Daily Commentary

MarketMinder’s View: Fears about UK Prime Minister Andy Burnham’s policies—and their fiscal ramifications—are still swirling, as evidenced by this piece (it also deals in politics, so a friendly reminder that MarketMinder is nonpartisan). With the autumn Budget set to be unveiled October 28, the article outlines several of Burnham’s policy proposals, including combatting homelessness, increasing council home building (i.e., public housing), higher defense spending and a slew of tax cuts. Echoing headlines’ griping in recent weeks, the article posits these measures risk putting the UK in “a funding gap of up to £60bn a year, amounting to some 2pc of GDP,” ostensibly cueing up future tax rises or higher borrowing—supposed negatives for government spending and Gilt yields, respectively. Anything is possible in politics, but we don’t see reason to fret from an economic or market standpoint here. For one, many of these measures’ (e.g., commercial property tax cuts for pubs and clubs, capping bus fares) costs aren’t huge relative to the UK’s tax receipts (nearly £940 billion in the tax year 2025 to 2026). “The 20pc cut in business rates for pubs and clubs will cost only about £100m per annum; capping bus fares at £2 will probably cost about £450m; and cutting VAT on electricity bills will probably cost only about £850m.” Secondly, and most importantly, these proposals are just … proposals. They aren’t yet policy, and the more contentious items may not even make it into the Budget. “Similarly, making social care free at the point of use, which is expected to cost just under £20bn per annum by 2035-36, will be the subject of much discussion and scrutiny before anything happens.” Rather, these rumors and trial balloons are part and parcel of politicians’ “silly season,” chiefly aimed at gauging constituents’ feelings toward certain ideas. Oh, and it is quite common for officials to scale back Budgets from their initial proposals, as seen in former Chancellor Jeremy Hunt’s milder-than-expected package in 2022. Or George Osborne’s in 2015. Or Rachel Reeves’s in 2024 and 2025. Overall, this seems like more evidence of lingering fears around the Burnham premiership—likely creating room for positive surprise if reality proves more benign than feared.

MarketMinder’s View: Here is an interesting look at the seeming disconnect within private credit, as weak data cut against industry leaders’ positive outlooks. With defaults rising, returns falling and funds’ watchlists of troubled borrowers growing, the industry seems in a tight spot amid slower dealmaking and a wave of writedowns tied to private equity’s recent run of weakness. To us, this fogginess highlights a key problem with private credit (and other unlisted investments, for that matter): a lack of transparency. As we have covered extensively, private companies needn’t report financial results as frequently as their publicly traded counterparts. Industry leaders are incentivized to sing a happy tune, as “fewer investors mean it would be harder for fund managers to raise money, shrinking the supply of capital to refinance existing corporate loans when they come due.” But private credit’s opaque nature means investors don’t have much reliable data to work with—and that can be problematic for those who may need their money in a jiff. Now, we are neither for nor against private investments inherently. But their lack of transparency—as well as their illiquidity—should be key considerations for investors before diving in. For more on private credit’s recent struggles, see our March commentary, “Putting the Latest Private Credit Implosion in Perspective.”

MarketMinder’s View: Some politics here, so please note MarketMinder is nonpartisan. We assess developments solely for their potential economic or market implications. We found this piece mixed, as it blends a common false fear—Social Security’s looming insolvency—with potential solutions that end up debunking the concerns. The article suggests America’s public retirement trust fund will reduce benefits by 22% by 2032 tied to a rising ratio of retirees to working-age folks. In theory, a smaller pool of payroll tax revenues would struggle to keep up with a growing number of retirees—a long-running prediction in the Social Security Trustees’ annual reports. But, as the article points out, workarounds abound. Policymakers could lift the payroll tax cap, raise the retirement age or even adjust the fund’s investments to strengthen Social Security’s base. We would also add that Congress is incentivized to make changes that keep benefits flowing to keep their constituents happy, as they have done before. If lawmakers acted to “save” Social Security in 1983, why wouldn’t they do so again when necessary? To us, they don’t have much incentive in the here and now, as 2032 is six years from now—an eternity in politics. The lingering concerns of a false fear down the road add bullish downward pressure on expectations, giving reality a lower bar to clear.