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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Plans for 99pc Mortgages Scrapped After Backlash From Banks

By Melissa Lawford and Michael Bow, The Telegraph, 3/1/2024

MarketMinder’s View: Ah, yes, this is why we don’t spend much time dwelling on the many policies rumored to be in the UK’s Spring Budget next week—or really, any of the speculation surrounding any government’s pending fiscal plans. (Oh and we also don’t prefer any party or any politician, and we assess political developments for their potential economic and market impact only.) Often, politicians will leak ideas as a way of floating trial balloons to gauge popularity and perspectives on potential unintended consequences, then fine tune or scrap ideas based on the feedback. We aren’t saying for sure that is what happened here, as there is no way to know, but the story fits the general profile. Rumor had it the government was considering backing mortgages for first-time buyers with mere 1% down payments with a Treasury guarantee. Several industry analysts and participants quickly pointed out that such a program wouldn’t do much, if anything, to help home affordability since the higher rates and principal would push payments higher, with one estate agent quoted here putting the figure at “38pc more than if they had used a normal loan,” with the premium rising to 53% in high-cost London. Add in banks’ reported concerns about buyers having less incentive to service mortgages if home prices fell when they had so little equity, and the proposal seems to have quietly bitten the dust, rendering any related speculation about the impact on public finances and home prices pointless. Better, in our view, to simply wait for the Chancellor of the Exchequer’s announcement next week and then assess the actual policies announced.


US Consumer Sentiment Posts Surprise Drop From Initial Reading

By Augusta Saraiva, Bloomberg, 3/1/2024

MarketMinder’s View: If ever you needed evidence that sentiment is fickle and unpredictable, here it is. The University of Michigan initially reported its consumer sentiment index hit 79.6 in February, which would have been its third straight increase. But the revised result is now 76.9, a decline from January. So, what changed between Valentine’s Day—the cutoff for responses to go into the first estimate—and February 26, the final interview deadline? “Gas prices climbed notably toward the end of the month, but the survey didn’t specify what led sentiment to deteriorate so much” as the month wound down. Inflation expectations didn’t change much. Maybe gas prices really did make people that gloomy. Or maybe it was the weather. Or a post-Super Bowl malaise. It could be anything, which is these surveys’ big weakness: They measure feelings at one moment, which may or may not translate to actual opinions of the economy, depending on what else is going on in their lives or the news. That is another reason these surveys don’t predict future spending. They are one of many helpful tools to assess the gap between sentiment and reality, but they aren’t foolproof in that department.


Industrial Output Falls at Fastest Pace Since May 2020

By Staff, Jiji Press, 3/1/2024

MarketMinder’s View: This is a timely reminder that sometimes one-off events can skew monthly data in ways that don’t necessarily reflect a country’s actual economic fundamentals. In this case, Japan’s automakers suspended several plants in January due to snow and a testing scandal (which reminds us, MarketMinder doesn’t make individual security recommendations, and we are here for the broader theme only), which knocked auto production to the tune of -17.8% m/m and had a secondary impact on other machinery manufacturers due to the fall in auto-related equipment. So the -7.5% m/m decline in total industrial output is likely a one-off disruption in one segment, not a sign of woe across all of Japan’s heavy industry. Note, too, that Tech-related production, which is more insulated from the auto sector, rose. We aren’t saying Japan’s economy is in great shape, but we wouldn’t read much into the present industrial dip, whose causes are well-known to markets by now.


Plans for 99pc Mortgages Scrapped After Backlash From Banks

By Melissa Lawford and Michael Bow, The Telegraph, 3/1/2024

MarketMinder’s View: Ah, yes, this is why we don’t spend much time dwelling on the many policies rumored to be in the UK’s Spring Budget next week—or really, any of the speculation surrounding any government’s pending fiscal plans. (Oh and we also don’t prefer any party or any politician, and we assess political developments for their potential economic and market impact only.) Often, politicians will leak ideas as a way of floating trial balloons to gauge popularity and perspectives on potential unintended consequences, then fine tune or scrap ideas based on the feedback. We aren’t saying for sure that is what happened here, as there is no way to know, but the story fits the general profile. Rumor had it the government was considering backing mortgages for first-time buyers with mere 1% down payments with a Treasury guarantee. Several industry analysts and participants quickly pointed out that such a program wouldn’t do much, if anything, to help home affordability since the higher rates and principal would push payments higher, with one estate agent quoted here putting the figure at “38pc more than if they had used a normal loan,” with the premium rising to 53% in high-cost London. Add in banks’ reported concerns about buyers having less incentive to service mortgages if home prices fell when they had so little equity, and the proposal seems to have quietly bitten the dust, rendering any related speculation about the impact on public finances and home prices pointless. Better, in our view, to simply wait for the Chancellor of the Exchequer’s announcement next week and then assess the actual policies announced.


US Consumer Sentiment Posts Surprise Drop From Initial Reading

By Augusta Saraiva, Bloomberg, 3/1/2024

MarketMinder’s View: If ever you needed evidence that sentiment is fickle and unpredictable, here it is. The University of Michigan initially reported its consumer sentiment index hit 79.6 in February, which would have been its third straight increase. But the revised result is now 76.9, a decline from January. So, what changed between Valentine’s Day—the cutoff for responses to go into the first estimate—and February 26, the final interview deadline? “Gas prices climbed notably toward the end of the month, but the survey didn’t specify what led sentiment to deteriorate so much” as the month wound down. Inflation expectations didn’t change much. Maybe gas prices really did make people that gloomy. Or maybe it was the weather. Or a post-Super Bowl malaise. It could be anything, which is these surveys’ big weakness: They measure feelings at one moment, which may or may not translate to actual opinions of the economy, depending on what else is going on in their lives or the news. That is another reason these surveys don’t predict future spending. They are one of many helpful tools to assess the gap between sentiment and reality, but they aren’t foolproof in that department.


Industrial Output Falls at Fastest Pace Since May 2020

By Staff, Jiji Press, 3/1/2024

MarketMinder’s View: This is a timely reminder that sometimes one-off events can skew monthly data in ways that don’t necessarily reflect a country’s actual economic fundamentals. In this case, Japan’s automakers suspended several plants in January due to snow and a testing scandal (which reminds us, MarketMinder doesn’t make individual security recommendations, and we are here for the broader theme only), which knocked auto production to the tune of -17.8% m/m and had a secondary impact on other machinery manufacturers due to the fall in auto-related equipment. So the -7.5% m/m decline in total industrial output is likely a one-off disruption in one segment, not a sign of woe across all of Japan’s heavy industry. Note, too, that Tech-related production, which is more insulated from the auto sector, rose. We aren’t saying Japan’s economy is in great shape, but we wouldn’t read much into the present industrial dip, whose causes are well-known to markets by now.