Daily Commentary

MarketMinder’s View: Please note, MarketMinder is nonpartisan and prefers no political party or politician over another. We also won’t wade into all the political jockeying going on over in France at the moment—our focus is on politics’ economic and market effects only. In that spirit, we think this breakdown of France’s budget situation provides some useful perspective on worries that the Fifth Republic and the currently precarious coalition leadership is turning the country Greek. “‘For the moment, it is a complete exaggeration,’ said Éric Heyer, an economics professor at Sciences Po. France has full access to debt markets. It raised €8.3bn on Monday. The 10-year yield on French government debt stands at some 3 per cent. At the height of its debt crisis, the yield on Greek debt climbed over 16 per cent. The Greek economy had cratered, made worse by punishing austerity measures, and Athens engaged in a bitter fight with Berlin and Brussels over the terms of a Eurozone bailout. During France’s recent political turmoil, the spread between its debt and German debt has widened by a mere 0.3 percentage points, Heyer said.” Markets realize that despite today’s shrill rhetoric and bluster, we are a long way away from the eurozone debt crisis from over a decade ago—France doesn’t appear to be on the verge of defaulting on its debt and threatening to exit the euro any time soon.

MarketMinder’s View: Please note, MarketMinder doesn’t make individual security recommendations, as the companies mentioned here are incidental to a broader theme we wish to highlight. That theme: When macroeconomic developments dominate headlines, savvy businesses see opportunity. As this article details, retailers ranging from online furniture dealers to beauty product shops are urging customers to buy product now before President-elect Donald Trump enters office next year and implements a spate of tariffs, making the cost of doing business more expensive. In a vacuum, it is true tariffs aren’t a positive given they hinder the flow of economic activity and externally interfere with prices. But crucially, “It is unclear what tariffs will be levied and how much they will affect prices. Companies are pouncing at a moment when fear and uncertainty are on the rise and consumer spending is showing signs of weakness.” The past isn’t always a prologue for the future, but markets have seen the Trump tariff movie before and, spoiler alert, global trade didn’t tank. It is possible the sequel is more problematic, but it isn’t a given—which makes all the tariff warnings, whether from economists or your favorite fishing rod maker, pure speculation at this point. Buy that new camping gear if you like, but don’t make portfolio changes based solely on possibilities. 

MarketMinder’s View: Spanish inflation sped in November, as consumer prices rose 2.4% y/y, up from October’s 1.8% and matching expectations of economists Bloomberg polled. But rather than fret about November’s uptick, this coverage sensibly provides the context: the base effect. “A brief jump in inflation across Europe has been widely expected by ECB officials, who see their 2% target being sustainably reached next year. … In Spain, the upswing in inflation was due to comparisons with energy and fuel costs that had slumped in late 2023. The country had registered price gains of less than 2% in the two previous months.” One economist interviewed here said she expects “this tick up to prove temporary.” Seems reasonable enough to us—and perhaps a sign inflation is no longer weighing on sentiment as it used to, with more and more folks moving on from this long-running headline fear.