Daily Commentary

MarketMinder’s View: While this article is technically an announcement of the columnist’s latest monthly book club pick (and we haven’t read the book), it also sheds some light on a difficult and important issue many folks will have to deal with: helping with or outright overseeing their aging parents’ finances. This complex task tends to occur at the most emotionally difficult times, magnifying the potential pitfalls (e.g., not being able to access accounts when the bills are due). If you know you will need to eventually help aging parents but wait until that lifechanging medical emergency happens to start getting their ducks in a row, you will always be four steps behind. So we heartily agree that the more you can work with them to sort things out in advance, the better it will be for them (and you). “As best you can, get an inventory of your loved one’s assets to identify how you can access cash if needed. Once a person passes away, bank accounts are often frozen, potentially cutting you off from the funds to handle their final affairs. You’ll need a plan for bridge money to cover pressing costs like keeping the rent current while you clear out an apartment or paying for funeral expenses before the estate is legally settled and the rest of the money is released.” We would also note that it may be beneficial to explore getting power of attorney—and if so, to take the time to determine which kind is most suited to your situation. Some take effect only if the principal is deemed incapacitated, which can present hurdles if you need to be able to take over and pay the bills in a pinch. The more legwork you and your parents do in advance, the more you will be able to help them and be fully present with them in the difficult times when they need you most.

MarketMinder’s View: Friendly reminder, folks: Valuations don’t predict performance. Not at the broad market level. Not at the sector level. Not at the company level. (Speaking of which, MarketMinder doesn’t make individual security recommendations and features this article for the broader theme only.) So no, Energy stocks aren’t suddenly a screaming buy just because their price-to-earnings (P/E) ratios are down and lower than other sectors, as the article alleges. Heck, the article even includes the breadcrumbs proving the point: “True, the sector was trading at high multiples before the conflict began. Even so, the selloff in energy equities puts the group at less than 14 times forward earnings, making it 36% cheaper than the overall index. That is steeper than its 29% discount on average over the past decade.” Sooooo ... Energy has been cheaper than the market for a decade. And you know what else it did during that decade? Lag global stocks by almost 100 percentage points over the trailing 10 years through yesterday’s close (using MSCI World Index and MSCI World Energy returns with net dividends in USD, per FactSet). As for those high pre-conflict P/E ratios, that reflected a big run in Energy stocks as they and oil pre-priced the rising likelihood of war and supply disruptions. Since Energy’s high on March 27, we think the sector has been un-pricing all of that fear and discounting the high likelihood of a relatively benign supply landscape over the next 3 – 30 months as the conflict resolves, the Strait of Hormuz reopens and new supply sources bear more fruit. Which gets to the main problem here: P/Es look backward, reflecting past performance and either old earnings or earnings forecasts markets have already priced in, depending on the measure used. Markets look forward, weighing how things are likely to unfold relative to what is already priced over the next 3 – 30 months. Having some Energy exposure is fine for diversification, but valuations aren’t a valid reason to load up.

MarketMinder’s View: In today’s episode of StarmerWatch, embattled UK Prime Minister Keir Starmer is digging in despite more Labour Members of Parliament (MPs) and cabinet members calling for his ouster. This is obviously a political story, so we remind you we are nonpartisan, prefer no politician nor any party and assess developments for their potential market implications only. So far, the intraparty opposition’s strategy seems to be to try to goad him into resigning so that no one has to actually take the risk of mounting a leadership challenge—likely because historically in UK politics, the person to use the proverbial dagger doesn’t end up winning the actual contest. Starmer’s response is basically, if you want me out, take the risk and follow the procedure as laid out in our party’s by-laws. While four cabinet members broke ranks, others are rallying behind him. Complicating matters, one of the two people deemed most likely successor, Manchester Mayor Andy Burnham, isn’t currently in Parliament (and has also twice lost Labour leadership races). Getting him in could take months and requires winning a by-election in an era when Labour is bleeding support to the populist left and right. The other candidate with favorable odds, Health Secretary Wes Streeting, “has said he will not initiate a contest, but would join one if it was already taking place,” which the article notes is not going down well with his colleagues. So it is all kind of a big mess, resulting in UK markets and bond yields wobbling a bit as the rumors ebb and flow. We suggest looking beyond the daily news and wobbles and weighing the situation from markets’ longer-term standpoint. Uncertainty is high now but poised to fall as we gradually get clarity, which will allow markets to focus on the future and the high likelihood that whoever leads the Labour Party faces deep opposition within the party, which usually means legislation moves slowly and gets sanded down in order to pass, easing markets’ legislative risk aversion.