Daily Commentary

MarketMinder’s View: First, please note MarketMinder favors no party nor any politician, weighing developments and elections solely for their potential market and economic effects. This election itself, which was for local seats across England, doesn’t carry enormous market implications of any sort. But the party dynamics here are very interesting. Former Conversative Member of Parliament Nigel Farage’s Reform UK Party—and the long dormant Liberal Democrats—made significant inroads in local elections, stealing vast share from the two traditional main parties (the Conservatives and Labour). Results are still rolling in, but it appears as though the Conservatives have lost more than 300 council seats and Labour 125, with Reform UK gaining a whopping 405 and the Liberal Democrats 42. This effectively hands Reform UK control of 7 councils across England, with the Tories losing 11—leading Farage to claim that his party is the chief opposition to the Labour government now. Now, that is all fine political rhetoric, but in Westminster, the Tories are still the main opposition and it remains to be seen if that changes before the next national election, which isn’t scheduled to happen until roughly 2029 (barring an earlier snap vote). That isn’t to say Reform UK won’t be the main opposition—maybe it will. If so, the splintering of traditional party support would look a lot like politics on the Continent, where main center-right and center-left parties have seen declining support. The effect there has been gridlock—as it requires complex and fragile coalition building. And that is a fine outcome for stocks. But again, whether that happens in Britain remains to be seen. Four years is a loooooong time in politics these days.

MarketMinder’s View: The wordy headline gives you the main data takeaways from Friday’s April US Employment Situation Report, which showed hiring slowed a bit but far exceeded expectations for 135,000. The headline unemployment rate remains historically low, at 4.2%, and—not reported herein—the broadest unemployment rate, the U6 rate, ticked down from 7.9% to 7.8%, the second-straight monthly decline. (Source: US Bureau of Labor Statistics.) That rate includes people working part-time for economic reasons and discouraged workers who haven’t sought a job in the past four weeks, so it is a more complete picture of labor market dynamics. Now then, this article goes on to cast this in light of political takeaways, so please note that MarketMinder favors no politician nor any political party, and the discussions herein just aren’t relevant for markets. It further casts the healthy labor market in light of what it means for inherently unpredictable Fed policy, mistakenly linking jobs to interest rates. The last three years should serve to prove the fallacy of this connection, as spiking rates didn’t send unemployment leaping. But the main thing to understand about this: The healthy state of the labor market tells you exactly nothing about what is to come. This article admits that tacitly by casting all this as pre-Trump tariff data, which they are. But labor market data are always late lagging. Trying to forecast forward-looking markets using them is a fallacious practice.

MarketMinder’s View: Naturally, this article discussing proposed tax legislation dives into partisan politics, so please note MarketMinder favors no politician nor any party, assessing developments solely for potential economic effects. Since the election, we have seen many posit sweeping tax cuts could boost growth—with tariffs possibly filling any gap in receipts. We think this is highly unlikely, for three reasons. One, tax cuts rarely have the stimulative benefits people presume. Two, Congress is narrowly divided, limiting the scope of a bill. Three, most talk is of extending the current code set to expire at yearend, which wouldn’t be stimulus at all. This article dives deep into numbers two and three here, sensibly documenting the scope of ongoing talks. While granting some certainty over tax policy is a benefit of potential legislation—and there are likely marginal positives from restoring “100% expensing”—other things like eliminating taxes on tips are too small to matter economically (if they can even pass Congress, as noted herein). This is a matter we are watching, but we don’t advise getting overly optimistic about huge cuts.