Daily Commentary

MarketMinder’s View: Here is an interesting observation worth noting for what it doesn’t mean for investors, though we think it provides useful insight into central banking mechanics. As explained within, the Fed has been “losing” money for a while, tied to its emergency pandemic response. But central banks aren’t commercial banks—the former can’t go bankrupt. Their losses amount to an accounting entry. However, it appears those unrealized losses may be reversing soon. As Fed watchers have noticed, “Since November 5, the size of the Fed’s so-called deferred asset has gotten smaller, moving from $243.8 billion to $243.2 billion on November 26. It’s ‌a small change, but it’s also a clear shift in a long-term trend.” With the Fed likely to earn about $2 billion this quarter, it will probably be years before it runs down its “deferred assets” and starts forking over its profits to the Treasury again. Now, that was never much to begin with. Per the St. Louis Fed, it averaged $84 billion annually from 2011 – 2021 (before deferred assets began racking up in 2022), which is pretty much peanuts compared to federal receipts north of $5 trillion in fiscal-year 2025. Moreover, “Fed ⁠officials have said repeatedly that profits and losses at the central bank have no bearing on its ability to conduct monetary policy.” As the lender of last resort, whether the Fed is technically making or losing money doesn’t affect its ability to operate since it can never go insolvent. So while not nothing, Fed profits’ absence—and eventual resumption—don’t move the needle much either way.

MarketMinder’s View: With more attention on payroll processor ADP’s employment report given the Bureau of Labor Statistics’ (BLS) delay—it will be out December 16—private firms’ shedding -32,000 workers in November may seem alarming. But as this article sensibly cautions, “When the BLS report arrives later this month, it will present a more comprehensive picture of the job market that also includes the public sector, with data on how the government shutdown and job losses for federal workers shaped overall employment. The government figures are based on an official survey that may reach a broader, more diverse set of companies.” For investors, though, this is water under the bridge. Markets look forward and jobs data reveal only the late-lagging effects of past growth. They are already aware hiring has downshifted this year. Further weakness isn’t shocking. Moreover: “Job losses last month were concentrated among smaller firms: Companies with fewer than 50 workers shed a net 120,000 jobs. Larger companies, by contrast, hired on a net basis—but not enough to overcome that deficit, according to ADP’s data.” This also continues a long-standing trend. And as publicly traded companies tend to be larger, markets have reflected this, too. What matters for stocks isn’t this or next month’s employment, but earnings and economic growth 3 to 30 months out. That isn’t anything ADP or the BLS can tell investors.

MarketMinder’s View: Nothing too eyepopping here. The Institute for Supply Management’s November services purchasing managers’ index (PMI) rose to 52.6 from October’s 52.4. (PMIs above 50 indicate a majority of firms surveyed expanded.) New orders slipped -3.3 points but remained expansionary at 52.9. However, the employment subindex showed contraction for the sixth month straight, although November’s result was the highest of those six. So not only are most services firms—the bulk of the US economy—growing, but they also see more growth ahead with orders climbing. Firms still seem reluctant to hire, in part due to lingering effects from “the government shutdown and customs impacts related to changing tariffs,” but that is a well-worn, backward-looking view at this point and none too relevant for forward-looking markets. About all it signals: Sentiment, though warming, remains far from ecstatic. Bigger picture, especially for those starved of delayed shutdown data, the latest PMI shows business activity in America’s biggest sector ticking along. Overall and on average, Q4 growth appears to be faring fine.