Daily Commentary

MarketMinder’s View: This piece touches on a couple of political developments, which isn’t our interest here. Rather, we highlight this in-depth look at California’s fuel prices to discuss a separate point: Global trends tend to outweigh local ones, but the latter still matter. Yes, the conflict in the Middle East caused global crude oil prices to jump, which has downstream consequences for products like gasoline and jet fuel. But global crude alone doesn’t determine prices you pay at the pump. As shared here, “California is isolated from the rest of US refining capacity. While three pipelines—Western Gateway, Sun Belt Connector and HF Sinclair—are planned to help transport more American refined products to the market, they are years away from completion. The state is set to lose roughly 280,000b/d of refining capacity with the closure of sites operated by Phillips 66 and Valero, said Rob Wilson, chief operating officer at East Daley Analytics, an energy intelligence company. Combined with earlier conversions and shutdowns, California’s supply has been structurally reduced.” That leaves California more reliant on imported gasoline and jet fuel, and alongside strict environmental regulations, sky-high taxes and high operating costs, it is little surprise the Golden State’s gas prices are the nation’s highest. While there isn’t a direct investment takeaway from this news, it is a useful reminder for investors to not overstate any one driver’s effect on prices—reality tends to be more complex. For more, see last month’s commentary, “Pain at the Pump Won’t Hurt the Global Economy.”

MarketMinder’s View: According to this long, very long and meandering article, the global economy will be worse off because of the Iran war—it is just a matter of magnitude. As argued at the top, energy prices are “painfully high” and supply cuts to commodities including oil, natural gas and fertilizer could make daily life even more difficult—potentially even setting off a global recession. Even if that worst-case scenario doesn’t come to pass, countries with fewer resources (e.g., those in developing Asia) may still suffer more than their developed peers. After running through a few possible outcomes, the piece concludes holding cash during this uncertain, volatile time would be a sensible move for investors. Look, we aren’t here to critique any specific forecast or economic outlook—these are opinions based on educated estimates, and a few of them may end up being correct. But we urge investors to refrain from treating them like crystal balls, especially because they won’t reveal what stocks will do. To us, the main value with mainstream economic forecasts is as a sentiment measure. When the consensus is expecting the titular “bad, very bad and much worse,” that suggests reality has a low, very low and even subterranean bar to clear to exceed expectations—a bullish development. As for the concluding investment advice, we think it errs greatly in focusing on feelings, not goals.  Sure, holding cash may feel “safe” as markets bounce around, but what happens when the negativity ends and the bull market continues? Missing out on a rebound and subsequent bull market is even more dangerous, in our view, than riding short-term volatility. We think it is wise to factor your comfort with volatility as you select an investment strategy, along with your goals, cash flow needs and time horizon. A blended portfolio of stocks and bonds, which reduces expected volatility relative to an all-stock portfolio, strikes us as a much wiser tactic than having far more cash than you need for an emergency fund—and thus missing returns—or hopping out of stocks every time things feel rocky. For more, see yesterday’s commentary, “Some Timeless Counsel After March’s Volatility.”

MarketMinder’s View: Tax Day is in less than two weeks, so for those who haven’t filed yet (or requested an extension), here are some stats that can help set expectations. “Tax season isn’t over so refund amounts may move higher but so far, the average tax refund has been much smaller than predicted. As of the week ending March 20, average tax refunds were up 10.9%, or just a few hundred dollars, to $3,571 from $3,221 from the same time last year, IRS data shows.” Reasons for smaller-than-predicted refunds vary, from gig workers who had to pay penalties for tax underpayment to eligibility changes for tax credits. Also, as one tax advisor here notes, some taxpayers’ relief is showing up, “… as higher take-home pay since less taxes were being taken out of their regular paycheck during the year. When tax-withholding drops, the tax relief shows up incrementally as more pay in paychecks instead of in a final tax-time lump refund.” As always, consult with your tax professional when it comes to your personal situation, but these high-level figures can provide a gut check after you crunch the numbers.