MarketMinder Daily Commentary

Providing succinct, entertaining and savvy thinking on global capital markets. Our goal is to provide discerning investors the most essential information and commentary to stay in tune with what's happening in the markets, while providing unique perspectives on essential financial issues. And just as important, Fisher Investments MarketMinder aims to help investors discern between useful information and potentially misleading hype.

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A Stock-Market Rotation of Historic Proportions Is Taking Shape

By Karen Langley, The Wall Street Journal, 7/22/2024

MarketMinder’s View: Please note, this piece mentions several specific companies, and MarketMinder doesn’t make individual security recommendations—rather, our focus is on a broader theme. The article observes small-cap value stocks are beating large-cap growth lately and proffers some guesses why: “Changing forecasts for Federal Reserve interest-rate cuts? Expectations that Donald Trump will return to the White House? A technology trade that grew precariously crowded?” Perhaps, though that titular rotation is on a teensy sample size: “The Russell 2000 index of smaller stocks beat the S&P 500 over the seven days through Wednesday by the largest margin during a period of that length in data going back to 1986, according to Dow Jones Market Data.” Sorry, but seven (7!) days is way too short a timeframe to declare a leadership rotation has occurred. As we often note, sentiment shifts can drive short-term market movements for any or no reason—and that could very well be the case here. Countertrends often accompany short-term volatility like last week’s. Now, it wouldn’t shock us if more value-heavy sectors outperformed at some point over the period ahead, and the rally’s breadth is one bit of evidence in favor of that. But in our view, it isn’t an either/or with growth, and it is more about a bull market benefiting companies postured offensively in general. Furthermore, leadership sifts are usually gradual and uneven, more like dimmer switches than on/off switches. They also tend to happen when no one expects them. Lastly, regarding the article’s closing statement that the bull market was too narrow to be sustainable, it is actually much broader than appreciated, with scores of companies outperforming the S&P 500. This was never about only seven big stocks.


Investors Are Putting Their Money on the โ€œTrump Trade.โ€ Hereโ€™s What That Means.

By Kate Gibson, MoneyWatch, 7/22/2024

MarketMinder’s View: As always, MarketMinder is nonpartisan, preferring no party or politician, and assesses political developments for their potential market impact only. Also, we don’t make individual security recommendations. Companies mentioned serve only to illustrate the broader investment theme, which is, as some titular investors here suggest: The “Trump trade” doesn’t mean much. While it is tempting to think a given presidential candidate’s stated (or implied) policies will benefit or hurt certain companies and/or industries, this isn’t inevitable. First, the election’s twists and turns—see President Biden’s dropping out of contention yesterday—underscore their inherent political uncertainty. We think basing trades on election odds that can shift on a dime is a speculative guess. Second and more importantly, we agree with how one CEO of a trading firm put it here, “This is speculation—as we both know, what’s said and what ends up happening can be two different things.” Not only do candidates typically moderate once in office, they have to work with Congress to pass legislation—which can be a high hurdle depending on its makeup—often watering down policies’ impact if they pass at all. Lastly, markets pre-price widely expected events, then usually behave differently than folks expect once these things come to pass. In our view, this is a big reason why returns at a sector and industry level defied expectations under both Trump and Biden. Supposed Trump stocks didn’t prosper during his term, and alleged Biden stocks haven’t led during his term to date.


The 401(k) Rollover Mistake That Costs Retirement Savers Billions

By Anne Tergesen, The Wall Street Journal, 7/22/2024

MarketMinder’s View: Here is a common mistake: “When people roll 401(k) balances from their old company’s plan into an individual retirement account, the money is frequently held as cash until they select new investments. Many never do, according to new research from Vanguard Group. Nearly a third who rolled savings into IRAs at Vanguard in 2015 still had the balance sitting in cash seven years later. Americans with cash-heavy IRAs give up more than $172 billion a year in retirement wealth they could have generated by investing in stocks and bonds, the Vanguard study estimates. ... In a recent survey of over 500 Vanguard IRA clients who completed a rollover in 2023 but were still in cash in June, 68% didn’t know how their IRA money was invested.” While the solution is simple—keep track of your retirement accounts, how much they hold and what they are invested in to make sure they are aligned with your overall financial plan—inertia can be difficult to overcome. For a helpful place to start, please see Fisher Investments founder and Executive Chairman Ken Fisher’s handy guide, “Left Your 401(k) at an Old Job? Here’s How to Find It.


A Stock-Market Rotation of Historic Proportions Is Taking Shape

By Karen Langley, The Wall Street Journal, 7/22/2024

MarketMinder’s View: Please note, this piece mentions several specific companies, and MarketMinder doesn’t make individual security recommendations—rather, our focus is on a broader theme. The article observes small-cap value stocks are beating large-cap growth lately and proffers some guesses why: “Changing forecasts for Federal Reserve interest-rate cuts? Expectations that Donald Trump will return to the White House? A technology trade that grew precariously crowded?” Perhaps, though that titular rotation is on a teensy sample size: “The Russell 2000 index of smaller stocks beat the S&P 500 over the seven days through Wednesday by the largest margin during a period of that length in data going back to 1986, according to Dow Jones Market Data.” Sorry, but seven (7!) days is way too short a timeframe to declare a leadership rotation has occurred. As we often note, sentiment shifts can drive short-term market movements for any or no reason—and that could very well be the case here. Countertrends often accompany short-term volatility like last week’s. Now, it wouldn’t shock us if more value-heavy sectors outperformed at some point over the period ahead, and the rally’s breadth is one bit of evidence in favor of that. But in our view, it isn’t an either/or with growth, and it is more about a bull market benefiting companies postured offensively in general. Furthermore, leadership sifts are usually gradual and uneven, more like dimmer switches than on/off switches. They also tend to happen when no one expects them. Lastly, regarding the article’s closing statement that the bull market was too narrow to be sustainable, it is actually much broader than appreciated, with scores of companies outperforming the S&P 500. This was never about only seven big stocks.


Investors Are Putting Their Money on the โ€œTrump Trade.โ€ Hereโ€™s What That Means.

By Kate Gibson, MoneyWatch, 7/22/2024

MarketMinder’s View: As always, MarketMinder is nonpartisan, preferring no party or politician, and assesses political developments for their potential market impact only. Also, we don’t make individual security recommendations. Companies mentioned serve only to illustrate the broader investment theme, which is, as some titular investors here suggest: The “Trump trade” doesn’t mean much. While it is tempting to think a given presidential candidate’s stated (or implied) policies will benefit or hurt certain companies and/or industries, this isn’t inevitable. First, the election’s twists and turns—see President Biden’s dropping out of contention yesterday—underscore their inherent political uncertainty. We think basing trades on election odds that can shift on a dime is a speculative guess. Second and more importantly, we agree with how one CEO of a trading firm put it here, “This is speculation—as we both know, what’s said and what ends up happening can be two different things.” Not only do candidates typically moderate once in office, they have to work with Congress to pass legislation—which can be a high hurdle depending on its makeup—often watering down policies’ impact if they pass at all. Lastly, markets pre-price widely expected events, then usually behave differently than folks expect once these things come to pass. In our view, this is a big reason why returns at a sector and industry level defied expectations under both Trump and Biden. Supposed Trump stocks didn’t prosper during his term, and alleged Biden stocks haven’t led during his term to date.


The 401(k) Rollover Mistake That Costs Retirement Savers Billions

By Anne Tergesen, The Wall Street Journal, 7/22/2024

MarketMinder’s View: Here is a common mistake: “When people roll 401(k) balances from their old company’s plan into an individual retirement account, the money is frequently held as cash until they select new investments. Many never do, according to new research from Vanguard Group. Nearly a third who rolled savings into IRAs at Vanguard in 2015 still had the balance sitting in cash seven years later. Americans with cash-heavy IRAs give up more than $172 billion a year in retirement wealth they could have generated by investing in stocks and bonds, the Vanguard study estimates. ... In a recent survey of over 500 Vanguard IRA clients who completed a rollover in 2023 but were still in cash in June, 68% didn’t know how their IRA money was invested.” While the solution is simple—keep track of your retirement accounts, how much they hold and what they are invested in to make sure they are aligned with your overall financial plan—inertia can be difficult to overcome. For a helpful place to start, please see Fisher Investments founder and Executive Chairman Ken Fisher’s handy guide, “Left Your 401(k) at an Old Job? Here’s How to Find It.