Daily Commentary

MarketMinder’s View: There is some good sense in this piece, which argues bonds—specifically US Treasurys—are still good portfolio ballast in volatile times. That much we agree with. However, in constructing an argument specifically for intermediate-term Treasurys (5 – 10 year notes), it veers much too much into these allegedly being bonds for all seasons—permanently superior assets. This is as nonsensical in bonds as it would be in stocks to argue one category, sector, style or size is permanently better than others. Every asset has its day in the sun and the rain. In bonds, that hinges on your economic outlook, interest rate views, inflation expectations and more. The article rightly notes that in equity-market downturns, high-yield bonds (and to a lesser extent, investment grade corporates) normally underperform Treasurys, because businesses repay obligations with sales—the same function that largely drives stocks’ cyclical moves. But at the same time, Treasurys are much more directly exposed to interest rate moves for the same reasons. So, if you are in a period when rates or inflation are rising, corporate bond exposure can help. At a higher level, it is always worth remembering Treasurys aren’t negatively correlated to stocks. The point to owning bonds is the smaller day-to-day wiggles, which tends to generate a smoother ride—potentially desirable if you need cash flow or need to dampen equity volatility for other reasons. That can apply whether we are talking Treasurys, corporates, municipals or what have you. Again, what is in favor among those categories and various maturities would hinge on expected conditions over the next 3 – 30 months.

MarketMinder’s View: We give this article like a 6.75 out of 10, as it does a fair job countering the doom-and-gloom, job-and-economy crushing AI narrative that went viral last week. But it doesn’t go quite far enough with its skepticism. Let us start with what we think it largely misses. It spends the opening few paragraphs detailing one company’s layoff announcement last week (which, by the way, we only mention as incidental to the broader discussion—we don’t make individual stock recommendations). But it takes management commentary at face value in covering Block’s decision to cut half its staff tied to “AI efficiencies” and not other factors. Friends. Zoom out. Look. The stock is down some 75% over the past three years, and some half the company is a bitcoin treasury. Bitcoin has plummeted in recent months. Factors like that very often precede cost cutting announcements. We aren’t saying that surely is the case here, but it is a reason to doubt the prevailing AI narrative. Beyond that, we like the article’s discussion of Tech’s history of creating jobs. “While no one has a crystal ball to say for sure, we do have a lot of recorded history to look back on to say authoritatively that tech — even the most disruptive — doesn’t shrink an economy. Quite the opposite: Tech tends to increase productivity, which gives people more time and money, which fuels growth and, yes, jobs.” It goes on to share a few examples of how Tech can destroy and simultaneously create work. Don’t discount that longstanding reality and presume now is so very different.

MarketMinder’s View: Perhaps the headline is true, but before you presume this means hot inflation is destined to return, this article offers a few points to consider. Namely, that consumer prices were up 2.4% y/y in January, which isn’t hot, and “A rule of thumb among economists is that a 5% increase in oil prices raises year-over-year measures of inflation by about 0.1 percentage points.” And so, so much of this hinges on the ongoing military operations’ duration and severity, which is presently unclear. While people often equate gas prices and inflation, it is also worth remembering that, “While consumers drive by gas stations and see posted prices every day, gasoline is a relatively small slice of average consumer spending. It represented only about 3% in December, according to the latest government inflation report. Food, by contrast, was about 13%. And housing costs eat up more than a third of household spending.” Lastly, as the article briefly notes, higher prices can motivate increased production, better balancing the market. It could mean not only the increased shale oil output referred to herein, but also more refinery activity—perhaps seizing on the increased heavy oil and gas exports from Venezuela, using backlogged inventories freed when Trump lifted sanctions recently. This isn’t the 1970s, and the presumption that Middle East conflict spells higher gas prices is easy to overstate in the modern day.