Daily Commentary

MarketMinder’s View: According to analytics firm Gallup’s annual poll, 37% of surveyed US adults think real estate is the “best” long-term investment. Gold (23%) ranked second while stocks (16%) were third (rounding out the rest: savings accounts, bonds and cryptocurrencies). Real estate has held this poll’s top spot since 2014, and to be fair to respondents, “best” is open to interpretation. For example, someone may think real estate is “best” because she plans to live in her home for the next 30 years. Another could argue gold is “best” because a metal bar may be a useful weapon in a possible zombie apocalypse. One of the experts here suggests the physical nature of real estate and gold adds to their appeal (you can touch your house, but you can’t touch your share in a publicly traded firm unless for some reason you have it in certificate form). But in our view, nebulous, subjective terms like “best” aren’t useful for investors. Rather, ask yourself, what role does this security or investment play in your strategy (an asset allocation designed to achieve your investment goals)? We believe owning stocks is necessary for those who require growth, and not just because of equities’ history of strong long-term returns relative to other popular asset classes. Stocks are also highly liquid—useful if life circumstances change and investors need cash in a jiffy. Selling physical objects (like a house, gold bar or gold coins) isn’t as easy or quick if you want anything close to their current value. To be clear, we aren’t arguing stocks are always and everywhere “best”—they are subject to short-term declines, like all asset classes. But for growth-oriented investors, ignoring stocks can be costly.

MarketMinder’s View: Please note, MarketMinder is nonpartisan and prefers no political party or politician over another (here or overseas). Our commentary analyzes economic and market effects only, and this discussion of German politics highlights the hurdles new Chancellor Friedrich Merz faces as he leads a “Grand Coalition” between his Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union, and the center-left Social Democratic Party (SPD). Merz began his chancellorship on a shaky note, initially falling 6 votes short of the 316 needed to confirm his government—which required a second round of voting to secure a majority. As this article explains, “The coalition is a cold-eyed marriage of convenience intended primarily to keep the [populist party] AfD—which came in second in the election and now polls neck-and-neck with the conservatives—at bay. Some in the CDU are deeply upset at Merz’s loosening of the constitutional debt break to finance a massive defence and infrastructure spending package. Many in the SPD are angry at Merz for an entirely performative migration restriction bill forced through the Bundestag with help from the AfD.” Moreover, Merz is contending with divisions within his own conservative bloc—some are “traditionalists who deplore the extreme right but seek to hone a crisper conservativism” while others want to “use the AfD to radically transform the party.” Most of the implications here are political and sociological, but for investors, this is a recipe for intraparty (and interparty) gridlock in Germany—not a bad thing for markets.

MarketMinder’s View: The Bank of England (BoE) cut interest rates by a quarter point to 4.25%, the fourth since last August. Policymakers argued monetary support was necessary, warning American trade policy will knock GDP growth over the next three years (though this forecast doesn’t account for today’s sort-of deal between the UK and US). While this analysis focuses mostly on the BoE’s outlook and monetary policy’s direction, it also shares a useful nugget about the feared fallout from some recent payroll tax hikes. The Monetary Policy Committee “… finds little evidence that [Chancellor Rachel] Reeves’s widely attacked increase in the rate of employer national insurance contributions (NICs), which came into force last month, has so far led to the mass layoffs some lobby groups predicted. ‘The impact of higher NICs on employment appears to have been fairly small to date,’ the MPC said. It continues to expect firms to use a combination of weaker wages and higher prices, alongside slower hiring, to pass on the costs.” Now, we aren’t cheering lower wages or higher customer prices. But concerns tax hikes would roil businesses’ ability to operate was always overstated, in our view—and lo and behold, UK firms have kept calm and carried on.