Daily Commentary

MarketMinder’s View: US retail sales bounced back in February, rising 0.2% m/m after January’s -1.2% slump. While the headline figure missed analysts’ expectations, flagging auto sales drove the weakness. Excluding autos, sales rose 0.3% m/m, in line with estimates. Overall, the report wasn’t bad. “Online spending helped boost the sales number for the month, with nonstore retailers reporting a 2.4% increase. Health and personal care showed a 1.7% gain while food and beverage outlets saw a 0.4% rise.” Some caveats worth considering: US retail sales aren’t a complete snapshot of consumer spending since they don’t account for inflation or most services spending—the bulk of US personal consumption. But sometimes, pundits’ reactions to the data are more telling, as is the case here. After covering retail sales’ disappointing-but-still-positive growth, the article jumps straight into fears around tariffs and other trade tensions, even noting the Atlanta Fed’s GDPNow pointing to possible Q1 GDP contraction (which we covered here and here). To us, this is another sign of sour sentiment toward the US economy—something we have seen in abundance lately. Such negativity makes it easier for economic reality to clear expectations, suggesting the bull market has more wall of worry to climb.

MarketMinder’s View: The central thesis here? US derivatives markets and other volatility gauges are indicating the worst of recent negative volatility has passed, which augurs well for stocks. “While perhaps falling short of a full vote of confidence that the S&P 500 will extend its Friday rebound, the fact that options pros are cashing out their downside hedges may give solace to those trying to gauge whether the selling pressure has abated.” One problem here: Past performance doesn’t indicate future results, and the market movements described here are just that—history. Options traders don’t have special insight other investors lack—rather, their decisions to offload some of their downside hedges are based on their views of ongoing market conditions. Those are opinions, not definitive realities. In our view, some improved moods in options markets may signal the sharp fear is easing to an extent, though it is a stretch to say optimism has returned. Keep this in mind when pundits hype derivatives markets’ meaning. When weighing stocks’ likely direction, consider how economic, political and sentiment factors might affect corporate earnings over the next 3 – 30 months. Options traders’ actions are just a fraction of that.

MarketMinder’s View: Confidence toward the eurozone’s largest economy remains in the dumps, which the Ifo Institute’s latest forecast illustrates. The Munich-based research firm now predicts just 0.2% annual GDP growth in 2025—down from 0.4% last December—citing “some forecast risks in light of upcoming economic policy decisions in Germany and the United States.” Interestingly, as this piece notes, the downgrade came despite Chancellor-in-waiting Fredrich Merz simultaneously striking a deal to secure the supermajority he needed to push through his €500 billion public investment package. Now, we don’t think the package will propel gangbusters growth in Germany, which we covered in detail here. But persistent skepticism about the German economy, even with the purported public spending boost, reveals how far German sentiment has fallen. At this point, even meager growth—public investment or not—is likely good enough for German stocks.