Daily Commentary

MarketMinder’s View: Rising rates aren’t just a US phenomenon, though this article argues they key off Treasury yields. Fair enough. America’s sovereign debt is the world’s biggest and most liquid pool, so “Changes in yields [globally] tend to be correlated. When Treasury yields rise, investors seeking a better return can sell their German bonds to buy Treasurys. That causes German bond yields to also rise.” The main point we take issue with here is the assertion rising global yields drag on stocks: “Rising yields can pressure stocks by lifting borrowing costs across the economy and increasing the risk-free return that investors can get by holding Treasurys to maturity. As that safe return rises, riskier assets like stocks can appear more expensive. ... Stocks could be especially vulnerable to rising yields now because they were already looking expensive by historical standards.” But as we have explained before, rates don’t drive stocks—and valuations aren’t predictive. While there are times when rising rates have coincided with bear markets, there are more times they don’t. In our view, the recent handwringing over rising global yields overlooks how bond markets can also be volatile in the short term. Yes, they swing less than stocks—but they can still swing, for any or no reason. Considering economic fundamentals in the US and elsewhere haven’t materially changed recently, we suspect some of that is at work here. Don’t overthink it.

MarketMinder’s View: Should surging red ink spilling from the Capitol concern investors? As this short article notes, “Interest on the national debt has totaled $308.4 billion in fiscal 2025, up 7% from a year ago. Financing costs are projected to top $1.2 trillion for the full year, which would surpass 2024′s record. The government this year has spent more on interest payments than any other category but Social Security, defense and health care.” We aren’t cheering the rise in government expenditures, but the article implies it is troublesome because it is seemingly pushing long-term interest rates higher, leading to more red ink and even higher rates—risking spiraling deficits. But consider: The article doesn’t mention government revenues dwarf financing costs by more than five times. The nation’s debt may be growing but it remains serviceable—which is what markets and debt owners care about most. Sentiment may swing Treasury yields, but fundamentally, rates aren’t rising because America can’t afford its interest payments.

MarketMinder’s View: Headline CPI sped to 2.9% y/y in December as gasoline prices surged, while core CPI (excluding food & energy) slowed to 3.2% from November’s 3.3%. What to make of this? While the discussion here centers on the latter—and what it means for monetary policy—we suggest investors leave interest rate implications aside. First, there is no telling what Fed folks will do—they frequently say one thing and end up doing another. More importantly, whatever they decide is generally overrated—rate moves hit at long and variable lags and have no preset market impact given all the attention. Surprise moves stocks most. As for inflation, consider the CPI ex. Shelter measure, which, per the BLS, rose 1.9% y/y. That is quicker than September’s 1.1% rate but within the 0.7% – 2.3% range that has persisted since May 2023. Shelter is CPI’s largest category. But owners’ equivalent rent comprises most of it—and that is an imaginary entry for what it would cost homeowners to rent their own houses to themselves. No one pays this. Cooling, rangebound inflation isn’t scintillating news, but all the slicing and dicing of whether easing CPI will last suggests some worries persist—perhaps some evidence that folks continue to overlook a better-than-perceived reality. Mostly, the focus looks like some people are fighting the last war on this front.