MarketMinder Daily Commentary

Providing succinct, entertaining and savvy thinking on global capital markets. Our goal is to provide discerning investors the most essential information and commentary to stay in tune with what's happening in the markets, while providing unique perspectives on essential financial issues. And just as important, Fisher Investments MarketMinder aims to help investors discern between useful information and potentially misleading hype.

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What Presidential Election? So Far, the Stock Market Doesnโ€™t Care

By Jeff Sommer, The New York Times, 7/19/2024

MarketMinder’s View: This article is rather mixed overall, but the sensible parts make some good points, and we tend to feel more magnanimous on Fridays, so that is where we will focus (while reminding you that we are politically agnostic, preferring no candidate nor any party, and we assess politics for its potential market impact only). The article leads by recapping widespread talk of the so-called “Trump trade,” which refers to theories of how stocks will do—and which sectors will do best—if former President Trump wins in November (in our view, an unknowable outcome for now). And then it helpfully sticks a dagger in this thesis with a simple point: “… the stock market is amoral and apolitical. There have been market misfortunes under both political parties but, for the most part, the stock market has done well under both Democrats and Republicans.” Yes, and as the article goes on to note—citing research from Bespoke Investment Group—for all the talk of certain sectors benefiting from Trump and others benefiting from Democratic presidents, returns tell a different story. “‘In President Obama’s eight years, the three top performing sectors were consumer discretionary, technology and health care; for Trump, the three top performing sectors were the same,’ the group said. ‘Likewise, energy was the worst performing sector for both presidents, and financials was in the bottom three.’” More recently, while everyone notes President Biden’s policies favor renewable energy over oil and gas while Trump’s rhetorical style takes the opposite tack, a clean energy ETF did great under Trump while falling under Biden—and an oil and gas ETF stumbled under Trump but soared under Biden. (Speaking of which, MarketMinder doesn’t make individual security recommendations and highlights this for the theme only.) As the article notes, while politics matter, so do global supply and demand trends. Now, we do quibble with the final section, which argues gridlock is an overrated positive because stocks have risen during periods of unified government. A fine observation, but gridlock can exist when one party controls Congress and the White House if its margin is small and it is divided internally. Also, markets move most on the gap between reality and expectations, so if expectations for radical change abound and the government simply does a bit less than feared, that can be bullish. Just, you know, some nuance.


Japan Cuts Growth Forecast, Prime Minister Warns of Weak-Yen Pain

By Staff, Reuters, 7/19/2024

MarketMinder’s View: Japan’s government slashed its GDP growth forecast for the fiscal year ending March 2025, projecting a mere 0.9% increase (down from January’s 1.3% estimate). This is still growth, which would likely be welcome after the recent GDP decreases, but the reasoning here is noteworthy and points to a timeless truth about markets. The government cited the weak yen’s impact on household costs and purchasing power (all else equal, the weak yen raises the cost of imported goods, which weighs heavily in a country that imports most of its energy). That is a noteworthy headwind against domestic demand. Yet Japanese stocks have done very well when measured in yen and keep hitting all-time highs. So, what gives? The yen’s weakness is a well-known headwind, and markets dealt with it long ago. Plus, the currency creates winners and losers. It isn’t a net negative. For multinational businesses with strong export markets, the profits from currency conversion (changing overseas revenues back into yen) can offset or exceed the higher import costs, boosting earnings. Japan has a lot of big multinationals that know how to deal with and benefit from currency swings. This is a big reason why we often point out the economy isn’t the stock market.


British Retail Sales Slump by More Than Forecast Amid Chilly Weather

By Richard Partington, The Guardian, 7/19/2024

MarketMinder’s View: We wouldn’t read any more into June’s -1.2% m/m drop in retail sales volumes than we would into May’s 2.9% rise. Or April’s -1.5% m/m drop. Or a potential July boom tied to the European soccer tournament and other big events. Britain’s wacky weather just played too great a role in what is already, normally, a rather bouncy data set. Taking a broader view, the overall trend is inching higher after a largely flat 2023, showing consumers are regaining purchasing power after the painful inflation spike. With wage growth still outpacing inflation, this looks likely to continue. And this is all without a single Bank of England rate cut, demonstrating the needlessness of all the attendant speculation. Thankfully, stocks see the UK’s resilience and improvement even if headlines don’t quite.


What Presidential Election? So Far, the Stock Market Doesnโ€™t Care

By Jeff Sommer, The New York Times, 7/19/2024

MarketMinder’s View: This article is rather mixed overall, but the sensible parts make some good points, and we tend to feel more magnanimous on Fridays, so that is where we will focus (while reminding you that we are politically agnostic, preferring no candidate nor any party, and we assess politics for its potential market impact only). The article leads by recapping widespread talk of the so-called “Trump trade,” which refers to theories of how stocks will do—and which sectors will do best—if former President Trump wins in November (in our view, an unknowable outcome for now). And then it helpfully sticks a dagger in this thesis with a simple point: “… the stock market is amoral and apolitical. There have been market misfortunes under both political parties but, for the most part, the stock market has done well under both Democrats and Republicans.” Yes, and as the article goes on to note—citing research from Bespoke Investment Group—for all the talk of certain sectors benefiting from Trump and others benefiting from Democratic presidents, returns tell a different story. “‘In President Obama’s eight years, the three top performing sectors were consumer discretionary, technology and health care; for Trump, the three top performing sectors were the same,’ the group said. ‘Likewise, energy was the worst performing sector for both presidents, and financials was in the bottom three.’” More recently, while everyone notes President Biden’s policies favor renewable energy over oil and gas while Trump’s rhetorical style takes the opposite tack, a clean energy ETF did great under Trump while falling under Biden—and an oil and gas ETF stumbled under Trump but soared under Biden. (Speaking of which, MarketMinder doesn’t make individual security recommendations and highlights this for the theme only.) As the article notes, while politics matter, so do global supply and demand trends. Now, we do quibble with the final section, which argues gridlock is an overrated positive because stocks have risen during periods of unified government. A fine observation, but gridlock can exist when one party controls Congress and the White House if its margin is small and it is divided internally. Also, markets move most on the gap between reality and expectations, so if expectations for radical change abound and the government simply does a bit less than feared, that can be bullish. Just, you know, some nuance.


Japan Cuts Growth Forecast, Prime Minister Warns of Weak-Yen Pain

By Staff, Reuters, 7/19/2024

MarketMinder’s View: Japan’s government slashed its GDP growth forecast for the fiscal year ending March 2025, projecting a mere 0.9% increase (down from January’s 1.3% estimate). This is still growth, which would likely be welcome after the recent GDP decreases, but the reasoning here is noteworthy and points to a timeless truth about markets. The government cited the weak yen’s impact on household costs and purchasing power (all else equal, the weak yen raises the cost of imported goods, which weighs heavily in a country that imports most of its energy). That is a noteworthy headwind against domestic demand. Yet Japanese stocks have done very well when measured in yen and keep hitting all-time highs. So, what gives? The yen’s weakness is a well-known headwind, and markets dealt with it long ago. Plus, the currency creates winners and losers. It isn’t a net negative. For multinational businesses with strong export markets, the profits from currency conversion (changing overseas revenues back into yen) can offset or exceed the higher import costs, boosting earnings. Japan has a lot of big multinationals that know how to deal with and benefit from currency swings. This is a big reason why we often point out the economy isn’t the stock market.


British Retail Sales Slump by More Than Forecast Amid Chilly Weather

By Richard Partington, The Guardian, 7/19/2024

MarketMinder’s View: We wouldn’t read any more into June’s -1.2% m/m drop in retail sales volumes than we would into May’s 2.9% rise. Or April’s -1.5% m/m drop. Or a potential July boom tied to the European soccer tournament and other big events. Britain’s wacky weather just played too great a role in what is already, normally, a rather bouncy data set. Taking a broader view, the overall trend is inching higher after a largely flat 2023, showing consumers are regaining purchasing power after the painful inflation spike. With wage growth still outpacing inflation, this looks likely to continue. And this is all without a single Bank of England rate cut, demonstrating the needlessness of all the attendant speculation. Thankfully, stocks see the UK’s resilience and improvement even if headlines don’t quite.