Daily Commentary

MarketMinder’s View: Here is one reason ongoing reports of Hormuz (and, for that matter, Red/Black Sea) blockages haven’t roiled markets anew: “Gulf countries that have for decades produced much of the world’s oil are now intent on breaking their dependence on the narrow waterway. They are building or expanding pipelines and other infrastructure that can bypass it, and vastly expanding storage capacity in places like Asia. These endeavors show how the war is changing the oil business in the Persian Gulf. They will cost billions of dollars and take years to complete, but companies and governments consider them essential hedges in an increasingly volatile region. Even if a cease-fire between the United States and Iran materializes, Gulf exporters recognize that relying too heavily on a single transit route is a risk they can no longer afford to take. And the moves, over time, could diminish Iran’s clout in the region.” Click through for more details, but markets look around 3 to 30 months ahead, and in that timeframe, today’s “chokepoints” likely become just one of several shipping routes. With energy supply more stable in the near future, disrupting any one pathway will be that much less shocking—which we think global stocks picked up on before most.

MarketMinder’s View: We think investors’ worries about a top-heavy economy—high earners driving spending versus those less well off—are unfounded since markets focus far more on overall economic growth and not sociological matters surrounding its composition. But because of widespread fear that the economy is liable to topple as a result, it is worth presenting evidence to the contrary. As noted here, “Economists warned that consumer spending growth was increasingly reliant on wealthy Americans, leaving the economy vulnerable to a stock market downturn or any other wealth shock.” (Since the article references research from some American banks, please note MarketMinder doesn’t make individual security recommendations, as our focus is on the broader theme only.) However, recent data dampen this concern. “After-tax wages rose 5.2% in July from the same period a year ago, surpassing the wage growth rate for higher-income households for the first time since December 2024.” From our perspective, lower-wage earners are starting to see the catch up in real wages they typically do after inflation squeezes, like Milton Friedman long taught. Now, perhaps that doesn’t make consumers feel better about the economy, but feelings aren’t predictive—and to us, recent wage data are in line with other figures underpinning the US economy’s stealthy strength. For more, please see last year’s commentary, “So Go the Top Earners, So Goes the Economy?”

MarketMinder’s View: With Q2 earnings season mostly in the bag, silly season seems to be upon us. (Once again, because the article references some specific firms’ research, please note MarketMinder doesn’t make individual security recommendations. Our focus is on the broader theme only.) “As the latest reporting season nears completion, all signs are indicating the second quarter was one of the best three-month periods in recent memory with profit growth running at more than 30%. The only problem? That torrid pace is unlikely to last. The consensus currently expects growth to fall below 20% in the first quarter of 2027 before moderating into the mid-teens for the full year ...” which seems fine to us? The article notes markets tend to do better when earnings growth is above trend and accelerating rather than above trend but decelerating—based on limited historical evidence—but we think that is more of a function of how stocks move most on the gap between reality and expectations. Early on in market cycles, expectations tend to be low, making it easier for accelerating earnings to surprise more positively. Later in the cycle, as sentiment warms—and earnings growth decelerates—not so much. Note too, it isn’t last quarter’s earnings that matter as much as the next 10. Something for investors to keep in mind as sentiment warms.