Daily Commentary

MarketMinder’s View: While this piece doesn’t offer a concise answer to the titular question, it makes an excellent point: No category of stocks leads for all time. Warren Buffett and the late Charlie Munger famously bought “wonderful businesses at fair prices” and held for many, many years—a classic growth-oriented, buy-and-hold approach. Their business model (adding investments to a holding company) doesn’t bear much resemblance to building and managing a long-term retirement investment portfolio, which usually has to do things like generate cash flow to support the investor’s ongoing needs. But it isn’t so much that their success is hard for individual investors to replicate. It is more that—as the piece discusses in detail—high-quality growth stocks lead at some times, and lower-quality value stocks lead at others. In discussing this, the article mentions several companies, and as a reminder, MarketMinder doesn’t make individual security recommendations—we are here for the broader theme of everything having its day in the sun and the rain only. To that end, the final third or so observes that high-quality stocks have done excellently lately, as they usually do when investors seek stable earnings in an uneven, slow-growing world. But then it argues the party will probably end soon as valuations get too stretched. Perhaps, and we can envision a scenario where value eventually takes the reins, but it has nothing to do with growth stocks’ valuations. They aren’t predictive, and multiple expansion is a normal feature as bull markets mature. Expensive stocks can always get more expensive, and cheap stocks can always get cheaper.

MarketMinder’s View: There is plenty of good data and information here, including a look at Black Friday weekend sales (up nominally over last year, according to several measures, but not as much as goods prices excluding food and energy) and the observation that retailers finally seem to have a good handle on inventory levels after three-plus years of pandemic-related weirdness. That is key because, as the article notes, it means retailers could still enjoy some nice quarterly earnings even if sales don’t quite outpace inflation. Where this runs aground, in our view, is in recycling a bunch of long-running fears (e.g., resumed student loan payments, higher prices) to argue consumer spending is likely to weaken. We don’t dismiss the pressure these issues may cause for some households, but there is a very big mitigating factor: Wages have followed prices higher, and US households are overall in much better financial shape than before COVID (according to the New York Fed’s latest look at household credit). So we think American consumers probably have a lot more bandwidth than this gives them credit for. And if not? If holiday sales fizzle? Well, the holiday season is one part of one segment of consumer spending. Retail isn’t everything. Services, most of which don’t count in Black Friday or retail sales tallies, are the majority of consumer spending and US economic activity overall. Discretionary goods are only a small piece of the puzzle.

MarketMinder’s View: This UK data roundup is fact-packed and a good snapshot of current sentiment—improved from recent despair but hardly optimistic. People are interpreting the latest data (a milder contraction in November’s manufacturing purchasing managers’ index and a modest rise in home prices) as broadly positive signs of economic stabilization. A slower contraction allegedly means factories are about to turn the corner, and rising home prices mean the pain of higher rates is easing. But economic projections aren’t exactly robust. The Bank of England still puts the odds of recession next year at 50/50 and forecasts flattish growth overall, while a growing number of analysts peg the chance for positivity on the hope for rate cuts. Seems to us sluggish growth—of the sort the UK has generated all year—would suffice to beat expectations, and UK stocks’ wall of worry remains high.