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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โ€˜Sovereign Wealthโ€™ for Politicians

By Editorial Board, The Wall Street Journal, 2/7/2025

MarketMinder’s View: As always, we are politically agnostic, preferring no politician nor any party. We assess developments for their potential economic and market effects only. This piece very clearly and directly shows why it will be no bad thing if intraparty gridlock blocks the Trump administration’s proposed creation of a sovereign wealth fund (SWF). Typically, countries start SWFs when they have piles of revenues from state-controlled national resources or a glut of foreign exchange reserves. Often, they will invest in overseas assets, including infrastructure. The SWF proposed by the administration is logistically much more complicated. “Washington’s biggest asset is its $1.6 trillion in student debt, about a quarter of which is already set to be written off. Other phantom assets include hundreds of billions of dollars in loans for disaster relief, low-income housing and green energy. The U.S. also owns some $2.6 trillion in property, software, plants and equipment, which are subject to depreciation. Other countries that have wealth funds, such as Norway, finance them with revenue from oil or resource sales. The U.S. earns revenue from spectrum sales and royalties from leases. But the politicians spend it.” Beyond that, as the article documents, SWFs often invite corruption and would result in the government owning stakes in—and probably interfering with—private businesses. It all runs far too close to socialism, literally owning the means of production. And it is far from an automatic money maker. The UK, as we type, is trying to manage losses of about £250 million in its government-backed investment fund. Buying domestic stocks wasn’t a good idea when the Bank of Japan did it through its quantitative easing program. It wasn’t a good idea when China did it to stabilize markets. And this isn’t a good idea in America, either, in our view, and would likely carry unintended consequences investors would need to consider. Now, it is far from a done deal, the constitutionality is questionable to put it mildly and we don’t think it is likely to go very far. And that is the good news.


Grim News for Rachel Reeves Is Good News for the FTSE 100

By Nils Pratley, The Guardian, 2/7/2025

MarketMinder’s View: This piece is a mixed bag, with a pretty crucial point nestled among some arguments we would quibble with. It explores why UK stocks might be at all-time highs (in pounds) and rising (in pounds and dollars) despite slowing GDP growth and other indications of a struggling economy. After rightly noting the stock market isn’t the economy, it credits BoE rate cuts with weakening the pound and therefore raising UK-based multinationals’ overseas earnings. “Earnings made in dollars are suddenly worth slightly more in terms of sterling-denominated share prices. Those companies exporting from the UK also become marginally more competitive.” Thing is, while this is mathematically true, companies hedge for currency swings, mitigating the impact, and overseas earnings tend to be reinvested overseas, not repatriated. But from here, it segues into an alternative explanation, making the observation that the UK is a value-heavy market. While we think it errs in saying valuations and dividend yields are why UK stocks are outperforming lately, it is true that value is beating growth globally so far this year. When this happens, the UK will generally outperform. But we think this is less about US Tech being overvalued and shaky and more about the wall of worry being higher outside the US, with UK economic fears one example. The wall looks highest in value-heavy places, namely the UK and eurozone.


Economy Adds 143,000 Jobs in January, Reflecting a Slower but Solid Pace of Growth This Year

By Lauren Kaori Gurley, The Washington Post, 2/7/2025

MarketMinder’s View: We would sum this up as a pretty muted reaction to an overall fine jobs report, which is a good sentiment snapshot. Nonfarm payrolls rose 143,000 in January, slowing sharply from November and December (revised up by a combined 100,000) but pretty good considering the Los Angeles wildfires weighed on hiring in a major metro area. We would add that there is probably a distorted base effect, as it looks like pre-election jitters pushed a lot of hiring from October into 2024’s final two months. But overall, a nice, backward-looking confirmation of US economic growth late last year. The coverage here, including the analyst quotes, acknowledge and cheer all of this, taking the slowdown in stride—an overall rational response. Yet there are some lingering worries over tariffs, inflation and the new administration’s approach to the federal workforce, keeping expectations measured. As markets gradually see these are false fears, however subconsciously (we doubt there will be some mass epiphany that wages don’t drive inflation, for example), stocks should keep climbing the wall of worry.


โ€˜Sovereign Wealthโ€™ for Politicians

By Editorial Board, The Wall Street Journal, 2/7/2025

MarketMinder’s View: As always, we are politically agnostic, preferring no politician nor any party. We assess developments for their potential economic and market effects only. This piece very clearly and directly shows why it will be no bad thing if intraparty gridlock blocks the Trump administration’s proposed creation of a sovereign wealth fund (SWF). Typically, countries start SWFs when they have piles of revenues from state-controlled national resources or a glut of foreign exchange reserves. Often, they will invest in overseas assets, including infrastructure. The SWF proposed by the administration is logistically much more complicated. “Washington’s biggest asset is its $1.6 trillion in student debt, about a quarter of which is already set to be written off. Other phantom assets include hundreds of billions of dollars in loans for disaster relief, low-income housing and green energy. The U.S. also owns some $2.6 trillion in property, software, plants and equipment, which are subject to depreciation. Other countries that have wealth funds, such as Norway, finance them with revenue from oil or resource sales. The U.S. earns revenue from spectrum sales and royalties from leases. But the politicians spend it.” Beyond that, as the article documents, SWFs often invite corruption and would result in the government owning stakes in—and probably interfering with—private businesses. It all runs far too close to socialism, literally owning the means of production. And it is far from an automatic money maker. The UK, as we type, is trying to manage losses of about £250 million in its government-backed investment fund. Buying domestic stocks wasn’t a good idea when the Bank of Japan did it through its quantitative easing program. It wasn’t a good idea when China did it to stabilize markets. And this isn’t a good idea in America, either, in our view, and would likely carry unintended consequences investors would need to consider. Now, it is far from a done deal, the constitutionality is questionable to put it mildly and we don’t think it is likely to go very far. And that is the good news.


Grim News for Rachel Reeves Is Good News for the FTSE 100

By Nils Pratley, The Guardian, 2/7/2025

MarketMinder’s View: This piece is a mixed bag, with a pretty crucial point nestled among some arguments we would quibble with. It explores why UK stocks might be at all-time highs (in pounds) and rising (in pounds and dollars) despite slowing GDP growth and other indications of a struggling economy. After rightly noting the stock market isn’t the economy, it credits BoE rate cuts with weakening the pound and therefore raising UK-based multinationals’ overseas earnings. “Earnings made in dollars are suddenly worth slightly more in terms of sterling-denominated share prices. Those companies exporting from the UK also become marginally more competitive.” Thing is, while this is mathematically true, companies hedge for currency swings, mitigating the impact, and overseas earnings tend to be reinvested overseas, not repatriated. But from here, it segues into an alternative explanation, making the observation that the UK is a value-heavy market. While we think it errs in saying valuations and dividend yields are why UK stocks are outperforming lately, it is true that value is beating growth globally so far this year. When this happens, the UK will generally outperform. But we think this is less about US Tech being overvalued and shaky and more about the wall of worry being higher outside the US, with UK economic fears one example. The wall looks highest in value-heavy places, namely the UK and eurozone.


Bank of England Suffers Exodus of Gold Bullion

By Szu Ping Chan, The Telegraph, 2/7/2025

MarketMinder’s View: This is actually a pretty funny story. The Bank of England (BoE), which has a gold storage facility private entities can use, has been processing a ton (sorry) of requests to withdraw gold bars. The chatter surrounding this, which the article alludes to, is that owners are freaking out over tariffs and want to repatriate their gold to the US before the Trump administration has the chance to start taxing those transactions. Now, there are no actual plans to tax gold imports from the UK, but fear is a weird thing. Anyway, perhaps there is some of that going on. But mostly, gold owners are responding to a market quirk. Gold trades in two places: New York and London. Each has its own benchmark price. Usually they trade in lockstep. But lately, New York gold futures prices rose above London gold spot prices, creating a funky arbitrage opportunity for people with the means to do so to take their London gold and sell it in New York. This piece notes the armored trucks clogging “the bullion yard” and making it hard for BoE employers to get to work. We have also seen amusing anecdotes of chartered transatlantic flights. It all sounds costly and cumbersome, but for the dealers involved, the return seems to exceed the cost. So no, tariff risk didn’t suddenly make the BoE a bad place for people to keep their gold. People are just taking advantage of an arbitrage opportunity. We chuckled at this and hope you do, too.