Daily Commentary

MarketMinder’s View: The Trump administration is pressing the World Trade Organization (WTO) to make permanent a global deal that prevents nations from slapping tariffs on the trillions of dollars’ worth of digital services delivered annually via the Internet instead of simply extending forward two-year bans that have rolled over since 1998. We think this would be a positive step, granting firms more clarity around the lay of the land—especially in light of uncertainty surrounding trade and tariffs on goods that has swirled over the past 12 months. Now, that very uncertainty stems from the US, making the administration’s position here a little awkward and leading some analysts to expect another temporary extension. It is possible, as this notes, that the WTO will elect to prolong the agreement for four years versus two in a compromise. But no one expects the deal to end following the late March meeting—it is more whether it will be rolled over, extended for longer or made permanent. Regardless of which is chosen, though, we doubt the market effects are giant. These rollovers have been a virtual rubber stamp for almost 30 years. We will keep an eyeball on it but doubt huge news comes from it.

MarketMinder’s View: Keep the following thoughts in mind when you read this long piece that documents the fact gold is down more than US stocks and as much as the world’s since Israel and the US launched strikes on Iran at February’s end. One, many say gold is a hedge against chaos and war. Two, many say gold is an inflation hedge. Three, many say gold benefits from interest rate cuts. Four, many say it moves opposite the dollar. The trouble is that all four of these theses are contradictory, as the piece inadvertently highlights. If you get chaos and war, people usually flock to the dollar, driving it up versus other currencies, which means point one is offset by point four. If you argue rising oil prices are inflationary, a hedge should rise. But it also likely means you won’t get rate cuts, so point two is offset by point three (and vice versa). It all highlights what we think is a basic point: Gold’s swings are all about sentiment. There is no guideline to apply, no rule, no if-then formula. Investing in it is speculating about others’ emotions, full stop. While it is only a few weeks since the war started, a short period, gold’s slide since is a reminder of just that. All the same holds for silver, which has a little more industrial use, but is still subject to speculation.

MarketMinder’s View: The idea of eliminating the 50-year-old requirement for US public companies to report earnings results quarterly has swirled for around six months. Now, days after Canadian regulators discussed the same, the Securities and Exchange Commission is reportedly about to move forward and submit a proposal, opening a comment period. Expect a lot of sturm und drang. “Those in favor of less-frequent reporting requirements believe a switch could help boost the shrinking number of public companies in the U.S. Among the reasons companies cite as to why they remain private is the time-consuming and costly clerical work required to list and maintain publicly traded shares. Any change is likely to face opposition from investors who rely on the transparency of regular disclosures.” Other proponents say that doing so would reduce a short-term mindset common to investors. We have our doubts this change would be very significant for good or ill. While it may encourage some firms to list, Sarbanes-Oxley criminal requirements for balance sheet errors remain—and are a headwind. Furthermore, more IPOs doesn’t mean “better” markets, especially given firms’ increased access to private capital in recent years. Ultimately, this looks like a fine solution in search of a notable problem.