Daily Commentary

MarketMinder’s View: There are some publicly traded companies named here, so please note MarketMinder doesn’t make individual security recommendations. Their mention is coincident to a broader theme: President Donald Trump’s tariffs haven’t decimated (or boosted) American businesses the way many predicted post-Liberation Day. This piece nicely outlines the reasons why tariffs aren’t economic gamechangers. For one, businesses’ effective tariff rates are lower than many think. This is due in part to strategies like nearshoring, when businesses move operations into countries facing lower tariff rates. Other companies are shouldering a percentage of tariffs’ costs, using their profit margins to maintain market share. “Bank of America estimates that consumers are paying 50%-70% of tariff costs so far, with companies covering the rest. A key reason: Corporate profit margins are much higher today than before the pandemic, making it easier for companies to pay tariffs without raising prices.” As for the purported benefits of tariffs? “Revenues from Trump’s levies have been far lower than the Treasury Department predicted, and there are few signs of a domestic manufacturing boom.” We acknowledge tariff-related costs and uncertainty could have longer-term downstream effects that show up in later data, which is why we believe tariffs are economic negatives—especially for consumers and businesses in the imposing country. But this article highlights businesses’ adaptability in the face of such challenges—a key reason underpinning the titular sentiment.

MarketMinder’s View: There is a lot of politics and sociology discussed here, so please note MarketMinder is nonpartisan, preferring no political party nor politician. We highlight political developments for their potential economic or market effects only. In a flashback to 2023, “greedflation” chatter is again purporting to connect rising food prices since 2020 to supermarkets’ profits. But as this piece explains, there are two major holes in this thinking. One, focusing on the dollar (or pound) amount of profits alone ignores the many costs businesses must pay, and in the UK supermarket industry, profit margins (around 3%) tend to be tighter compared to the 8.8% average net profit margin among private, nonfinancial UK businesses as of Q2 2024 (the latest data available, per ONS). Consider, too, the specific headwinds facing the supermarket industry: “The real reason for the surge in food price inflation is the surge in costs. This includes the much higher costs of agricultural commodities, transport, packaging, energy and labour. Most of these pressures are global. Just in case anyone is tempted to blame Brexit again, food prices in the UK and EU have risen by similar amounts since 2020.” The second half of the article then explores hypothetical taxes that may come to pass, which is mostly speculation at this point (and we would add levies don’t have the predetermined economic effect, for good or ill, many presume). We would just remind investors that whenever central bankers, politicians or other public figures seek to blame the economy’s woes on a singular, squishy factor (e.g., “greedy” business executives), look past the rhetoric and dig deeper—reality is usually more complex.

MarketMinder’s View: The titular weakness refers to the Institute for Supply Management’s manufacturing PMI, which fell from September’s 49.1 to 48.7 in October. This marks the gauge’s eighth consecutive month under 50.0 (the level dividing contraction and expansion) and misses analysts’ previous estimates for 49.5. This article does a solid job digging into the gauge’s many subcomponents, which point to broad-based tariff-related weakness and the associated uncertainty. For instance, factories’ input costs continued growing (extending a trend we saw in September) while the forward-looking new orders component remained in contraction. “‘For every positive comment about new orders, there were 1.7 comments expressing concern about near-term demand, driven primarily by tariff costs and uncertainty,’ said Susan Spence, chair of the ISM manufacturing business survey committee.” So … not great. Yet this weakness isn’t new. Manufacturing’s weak patch has persisted for years, starting when demand shifted back from goods to services as economies worldwide reopened after the pandemic. And since stocks look 3 – 30 months ahead, they have long since moved on from this old story.