Daily Commentary

MarketMinder’s View: Please note MarketMinder is nonpartisan, preferring no politician or political party over another. However, this in-depth review of Italian Prime Minister Giorgia Meloni’s government, in power since September 2022, raises some key themes that investors benefit from internalizing. One, politicians on the campaign trail and politicians in office are different beasts—the former can be bombastic and radical-sounding when trying to win votes, while the latter frequently moderate once in power. “In office, Meloni and her League finance minister Giancarlo Giorgetti have displayed an unexpectedly zealous commitment to fiscal discipline. They have cut Italy’s budget deficit to the 3 per cent of GDP target set by the EU, from 8 per cent when they took charge. … In opposition, the right-wing parties in Meloni’s coalition said that ‘austerity was the worst thing a government can do’, points out economist Veronica De Romanis, a former treasury official who is now a professor at Rome’s Luiss University. ‘But if you look, the current government has imposed the biggest dose of austerity, raising taxes and cutting expenditure.’” Which brings us to the second theme: Politicians have limited political capital, and when elections loom (Italy’s next general election is scheduled for 2027), they are less likely to push major structural reforms that create winners and losers and instead focus on keeping their constituents on board. “But exercises in cutting wasteful expenditures would inevitably put special interest groups on the defensive. That helps explain why Meloni, despite her coalition’s comfortable parliamentary majority, has mostly opted for straight budget cuts after initially shutting down an unsustainable construction bonus, and suspending a controversial welfare scheme.” These themes aren’t unique to Italy, and investors can apply the lessons here to their political analysis elsewhere as they search for investment opportunities. For more, see our December commentary, “Market Lessons From Europe’s Political Dramas.”

MarketMinder’s View: For those of you keeping tabs on major monthly US economic data reports, here is some news you can use: The Bureau of Economic Analysis (BEA) will publish a report covering October and November personal consumption expenditures on January 22, while its initial Q4 GDP estimate and December PCE figures will hit February 20. These delays are a consequence of last year’s government shutdown, and the article shares some of the caveats that will accompany the titular datasets. For instance, the BEA relies on the Bureau of Labor Statistics’ (BLS’s) data to put together its PCE inflation measure, but “The BLS wasn’t able to collect most price data in October because of the shutdown, and in December published an inflation report covering October and November that left much of the October data blank. That left a problem for the BEA, depriving it of data it relies on in its own calculations. To get around that issue, the BEA said that it will average September and November numbers to interpolate the October missing data.” Now, Q4 2025 price data aren’t likely to trip up forward-looking markets, which have long since moved on, but this one-off workaround reinforces how economic measures are always imperfect—helpful to remember as things get back to normal. Oh and bear in mind that GDP release date hinges on the government not shutting down again at this month’s end.

MarketMinder’s View: As always, MarketMinder’s discussion of politics is nonpartisan and zeroes in on the economic effects (or lack thereof). The article reports the UK Treasury is preparing to U-turn on planned changes to business rates (basically a commercial property tax) for pubs. For some context, Chancellor Rachel Reeves’s Budget last year initially pledged across-the-board cuts for small business, but details released the next day revealed the expiration of COVID-era relief, alongside a property revaluation, would result in major tax hikes for the hospitality sector even with the headline rate cuts. Regarding the end of COVID policies in particular: “This would exacerbate the impact of a revaluation of property valuations, the basis for business rates, which has caused a rise in the taxable value of pubs and restaurants from their Covid-affected lows. Starting from April, rates will rise by 115% for the average hotel and 76% for a pub, compared with 4% for large supermarkets and 7% for distribution warehouses.” But after a sharp outcry from the hospitality industry, the government reportedly plans to climb down from its original plan. Now, from a macroeconomic perspective, hospitality comprises approximately 3% of total UK output (on a gross value added basis, per the Office for National Statistics), so tax changes here aren’t economic gamechangers. More interesting to us is that, “… it will be another U-turn [from the government], following those on curbs to winter fuel payments for older people, and on changes to inheritance tax for farms, the latter announced two days before Christmas.” Government policy isn’t set in stone, worth keeping in mind for those investors who may act based on prospective (or even announced) changes. And together, these changes may help reduce uncertainty and boost sentiment modestly even though their scope is small. For more, see our November commentary, “Few Surprises: Leaks and Trial Balloons Mute the Market Effects of Britain’s Tax Shifts.”