Daily Commentary

MarketMinder’s View: A nice rebound for eurozone retail sales volumes, which grew 0.2% m/m in May after contracting -0.3% in April. Stronger sales of food, drinks and tobacco helped drive growth as Europeans geared up for early summertime fun. And while auto fuel sales slumped for a second straight month, that is just more evidence higher prices prompted conservation, not stiff spending cutbacks elsewhere. Pundits have long worried the war’s effect on energy prices would cause folks to tighten the purse strings. But these fears seem a bit overblown, with month-over-month sales volumes rising in two of three months since the war’s start. Even with this solid stretch and oil prices’ recent round trip to pre-war levels, the article still rehashes fears around households’ finances near the end here. But as we covered last week, these worries are merely a twist on longer-running inflation fears—a prime example of fighting the last war, suggesting sentiment in Europe remains skeptical.

MarketMinder’s View: First a big caveat: The titular bill is on its way to the Senate, and despite its overwhelming passage in the House, its future is murky. “A previous version of the legislation passed the House 419-0 in 2023 but expired after the Senate took no action.” However, we think the news here is worth sharing because while the bill’s intentions are noble, they are no failsafe for investors. As detailed here, “The bill that cleared the House aims to prevent victims of scams from parting with their money. Specifically, it allows the delay of a requested redemption if the fund company or transfer agent believes the transaction involves the financial exploitation of a person age 65 or older or an adult unable to protect their interests due to a disability. The bill says the delay can be for up to 15 days initially and then another 10 days if it is determined that exploitation is involved. Longer delays can be imposed if permitted by a court, state regulator or other applicable authority.” This legislation would apply specifically to open-end funds (e.g., mutual funds and most ETFs) and their transfer agents—investment companies aren’t required to participate. With that said, many financial institutions already voluntarily adopted the protections this legislation would codify, including asking clients for a “trusted contact” to be notified if fraud is suspected. Now, could this legislation, if it became law, help protect potential fraud victims? Sure. But investors shouldn’t depend on Congress (or any other third party) to ensure their money is safe. That responsibility primarily lies with the individual. As daunting as it may seem, investors must educate themselves: When it comes to your money, don’t allow yourself to be rushed. Bad actors seek to create an emotional response to get folks to act without thinking. This legislation seeks to insert some pauses in the process, but instilling that practice on your own can go a long way in protecting yourself. For more, see our March commentary, “Don’t Fall for Scams This Spring.”

MarketMinder’s View: Under new Fed head Kevin Warsh, many analysts worry a Fed that talks less means more market volatility since investors won’t have official monetary policy clues. The central misperception in this is that the Fed’s “forward guidance” actually reduced uncertainty and volatility. It didn’t, folks. Former Fed head Ben Bernanke adopted the approach first, yet the guidance about tapering the Fed’s quantitative easing program in 2013 caused a selloff—and the Fed reversed course. His successor, Janet Yellen, guided for hikes when unemployment fell below 6.5% “or that kind of thing” yet eschewed them long after that mark was met, triggering needless questions and uncertainty. Warsh’s predecessor, Jerome Powell, downplayed rate hikes in 2021 and early 2022 before steep hikes in mid-2022, which also surprised markets. The underlying fallacy here, in our view, is that the Fed or any other central bank has special insight into the economy. But central bankers’ forecasting prowess is vastly overrated (so the “dot plot” of Fed folks’ target rate forecasts also often proves wrong), and their actions usually follow the market. Now, we won’t predict whether the Warsh Fed will be stingier with its word count than its predecessors for long—central bankers’ actions are unpredictable—but less prose to pore over and fewer Fed forecasts to forget sounds like a benefit to us. For more on the Fed, see yesterday’s commentary, “Declaring Fed Independence Fears False.”