Daily Commentary

MarketMinder’s View: September UK retail sales volumes fell -0.4% m/m, missing expectations for a -0.1% drop. Pair that with October’s dreary consumer confidence read, and forecasters are penciling in weak Q4 consumer spending. That all seems like a stretch to us. Confidence measures aren’t predictive. And monthly series like sales data are volatile. UK retail sales had plenty of one-off drops that weren’t new, bad trends. This argues consumers are struggling, but that is hard to square with gasoline sales’ rise: Even as prices rose, consumers put more gallons of petrol in their tanks. Generally, when households are struggling, they conserve as prices rise. As for the weak spots, the big one was clothing sales. That seems logical, considering the UK’s September was abnormally warm and all the shops had their fall and winter collections out. You probably won’t buy a tweed overcoat when it still feels like summer. We suspect this report is the kind of noisy reading stocks typically look through. It also helps keep expectations low, building more wall of worry for UK markets to climb.

MarketMinder’s View: Well yes, the aggregate gap between global corporate bond yields and government bond yields is the widest it has been in 17 months. Counting on our fingers, 17 months ago was … May 2025. When spreads were falling after a brief spike tied to tariff terror. We don’t recall a global corporate debt crisis with defaults galore back then. Moreover, spreads were far higher in 2020, 2022 and 2008, all stock bear market years. (And only 2008 was a bear market that paired with a traditional recession, contrasting with 2020’s lockdown panic and 2022’s shallow, recessionless, sentiment-induced downturn. In 2008, spreads were orders of magnitude higher than those shown here.) But we guess showing a fuller history would have defeated the article’s purpose. Anyway, this looks like a sentiment blip to us. While some companies have genuine trouble, which you can see in their credit default swap spreads, the corporate world overall has strong revenues and profit margins. When bonds take a sentiment hit as they have lately, corporate yields often spike more than government yields because they have different risks and higher innate volatility. The flipside: Spreads tend to narrow as sentiment eases. Don’t overthink it.

MarketMinder’s View: UK national debt crossed £3 trillion (~$4.02 trillion) in September. Public debt hitting big, round large numbers often triggers worried headlines. This piece offers some less-frantic perspective, which we appreciate. However, we found the analysis mixed. The first half explains how Britain built its debt load in recent years—and bemoans the failure to rein in spending—before revealing its reason for “optimism.” “Never mind its £3tn debt mountain, the UK has moved off the naughty step in bond markets and is increasingly seen in a relatively positive light. Three trillion makes a good headline, but doesn't in itself mean a great deal. What does count is where borrowing is heading as a proportion of national income. In the past year, the UK has moved out of the 5pc club still occupied by the US and France and is now forecast by the International Monetary Fund to have the lowest deficit by 2029 in the G7, with overall debt as a share of national income on a falling trajectory.” It goes on to note that Britain’s household debt-to-income ratio has tumbled from 157% entering the 2008 financial crisis to 115% now and non-financial corporate debt is down to 64% from 90%. The piece doesn’t say this, but we would note this means the riskier borrowers have deleveraged while the government (which can use taxes and inflation to help buoy revenue) ramped up. Now, beyond that, comparing debt to national income (or GDP or any other national measure) doesn’t tell you much about a country’s ability to service its debt obligations. This matters most to investors. According to the Office for National Statistics, UK tax revenue covers its debt service cost by 11 times. This affordability shows why even the UK’s sovereign debt load isn’t as onerous as feared.