Daily Commentary

MarketMinder’s View: The New York Fed’s May Survey of Consumer Expectations showed “the share of [respondents] seeing their current situation as ‘much worse’ than a year ago leaped to 13.3%, up about 2.7 percentage points from April and the highest since July 2022.” That is in line with other sentiment gauges, which have deteriorated due to the Iran war’s effect on prices—especially those at the pump. But while respondents’ concern over their “current situation” worsened, their outlook for prices wasn’t as dire: “Inflation expectations at the one-year horizon declined just 0.1 percentage point, to 3.5%. The outlook at the three- and five-year time frames held flat at 3.1% and 3%, respectively.” That mirrors last month’s reading, and as we wrote then, it is impossible to know why. Maybe people are observing global oil prices’ continued cooling from early April’s highs (per FactSet). Maybe they trust businesses are adapting. Whatever the reasons, remember that sentiment gauges are, at best, coincident indicators—they tell you what just happened and hold little insight about what consumers will do in the future. Need evidence of that? Consider: “The net between those seeing better versus worse conditions hit its lowest since October 2022, the New York Fed said in the release.” Want to know what else hit a low in October 2022? Stocks. Then they zoomed higher.

MarketMinder’s View: Please note, MarketMinder doesn’t make individual security recommendations, and any companies mentioned here are coincident to the broader theme we wish to discuss. As a space-related firm prepares to make its public debut this week, we think this article provides a sober reminder about initial public offerings (IPOs): The average investor likely doesn’t stand to benefit. While those buying at the offering price (the per-share price underwriters and issuing companies set pre-IPO) have sometimes enjoyed strong gains, those buying just a few hours late haven’t. “The average historical return for buying an IPO at the end of its first day of trading and holding it for three years is about 21% lower than what a value-weighted market index would have returned, according to [University of Florida Professor Jay] Ritter’s historical data.” Crucially, as the article notes, most folks can’t access these newly public companies’ offer prices. Underwriters typically prioritize large institutions over individual investors, and the latter that do have access are few in number. The vast majority of retail investors can’t access shares until after trading starts, meaning they miss the initial “pop” (if there is one). Many of those early investors also face lock-up periods or restrictions on the sale of shares, putting even their first-day gains at risk of reversing. Pair this with IPOs generally being overpriced to begin with, and we don’t see much benefit for long-term investors trying to “get in early”—a hyperfocus on IPOs can actually distract long-term investors from a disciplined approach that can help them reach their goals and objectives. To be clear, we aren’t predicting how any specific, upcoming IPOs will perform. Rather, we think investors ought to keep in mind IPOs aren’t all upside.

MarketMinder’s View: News you can use! With financial fraud omnipresent, this piece showcases how one major US bank is training its tellers to snuff out criminal activity and shares bad actors’ approaches herein—the more you know, the easier they are to avoid. First, some fraudsters are posing as bank representatives, calling victims and insisting they transfer their money into a new account for safekeeping. While the stranger’s tone can seem helpful and kind, this is a designed trap. If anyone calls you asking for an unexpected transfer, simply hang up and talk to a branch official in person or contact the bank via the customer service line on your debit card or the firm’s official website. Banks will rarely, if ever, request funds over the phone. In the second instance herein, fraudsters convinced one person to pay for fabricated “damages” her daughter caused. This could have been avoided by a quick call to confirm whether these damages even took place. While fraudsters’ technological tactics have become more advanced, they have always tried to capitalize on victims’ emotions to ensure you don’t have time to double check. Today is no different. If a request doesn’t seem quite right, don’t blindly follow—rather, go directly to your local branch and raise your suspicions. For more on the latest in financial fraud, see our March commentary, “Don’t Fall for Scams This Spring.”