Daily Commentary

MarketMinder’s View: There is a lot of good sense in this, which argues the ECB’s rate hike today risks proving to be a monetary error—if it proves the start of a cycle. As we have noted, this highlights and contrasts Europe’s energy markets now with 2022, when Russia-related energy price jumps were far, far larger. It highlights progress in refilling gas storage for the winter, a lack of flow-through from energy to other goods and calmness in food prices. All that is sensible. Yet it missed the key difference: 2022’s inflation, like all inflation shocks, was chiefly about vastly excessive money supply growth, which we don’t have today. But all in all, this is a fairly good look at the lack of lasting inflation pressure in Europe. Like this piece, we don’t see one hike as a calamity, as it won’t invert the yield curve and cause credit to freeze. But more hikes could—a risk worth watching.

MarketMinder’s View: Despite recent stock market churn, gold is down again this week, with the slide through early Thursday putting it down -5.9% year-to-date, per FactSet data. This follows the year’s early, 23.7% boom through January 29. All this illustrates some core points that this article frankly misses. One, gold is volatile. Very volatile. More volatile than stocks. Hence, the big January boom. And the bear market gold is now in (it is down -23.9% from January’s record high). Two, this is all coming as war breaks out and oil prices and inflation fears surge. Gold is supposed to hedge you from that stuff, if you buy the common wisdom. You shouldn’t buy that thinking, though, because it has never been true. Hence, all the gymnastics this article goes through to try to explain why gold isn’t up given these supposedly “bullish” drivers are totally and entirely unnecessary. Accept the point: Gold is no haven. No hedge. No chaos cushion. It is a commodity with little industrial use that sways on little more than fickle sentiment. It has no place in a well-constructed portfolio, in our view.

MarketMinder’s View: Please note our interest here is only in the titular discussion; the news roundup following it is beyond our scope. We highlight this because it encapsulates the market fears currently swirling. (Also, as it mentions specific companies, we remind readers MarketMinder doesn’t make individual security recommendations.) So what is supposedly eating investors? According to the article: 1) “the return of overt hostility in the Middle East,” 2) potential IPO indigestion and 3) “... the most important factor driving market nerves is probably also the most ‘routine’ one. All else being equal, markets don’t like it when interest rates go up.” Although all three developments can weigh on sentiment, only one is a fundamental factor we think is worth watching: the second. IPO hype—and an equity supply glut—are certainly some things to watch for since areas where reality may underwhelm 3 to 30 months ahead can face headwinds. That they are centered in AI and Tech highlight the high sentiment confronting these stocks today. But outside those categories, expectations are far more subdued—there is plenty of room for positive surprise to drive the global bull market, particularly outside America. Beyond this, the Iran war may ding sentiment occasionally but lacks much punch. From markets’ perspective, regional wars aren’t bear market fuel and the resumption of Persian Gulf hostilities has loomed for months—it isn’t shocking—and anticipation is mitigation. Last, but not least, rising rates’ threat is an old, “routine” myth that has never held water. Simply, rates don’t drive stocks, which move on the gap between earnings’ fundamentals and how well markets have priced them. Rates hardly enter into that equation. Then, from a higher level, ask: When has stocks’ big picture backdrop not looked “messy”? From this vantage point, the wall of worry looks high—reason enough to remain bullish.