Daily Commentary

MarketMinder’s View: This article could use a lesson in how markets work, in our view. It expresses befuddlement at German stocks’ (as measured by the DAX) making new highs despite the titular “faltering economy.” The explanation expressed here: “growing confidence that interest rates will soon be cut.” Other analysts cited point to less worse economic data perhaps indicating an eventual upturn, falling energy prices “supporting profitability” and German stocks’ exposure to a stronger global economy. Here we note that MarketMinder doesn’t make individual security recommendations, as a couple companies are mentioned at this point. But these are incidental and miss the big reason why stocks seemingly shrug off the weak data: They are old news to markets. In our view, stocks—which move most on the gap between reality and expectations over the next 3 – 30 months—already reflect Germany’s economic struggles. German markets have been contending with recession fears for close to two years—recent signs of weakness aren’t catching them by surprise. If there is a recession, it wouldn’t shock. Meanwhile, stocks are looking beyond the next quarter. We find markets are exceedingly good at separating wheat and chaff, and they are fathoming better days ahead than most appreciate.

MarketMinder’s View: Here is a refreshing look at America’s economy and markets. Hyperbolic headlines have dominated over the last year, but the article’s view is even-keeled: “I don’t find anything sinister or strange in these charts. Instead, I see an economy that is growing moderately (perhaps only modestly). I see a healthy labor market, an equity market that is rising at a normal pace, bond yields that have most likely risen by enough to cool inflation, credit spreads that are unremarkable (which is good), and a dollar that has been fortified by Fed tightening.” Risk isn’t absent, but it looks more and more like COVID-related dislocations are fading and things are gradually returning to prepandemic trends—which were a-ok for stocks.

MarketMinder’s View: Please note that MarketMinder is nonpartisan, preferring no party or politician over others anywhere. Our commentary on political happenings serves only to assess their economic and market implications. In this case, we think Argentina’s President-elect Javier Milei is a shining example of how politicians often espouse extreme rhetoric and policies on the campaign trail—to draw attention (and funding)—only to moderate in office, as appears likely here. To wit: “Days ahead of his inauguration Sunday, Milei is backpedaling, surprising supporters and opponents. He has jettisoned some top economic advisers who were enlisted to help him kill the central bank and adopt the U.S. dollar as the national currency. He has aligned instead with officials from a previous center-right government that he previously derided. ‘No one said eliminating the central bank was going to be instantaneous,’ he said Sunday. After promising to cut ties with China—he had referred to the communist regime as assassins—he has since exchanged cordial words with Beijing. China is Argentina’s top buyer of soy, and Argentina is Latin America’s third-largest recipient of Chinese state-bank loans in South America. Even his tone has shifted from talk-show personality to stoic voice of reason. He acknowledged the transition from nearly two decades of leftist Peronist governments to his vision of unfettered capitalism could take longer than expected. His moderation comes as powerful labor unions and social movements are lining up against him.” (Not to mention Argentina’s congress, where Milei’s party is in the minority.) Argentina’s share of the global economy and markets is tiny, but this saga shows how elections frequently underwhelm what many initially fear (or hope) heading into them. Something to keep in mind as 2024 campaigns heat up in the US.