Daily Commentary

MarketMinder’s View: This article delves into corporate tax policies, clearing up some misconceptions along the way, which is why we feature it. However, it also gives opinions and recommendations on said policies, which you can take or leave—we aren’t opining on the “right” corporate tax rate, which is beside the point. The broader discussion is why we are here, because it casts some light on an occasional question we have seen from investors: When a company’s reported earnings to shareholders say one thing and its IRS corporate tax filings say another, which one is right—are higher earnings reported to shareholders funny math and a false representation? The answer is they are both correct because the SEC’s and the IRS’s accounting systems differ. In explaining how “88 large corporations paid zero federal income tax on $105 billion of profits in 2025,” the piece notes the SEC’s Generally Accepted Accounting Principles (GAAP) and the IRS’s tax code “define income, deductions, and timing differently,” and that mixing and matching “one system in the numerator to the other in the denominator tells us nothing meaningful about profits or taxes.” To see why: “Imagine a company earns $10 million and spends all of it on a new piece of manufacturing equipment in 2025. Under [GAAP] financial accounting rules, the firm spreads out the cost of that purchase over 10 years, deducting $1 million per year. So in 2025, the firm’s accounting books show $9 million of profit on $10 million of pre-investment earnings. Under current tax law, the firm can deduct the full $10 million in the year the investment is made. The firm’s taxable income in 2025 is zero, but it will have no additional deductions left over in future years. ... This isn’t tax avoidance; the tax code and accounting rules simply recognize costs at different times. Comparing the two misunderstands the lumpiness of business income, and this misunderstanding is at the heart of nearly every company [in question here].” Gradual expensing lets companies give a clearer view of their core profitability, while the tax code is designed to encourage more investment (immediate expensing for tax purposes gets bipartisan support). Markets are well aware of GAAP (and other) methods accounting for corporations’ financial results and the differences with how the IRS treats them. Both illuminate reality. Knowing how they work and their conventions is critical to avoid confusion—and potential investing mistakes.

MarketMinder’s View: Although markets have long since priced the backward-looking data presented here, we think Taiwan’s position as one of the world’s key technology hubs helps explain—and support—global stocks’ resilience. (As the article also mentions a certain contract chipmaker in passing, please keep in mind that MarketMinder doesn’t make individual security recommendations, focusing upon the broader theme only.) To wit: Taiwan’s “Export orders in March rose 65.9% from a year earlier to $91.12 billion, an all-time high level, the Ministry of Economic Affairs said on Tuesday. That was its biggest clip in more than 16 years and much better than analysts’ expectations for a gain of 41.0%, and marked its 14th straight monthly gain. ... For April, the ministry said it expected export orders to rise between 47.3% and 50.7% year on year.” Lest you (logically) think fast growth stems from last April’s Liberation Day tariff panic depressing orders then, we checked, and that isn’t the case: April 2025’s orders jumped 25.4% y/y, per FactSet. Therefore, ongoing double-digit order growth, led by technology products, across all regions globally, suggest firm business demand. Moreover, such robust capital expenditure rather undercuts recent high-profile forecasts (like from the IMF) warning the global economy may be on the verge of recession, as business investment is the chief swing factor during downturns. With that looking gangbusters based on orders sent to Taiwan—“a bellwether of global technology demand”—a global downturn doesn’t look nigh.

MarketMinder’s View: Per FactSet, China’s services sector overtook manufacturing as a percentage of GDP in 2015. While a notable development, this article shows why there is likely far more growth to go. “China’s services spending has outpaced goods consumption growth in recent years but still lags far behind developed economies. Per‑capita services consumption accounted for 46.1% of total consumption in 2025, well below the roughly 70% seen in the United States. China’s new five-year plan pledged to ‘significantly’ raise the share of household consumption in the economy over the next five years from around 40% at present, though it stopped short of setting a specific target.” You can also back your way into a growth target, considering the services sector growing from ¥80.89 trillion in 2025 to ¥100 trillion in 2030 amounts to 4.3% annualized nominal growth. That isn’t very aggressive. Note, too, that America’s consumption share is over two-thirds of its GDP (and also mostly services). To the degree China follows in the developed world’s footsteps, which from an economic perspective looks reasonable to us (see fellow, and further-along, East Asian development successes in Japan, South Korea and Taiwan), this suggests the world’s second-largest economy has lots of low-hanging fruit to pluck as it catches up with the West. Services not only offer a steadier growth path, less prone to industrial boom and bust (that China is familiar with), it also provides a ready avenue for Chinese economic planners to maintain social stability, always a priority there. That they are pursuing such a strategy isn’t exactly groundbreaking, but we think it helps highlight how perennial “hard landing” fears are likely overwrought.