MarketMinder Daily Commentary

Providing succinct, entertaining and savvy thinking on global capital markets. Our goal is to provide discerning investors the most essential information and commentary to stay in tune with what's happening in the markets, while providing unique perspectives on essential financial issues. And just as important, Fisher Investments MarketMinder aims to help investors discern between useful information and potentially misleading hype.

Get a weekly roundup of our market insights.

Sign up for our weekly email newsletter.




Disinflation Is Happening in All the Right Places

By Jonathan Levin, Bloomberg, 6/13/2024

MarketMinder’s View: Don’t read too much into one month of data—a point this piece reiterates several times—but the review here of May’s CPI report highlights a noteworthy, longer-running theme: US disinflation is broad-based. This article looks under the hood to find a spate of price categories cooling, from personal services (which include haircuts) to motor vehicle insurance. The latter “… swung from a major source of upward inflationary pressure in the past year to a slight drag, providing some relief on the headline number—albeit meaningless relief because it tells us little about where inflation is heading. Companies have lifted insurance premiums to account for past inflation in the underlying cost of autos, parts and repairs, yet that occurs with a lag due to heavily regulated pricing.” What about shelter prices, represented primarily by owner’s equivalent rent (OER)—a hypothetical amount nobody actually pays and comprises a sizable chunk of CPI? “As for shelter, the heavily weighted rent and owners’ equivalent rent categories saw prices rise 0.4% from the previous month, the same as April. But Inflation Insights LLC President Omair Sharif projects that it may start stepping down in June (with the data released the following month). He’s keeping an eye on the Bureau of Labor Statistics’ All Tenant Regressed Rent Index, which will get updated in July and tends to provide a strong signal about where CPI rents are going.” Now, this information will neither tell you where prices are headed nor reveal anything new to forward-looking stocks. But easing prices may ease a headwind that has long weighed on consumer sentiment, allowing investors to see the economic environment isn’t as poor as many think. For more, see yesterday’s commentary, “Quit Playing the Fed’s Dull Waiting Game.”


US Corporate Stockpiles Grow, Soaring to Record $4.11 Trillion

By Nina Trentmann, Bloomberg, 6/13/2024

MarketMinder’s View: This article mentions a specific company in its conclusion, and as a reminder, MarketMinder doesn’t make individual security recommendations. We share this piece to highlight a broader theme: Corporate America’s balance sheets are flush right now. “US companies added to their cash stockpiles in the first quarter, sending holdings to a record $4.11 trillion as a resilient economy and relatively high interest rates helped boost returns. Holdings rose 12.6% from the prior-year period, and were $1.28 trillion above their pre-Covid baseline, according to a recent analysis of the Federal Reserve’s quarterly flow of funds by treasury advisory firm Carfang Group.” Now, how this research group came to the exact figure isn’t completely clear. But the dataset—the Fed’s Z1 Flow of Funds report—shows companies are broadly cash- and cash-like asset rich. These stockpiles won’t necessarily all go into future growthy initiatives—many businesses may use some of that buffer to weather a rainy day (and have increasingly done so ever since 2008). But we do think this speaks to Corporate America’s ability to self-fund investment. After two years of belt-tightening for a recession that never came, we think American companies are well positioned to go on offense, supporting ongoing expansion for the foreseeable future. Furthermore, their cash-flush nature illustrates another reason why rate hikes weren’t all-powerful over stocks—these businesses didn’t need oodles of credit and actually earned higher interest through hikes. Obviously, that isn’t true universally—but enough that it is worth considering.


Dollar Doomsters Have Got It All Wrong

By Katie Martin, Financial Times, 6/13/2024

MarketMinder’s View: Here is a pretty good piece showing that the long-running fear of the dollar losing its status as the world’s primary reserve asset is hooey. Many claim governments like China or Russia are in cahoots to reduce the dollar’s hegemony, whether through the ascension of another currency (e.g., China’s yuan) or an alternative option (e.g., gold). But this piece refreshingly refutes the fear with data and facts. For example, “The share of global central bank reserves held in dollars declined in recent decades. Back in 2016, the currency made up more than 65 per cent of official reserves, according to data from the IMF. By the end of 2023, that had shrunk to 58.4 per cent. The amount held in Chinese renminbi at the start of 2016 was zero. Between the end of that year and 2023 it jumped 188 per cent. But while that sounds huge, it is still just a 2.3 per cent slice of the total.” According to the New York Fed, this pullback was not due to a global cooling towards the buck, but instead, a handful of countries’ (e.g., China and Russia) reducing their dollar holdings and Switzerland’s huge accumulation of euros (tied to the Swiss National Bank’s monetary policy). Furthermore, a point not made here: Because the absolute amount of reserves skyrocketed since the early 2000s, the dollar’s share of reserves may be down, but the absolute dollars central banks hold is up dramatically. Whatever way you look at it, dollar demand remains robust—a driver that isn’t likely to change materially in the foreseeable future. One point we do quibble with: There is no real evidence the dollar’s reserve currency status is all that central to bond demand or much of an exorbitant privilege.


This Is Not the World That the Peak Oil Energy Doomer Promised

By James Pethokoukis, AEIdeas, 6/13/2024

MarketMinder’s View: We highlighted the International Energy Agency’s (IEA’s) annual medium-term oil market report yesterday in MarketMinder’s “What We’re Reading” section, making the point that many of the outfit’s longer-term projections are unknowable now—and thus, not anything to base portfolio decisions on, given stocks don’t look more than 30 months into the future. This article provides a useful example on the shortcomings of super long-term projections: oil forecasts in the early 2000s. “… Soaring oil prices back then fueled fears that global oil and gas production had peaked. Crude oil prices skyrocketed from $20 a barrel in 2001 to a record $147 by July 2008, reviving 1970s-era, ‘Limits to Growth’ concerns about resource depletion. Some catastrophists, like journalist James Howard Kunstler, predicted a destabilizing oil shortage that would force Americans back to an agrarian lifestyle, with suburbs becoming slums or ruins.” Not only did those doomsday scenarios not come to pass, but the US has gone on to become the world’s top oil producer. Now, this doesn’t mean oil demand will climb in perpetuity—rather, remember global markets are constantly changing, and that dynamism is why forecasts based on straight-line math often end up missing the mark.


Disinflation Is Happening in All the Right Places

By Jonathan Levin, Bloomberg, 6/13/2024

MarketMinder’s View: Don’t read too much into one month of data—a point this piece reiterates several times—but the review here of May’s CPI report highlights a noteworthy, longer-running theme: US disinflation is broad-based. This article looks under the hood to find a spate of price categories cooling, from personal services (which include haircuts) to motor vehicle insurance. The latter “… swung from a major source of upward inflationary pressure in the past year to a slight drag, providing some relief on the headline number—albeit meaningless relief because it tells us little about where inflation is heading. Companies have lifted insurance premiums to account for past inflation in the underlying cost of autos, parts and repairs, yet that occurs with a lag due to heavily regulated pricing.” What about shelter prices, represented primarily by owner’s equivalent rent (OER)—a hypothetical amount nobody actually pays and comprises a sizable chunk of CPI? “As for shelter, the heavily weighted rent and owners’ equivalent rent categories saw prices rise 0.4% from the previous month, the same as April. But Inflation Insights LLC President Omair Sharif projects that it may start stepping down in June (with the data released the following month). He’s keeping an eye on the Bureau of Labor Statistics’ All Tenant Regressed Rent Index, which will get updated in July and tends to provide a strong signal about where CPI rents are going.” Now, this information will neither tell you where prices are headed nor reveal anything new to forward-looking stocks. But easing prices may ease a headwind that has long weighed on consumer sentiment, allowing investors to see the economic environment isn’t as poor as many think. For more, see yesterday’s commentary, “Quit Playing the Fed’s Dull Waiting Game.”


US Corporate Stockpiles Grow, Soaring to Record $4.11 Trillion

By Nina Trentmann, Bloomberg, 6/13/2024

MarketMinder’s View: This article mentions a specific company in its conclusion, and as a reminder, MarketMinder doesn’t make individual security recommendations. We share this piece to highlight a broader theme: Corporate America’s balance sheets are flush right now. “US companies added to their cash stockpiles in the first quarter, sending holdings to a record $4.11 trillion as a resilient economy and relatively high interest rates helped boost returns. Holdings rose 12.6% from the prior-year period, and were $1.28 trillion above their pre-Covid baseline, according to a recent analysis of the Federal Reserve’s quarterly flow of funds by treasury advisory firm Carfang Group.” Now, how this research group came to the exact figure isn’t completely clear. But the dataset—the Fed’s Z1 Flow of Funds report—shows companies are broadly cash- and cash-like asset rich. These stockpiles won’t necessarily all go into future growthy initiatives—many businesses may use some of that buffer to weather a rainy day (and have increasingly done so ever since 2008). But we do think this speaks to Corporate America’s ability to self-fund investment. After two years of belt-tightening for a recession that never came, we think American companies are well positioned to go on offense, supporting ongoing expansion for the foreseeable future. Furthermore, their cash-flush nature illustrates another reason why rate hikes weren’t all-powerful over stocks—these businesses didn’t need oodles of credit and actually earned higher interest through hikes. Obviously, that isn’t true universally—but enough that it is worth considering.