Daily Commentary

MarketMinder’s View: Some better-than-expected and growthy news from July’s UK monthly GDP report this morning: “Figures from the Office for National Statistics (ONS) showed a surprise 0.4% increase in gross domestic product (GDP), compared with 0.3% growth in June. City economists had forecast zero growth.” Most credited that growth to AI and AI-related industries but: “The ONS said industrial production was also up in July, by 0.2%, with a rise in manufacturing output offsetting falls in mining, and electricity and gas supply.” That doesn’t look so directly AI-related. More broadly, “Over the three months to July – a period the ONS says is more representative of economic conditions – GDP growth was also 0.4%, the same pace as in the three months to June.” The rest of the article hypes alleged threats like oil above $100 a barrel, possible rate hikes and more. But those worries have swirled for many months and the UK has proven, as the article puts it earlier, “resilient.” That disconnect shows plenty of fuel for future positive surprise and bull market to us.

MarketMinder’s View: The European Central Bank (ECB) hiked its overnight policy rate by 0.25 percentage point at its meeting today, the second such hike this year, citing above-target inflation of 3.3% y/y (the target is 2.0%) and projections of prices rising 2.1% in 2028. In our view, this is an error. Simply, as the article notes, the uptick in inflation is about energy. Per Eurostat, the eurozone consumer price index excluding energy has been in a 2.2% to 2.4% range all year (it was 2.2% in August for the third consecutive month). That is a hair’s breadth from the target and the lack of spreading price pressures shows little reason to tighten policy. Moreover, we doubt it will do much to quell prices, given the ECB has no ability to affect energy supply. Look, the ECB’s two hikes are small enough that they aren’t bearish, but they are mistakes and global policymakers should tread carefully here. The channel through which monetary policy affects growth and the economy is credit markets, by swaying the yield curve spread (the gap between long and short rates from the same issuer). Banks borrow short term to fund long-term loans, so this gap being positive is a proxy for loan profitability—and, hence, availability. Today it remains positive, even after this hike. But flip it negative through more and more global hikes, and that could change. Keep an eye on news like this and the effects on the yield curve.

MarketMinder’s View: This discussion of possible “tourist taxes” in various UK locales (and perhaps nationally) highlights a broader theme worth internalizing for investors: While we think the old adage, “if you tax something, you get less of it” is generally true, taxes’ downstream consequences aren’t always clear-cut. That seems to hold here. Across the UK, cities are mulling a levy on overnight stays as a way to raise funds. The UK hospitality industry has overall pushed back hard, warning it would reduce tourism and result in thousands of job losses. Yet as this analysis points out, cities in Europe, including Amsterdam, Barcelona and Venice, have imposed similar duties. “But there is little evidence they kept visitors at bay: trips to all three destinations have risen consistently over the past decade (despite Amsterdam charging an additional 12.5% for an overnight stay, believed to be the most expensive tourist tax in Europe). In April 2023, Manchester became the first place in the UK to introduce an overnight visitor levy, charging £1 per room per night in the city centre. A study published in the journal Tourism Management in 2025 found that the tax had had ‘no significant impact’ on the occupancy of hotels in the city.” Why is that? Reality is complex, but think this through: If you really wanted to visit Amsterdam, Barcelona or Edinburgh, would you kibosh your plans over a few extra pounds spent on your hotel? If the rate is high enough, perhaps you would. But a low rate likely does more to spur hard-to-identify substitution. Perhaps the money that went to that levy doesn’t go to an extra pastry or souvenir. Or the business can swallow it by adjusting rates. Or the consumer could forego a trip to one British town in favor of another that charges less or has cheaper accommodations. The data on this won’t ever be totally clear. But investors benefit from putting dire-sounding warnings about taxes roiling local industries into perspective and considering that the range of options is much wider than (in this case) tourism boom or tourism doom, especially when there are elections coming up (as is the case here in America). That same diversity in outcomes applies for many other taxes, too.