MarketMinder Daily Commentary

Providing succinct, entertaining and savvy thinking on global capital markets. Our goal is to provide discerning investors the most essential information and commentary to stay in tune with what's happening in the markets, while providing unique perspectives on essential financial issues. And just as important, Fisher Investments MarketMinder aims to help investors discern between useful information and potentially misleading hype.

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Will the Fed Really โ€˜Lose Controlโ€™ of the Bond Market?

By Jamie McGeever, Reuters, 11/6/2024

MarketMinder’s View: This article fundamentally misperceives what moves bonds, in our view. It worries 10-year Treasury yields’ rise from 3.79% at September’s end to 4.43% today (per FactSet) means the Fed could be “‘losing control’ over the long end of the yield curve.” Supposedly, if the Fed doesn’t rein in its easing measures, “markets could see the 10-year and 30-year yields spike above 5.50% and 6%, respectively. The ‘term premium’ could jump to 100 bps from 25 bps currently, inflation expectations could be de-anchored, and the S&P 500’s 12-month forward P/E ratio could fall to 16 from 22 today.” Although the article acknowledges “the Fed doesn’t actually have true ‘control’ over this part of the curve to begin with,” it supposes that through the Fed’s past bond buying programs, forward guidance and investor “faith,” the central bank can influence long-term borrowing costs. But the big problem with this: None of these are bonds’ main driver. That is inflation, which is caused by too much money chasing too few goods and services. And while the Fed has some power over money supply, it doesn’t dictate people’s “chasing”—how quickly (or slowly) money changes hands—much less the amount and variety of goods and services in the economy. With inflation continuing to fall as the supply of goods and services expands amid tame money supply growth, we see little risk of inflation expectations de-anchoring or bond yields spiking. Moreover, bond yields don’t drive stocks—and valuations aren’t predictive. In our view, the fear of false factors on display here indicates pockets of skeptical sentiment persist.


Q3 Earnings Half-Time in Europe: Investors Reward Beats but Fret About China

By Lucy Raitano and Samuel Indyk, Reuters, 11/6/2024

MarketMinder’s View: Europe’s Q3 earnings season is about halfway through, and so far, so good, “with around 50% of the STOXX 600 having reported results, some 56% of companies have beaten expectations, according to Citi equity strategists, broadly in line with an average quarter.” (The article names some specific companies, so please remember MarketMinder doesn’t make individual security recommendations—our focus is on the broader theme.) As noted, analysts typically lower estimates beforehand, so take the “beat” percentage with a grain of salt. We also wouldn’t read much into stocks’ outperforming after earnings beats. Stocks are mostly looking ahead to the next 3 – 30 months’ earnings, not Q3’s, which are more than a month in the rearview. The recent results confirm what stocks (hovering near record highs) have already priced, in our view. Consider: STOXX 600 earnings are on track for 8.3% y/y growth in Q3, per LSEG, accelerating from Q2’s 3.0% (and four quarters of declining earnings before that). European stocks priced that earnings improvement well in advance. So what can investors take away from this? The article frets that China’s economic struggles are weighing on European cyclical stocks like autos and luxury brands, but hints that forthcoming stimulus offers a “glimmer of hope” to a weak growth outlook—signaling some potential upside surprise as investors realize China’s economic reality is better than perceived.


How to Find Lost or Forgotten Pensions, 401(k)s, and Retirement Money

By Susan Tompor, USA Today, 11/6/2024

MarketMinder’s View: It isn’t every day you discover a big chunk of change you may have lost or simply forgotten about. But according to this article, there is a considerable amount of old and unclaimed 401(k)s from previous employers lying around. “One estimate indicates that about 29 million 401(k) accounts remained forgotten in 2023, amounting to nearly $1.65 trillion in unclaimed retirement benefits nationwide.” So what do you do if you suspect you have some money in one of these accounts? The article describes a new federal Retirement Savings Lost and Found database—along with a few issues keeping it from getting up and running properly. In the meantime, as detailed herein, you can contact your old employer or search your files for clues to reach the plan administrator. Also look out for a letter from Social Security. “When someone files for a Social Security benefit, Social Security will often issue a notice regarding the possibility that you are eligible to claim a private benefit ... The person would then call the Employee Benefits Security Administration for assistance to unravel how people can find or claim that money.” Then, too, “The U.S. Department of Labor has an ‘abandoned plan search’ program to find out if a retirement plan has been terminated after a business went bankrupt or merged.” And for more tips on recovering old plans, please see Fisher Investments founder and Executive Chairman Ken Fisher’s column, “Left Your 401(k) at an Old Job? Here’s How to Find It.


Will the Fed Really โ€˜Lose Controlโ€™ of the Bond Market?

By Jamie McGeever, Reuters, 11/6/2024

MarketMinder’s View: This article fundamentally misperceives what moves bonds, in our view. It worries 10-year Treasury yields’ rise from 3.79% at September’s end to 4.43% today (per FactSet) means the Fed could be “‘losing control’ over the long end of the yield curve.” Supposedly, if the Fed doesn’t rein in its easing measures, “markets could see the 10-year and 30-year yields spike above 5.50% and 6%, respectively. The ‘term premium’ could jump to 100 bps from 25 bps currently, inflation expectations could be de-anchored, and the S&P 500’s 12-month forward P/E ratio could fall to 16 from 22 today.” Although the article acknowledges “the Fed doesn’t actually have true ‘control’ over this part of the curve to begin with,” it supposes that through the Fed’s past bond buying programs, forward guidance and investor “faith,” the central bank can influence long-term borrowing costs. But the big problem with this: None of these are bonds’ main driver. That is inflation, which is caused by too much money chasing too few goods and services. And while the Fed has some power over money supply, it doesn’t dictate people’s “chasing”—how quickly (or slowly) money changes hands—much less the amount and variety of goods and services in the economy. With inflation continuing to fall as the supply of goods and services expands amid tame money supply growth, we see little risk of inflation expectations de-anchoring or bond yields spiking. Moreover, bond yields don’t drive stocks—and valuations aren’t predictive. In our view, the fear of false factors on display here indicates pockets of skeptical sentiment persist.


Q3 Earnings Half-Time in Europe: Investors Reward Beats but Fret About China

By Lucy Raitano and Samuel Indyk, Reuters, 11/6/2024

MarketMinder’s View: Europe’s Q3 earnings season is about halfway through, and so far, so good, “with around 50% of the STOXX 600 having reported results, some 56% of companies have beaten expectations, according to Citi equity strategists, broadly in line with an average quarter.” (The article names some specific companies, so please remember MarketMinder doesn’t make individual security recommendations—our focus is on the broader theme.) As noted, analysts typically lower estimates beforehand, so take the “beat” percentage with a grain of salt. We also wouldn’t read much into stocks’ outperforming after earnings beats. Stocks are mostly looking ahead to the next 3 – 30 months’ earnings, not Q3’s, which are more than a month in the rearview. The recent results confirm what stocks (hovering near record highs) have already priced, in our view. Consider: STOXX 600 earnings are on track for 8.3% y/y growth in Q3, per LSEG, accelerating from Q2’s 3.0% (and four quarters of declining earnings before that). European stocks priced that earnings improvement well in advance. So what can investors take away from this? The article frets that China’s economic struggles are weighing on European cyclical stocks like autos and luxury brands, but hints that forthcoming stimulus offers a “glimmer of hope” to a weak growth outlook—signaling some potential upside surprise as investors realize China’s economic reality is better than perceived.


How to Find Lost or Forgotten Pensions, 401(k)s, and Retirement Money

By Susan Tompor, USA Today, 11/6/2024

MarketMinder’s View: It isn’t every day you discover a big chunk of change you may have lost or simply forgotten about. But according to this article, there is a considerable amount of old and unclaimed 401(k)s from previous employers lying around. “One estimate indicates that about 29 million 401(k) accounts remained forgotten in 2023, amounting to nearly $1.65 trillion in unclaimed retirement benefits nationwide.” So what do you do if you suspect you have some money in one of these accounts? The article describes a new federal Retirement Savings Lost and Found database—along with a few issues keeping it from getting up and running properly. In the meantime, as detailed herein, you can contact your old employer or search your files for clues to reach the plan administrator. Also look out for a letter from Social Security. “When someone files for a Social Security benefit, Social Security will often issue a notice regarding the possibility that you are eligible to claim a private benefit ... The person would then call the Employee Benefits Security Administration for assistance to unravel how people can find or claim that money.” Then, too, “The U.S. Department of Labor has an ‘abandoned plan search’ program to find out if a retirement plan has been terminated after a business went bankrupt or merged.” And for more tips on recovering old plans, please see Fisher Investments founder and Executive Chairman Ken Fisher’s column, “Left Your 401(k) at an Old Job? Here’s How to Find It.