Daily Commentary

MarketMinder’s View: Some politics here, so please remember MarketMinder is nonpartisan. We assess developments for their potential market and/or economic effects only. Results from Bloomberg’s Markets Pulse survey earlier this month show how political biases can shape investors’ expectations. According to the majority of respondents, a Democratic sweep would support bond returns as a gridlocked Washington lowers already low policy volumes. Conversely, Republicans’ maintaining Congressional control would supposedly boost stocks as AI regulation remains low. We won’t try to predict any election outcomes here. But this underscores investors’ long-running (and false) assumptions that Republicans are pro-market and vice versa. Neither party is best for stocks. Presidents from both parties have overseen bull and bear markets. Both have passed sweeping legislation creating winners and losers. Thus, letting partisanship guide your portfolio decisions is off base—and risky. Take the gridlock example here. Historically, the three quarters following midterm elections are overwhelmingly positive for stocks because of gridlock. 92% of these stretches feature positive returns (per FactSet and Finaeon, Inc.). The opposite, single-party control, is usually a market headwind. Both realities cut against respondents’ views. Take this as a reminder to think as stocks do. Not about which party is best—which is subjective and is more a reflection of partisan bias. But how likely Congress is to pass sweeping legislation, which tends to raise uncertainty and fog businesses’ investment plans.

MarketMinder’s View: We found this piece mixed. Sensibly, it warns daily portfolio monitoring can inspire greed- or fear-based portfolio decisions. Stocks’ spiking (whether up or down) may tempt you to react emotionally. But past moves don’t predict. Stocks’ falling or rising today—no matter the magnitude—doesn’t mean they will continue doing so. By that logic, stocks would move in one direction perpetually. They don’t. More generally, you should guard against allowing greed or fear to dictate your portfolio decisions. Beyond this, we also wouldn’t argue for ignoring your portfolio altogether. Doing periodic checkups (e.g., quarterly or semiannually) can help you catch outsized weights—which can then help mitigate concentration risk. Owning too much of one category or stock can be problematic if said category or stock suffers. All good points. Our quibble? One professional quoted here suggests portfolio checks amid volatility can “create opportunities to buy good investments at lower prices.” But this is just market timing veiled as “buying the dip” … reacting to past movement! Consistently timing the market by “buying low and selling high” is impossible. It isn’t an investment strategy. There are many reasons to check and review your portfolio. But beware of fear and/or greed it may inspire and keep your long-term plan in mind.

MarketMinder’s View: Credit ratings agency Moody’s held its French bond rating at Aa3 last Friday—a contrast to the other two major agencies (Fitch and S&P), which downgraded France last year. Moody’s titular warning? “Moody’s noted that [its] outlook [on French debt] remained negative and that France still needed a ‘significant and sustained fiscal effort’ to stabilize its debt burden.” The article reviews the well-publicized details underpinning the negativity, including budget disagreements, social unrest and rising long-term bond yields. We don’t dismiss France’s current political and sociological challenges. But from an economic perspective, France’s finances are in fine shape. As we covered earlier this month, around 10% of French tax revenues go to servicing its debt, which isn’t onerous—the ratio was higher in the late 1990s and early 2000s and didn’t spell trouble then. Noisy budget disputes and protests don’t change this. Nor do credit raters’ outlooks, which are just backward-looking opinions. Consider: Moody’s downgraded its French debt outlook to “negative” in October 2024, citing legislative roadblocks to addressing its rising deficit (sound familiar?). Yet France has yet to default. French stocks and GDP have grown over this stretch, too (per FactSet). Credit ratings agencies get attention, but their ratings reflect well-known information—markets have long since moved on.