Daily Commentary

MarketMinder’s View: Investors, as shareholders, can vote on major corporate decisions—like electing the board of directors, executive compensation and M&A activity—though in practice, few do. But many also own stock indirectly as beneficial owners—e.g., through mutual funds and ETFs, whose providers are often the registered owners on corporations’ books. (As the article lists some, please note MarketMinder doesn’t make individual security recommendations.) These providers can amass large chunks of voting shares, and while they offer beneficial owners ways to register their preferences, again, few do, leaving the funds themselves with big voting power. This piece dives into those waters, explaining how major index-fund managers employ investment-stewardship teams “able to put the necessary resources into voting their shares in accordance with their fiduciary duties to clients” while smaller fund managers typically enlist proxy advisory firms to do similar. Either way, “These index-fund managers tend to vote with corporate management.” But not everyone is on board with this arrangement. “Critics have said voting recommendations from [proxy advisors] often carry the day, forcing boards to follow pay and governance practices they might otherwise eschew.” More importantly, perhaps—and the subject of this article—such critics appear to have the White House’s ear, which could “curb the influence of proxy advisers and index-fund managers [including] a broad ban on shareholder recommendations or an order blocking recommendations on companies that have engaged proxy advisers for consulting work ... .” Now, any possible changes discussed here are speculation—the White House hasn’t issued any executive orders—but since the practice is a matter directly affecting shareholders (and potential shareholder activism) we think it is one worth watching for investors.

MarketMinder’s View: This article obviously dives into politics and there are partisan angles discussed herein, so please note MarketMinder favors no politician nor any political party, analyzing developments solely for their potential market and/or economic effects. Here those effects are very limited. Yes, the Senate passed a bill to fund government and end the record-long partial shutdown Monday, and the House is returning to vote on the bill this week with the expectation it will pass swiftly. Loads of articles discuss who won the standoff, which we don’t really traffic in because it has zero market relevance. With this shutdown seemingly near its conclusion, we have yet another example supporting the basic premise that shutdowns don’t faze markets. Through Monday’s close, FactSet data show the S&P 500 has climbed 2.3% since Uncle Sam went on hiatus September 30. Now, we could be setting up another fight in the not-so-distant future, as “The package includes a three-bill ‘minibus’ that would fund the Department of Agriculture and the FDA, the Department of Veterans Affairs and military construction projects, and the operations of Congress for all of the current fiscal year — the product of months of bipartisan, bicameral negotiations between top appropriators. All other agencies would be funded through Jan. 30.”

MarketMinder’s View: This article dives again into potential tax policy changes ahead of the UK’s November 26 Budget reveal, so please note we favor no politician nor any political party, assessing the developments and speculation solely for potential market effects. It seems many British investors are on edge ahead of the announcement, for fear it will boost taxes on dividends or capital gains or shift other investment taxes on things like pension distributions. Hence, “Nearly £7.3bn has been withdrawn from equity funds by UK-based investors since July, the largest outflow ever recorded in a four-month period, according to new data.” Now, a couple lessons from this. One, fund flows don’t dictate market performance. Despite that record four-month outflow, FactSet data show the FTSE 100, FTSE All Share and FTSE 250 Indexes (the latter focused on smaller, UK domestic firms) all posted gains. All three hit record highs in late October! Two, taxes went up on employer payrolls in April, yet the bull market has persisted anyway. This is largely because such matters are widely watched and tend to get pre-priced swiftly. The outflows this article documents are just a part of that process, whether the fear that motivated them is Budget or AI bubble-related. This should mitigate the market effects of whatever Chancellor of the Exchequer Rachel Reeves announces later this month.