Daily Commentary

MarketMinder’s View: First, this article mentions specific companies, so please note MarketMinder doesn’t make any individual security recommendations—our interest is the higher-level theme. While we find Chinese government economic interventions occasionally counterproductive and unnecessary, given overall fine growth, this step has one interesting aspect we think is worth noting: It focuses on services and consumption. “On Tuesday, China announced it would offer interest subsidies for businesses in eight consumer service sectors, as well as for individual consumers. Eligible businesses and consumers can receive an annual interest subsidy of one percentage point on loans. Consumption of services in China has significant growth potential and the policy will help expand domestic demand and stabilise employment ... .” Traditionally, China has deployed stimulus targeted at heavy industry, infrastructure, real estate and exports—to the extent many people think they have overdone it. China has, for years, stated a desire to shift to a more services- and consumption-led economic model, but policymakers flipped back to old stimulus in a pinch. Maybe this is a sign of a renewed effort, although the jury is out on how effective it may be.

MarketMinder’s View: “The producer price index increased 0.9% from a month earlier after no change in June, according to a Bureau of Labor Statistics report out Thursday. The measure rose 3.3% from a year ago. Services costs increased 1.1%—the most since March 2022. Within services, margins at wholesalers and retailers jumped 2%, led by machinery and equipment wholesaling. Goods prices excluding food and energy rose 0.4%.” A couple things here. First, as the article notes: “The report indicates companies are adjusting their pricing of goods and services to help offset costs associated with higher US tariffs, despite the softening of demand in the first half of the year.” Companies appear, so far, to be at least partially absorbing whatever tariff costs are coming their way. Could this change in the coming months? Certainly, and that will be worth monitoring, but for now some margin compression isn’t anything surprising. Some of the upturn here also has zero to do with tariffs, like a large jump in monthly portfolio management costs, which is based largely on past stock market movement. Second, the article argues potential cost-push inflation could influence Fed decision making down the road. Perhaps, but history shows producer and consumer prices are coincident—the former doesn’t lead the latter. Instead, they mostly move together, so we wouldn’t read anything into one month’s divergence, much less what it means for inscrutable Fed officials’ thinking about rates’ path.

MarketMinder’s View: This article traffics in US politics, so please note that MarketMinder favors no politician nor any party. The piece asserts that with US trade policy “all over the place,” economic uncertainty is riding high, yet so are stocks. It offers several explanations for this, ranging from the policies are actually good and the negative take common in media is politicized (we disagree), markets are blissfully shrugging off bad things in an irrational short-term focus (we strongly doubt it) and a third, which is a solid reason why: Markets pre-priced the bad news. This, in our view, is the story of tariffs and 2025’s bull market. Stocks pre-priced worst-case tariff scenarios in April. Those didn’t materialize, as deals, exemptions and collection issues became reality. That positive surprise is bullish. But while we would just end it there, this rejects that to conclude “investors are frogs in a pot, and the gathering warmth is rising from the flame underneath. Either way, subdued markets give the president a pass to push norms and institutions further and further towards the breaking point.” We don’t dismiss this outright. Political risks radically rearranging property rights and roiling business activity and investment are always possible. But for markets they would have to be big—and surprising—enough to wallop stocks. Presently, we don’t see anything that fits the bill.