Daily Commentary

MarketMinder’s View: As US President Donald Trump and Chinese President Xi Jinping continue their summit, there is ample chatter and speculation about what agreements might emerge. One item potentially on the list is a trade deal similar to those inked with Japan, South Korea and others, that improves market access on both sides in exchange for concessions including Chinese commitments to boost US investments. This article explores some of the potential complications around this, including long-running national security concerns and Americans’ general skepticism about Chinese projects here, which politicians from both parties have often exploited (which reminds us, we are politically agnostic and explore developments for their potential economic and market implications only). It ends with the note that Trump officials are downplaying the likelihood of a large investment package. For stocks, we doubt any of this matters either way. These investment commitments tend to be symbolic, often reflecting previously announced projects and things companies were going to do anyway as they reinvest US export revenues—a natural byproduct of America running a trade deficit with any country. Chinese companies have always faced national security vetting and other friction when planning projects here, so nothing much is changing. These investments also tend to move slowly, not just because of the politics, but also because of all the permitting and bureaucratic processes that throw sand in the gears. It can take years to progress from a planned factory to a completed, active facility (if you are into learning about this sort of thing, look up the story of a well-known Chinese tech manufacturer trying to open a campus in Mount Pleasant, WI, which we note as an illustrative example with the reminder that we don’t make individual security recommendations). All of it tends to be too slow-moving and well-known to boost business investment in a way that would deliver a surprise economic acceleration and turbocharge the bull market. Foreign investments in the US are pretty normal, regardless of whether they make headlines, and markets know the drill.

MarketMinder’s View: There is a whole lot of “it’s different this time” illogic in this piece documenting the University of Michigan’s Consumer Sentiment gauge hitting a record low, coupled with a skosh of “how will sentiment ever improve?” And it all seems very bullish to us. To summarize, the gauge hit 48.2 in May, the lowest reading since records start in 1952. Yes, consumers feel the economy is worse now than in 2008/2009. Or 2020. Or 2022. Or the 1970s, when inflation ran far hotter combined with a deep mid-decade recession. Pick your date. How folks feel now is worse. Some claim this pessimism is tied to high prices, after the hot inflation from 2022 and 2023 drove prices up quickly or the recent rise in gasoline. Others say it is the rolling “crises” like tariffs, war and inflation, and that consumers need a break from headline churn to feel better. We can understand frustrations with elevated prices, and today’s gas prices may pour salt in that wound. But all this misses a key driver of low sentiment: partisanship, which UMich data show has long skewed reads downward. Above all else though, and callous as this may seem, stocks couldn’t give a whit about what might make Americans feel better about the economy. As noted herein, “… despite what they tell pollsters, consumers, broadly speaking, have continued to open their wallets with abandon. Uber and Walt Disney last week reported strong customer spending, defying fears that shoppers would tighten their purse strings in response to price increases.” A separate report today showed US retail sales rose in April, too. This article couches consumers saying one thing while doing another as new. It isn’t. Sentiment has never been a reliable predictor of consumer behavior. It wasn’t in the early 2010s, when sour sentiment coincided with the strong start to history’s longest bull market. Or the early 1990s. Or the early 1980s. The “vibes” followed economic trends—they didn’t lead them—just as “vibes” today follow high prices from 2022’s inflation. People fight the last war. It is human. But per FactSet, US GDP, US ISM and S&P Global Manufacturing and Services purchasing managers’ indexes (and new orders), retail sales, projected corporate profits and revenues all point to growth. Only these consumer sentiment readings are so deeply dour. Should that continue, it is a pretty bullish disconnect and a strong backdrop for stocks.

MarketMinder’s View: Though often conflated, inflation—economywide price changes reported in the Consumer Price Index (CPI) or Personal Consumption Expenditures (PCE) price index—is different from your own cost of living. That is because your consumption basket probably differs substantially from the aggregate of what everyone buys. A college student, for example, likely weighs educational costs more than healthcare—and vice versa for a senior (not in school). Or consider homeowners versus renters. But that isn’t the only reason why you shouldn’t use inflation as a measure of living costs, as this article underscores. When the Bureau of Labor Statistics compiles CPI, it uses “hedonic” adjustments to account for changes in products’ qualities. “What if the camera or processor in my iPhone is better than last year for the same amount of money? ... And that’s how you get smartphones registering as 12% cheaper in April 2026, compared to April 2025, in the latest Consumer Price Index print—because, when adjusted for feature parity, they are. This leads to some pretty insane results. For example, according to the official CPI data for smartphones, prices (read: quality-adjusted prices) have dropped 65% since the start of 2020 in the United States.” Even though in dollar terms, a smartphone costs more than it did six years ago. Sure, you may be getting more (quality) for your money, but that in no way is ever reflected in people’s actual pocketbooks. On the flipside, this also enables CPI to capture annoyances like “shrinkflation,” where a company holds the price steady while decreasing size or quantity (think shrinking a bag of chips from 12 ounces to 10 while keeping the price at $5.79). When it comes to personal finance—and financial planning—taking your own living costs (current and future) into account is far more relevant than what could be making adjustments naively based on government measures of inflation, whose purpose is to track whether there is excess money in the system.