Daily Commentary

MarketMinder’s View: This article focuses on the UK experience, but we find its takeaways applicable to America, too, as it explores several drawbacks of relying on residential real estate as your main nest egg. (Also our interest here is only in the titular discussion; the news roundup following it is beyond our scope.) While many view real estate as a tried-and-true ticket to wealth, the data paint a different picture: “Over the past five years, the average UK house price has risen by 3.3% a year. That’s significantly below inflation, at 5.1%. Global equities by contrast have returned 10.9% a year, even before you consider reinvested dividends. Over 20 years, the contrast remains. If you’d bought a home for £100,000 in December 2005, and its price had grown in line with the average UK house price, then by December 2025 it would be worth £182,000. The equity portfolio would have been worth £450,000, again without dividends. With reinvested dividends, the equity portfolio would be worth £728,000.” Sure, a national average housing price isn’t necessarily indicative of every investor’s experience, but even after adding in rental income, real estate lags. Also don’t forget maintenance and repair costs, homeowners’ insurance and property taxes when making (after-tax/fee) comparisons to stock returns—keeping in mind many dedicated retirement accounts also carry tax advantages that physical real estate usually doesn’t. Then, too, managing a property portfolio properly can be a full-time job, which might be the last thing you would want to undertake in retirement: “If you are looking to invest for retirement in a relatively low-effort way, there is simply no comparison. Investing via your pension or ISA [British equivalent of a 401(k)] is just so much easier, while giving you returns that—based on history—are at least as good. I have no ideological bias against investing in property. There are good and bad landlords, but I don’t think landlordism itself is to blame for our dysfunctional housing market. But being a landlord is a business, and you have to treat it as such. Relative to a portfolio of equities, it is simply much harder and more time intensive to manage.” While a house is great for living in, its benefits as a long-term investment are frequently overstated.

MarketMinder’s View: How is monetary policy likely to evolve under new Fed head Kevin Warsh? “Several former top officials said that they expected Warsh, whom President Donald Trump swore in to succeed Jay Powell as Fed chair in May, to begin rolling back the central bank’s ‘forward guidance’ on interest rates as soon as the mid-June Federal Open Market Committee meeting.” The article claims this would be “the most significant reshaping of the central bank’s role at the heart of the US economy in decades.” But hold the phone. This possible change would just amount to fewer words, words, words—useless to begin with—from the Fed. We don’t think its “guidance” has ever been anything to go by, as members frequently say one thing only to do another. As the new Fed chair has pointed out, “the forecasts lead officials to cling to their views on the economy long after reality has shifted, resulting in policy errors.” Central bankers may change their minds based on new information, but without any rhyme or reason anyone can pin down, it is anyone’s guess how they end up voting. Since investors are best served ignoring Fed guidance anyway, we daresay its rollback if not removal altogether would be far less consequential than suggested here. As always, assess Fed moves as they come—their effects manifest at long and variable lags—and spare yourself the futility of getting twisted into knots reading tea leaves.

MarketMinder’s View: As this short article notes, “The RatingDog China General Services Purchasing Managers’ Index [PMI], compiled by S&P Global, rose to 54.4 in May from 52.6 in April, staying above the 50-mark that separates expansion from contraction.” That means a greater share of Chinese companies’ business activity is expanding, though by how much remains unclear (since PMIs cover the breadth, not magnitude, of firms’ growth). The piece also hints China’s official services PMI—with more coverage of state-owned enterprises versus the titular PMI’s private-sector emphasis—returned to expansion in May. So with China’s official and private manufacturing PMIs above 50 in May, Middle Kingdom growth looks broadly expansionary. Moreover, this looks set to continue: “New business grew at the fastest pace in three months, supported by improved demand, business innovation and new client acquisitions. New export business returned to growth after contracting in April.” The world’s second-largest economy keeps chugging along, contributing to global growth—and defying the long-awaited reckoning skeptics warn is around the corner.