By Evelyn Cheng, CNBC, 3/18/2024
MarketMinder’s View: Newly released January and February Chinese economic data—combined to control for shifting Lunar New Year holidays—beat across the board today, with retail sales up 5.5% y/y, industrial production 7% higher and fixed-asset investment rising 4.2%. Yet reactions here to ongoing growth in the world’s second-largest economy remain cautious, with most focus (as in this article) on the continued fallout in property markets. For investors, we see this as good news. China’s chugging along continues to quietly contribute to global growth despite fears otherwise, helping reality exceed expectations and propel stocks further up the wall of worry.
Bond Vigilantes Snooze as Treasury Market Shrugs Off Vast US Borrowing
By Kate Duguid, Financial Times, 3/18/2024
MarketMinder’s View: As this article notes, if US government spending is “out of control,” the Treasury market—which has most to lose if it was—isn’t showing it. In our view, this is fundamentally because there is next to no chance investors won’t be paid back with interest. This doesn’t mean sentiment swings otherwise won’t scare on occasion. For example, “Last autumn, Treasury yields hit a 16-year high. While that was driven by the Fed’s ‘higher for longer’ message on rates, some investors said it was exacerbated by the sheer weight of issuance, after the US Treasury said in August it would increase the size of its debt auctions.” But with that elevated issuance since, Treasury yields have fallen, undercutting the belief it would overwhelm demand. Instead, demand has soared, with buyers eager to lock in high rates. Over the longer run, markets are a weighing machine, and the main factors for bonds are issuers’ creditworthiness and inflation expectations. In our view, with America’s finances rock solid and inflation continuing to ease, it is no surprise Treasury yields aren’t barking.
Britain to Import Energy From US Under Plan for Transatlantic Power Cable
By Jonathan Leake, The Telegraph, 3/15/2024
MarketMinder’s View: Obviously, given the costs, time, engineering difficulties and inevitable political opposition, a transatlantic cable allowing the US and UK to trade power in order to more efficiently use excess electricity from renewables isn’t a near-term solution to increasing supply—or much of an investment opportunity. Any deployment is likely years out and not an economic or market driver in the near term. But we thought it worth highlighting anyway as a timely reminder that as technology advances, it helps create solutions to problems once thought intractable—think of the automobile ending concerns over manure burying New York and London. Or the blending of horizontal drilling and hydraulic fracturing fomenting the shale boom and destroying Peak Oil fears. Or any of the many previously unfathomable things Moore’s Law has enabled. In this case, it isn’t that people suddenly thought linking the US and UK grids was a wonderful idea—the idea was always there. It is just feasible now because electricity transmission has gotten a lot better. “The idea of laying interconnectors over such long distances would have been unthinkable until the last decade because the electrical resistance inherent in cables would have soaked up too much power over such distances. In recent years, however, cable makers have improved the quality and size of their systems so that power losses amount to just 3pc for every 1,000km.” Technology—plus the profit motive to deploy it—can do amazing things to improve quality of life and keep the economy humming along.
By Evelyn Cheng, CNBC, 3/18/2024
MarketMinder’s View: Newly released January and February Chinese economic data—combined to control for shifting Lunar New Year holidays—beat across the board today, with retail sales up 5.5% y/y, industrial production 7% higher and fixed-asset investment rising 4.2%. Yet reactions here to ongoing growth in the world’s second-largest economy remain cautious, with most focus (as in this article) on the continued fallout in property markets. For investors, we see this as good news. China’s chugging along continues to quietly contribute to global growth despite fears otherwise, helping reality exceed expectations and propel stocks further up the wall of worry.
Bond Vigilantes Snooze as Treasury Market Shrugs Off Vast US Borrowing
By Kate Duguid, Financial Times, 3/18/2024
MarketMinder’s View: As this article notes, if US government spending is “out of control,” the Treasury market—which has most to lose if it was—isn’t showing it. In our view, this is fundamentally because there is next to no chance investors won’t be paid back with interest. This doesn’t mean sentiment swings otherwise won’t scare on occasion. For example, “Last autumn, Treasury yields hit a 16-year high. While that was driven by the Fed’s ‘higher for longer’ message on rates, some investors said it was exacerbated by the sheer weight of issuance, after the US Treasury said in August it would increase the size of its debt auctions.” But with that elevated issuance since, Treasury yields have fallen, undercutting the belief it would overwhelm demand. Instead, demand has soared, with buyers eager to lock in high rates. Over the longer run, markets are a weighing machine, and the main factors for bonds are issuers’ creditworthiness and inflation expectations. In our view, with America’s finances rock solid and inflation continuing to ease, it is no surprise Treasury yields aren’t barking.
Britain to Import Energy From US Under Plan for Transatlantic Power Cable
By Jonathan Leake, The Telegraph, 3/15/2024
MarketMinder’s View: Obviously, given the costs, time, engineering difficulties and inevitable political opposition, a transatlantic cable allowing the US and UK to trade power in order to more efficiently use excess electricity from renewables isn’t a near-term solution to increasing supply—or much of an investment opportunity. Any deployment is likely years out and not an economic or market driver in the near term. But we thought it worth highlighting anyway as a timely reminder that as technology advances, it helps create solutions to problems once thought intractable—think of the automobile ending concerns over manure burying New York and London. Or the blending of horizontal drilling and hydraulic fracturing fomenting the shale boom and destroying Peak Oil fears. Or any of the many previously unfathomable things Moore’s Law has enabled. In this case, it isn’t that people suddenly thought linking the US and UK grids was a wonderful idea—the idea was always there. It is just feasible now because electricity transmission has gotten a lot better. “The idea of laying interconnectors over such long distances would have been unthinkable until the last decade because the electrical resistance inherent in cables would have soaked up too much power over such distances. In recent years, however, cable makers have improved the quality and size of their systems so that power losses amount to just 3pc for every 1,000km.” Technology—plus the profit motive to deploy it—can do amazing things to improve quality of life and keep the economy humming along.