Daily Commentary

MarketMinder’s View: A lot of UK politics here, so please note MarketMinder is nonpartisan, preferring no party nor politician and assessing developments for their potential economic or market effects only. A little over a week ago, the UK’s Office for Budget Responsibility (OBR, the country’s fiscal watchdog) informed Chancellor of the Exchequer Rachel Reeves about its plans to downgrade its productivity forecasts. That may force Reeves to make some politically tough decisions with her autumn Budget (e.g., raising taxes) because the Chancellor, by law, must target a balanced budget within five years—and the OBR’s forecasts are the arbiter. This piece provides some interesting background for those unfamiliar, and it raises a key point: This is largely a political debate, not an economic one. “Tensions between the OBR and the Treasury have spilled into the open in recent weeks, with Reeves using an interview to call on the forecaster to ‘score’, that is to say include in its projections, pro-growth government policies. To avoid another spring scramble for savings, Reeves is also considering having the OBR assess her against her rules only once a year.” Again, we aren’t choosing sides, but basing fiscal policy on subjective forecasts is questionable, especially since the OBR’s outlooks (similar to other outfits) are based on historical averages and straight-line math. Besides inaccurate projections, there isn’t much proof politicians’ responses have alleviated Britain’s Budget worries. We will keep an eye on how this hot-button issue develops, but for investors, remember markets care less about what is “good” or “bad” for markets and more about the fundamental state of the UK’s finances. On that front, reality is better than headlines make it seem, considering the affordability of the UK’s debt.

MarketMinder’s View: Lots of politics here, so a friendly reminder that MarketMinder is nonpartisan, preferring no party nor politician and assessing developments for their potential economic or market effects only. Last Friday, French President Emmanuel Macron re-appointed Sébastien Lecornu as prime minister, just four days after the latter resigned. Given Lecornu’s uphill battle of passing a budget through a fractured National Assembly and forming a cabinet with a parliament that largely opposes him, this piece suggests the Fifth Republic (France’s current government, which originated in 1958) is on its last legs. That hyperbolic call is possible, though it doesn’t look probable yet. That political debate also overshadows some key points that markets—which is our focus—care about. Sure, a new government could inject some uncertainty into markets. But what about the supposed red flags? For example, the article stresses over rising French debt. But serviceability is most important for stocks, and French debt it is quite affordable. Per Insee, France’s national statistics agency, just 13% of tax revenues went to cover interest payments last year—up recently but below levels seen in the 1990s and 2000s. Moreover, markets aren’t flashing warning signs, either. 10-year OAT (government bonds) yields are up relatively to the start of this decade but they remain well off levels from the 1990s and early 2000s. (per FactSet) If disaster truly lay waiting, we doubt forward-looking markets would be showing such a “meh” reaction.

MarketMinder’s View: This piece mentions several equity indexes and publicly traded companies, so please note MarketMinder doesn’t make individual security recommendations. Their mention is coincident to our highlighting a broader theme: Three quarters in, US stocks are way down the leaderboard, with America’s S&P 500 ranking just 57^th globally in year-to-date returns in local currencies. The article attempts to diagnose this shift, suggesting worries around a trade war, politics and government debt have dragged on US returns. Perhaps. But we would add a broader factor: differences in expectations and reality globally. Entering 2025, sentiment toward non-US nations (especially Europe) was noticeably cooler relative to the US for reasons including political uncertainty in Germany, France’s budget problems and UK tax hikes) and overall weak economic growth fears. That irrationally depressed sentiment queued up a larger wall of worry across the pond—and as better-than-expected economic reality came to pass, the relief boosted non-US stocks. Compare that with America, where politics and lofty Tech-related growth expectations made sentiment relatively brighter—and it didn’t help that tariffs hurt the imposing country more than tariff recipients. This is an illustrative case of how markets work. Stocks move the most on the gap between reality and expectations, and the gap was simply wider outside of America’s borders this year—which non-US returns show.