas the “equal weight” S&P 500 is at an all-time high.
- The ten-year bond yield closed today at 4.03%, -2 basis points on the day
- Top-performing sector for the day: Communication Services (+2.33%)
- Bottom-performing sector for the day: Consumer Staples (-1.15%)
- With concerns in the jobs market data, which market data point is providing confirmation of a weakening economy? Well, the answer is not the high-yield bond market, as CDX spreads hit the tightest levels we have seen since the beginning of the year.
- The Russell 2000 index (small cap) has gone a thousand days without making a new high, but is finally getting very close
- One of the things that I have come to believe serves as one of the most reliable indicators of future challenges in the markets is when you see strong outperformance from unprofitable companies. Let’s just say we’re seeing more of this …
Public Policy
- My friend, Rene Aninao, of Corbu Research, seemed to be the only one who publicly recognized the significance of President Trump’s social media post Saturday morning, but I found it significant in multiple ways. He said (and I quote):
“I am ready to do major sanctions on Russia when all NATO nations have agreed, and started, to do the same thing, and when all NATO nations STOP buying oil from Russia. As you know, NATO’s commitment to WIN has been far less than 100% , and the purchase of Russian Oil, by some, has been shocking! It greatly weakens your negotiating position, and bargaining power, over Russia. Anyway, I am ready to go when you are. Just say when. I believe this, plus NATO, as a group, placing 50% to 100% TARIFFS ON CHINA, to be fully withdrawn after the WAR with Russia and Ukraine is ended, will also be of great help in ENDING this deadly, but RIDICULOUS war. China has a strong control, and even grip, over Russia, and these powerful Tariffs will break that grip.”
I see the President here globalizing the Russia-Ukraine war to now be a NATO/U.S. vs. Russia/China matter. I see him using economic warfare as the next tactic in trying to find an off-ramp (a theme Rene has been writing about for years). And frankly, I see this suggestion as having a lot of legs to it. The President seems to be daring Europe to call his bluff. Is there any leverage over Putin without greater sanctions on Russia? Probably not. But what President Trump now seems to be saying is, why should the U.S. go out on a limb with sanctions if the very countries asking him to do so are, themselves, Russia’s best oil customers. Candidly, he has a point. And to then lump China into this (Russia’s favorite customer) makes clear his end-run: get NATO to play ball with him in an effort to get China to play ball with Russia in an attempt to use economic warfare to create leverage.
It is way above my pay grade to know how this will play out, but this direction seems to me to be different from what we have seen before in that, well, I actually think this may be the path that plays out. The President has struggled to create leverage with Putin thus far. Will this be a way to make it happen by shifting the uncomfortable burden to a shared burden with NATO?
- Secretary Bessent and USTR Jamieson Greer are in Madrid, Spain, finishing up the fourth round of talks with Chinese counterparts, this time focusing on Russian oil and the TikTok deal. The Treasury Secretary has not said what this means, but he did report that they have a “framework” for a deal with China about TikTok.
Economic Front
- “None dare call it inflation,” I know, but here is the annualized change in prices for the following products over the last four months (h/t Peter Boockvar):
- Coffee: +28%
- Bananas: +14.7%
- Floor coverings: +8.1%
- Window coverings: +6%
- Appliances: +8.7%
- Used cars: +3.7%
- Dishes/flatware: +4.8%
- Tools/hardware: +11.7%
- Outdoor equipment: +9.9%
- Jewelry: +14.4%
- Televisions: +9.3%
- Camera equipment: +13.8%
- Toys: +7.5%
- I argued throughout the 2021-2024 jobs data that while there were a lot more job openings than unemployed people (at one point, twelve million openings with just six million unemployed), it was not as simple as the data suggested because that mismatch of numbers could not account for the skills and qualifications delta (i.e. millions of the job openings required skills that millions of the unemployed people did not have). Nevertheless, it still reflected a significant period of healthy employment where workers (qualified or otherwise) were harder to come by than jobs. That makes it all the more concerning that, for the first time since early 2021, we have more unemployed people (7.4 million) than job openings (7.2 million).
- The NY Manufacturing Survey for September was not good, declining -8.7 points. Leading the decline were new orders, which saw a substantial drop. The six-month business outlook hit a four-month low.
Federal Reserve
- The FOMC meets tomorrow and Wednesday and will make its rate announcement on Wednesday, followed by the standard press conference.
- As we sit now, there is a 94% chance of a quarter-point cut this week and a 6% chance of a half-point cut.
- We are up to a 77% chance of three cuts (75bps) by the end of the year, and a 5% chance of a full 1% reduction by the end of the year.
Oil and Energy
- WTI Crude closed at $63.32/barrel, +1.00%
- Midstream was up about +1.3% last week, with C-Corps and Canadians leading the way and MLPs lagging.
- Oracle’s capital spending plans fueled reminders (see what I did there) that such capex requires power and such power demand requires natural gas and such natural gas requires pipelines to deliver it.
Ask TBG
| “I saw an article recently that some companies are looking for ways to report earnings results semi-annually instead of quarterly. Do you think this would be damaging for investors to get information less frequently?” ~ Graham P. |
| To be clear, this is not something that the SEC has approved or is set to approve anytime soon, and the interest in it is mostly limited to a new, proposed method for companies to potentially list and become public. I do not believe there is much chance of it going anywhere (for now). However, if it did, I do not think it would even remotely phase us or our process. I could not care less about getting quarterly updates (vs. semi-annual), and for those more focused on long-term, fundamental performance (i.e., dividend growth investors), it is hard to envision a scenario where such frequency of required communication would be any kind of problem. And I would add, I have little doubt that such a move would actually reduce “noise” and volatility, and perhaps improve company incentives. But no one asked me (besides you).
No sooner had I written my answer to this question than President Trump came out and said he supported a change to semi-annual versus quarterly reporting. |
On Deck
- Clients will receive their weekly portfolio holdings report this Wednesday morning per usual
- Two weeks from today (the 29th), Kenny, Brian, and I begin our annual meeting, wherein we will see a flood of portfolio manager partners in person in NYC for extensive diligence, updates, and a general perspective on the state of things. We have a few ideas in mind for where some allocation adjustments may be coming, and look forward to challenging our own thoughts with some of the best and brightest we know in this upcoming week. This tradition began in 2006, and so that makes this our 20th annual year (yes, we kept it going even in the COVID shutdown year). More to come, for sure.
The weekend provided some good escape from the ugliness of the news cycle to fall into healthy football distractions. My Trojans got it done on the road in Purdue Saturday night, and somehow, some way, my Cowboys got it done at home on Sunday (truly miraculous ending in both regulation and overtime to win).
I enjoyed a talk I gave to a cohort early Saturday afternoon and am very excited for another talk tonight in Houston (with a big client dinner event tomorrow night). I speak to a group in Nashville on Thursday morning, will be back in New York City on Thursday night, and head to a big speech in Washington, DC, this weekend before returning to California for a few days Saturday night. So lots and lots of miles to rack up in the next six days, lots of clients to see, work to do, and fun to be had. It’s the way it is supposed to be.
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.
