Dear Valued Clients and Friends –
Greetings from New York City, where Brian, Kenny, Robert, and I have spent the day in meetings with our various taxable fixed income managers from Voya, multiple PMs, and leaders from Blackstone, and the portfolio team at Stepstone Venture Capital. It is not easy to fit nine meetings into one day, but we made it happen. I am resisting the temptation to share anything from this week’s meetings throughout the week, opting instead to create a more comprehensive recap for those who want it after the week concludes. I will focus on key, actionable takeaways in this Friday’s Dividend Cafe.
Dividend Cafe on Friday looked into the state of the labor market as it pertains to finding workers. It went past the weekly and monthly reports and analyzed the trend over many, many years in the labor participation force. The written version is here (my favorite), the video is here, and the podcast is here.
The Dividend Cafe topic about work coincided with lectures I gave last week about the purpose embedded in work, the inherent dignity of work, and the fundamental need to see work as not merely transactional, but soul-giving. It is among the messages I care about most, and it was incredibly satisfying to see 25 high school seniors take it in last week. The economic necessity of getting more to embrace work will never resonate without the more existential understanding that work is the useful and productive activity we were made for, and not merely something to pay the bills (though I do recommend it for paying the bills, too).
Before our meetings began this morning, I kicked off the day on CNBC Exchange, talking about the government shutdown and dividend stocks. A good hit here.
Off we go …
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Market Action
- The market opened flattish today and bounced around throughout the day.
- The Dow closed up +69 points (+0.15%) with the S&P 500 up +0.26% and the Nasdaq up +0.48%
*CNBC, DJIA, Sept. 29, 2025
- Those pointing to earnings growth to explain the market moves higher in 2023, 2024, and 2025 are right that earnings have grown (they almost always do in non-recessionary periods because, well, free markets gonna free market). But they may be missing that about 2/3rd’s of the return the last two years and half of the return this year (for S&P 500 index investors) has come from multiple expansion.
- The ten-year bond yield closed today at 4.14%, down 4.6 basis points on the day.
- Top-performing sector for the day: Consumer Discretionary (+0.55%)
- Bottom-performing sector for the day: Energy (-1.91%)
- Correlations amongst the stocks in the S&P 500 are at extremely low levels. Put differently, not all stocks are created equal right now.
Top News Stories
- New York City Mayor Eric Adams dropped out of his independent bid for this year’s Mayoral race. It is unclear if this will help the other independent challenger, Andrew Cuomo, who is seeking to defeat the socialist nominee, Zohran Mamdani.
- President Trump has said that Israeli President Bibi Netanyahu has agreed to his proposed peace deal in Gaza.
Public Policy
- President Trump is talking about expanding tariffs on certain sectors (25% on heavy trucks, 30% on upholstered furniture, 50% on kitchen cabinets and bathroom vanities, and 100% percent on some pharmaceuticals, though today we found out big pharma companies are carved out). Markets have mostly shrugged off the newest threats. Oh, he also threatened today to impose 100% tariffs on any “movies made” outside the United States.
- The President met with Republican and Democratic House and Senate leadership today. The word after the meetings was “oh yes, a shutdown is coming.”
- There are reports that the trade deal with South Korea is on shaky ground.
- There are reports that President Xi is offering more concessions to the United States if they will publicly speak against Taiwanese independence.
Economic Front
- The PCE inflation data on Friday came in exactly as expected, up +0.3% on the month and up +2.7% year-over-year. The next hour was filled with people in one political party saying, “see, inflation is contained” (because it wasn’t higher) and another party saying, “see, inflation is a problem because of tariffs” (because it hasn’t gone lower this year, and because y/y PCE was +2.4% a year ago). The bond market did not move much in the aftermath; long-end yields dropped one basis point (so not much at all, but directionally lower, not higher).
- Those of us in the weeds of the data notice that goods prices were up +0.9% on the year. This is, of course, very low, but it has been +0% year-over-year for quite some time. This most recent increase is isolated to tariff-impacted products.
- The increasingly possible scenario is that the labor market’s softness is related to the impact of immigration, reduced hiring needs (some of that AI-related), and less hiring appetite (trepidation around tariff impact), even as the economy hangs in there. Now, some have said, “You cannot have a weak labor market and a strong economy at the same time,” and that is theoretically true. But it all depends on what the meaning of the word “time” is … The labor market can soften as a leading indicator of future weakness, but that is not the same thing as a total overlap of timing. I do not expect GDP and payrolls to be disconnected for long (directionally), but I accept enough nuances and moving parts (volatile one-time import/export impact on GDP, immigration, AI) to require more time to make sense of it all.
- Personal Income rose +0.4% in August, slightly more than consensus.
- Durable goods orders were up +2.9% in August, with most of the increase coming in commercial and defense aircraft. Ex-transportation, the increase was just +0.4%.
Housing & Mortgage
- New home sales contracts picked up in August (800k vs. 664k in July). Homebuilder sales incentives have picked up dramatically. Existing home sales continue to lag, but did pick up. Year-over-year existing home sales are flat.
- I am already excited to share some of what I learned today in the single-family and multi-family space from Blackstone on Friday. But like I said, if I start talking about it now, I won’t be able to stop.
Federal Reserve
- We are sitting with a 91% chance of two more rate cuts this year. If we look all the way to the end of 2026, the chance of the Fed funds rate being 3% or lower is now 64% (per the fed funds futures market).
Oil and Energy
- WTI Crude closed at $63.14, down almost -4% on the day.
- Unsurprisingly, energy stocks declined today as oil prices declined behind talk that OPEC+ will announce production increases this weekend.
- That said, midstream was up substantially last week (+3% give or take, depending on the index).
Ask TBG
| “If expanding supply of single family homes is important to restoring the American dream, is there any role for national policy here (we already have a mortgage interest deduction)? What about trying to prevent large companies from making over listing price no-contingency offers that individual buyers can’t match?” ~ Lee R. |
| It seems to me that that idea would be a really unfair thing for any person out there living the American dream, trying to sell their house, that the federal government would set rules on how much it can be sold for, and to whom it can be sold, and under what terms and conditions. The federal government overstepping its role in the market to try and pick winners and losers always, always, always, always hurts the little guy more, the person they are allegedly trying to help in such policy interventions. Large companies have nothing to gain by overpaying for something. And no seller should have to take a lower-than-market offer just to appease a buyer who really wants something. Policy interventions disincentivize capital coming into the space, which limits supply, which pushes prices higher when demand is high. I will do a fuller Dividend Cafe on this subject soon, and spoke about it with one of the largest institutional real estate investors in the world today. What is needed are solutions that will help the little guy, but not solutions that are just intended to make people feel better. And real help comes from removing impediments to new supply. Always and forever, the solution to high prices is high prices, and then new supply. The government’s “help” always hurts more than it helps in these cases. |
On Deck
- Taxable bonds, high yield, mortgages, and one manager in private credit, private equity, infrastructure, and real estate are behind us. But tax-free bonds, municipal high yield, floating rate (syndicated loans), more private credit, structured credit, and small cap growth managers await tomorrow. Are you jealous? That will just be Tuesday!
- We will see if the September jobs number comes out this Friday or not, as I suspect a shutdown Wednesday night means a delay in data.
USC lost off of a field goal at the buzzer on Saturday (after deserving to lose by more with that pitiful defense), and the Cowboys ended in a tie in Sunday Night Football against the Packers (after playing quite well, actually). Why anything on earth is ever allowed to end in a tie, let alone a bunch of grown men playing football, is beyond me. But in the meantime, there will be no ties for Brian, Kenny, and me this week as we bounce through notepads of notes like it is our job. Because it is.
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.
