Daily Commentary

MarketMinder’s View: Please note our interest here is only in the titular discussion; the news roundup following it is beyond our scope. We highlight this because it encapsulates the market fears currently swirling. (Also, as it mentions specific companies, we remind readers MarketMinder doesn’t make individual security recommendations.) So what is supposedly eating investors? According to the article: 1) “the return of overt hostility in the Middle East,” 2) potential IPO indigestion and 3) “... the most important factor driving market nerves is probably also the most ‘routine’ one. All else being equal, markets don’t like it when interest rates go up.” Although all three developments can weigh on sentiment, only one is a fundamental factor we think is worth watching: the second. IPO hype—and an equity supply glut—are certainly some things to watch for since areas where reality may underwhelm 3 to 30 months ahead can face headwinds. That they are centered in AI and Tech highlight the high sentiment confronting these stocks today. But outside those categories, expectations are far more subdued—there is plenty of room for positive surprise to drive the global bull market, particularly outside America. Beyond this, the Iran war may ding sentiment occasionally but lacks much punch. From markets’ perspective, regional wars aren’t bear market fuel and the resumption of Persian Gulf hostilities has loomed for months—it isn’t shocking—and anticipation is mitigation. Last, but not least, rising rates’ threat is an old, “routine” myth that has never held water. Simply, rates don’t drive stocks, which move on the gap between earnings’ fundamentals and how well markets have priced them. Rates hardly enter into that equation. Then, from a higher level, ask: When has stocks’ big picture backdrop not looked “messy”? From this vantage point, the wall of worry looks high—reason enough to remain bullish.

MarketMinder’s View: This article provides an in-depth look into the Social Security Trustees’ annual report, which warns the Old-Age and Survivors Insurance Trust Fund will now become “insolvent” in 2032, a year earlier than expected, “triggering automatic benefit cuts of 22 percent, as mandated under current law.” In doing so, however, these shifting projections inadvertently show why you shouldn’t take them to the bank. The report gives three reasons for moving forward Social Security’s insolvency date: 1) The One Big Beautiful Bill Act “reduced the program’s revenues,” 2) immigration restrictions’ creating “a smaller workforce and lower payroll tax revenues” and 3) “Lower projected fertility rates.” That may sound daunting, but here is the thing: Those variables aren’t set in stone. Legislation changes—indeed, that is why Social Security didn’t go insolvent in 1983. Congress tweaked taxes and benefits slightly, kicking the can all the way to *checks notes* 2032(-ish). When constituents’ and voters’ livelihoods are affected, there is every reason—and all the incentive—for Congress to act again. The same goes for immigration policy, which blows with the political wind. Lastly, fertility may be waning, but longevity is rising—alongside seniors’ workforce participation. Straight-line demographic projections oversimplify the many moving parts that confound long-term forecasts. All this to say: Reports of Social Security’s insolvency are greatly exaggerated.

MarketMinder’s View: Despite ongoing fighting in the Middle East, economic reality is once again proving more resilient than feared. Increasing amounts of clandestine Persian Gulf shipments are “part of a growing number of tankers that are turning their transponders off to lift oil flows through the Strait of Hormuz from a trickle to a stream. While conventional vessel-tracking data show little change in shipments, senior shipping executives, Asian oil buyers and satellite images paint a different picture: That Hormuz is now a lot less blocked, with transits becoming more steady and greater in volume.” As the article details (and we covered earlier), Middle East oil flows have persisted thanks to US-led assistance in getting select ships through the gulf and, crucially, via other workarounds (e.g., utilizing pipelines that avoid the strait). Of course this is far from ideal: “About 2 million barrels a day of oil and related products are now flowing out of the Gulf, according to Rapidan Energy Group—a level that’s far below normal, but much higher than earlier in the conflict.” But here again, this misses that some five to seven million barrels are using pipelines, which utterly avoid the strait. So the decline isn’t nearly as great as feared earlier. Moreover, bull markets don’t require perfection, only for things to go a bit better than expected—a reason oil prices have cooled (and haven’t resurged) since their April high.