Daily Commentary

MarketMinder’s View: China’s National Bureau of Statistics announced GDP and a spate of other data on Sunday. The results extend the longer-running, slowing-growth trend, with external demand robust and domestic demand tepid. The article suggests foreign demand reliance creates a slippery slope if the global economy stops buying Chinese goods and services. That is possible but not probable at this point. Rising trade volumes indicate resilient demand, and it doesn’t seem Chinese factories and ports are slowing down. Domestically, data have been lackluster: “Retail sales were weak through the third quarter. A prolonged housing market crash, which has driven existing-home prices down roughly 40 percent since 2021, has wiped out much of the middle class’s savings and left millions of households reluctant to spend. Sales of cars and other durable goods, including household appliances, have plummeted.” Retail sales rose just 1.1% y/y in September, a contrast to industrial production’s 5.5% growth. The handwringing here reminds us of worries about “unbalanced” growth, i.e., China’s economy relying too much on external demand. For investors, think globally. While China’s numbers face understandable scrutiny, it is still contributing nicely to the global economy—other countries’ trade data confirm as much. That reality is enough to exceed low expectations.

MarketMinder’s View: To lower the likelihood of conflict-related supply crises ahead, Japan’s government submitted four bills that would “provide partial financial support for transporting crude oil along routes that bypass the Strait of Hormuz, enable investment in pipeline infrastructure in oil-producing countries, and ensure that ships carrying crude oil and petroleum products can obtain insurance coverage.” Note, nothing here is finalized. Officials will discuss and vote on them soon. Should the measures pass, they would likely mean higher procurement costs. But diversifying energy imports away from the Hormuz may be a long-term positive for the country. Japan imported about 90% of its crude oil through the Strait last year. The closure forced Japan to tap its strategic reserves, restart its coal program and make other adjustments to maintain energy supply. These investments, if passed, could help to a degree, though not immediately (e.g., Japan’s domestic refineries are designed to process Middle Eastern grade crude oil, so the region will remain a major contributor for the foreseeable future). To us, this is another example of people adapting to this year’s volatile energy environment.

MarketMinder’s View: America’s budget deficit nearly hit $2 trillion this year, rising 12% from last year’s $1.78 trillion gap. This piece highlights a common fear: a higher deficit-to-GDP ratio and its debt burden implications. Scale and context show why these are off base. First, today’s roughly 6% deficit-to-GDP sits below levels seen in the early 2010s and early 2020s—neither of which prevented economic or market growth in the years that followed. These higher levels weren’t permanent. They reflected higher public spending following the global financial crisis and COVID pandemic. Secondly, the amount of debt matters less than the government’s ability to service it. And while US debt is rising, tax revenues can still cover them several times over. This false fear’s ongoing prominence suggests the bull market’s wall of worry still has bricks to climb.