Daily Commentary

MarketMinder’s View: The US dollar has risen relative to a basket of major currencies since January (per FactSet), reversing some of last year’s decline and highlighting why “Sell America” and broader “weak dollar” fears were myopic and off base. Please note this piece mentions a few publicly traded companies, so keep in mind MarketMinder doesn’t make individual security recommendations. This piece cites several reasons why non-US investors aren’t shying away from US assets, from supposedly higher returns relative to other developed markets’ assets (thanks to potentially higher US interest rates) to a stronger-than-feared economy. We disagree with the former—Fed rate hikes have no predetermined influence over markets—but we do agree America’s economic resilience is underrated, especially in non-AI/Tech industries. That said, even though global investors don’t appear put off by US opportunities, not everything is cheery. The back half of this article worries central bankers and investors are shifting away from US assets due in part to political uncertainty and a growing federal budget deficit. US public debt isn’t in dire straits by any means, so worries about its size and sustainability indicate plenty of fear remains—bullish, in our view.

MarketMinder’s View: In its latest economic report, the Bank for International Settlements (central banks’ bank) listed several potential headwinds for the global economy ahead. Chiefly, the financial institution worries AI is looking bubbly and war-related inflation will become “entrenched.” We are split on these. Elevated sentiment can drive inefficient investment into unprofitable companies, setting the stage for reality to fall short of expectations—see 2000’s dot-com bubble and ensuing crash for one glaring comparison. We agree moods toward certain sectors and industries, including Tech and Communication Services, look lofty, though optimism and even euphoria aren’t timing tools. Early euphoria also looks quite different to late-stage euphoria. Worth noting: Elevated sentiment toward AI doesn’t mean moods are broadly euphoric, either, as evidenced by the inflation fears discussed here. Inflation expectations don’t determine future inflation rates. Inflation is everywhere and always a monetary phenomenon of too much money chasing too few goods and services. And with today’s benign money supply growth, prices aren’t likely to gallop away as they did in 2021 and 2022. Reports like this one are useful in gauging sentiment, so in that vein, the negativity here—rooted in reality or not—suggests stocks’ wall of worry has plenty of bullish bricks.

MarketMinder’s View: This piece names several companies, so a friendly reminder that MarketMinder doesn’t make individual security recommendations—all those here merely highlight the broader theme. We also aren’t registering opinions on the activist investor proposals listed here. Our interest is more that this wave is happening at all. When the late Shinzo Abe became prime minister in 2012, a big plank of his “Three Arrows” economic policy was corporate governance reform to make business more competitive. Japan had long lagged on that front despite its amazing human capital and technical prowess because its huge conglomerates had complicated shareholding arrangements that protected legacy interests and kept less competitive subsidiaries afloat artificially. Abe and his cabinet at the time surmised that reducing cross-shareholdings among conglomerates (where they own stakes in one another to maintain centralized control) and enabling more activist investor participation would introduce creative destruction and improve competitiveness. They passed myriad policies aimed at this, and the wave of activist initiatives suggest they are bearing fruit. This was always more of a structural driver than a cyclical one—not a near-term return booster. But it is cool to see reforms work out as intended, with investors and the Japanese economy gradually reaping the benefits.