Daily Commentary

MarketMinder’s View: We like this piece because it reports the facts without catastrophizing about the potential effects on inflation. It omits some context, but we will happily provide that for you. The facts: Because of low water levels, the Panama Canal Authority is reducing daily crossings from 36 to 32, about one-fifth below normal capacity (40 per day). That is a major headache, considering demand for the canal surged as carriers tried to work around the closed Strait of Hormuz. Costs were already up because of this, and fewer crossings probably raises that. Yet we already have compelling evidence this isn’t a huge economic or inflation risk. Consider: “In 2023, the water level in the lakes feeding the canal was so low that the waterway’s operators cut the daily ship transit number to 22. The restrictions led to a bottleneck of ships waiting for their turn to cross.” That episode sparked major inflation fears, especially as it coincided with the Houthi militia’s attacks on cargo ships in the Red Sea as well as fighting in Ukraine. But the Global Supply Chain Pressure Index (GSCPI) signaled only a brief blip of tightness before easing again. Inflation didn’t spike, and global trade and economic growth continued. The GSCPI is higher now but well below April’s year-to-date high as carriers have adjusted to the Middle East disruptions, and it is far, far below 2020 and 2021’s peaks, which registered genuine chaos and preceded actual hot inflation.

MarketMinder’s View: This is a measured take on July’s UK retail sales drop, showing why one month isn’t necessarily a trend and why retail sales may not show the full economy’s health. Sales volumes fell -0.5% m/m, reversing June’s downwardly revised 0.7% rise (which followed May’s 1.3% jump). The major heatwave, not weak consumer fundamentals, is getting the blame, which sounds right to us: “Non-food stores took the biggest tumble, falling 1.3%, on the back of a drop in clothes shopping, after retailers brought forward cut-price sales into June while heatwaves in July resulted in more people staying home than hitting the high street. … Demand for furniture also took a dive, with fewer households looking to change decor during the extreme heat, while department stores suffered because of a drop in available stock. Some retailers had warned of lengthier delivery times during recent heatwaves.” Meanwhile, because UK retail sales don’t count pubs and restaurants, a potential major positive is omitted: “The British Beer & Pub Association said last month that late opening hours and England’s progress to the semi-finals gave a big boost to the industry, with pubs pouring an extra 30m pints than normal over the course of the tournament. That produced an extra £150m in added sales for its members.” This will show up in monthly and quarterly GDP, which is a reminder that retail sales focus only on physical goods, a small share of total household spending.

MarketMinder’s View: Here is a friendly, detailed reminder to working-age folks to see whether all their IRA and 401(k) ducks are in a row. Diligent saving and generous employer matches have helped folks build big 401(k)s. Great! But for folks whose savings are all in traditional tax-deferred 401(k)s and IRAs, this can present some tax headaches in retirement. “Here’s a simplified example. John and Mary, who are in their mid-70s, have traditional IRA assets of $3.5 million and total income of $260,000. That includes $140,000 of required withdrawals that they don’t need all of. As a result, they owe higher Medicare income-based Irmaa premiums; they won’t get $12,000 of senior deductions enacted last year; and they’ll owe the 3.8% surtax on part of their investment income, among other things. This will continue. If this couple had more savings that didn’t require withdrawals—such as Roth 401(k)s and IRAs or taxable accounts—they would have more flexibility and perhaps lower taxes.” If this could be you, you might find it makes sense to save more in a traditional brokerage account. You don’t get the tax deferral, but the capital gains tax rates you will pay will likely be lower than ordinary income rates. Another option: If you estimate your eventual 401(k) and IRA withdrawals will face higher income tax rates than your current top marginal rate, saving more in Roth 401(k)s and Roth IRAs perhaps makes sense (though, as the article notes, this is seldom likely for people in their peak earning years). What is right for you will depend on your unique situation and needs, but checking in is always a good idea.