Daily Commentary

MarketMinder’s View: As we went to great pains to detail for you recently (you’re welcome), Britain’s Labour government has floated a vast armada of trial balloons ahead of November 26’s Budget announcement—raising expectations some kind of austerity is coming. While this raised near-term fear of tax hikes hammering growth and stocks (which morphed into deficit fears once the government retreated from income tax rate hikes), the reality is that it also prices those fears into markets. Investors don’t sit around and wait for events; they anticipate the outcome based on forecasts, talk, opinion and leaks. This is the latest evidence of that. “Allocation to UK equities saw the biggest three-month drop since October 2022, the poll showed. ‘In November, bearish asset allocation was expressed via allocation to UK stocks,’ strategists led by Michael Hartnett wrote in a note. Fears have been mounting about the economic outlook for the country, while the Labour government could announce tax hikes and austerity measures to plug the hole in the finances during the Autumn budget on Nov. 26.” All this mitigates the negative surprise power in whatever Chancellor of the Exchequer Rachel Reeves announces—and increases the likelihood the announcement is tamer than feared. This, plus the fact stocks rarely sway long on incremental tax changes and the reality that debt fears are decades old, suggests to us sentiment is just too low toward UK stocks.

MarketMinder’s View: It appears government number crunchers are starting to work through backed up data from the shutdown, as the US Department of Labor published one weekly figure of initial jobless claims from mid-October. Curiously, the update is just for the week of October 18, leaving three blank weeks before and after it. Maybe the data nerds over there have elected to simply drop data at random, seeking to puzzle the world, which watches with bated breath. Anyway, the official, seasonally adjusted figure is 232,000, which is right in line with where jobless claims were in mid-September and in several reports before that, so really the out-of-sequence figure is the only surprise here. And, of course—as we explained recently—these figures are filed at the state level and were already available (albeit non-seasonally adjusted). Now, this piece argues that while these figures and those immediately surrounding them aren’t out of step with the earlier trend, they don’t account for layoffs announced since, which it casts as foreboding. The trouble with that logic is that jobless claims are one-sided—they don’t tally hiring in this report—and all employment data lag growth, which lags stocks. So we wouldn’t stress the figures, considering they won’t tell you much about where the economy or markets head, whatever the data show when they eventually arrive.

MarketMinder’s View: The European Commission, the EU’s executive branch, published its Autumn Forecast for full-year economic growth in 2025, 2026 and 2027, with real EU GDP projected to grow 1.4% in both this and next year before accelerating to 1.5% in 2027. Inflation is expected to hover around the ECB’s 2% target over this span. Now, this article documents all the nitty gritty of that, which isn’t really our interest. It is more that the forecast and coverage, read at a higher level, suggests warmer sentiment. Officials like EU Economy Commissioner Valdis Dombrovkis touted the bloc’s resilience in the face of the “challenging external context” (read: US tariffs and associated uncertainty). Or, as the coverage noted, “Latest business indicators and survey data point to sustained positive momentum in the coming quarters. Looking further ahead, the global environment remains challenging, says the report, but a resilient labour market, improving purchasing power and favourable financing conditions are set to support moderate economic growth. … The EU’s highly open economy remains susceptible to ongoing trade restrictions, but the trade deals reached between the US and its trading partners, including the EU, have alleviated some of the uncertainties that overshadowed the Spring Forecast.” The sunnier coverage here seems to reflect gradually warming sentiment in the bloc, although that warming is lagging the US’s optimism. This suggests to us there is still a significant wall of worry for European stocks to climb.