Daily Commentary

MarketMinder’s View: Plenty of politics here, as the title suggests, so please note MarketMinder is nonpartisan. We assess political developments for their potential market and/or economic effects only. UK Prime Minister Keir Starmer is under fire and facing at least a mini-mutiny, after revelations he turned a blind eye to US Ambassador Peter Mandelson’s actions and behavior, laid bare by the Epstein files. For now, he is digging in, with reports Monday that he won over backbenchers at an evening Parliamentary Labour Party (PLP) meeting. That hasn’t quieted leadership challenge rumblings, but his standing seems to have strengthened since this article published Saturday. But the murmurings continue, and the central question remains on folks minds: What would a change in government mean for markets? This piece suggests candidates would tack “sharply to the left” in a leadership contest, sparking fears of higher taxes and public spending that would rock Gilt markets, sparking the titular crisis. This looks to us like rehashed debt fears in political clothing. Yes, given how the Labour Party selects leaders, the winner will have to appeal to the grassroots—just as Conservative or Reform Party leaders must. But trying to predict markets’ reaction to a campaign smacks of trying to predict short-term sentiment swings, which is impossible. Markets efficiently discount all widely known information, including potential leadership challengers’ views. Those have been on display for months. Politicians also have a long, long history of saying what they must on the campaign trail, then governing differently, and markets know this. Stocks also know Labour remains divided, with recent tax hikes one of the main things upsetting backbenchers. It wouldn’t take much of a revolt from the PLP to water down legislation. In our view, the larger headwind here is the uncertainty not just over whether Starmer will resign or be forced out, but over whether his successor would call a snap election. Clarity would likely be beneficial for markets.

MarketMinder’s View: This highlights a growing trend of younger folks asking chatbots if their investments are right for their needs, showing both the good and the bad. The good: People are focusing more on their goals and the need to get their investments in line with them. It is also leading a lot of these people to take the next step and get help from actual professionals, which is vital because of the bad: “Chatbots can produce inaccurate or overly generalized advice, misinterpret personal circumstances or offer recommendations that lack important context, said Megan Slatter, a wealth adviser at Crewe Advisors.” Heck, one survey referenced here found more than half of Americans who used generative AI for financial advice ultimately made “a poor financial decision or a mistake.” We don’t mean to pick on these folks, but their story is worth sharing with family and loved ones. Key to this? AI lacks a deep understanding of your personal situation, including your goals, investing time horizon, cash flow needs and comfort with volatility—all essential in building a personalized financial plan. That said, we think the article leaves out one major piece: Most AI chatbots and other large language models (LLMs) derive their responses from a massive bank of existing public information, which means they are prone to spouting conventional wisdom. They may also give you a different answer each time, due to the way the models are trained (in the lingo, they are not “deterministic”). Your investment strategy should be tailored to your goals, needs, time horizon and other personal circumstances, and it should be the one with the highest likelihood of generating the returns you need to reach those goals—not something a chatbot assigns by random chance while taking into account industry mythology and the occasional error, given LLMs are trained on the whole Internet. There is no substitute for human expertise, doing your due diligence and taking the time to get information from reputable sources.

MarketMinder’s View: Whenever markets get volatile, you get a mass scramble to figure out the cause. We have long called it “searching for meaning in bouncy times,” and it is a hallmark of sentiment-driven pullbacks. These days, there is an epidemic of people searching for meaning in bouncy bitcoin, trying to figure out why it has crashed despite the alleged fundamental case for it (a crypto-friendly administration) largely holding up. The article offers five popular explanations for the drop: shifting investor attention to other speculative securities and prediction markets; crypto derivatives stealthily increasing supply; a new Fed head; stalling legislation to establish a crypto regulatory framework; and good old-fashioned “profit taking,” which just means selling. What do most of these have in common? Sentiment! There is no fundamental, logical reason a new Fed head would have any sway over crypto prices, given the Fed conducts monetary policy (which bitcoin has no reliable correlation with). If people are indeed shifting to other speculative tools, that is also sentiment-driven, given that is an inherently emotional endeavor. As for the legislation, bitcoin’s whole allure is its lack of regulation, so stalling regulatory bills would logically be a positive, not a sell trigger. The only fundamental-based suggested cause here is the stealthy runaway supply increase, which we have long noted was a potential side effect of all the financial innovation surrounding crypto. All told, these underscore our long-running view: Bitcoin is a speculative commodity-like vehicle that swings hard on sentiment, which is inherently unpredictable.