Daily Commentary

MarketMinder’s View: A couple required disclaimers here up front: This article dives into politics and mentions several individual securities—many politically themed—along the way. Please note that MarketMinder favors no politician nor any political party nor do we make individual security recommendations—and we certainly don’t recommend any individual politician (ick). Our interest here is a phenomenon we call the perverse inverse. When a politician is elected, people often think things aligned with the president/politician are likely to boom, teeing up excitement around those assets. But it often proves overblown, either tied to politicians not following through on promises—or hype just proving excessive. In the case of President Donald Trump, the inflated categories were largely crypto assets, private prisons and—unmentioned here—fossil fuel-related Energy companies. Initially, there was a sharp rush into these assets. To the surprise of some, that has fallen by the wayside. As noted herein, personality-linked meme coins have tanked. Private prison stocks are down and out. Even bitcoin, which initially jumped, is down this year. Global Energy stocks (almost entirely fossil-fuel related), which Trump has championed over renewables, are up this year and since Election Day 2024. But they are lagging broad markets quite badly—and the S&P Global Clean Energy Transition Index is more than tripling them (up 47% year to date versus 12.8%, per FactSet). A lot of these trades always lacked logic—for example, more crypto supply via Washington backing it, would never be a bullish factor. But people piled in anyway. Heed the lesson. Chasing excitement and perceived first-order effects from an election victory is a recipe for disaster. Don’t fall prey to the perverse inverse.

MarketMinder’s View: Watch what people do, not what they say. That is our counsel after reading this looooong piece documenting the divergence between sour US consumer sentiment and better-than-expected consumer activity across a range of metrics from retail sales to individual retailers’ earnings results. (Which reminds us, this mentions individual companies, so please note MarketMinder doesn’t make individual security recommendations.) While the juxtaposition of what people say and what they do—and the holiday-season bent to it—is fine, we guess, the idea this is new post-2021 or a mystery to be solved is wrong, wrong, wrong. There has always been a divide between people’s perceptions of the economy and how confident they feel and what they actually do in the economy. On a year-over-year percentage change basis to match the chart included here, consumers were dour for long stretches in 2005 – 2006 while both retail sales and inflation-adjusted personal consumption expenditures grew. Ditto in 2011. And 2015 – 2016 as well as 2019 (all per FactSet data). People have, since the dawn of time, said one thing and done another. You can’t foretell consumer behavior based on consumer sentiment surveys.

MarketMinder’s View: This is a somewhat unconventional look at the federal budget deficit, given it doesn’t operate on the October 31 – September 30 fiscal calendar. (It also mentions some politics, so keep in mind we favor no politician nor any political party.) This unconventional look shows the federal budget deficit has fallen quite a bit since President Donald Trump’s January inauguration. Not because of spending cuts—outlays are flat. Not solely due to tariffs. But instead because incomes and stock market results are driving up federal income tax revenue, despite the federal income tax code staying largely constant. “Since Donald Trump returned to the White House in January, the federal deficit has declined by $516 billion on a trailing-12-month basis. Spending is basically flat, but revenue is up a remarkable 8.5%. … Over just the past six months, tariffs have brought in $176 billion compared with $42 billion over the same period last year.” Now, we never really thought the deficit or US debt were as problematic as many thought, but quietly, the budget balance is improving. And, as the article notes, the One Big, Beautiful Bill Act (which many claimed was a tax-cutting deficit disaster) largely just extends main income-tax provisions outside a few outlying shifts increasing deductions for state and local income tax, Social Security recipients and tip income, which lack scale. These data should rebut both a) the notion that you must hike tax rates to raise revenue and b) that the deficit poses a threat to the US economy.