Daily Commentary

MarketMinder’s View: The recap of daily volatility here is what it is. Our concern is less with the moves and more with how people are portraying them, which we think highlights some key pitfalls and lessons. Also, given the heavy political discussion here, we remind you we are politically agnostic, preferring no politician nor any party and assessing developments for their economic and market implications only. If you haven’t been following, UK Chancellor of the Exchequer Rachel Reeves had a bad day Wednesday, facing what some might sensibly call bullying, leading to widespread questions over her future. UK bond yields spiked as her day got worse, then settled down as Prime Minister Keir Starmer said she isn’t going anywhere. This piece, like many others, casts market movement as a logical fundamental response, arguing markets are very sensitive to the UK’s public finances and any hint that a pro-austerity Chancellor will make way for someone more spendthrift. This piece is a prime example, highlighting analysts who call her a “market-friendly” Chancellor and the importance markets ascribe to her fiscal rules. Look, things like “market-friendly” are always in the eye of the beholder, and markets ultimately care about policies, not personality and reputation. But also, super short-term moves like this typically have much more to do with traders making very short-term plays than an actual, fundamental, effect. Short-term moves are almost always noise. You can’t really look at them and decide Thing X is fundamentally good or bad. Short-term overreactions like this happen regardless of the party or person setting fiscal policy. In our view, it is much more important to note that, irrespective of which party is in charge, UK finances are in a good place, with debt service costs quite manageable relative to tax revenues. Fiscal targets based on a nonpartisan government watchdog’s forecasts are a political issue and rather arbitrary, and that is as much the case now that it is a Labour government wrestling with whether and how to amend the logistical process as it was two years ago when a Conservative government was mulling the same. Keep this in mind and think long-term, focusing on the supply and demand fundamentals underpinning bond markets over the next 3 – 30 months. Short-term moves in this space aren’t any more meaningful than they are in stock markets, in our view.

MarketMinder’s View: This piece touches on the latest political debate in the UK, so we remind you we prefer no politician nor any party and assess developments for their potential investment implications only. Also, the potential reduction of tax-deferred cash saving allowances is really only the jumping-off point for a broader discussion, making this quite relevant for all investors regardless of geography. It makes a simple point: There is a risk in holding too much cash, and investors need to carefully consider their goals (the primary purpose for their money) and time horizon (how long their money needs to last) when choosing how much to allocate to stocks, bonds, cash and other securities. As the article notes, cash is right for situations where return of your money is more important than return on your money, such as an emergency fund, money earmarked for a down payment or other large near-term expense, or similar. But once you establish that, adding more risks going overboard, holding too much in cash, which raises the risk you don’t get the returns you need to reach your goals and reduce the risk of outliving your assets. Don’t underestimate your need for growth. Consider: something “few people properly understand is the ravage of inflation. Even those of us who think about how much we might need to fund our retirement fall into the trap of thinking about this in today’s money. What we need to understand is that even at the Bank of England’s 2pc target for inflation, the pot we manage to accumulate will buy us half as much in 36 years’ time as it does today. At 3pc inflation, our purchasing power will halve in just 24 years.” Stock returns have a long history of outpacing inflation, while cash generally won’t, meaning it may actually increase your risk of missing your goals and needs. For more, see Fisher Investments founder and Executive Chairman Ken Fisher’s June 23 New York Post column, “The Big Problem With ‘Cash Cushions’ and ‘Dry Powder’ in Your Investing Portfolio.”

MarketMinder’s View: The Trump administration’s deadline for the 90-day pause on reciprocal tariffs is next Wednesday, and while many major trade partners are singing an optimistic tune publicly, others are tempering expectations. South Korean President Lee Jae Myung is in the latter camp, saying, “It is difficult to say with certainty whether they [talks] can be concluded” by the deadline, and this article provides some of the specifics on why. For instance, the US and South Korea have talked about Korean investment in American shipyards to boost shipbuilding and a commitment to purchase gas from a potential liquified natural gas project in Alaska. As enticing as that may sound, “One of the people said the talks over shipbuilding cooperation had been complicated by protectionist US legislation preventing foreign involvement in the industry. Korean companies also remain hesitant about committing to the Alaska LNG project, the viability of which has been questioned by energy industry experts, according to several people familiar with the discussions.” Hammering out trade deals is a wee bit more complex than griping about “fairness” (which is always in the eye of the beholder) on social media, hence why even the one with the UK amounts mostly to a deal to make a deal in the future. Now, we don’t think economic growth or the bull market depend on a spate of comprehensive trade agreements coming through next week. Tariffs are a negative, to be sure, but they are also so widely known at this point, they don’t have much negative surprise power left. But it behooves investors to have rational expectations about July 9 (or a future date, should the Trump administration decide to kick the can down the road).