MarketMinder

Headlines

Here we analyze a selection of third-party news articles—both those we agree and disagree with.

Please note: Though we make every effort to source articles from freely available sites, we will also regularly include articles on sites that have limited content for non-subscribers. Doing so is increasingly unavoidable, as more and more financial media is published behind paywalls.


Powell’s Taper Tightrope Could Be Complicated by Fed ‘Dots’

MarketMinder’s View: This piece argues that Fed head Jerome Powell may face a messaging challenge in trying to assure markets that tapering its quantitative easing bond purchases doesn’t automatically start a clock on rate hikes—particularly because the Fed will release an updated “dot plot” of monetary officials’ expectations for short-term interest rates. But here is the thing: Fed officials have stressed repeatedly that those dot-plot outlooks aren’t written in stone and they basically change at every meeting, to varying degrees. Also, the idea, “Markets tend to pay close attention to the median projection” is a statement offered with no supporting evidence. The dot plot just isn’t a reliable indication of what policy will actually be. Consider: The September 2012 dot plot saw 19 Fed officials project a median 1.00% midpoint of the fed-funds target range at the end of 2015, with one forecasting no change to the then-effective 0.00% – 0.25% range and one seeing a midpoint as high as 4.50%. The fed-funds target range was 0.25% – 0.50% on December 31, 2015. The median forecast for the midpoint remained at 1.00% the following year and rose to 1.13% by 2014’s close. So not only did the forecasts overshoot, but they got worse as 2015 drew near. At any rate, markets have no preset reaction to tapering or rate hikes, as the last bull market demonstrates, so we don’t think you need to stress it—even if Powell does.

UK Manufacturing Orders Gauge Hits Record High in September: CBI

MarketMinder’s View: While the rise in manufacturing orders is good news for UK demand, we guess, it also isn’t exactly too actionable for investors. Yes, orders are about as forward-looking a data point as we will get. But given supply constraints and price pressures, their ability to predict impending output is likely pretty limited. This is perhaps doubly true in Britain, given manufacturing was a tiny 8.7% of GDP in 2019 per World Bank data (used to avoid pandemic skew). Services, 71% of GDP, far outweighs factory activity.

How Car Rentals Explain the 2021 Economy

MarketMinder’s View: We are always rather skeptical of claims that a single small industry is a microcosm of the entire US economy, but we do agree the rental car industry is a good way to see how the past 18 months have affected prices—and why those price increases don’t reflect runaway inflation (a monetary phenomenon of too much money chasing too few goods and services, boosting prices economy-wide). During 2020’s first round of lockdowns, as travel all but ceased, car rental prices plunged. Rental companies sold off their fleets to cut costs and raise cash. Demand finally returned this summer, but fleets were still lean, and new cars were in short supply thanks to the semiconductor shortage. That sent rental prices to new highs. But more recently they have come down again, as supply and demand are more in balance. Car rental companies turned to the lightly used car market to rebuild their fleets, while travelers found workarounds. In short, prices weren’t a monetary phenomenon, and monetary policy couldn’t and didn’t tame them. “The story of rental car prices, while unique in its way, is a vivid example of dynamics that apply across many other goods. The shortages of 2021 were in large part caused by a combination of supply decisions made more than a year ago that can’t be undone, and demand conditions that returned to normal with speed that few expected. Markets are quite effective at doing their job of finding equilibrium. When prices get as high as they did for car rentals in June, it destroys demand. People will figure out another plan. But just because prices moderate doesn’t mean they have to go back to their prepandemic level, and some of the change that has happened may turn out to be surprisingly long-lasting.” We would only add that prices’ plateauing above pre-pandemic levels don’t represent lasting inflation, as the higher base will likely slow or even reverse price gains in time.

The Merkel Era Is Over, but Her Economic Legacy Will Linger On

MarketMinder’s View: As Germans prepare to vote this weekend, we have seen numerous retrospectives on outgoing Chancellor Angela Merkel’s economic record, but this one has three particularly interesting nuggets for investors. First, it makes the very simple point that trade deficits aren’t inherently bad and surpluses aren’t good, as shown by a comparison between trade-surplus Germany and trade-deficit Britain. “The ultimate end of production is consumption and the purpose of exports is to pay for imports. Believe it or not, during the 1980s, 1990s and 2000s, real consumption per capita grew faster in the UK than in Germany. And the level of real consumption per capita is now about the same in the two countries.” Second, fiscal surpluses aren’t an automatic economic plus. We don’t take quite as dim a view of Germany’s negative net public investment as the article does, as that can also create room for more private investment, but routine surpluses—if used to pay down debt—suck money out of the economy and are technically contractionary, albeit to a small degree. Third, even if Merkel’s party gets shut out of the next government, a victory by the Social Democratic Party (SPD) probably just extends gridlock and the status quo. “But even though the SPD has moved sharply to the left, if it ‘wins’ the election, it is likely to be able to form a government only in coalition with the Greens and the conservative FDP – the so-called Rainbow Coalition. In that case, the adoption of ultra-radical policies is unlikely.” Indeed, and this illustrates the importance for investors—like MarketMinder—to be politically agnostic and focus not on personalities but policies and the likelihood they pass.

Energy Chaos Adds to Inflation Angst for Europe’s Policy Makers

MarketMinder’s View: This piece argues Europe’s spiking electricity prices will spark runaway inflation not just through the energy component of the consumer price index, but by raising manufacturing costs pretty much everywhere. This, allegedly, calls for action from the European Central Bank (ECB) and Bank of England (BoE). We see a few things wrong with this thesis. One, as the article notes, companies hedge against power price fluctuations and probably have an overall ok buffer. Two, while those hedges do eventually expire, exposing companies to higher prices down the road, presuming prices will be super-high this winter is sheer speculation. It extrapolates the current natural gas shortage forward, without considering the possibility for Russia to turn the taps back on or for overseas gas exporters to respond to high demand in Europe. It also ignores the weather’s contribution to the spike—if the wind returns to normal in the North Sea, that likely offers immediate release. Three, even if this is a longer-running issue, the notion that central banks can do anything about it strains credulity. Hiking interest rates won’t raise gas supply—only entities outside central banks’ control can do that—and it certainly won’t make the wind blow.

Covid-19 Vaccinations Boost the Global Economy, but May Not Cure It Alone

MarketMinder’s View: On the one hand, this piece sort of earns a point for acknowledging the simple reality that vaccine mandates aren’t positive economic drivers. With that said, however, we think this piece vastly overrates COVID as an economic swing factor, which relies mostly on unsupported generalizations. It claims COVID is “chilling” spending, which is a claim we can’t find a single piece of data to support. “Disruptions to manufacturing and shipping” in Asia are real, but those stem from government responses to the virus in command and control economies (e.g., Vietnam and China), not the virus itself. Developed nations have taken a different path of learning to live with the virus without draconian lockdowns. Most importantly, it presumes any economic slowing from the summer’s reopening boom must be courtesy of some new COVID-related problem, rather than a simple return to normal. As for boosters, why would they boost growth (sorry) if businesses have already reopened and pent-up demand is spent? Rolling them out while businesses are already open merely extends the status quo rather than giving it an additional shot in the arm (sorry). In our view, it has been likely from the start that post-pandemic economies would look a lot like slow-growing pre-pandemic economies—a reality stocks were fine with for years.

Scotland Faces £8.5bn Black Hole After Independence Vote

MarketMinder’s View: Here we go again. With the Scottish government inching forward on a second independence referendum, the economic forecasts aiming to show the downside are in full swing. Soon we will no doubt see pro-independence groups publishing studies that show the opposite. We suggest taking all of it with a grain of salt. One, as we saw with the Brexit vote, fear-based campaigns against independence votes don’t work automatically—voters consider issues far beyond economic forecasts, and rational is in the eye of the beholder. Two, forecasts are opinions, often shaped by bias, and aren’t guaranteed to come true. Three, all this does is project the status quo forward—in this case, the £8.5 billion worth of the UK deficit that is attributable to Scotland, which the article notes is about 8% of pre-pandemic Scottish GDP. Forecasters here allege that means austerity and tough times, especially if Scottish bonds won’t be eligible for the BoE’s quantitative easing (QE) program—a stance, in our view, that wrongly views QE as monetary financing of government debt. All the rest of this, including speculation about an independent Scotland’s ability to tap sovereign bond markets, is sheer guesswork. We do think it is fair to say referendum talk is raising political uncertainty in the near term, which can weigh on sentiment, but that is about as far as we think the market impact goes. Anything more will likely get priced in slowly as this process grinds out, and we don’t think a vote either way has any pre-set market impact.

U.K. Retail Sales Fall in Worst Stretch for Shops Since 1996

MarketMinder’s View: No, August’s -0.9% m/m drop in retail sales volumes isn’t good news. But there is one important consideration this article’s rather dour take leaves out: Most consumer spending in the UK goes to services, not goods, making it an error to extrapolate weak consumption from this report alone. As the article notes, sales fell as “consumers steered spending toward bars, eating out and entertainment events newly reopened after lockdowns.” Unlike its American counterpart, the UK retail sales report doesn’t include food services, making it a very incomplete look at total spending. So rather than jump to conclusions about inflation hitting consumer demand, we recommend waiting for the monthly GDP report in a couple weeks, as it will reveal full consumer spending in the month. To illustrate the difference, consider that in July retail sales fell -2.8% m/m, yet output at consumer-facing services overall fell just -0.3% according to the Office for National Statistics. We could easily see a similar gap in August.

China’s Bid to Join TPP Trade Group Puts Members in an Awkward Spot

MarketMinder’s View: This piece nicely captures the various challenges standing between China and membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an 11-member free(ish) trade bloc spanning the Pacific Ocean (which the UK has also applied to join, potentially necessitating a name change). The rather amusing thing about China’s request to join the CPTPP is that China has already spearheaded its own regional trade bloc, which includes many CPTPP nations but doesn’t actually free trade much—it just codified existing protectionism. That was largely by China’s design, making it a bit strange that it would apply to a bloc that stresses intellectual property protections and theoretically requires participants to scrap subsidies and import quotas—all things Chinese economic reforms have yet to really stress. Seems to us, as this piece concludes, that the move is largely political. It also seems unlikely to go anywhere soon. “China has clashed with TPP members in recent years, particularly Canada and Australia, over security matters. It handed in its application shortly after Australia reached a deal with the U.S. and U.K. to acquire nuclear submarines, a move aimed at countering China’s growing naval power in the Pacific. Any single country could prolong or effectively block Beijing’s application.” Japan, which holds the CPTPP chair this year, already appears to be slow-rolling Beijing’s bid. As for the prospect of reforms if China does pursue this request and make it in the club, we guess that is worth watching, but the government there has a long history of saying one thing and doing another about intellectual property rights, and the CPTPP’s enforcement mechanisms are untested. So in short, we don’t view this as a market driver in the here and now.

My Biggest Financial Mistake: FT Writers Confess

MarketMinder’s View: This confessional from a collection of delightful Financial Times writers is chock full of personal finance wisdom, much of it for young folks. The lessons are timeless: Always participate in your employer’s retirement plan and take advantage of matching funds; beware department store charge cards; pay off your credit cards; don’t spend yourself dry trying to keep up with the society set; don’t gamble. And for all investors out there, do your own due diligence. One writer tells of the time she covered a big mutual fund scandal in which “unscrupulous investment managers had cut secret deals that allowed hedge funds to buy and rapidly sell shares in their funds. This had the effect of siphoning away returns from buy and hold investors.” She then realized she owned shares in these funds and had failed to do sufficient digging when she bought in. The lesson she imparts is hugely important: “Read the small print and ask your broker or adviser if they have a personal financial interest in their recommendations.”

U.S. Retail Sales Surprise to Upside in Strong Boost to Economy

MarketMinder’s View: This roundup of the latest US economic data focuses primarily on retail sales, which unexpectedly rose 0.7% m/m—beating expectations of a -0.8% m/m dip and rebounding from July’s downwardly revised -1.8%. The beat surprised some economists who projected a weak August due to issues including the Delta variant (a weird aspect of the forecasts, considering retail sales were turbocharged by social distancing requirements’ boosting demand for goods at services’ expense) and fading fiscal stimulus. In our view, the more interesting observation is that the retail sales report seems to echo the recent inflation report: Categories most impacted by reopening appear to be stabilizing after big monthly jumps earlier this year. For example, after a strong May and June, clothing shopping dipped -2.7% m/m in July and rose just 0.1% in August—the reopening pop related to folks’ spending on new wardrobes since they now had places to go had worn off. Now, just like with July’s dip, we caution investors against extrapolating a better-than-appreciated August forward—monthly data are volatile. But from a high level, the data continue to suggest economic growth is returning to its pre-pandemic trends—a fine environment for markets, though one that favors big, stable firms over smaller, economically sensitive ones.

Stop Worrying About a Crash: The Bull Market Has Further to Run

MarketMinder’s View: While we agree with the titular sentiment, the evidence presented here is way off, in our view. It begins by presenting five false fears: poor seasonality trends; a looming slowdown in Fed asset purchases; the Delta variant and associated restrictions; rising prices; and broad investor complacency (based on stocks’ strong 2021 returns despite all these purported negatives). The article then shares its chief sensible nugget—i.e., investors shouldn’t get too hung up on day-to-day volatility, as reacting to noise can thwart their long-term investment plans—before presenting another misperceived take: Investors needn’t fret the near-term stuff because we are in the midst of a secular bull market (a long-running rise in stock prices, sometimes lasting multiple decades). The reasons to be secularly bullish: The boomer generation remains a supposed pillar of the market, as they must invest in stocks due to low interest rates; and market-leading large growth stocks look healthy and not overvalued. While we are bullish, it isn’t for any of these reasons. One, we think markets are cyclical—not secular—and focus most on the economic and political factors impacting corporate profits over the next 3 – 30 months. Anything beyond that timeframe is unknowable, in our view, and shouldn’t be the basis of an investment outlook. Two, the idea retiring boomers are shunning low-rate bonds for stocks generally—the so-called Great Rotation—isn’t supported by data like fund flows. Three, valuations aren’t market timing tools. Again, we think global stocks look well positioned to deliver strong returns for the rest of this year, but presuming the bull has years left in a stock market supercycle of sorts is a stretch, in our view, and a risky one at that.

A Big Bond Market Headache, Courtesy of the SEC

MarketMinder’s View: This piece gets a bit into the speculative regulatory weeds, but we think it is worth raising to highlight a broader theme: the importance of monitoring regulatory changes for their potential unintended consequences. The change in question here: “An obscure SEC rule, 15c2-11, was amended a year ago for the first time in almost three decades. The change, which is meant to improve disclosure and investor protection in over-the-counter trading markets, sounds innocuous enough on its face. It ensures ‘that broker-dealers, in their role as professional gatekeepers to this market, do not publish quotations for an issuer’s security when current issuer information is not publicly available.’ There’s one big problem: The rule, which had long been understood to safeguard retail investors from penny stocks and other ‘pump-and-dump’ schemes, doesn’t explicitly exclude fixed-income assets, except for municipal bonds.” As the article goes on to detail, the new rule could impose a host of new requirements on dealers before they quote a bond price—potentially leading to higher compliance costs, which could discourage firms from going through the hassle of quoting a price for certain securities—thereby hurting price discovery. Now, the worst-case scenarios presented here aren’t a given, as the SEC could clarify its position, make exemptions or find a compromise. However, watching how rules impact how markets operate—both the intended and unintended consequences—is always worth keeping on your radar, in our view.

Europe’s Uninspiring Car Sales Turn Ugly Amid Chip Crunch

MarketMinder’s View: The global semiconductor shortage hit the auto industry in a major way this summer, weighing on production and sales. “New-car registrations [a proxy for sales in the EU, Iceland, Norway, Switzerland and the UK] fell 18% in August and 24% in July from year-ago levels, the European Automobile Manufacturers’ Association said Thursday. Sales are now up just 13% for the year, less than half the percentage increase posted at the year’s halfway point.” Now, this piece argues that chip shortages may have affected sales, but so far, automakers have been holding up just fine: “First-half earnings, margins and cash flows were the highest in the industry’s history, Bernstein analyst Arndt Ellinghorst said in a report Wednesday.” Ultimately, we think that simply suggests firms were having modest success passing costs on earlier, but slowing sales suggest there may be limits to that, in our view. Regardless, lots of people stress auto production worldwide as some harbinger of economic direction, but that is a fallacy. Auto producers have been dealing with supply constraints for a while, but that hasn’t caused the eurozone economy—or output from big auto-producing nations like Germany—to contract (see Q2 GDP growth for more). Why? Even in powerhouse Germany, World Bank data show overall manufacturing was just 19% of GDP in 2019, before the pandemic. Western economies are generally services-dominated, so drawing macroeconomic conclusions from narrow measures of heavy industry misses the broader picture.

Fears for UK Recovery as Record Energy Prices Shut Fertiliser Plants

MarketMinder’s View: Across the pond, high energy prices are roiling UK and European households and businesses. As the open here describes, “Record energy prices have forced two fertiliser plants in the north of England to shut down and brought steel plants to a halt, in some of the clearest signs that the energy crunch engulfing Europe could deal a blow to the UK’s economic recovery.” We feel for both the households and companies squeezed by soaring energy costs, especially since there is no quick fix—as we discussed yesterday, structural and political factors have put the UK and Europe in this position. However, we think it is a stretch to argue higher energy prices, while a drag, threaten the economy. Consider: Utilities comprise less than 15% of the UK’s Consumer Price Index basket—energy impacts prices economy-wide, but it isn’t necessarily make or break. The headwind likely persists until supply adjusts to better meet demand, but we don’t think it will blow the UK recovery off course. Also, while there is no quick government fix for all this, much of the problem should be alleviated whenever the wind starts blowing again in the North Sea. In our view, it is likely a mistake to extrapolate the recently high prices far forward. Weather, as you likely know, is tough to predict far in advance.

Analysis-Biden’s Lofty Climate Goals Collide With Political, Economic Reality

MarketMinder’s View: Please note, MarketMinder is nonpartisan and doesn’t favor any politician nor any party. Our analysis here serves only to assess political developments’ potential market impact—or lack thereof. Note, too, this piece focuses heavily on policy related to climate change—a sociological issue that doesn’t materially impact the economic and political factors stocks focus on most, in our view. As charged as the issues discussed in this article are, though, political and economic reality has a way of undermining politicians’ rhetoric and ambitions. The result: Policy ideas have a tough time becoming enacted legislation, at least as initially proposed. To wit, “... nine months into [Joe Biden’s] presidency, political, legal, and economic obstacles have forced his administration to make several moves in support of fossil fuels development at home and abroad, and raised questions about whether the Democrat will be able to meet his commitments to clean energy. ... Most importantly, heavy political opposition has forced the administration to put its centerpiece climate proposals that would help deliver an April pledge to halve greenhouse gas emissions by 2030 into a budget reconciliation bill that has an uncertain future in the closely-divided U.S. Congress. Democrats, who hope to pass the bill by the end of September, are already talking about paring back investments and targets.” We don’t know whether this passes or goes down in flames (alongside the bipartisan infrastructure bill). But even if new legislation sees the light of day, it will likely be watered down from the lofty goals that drew so much attention and headlines. For investors, this isn’t a negative for markets—in our view, it is an underappreciated positive, as stocks can do great in an environment where politicians make fewer waves than initially hoped or feared.

If You’re Not Super-Rich, Tax-Hike Proposals Probably Won’t Affect Your Retirement Investing

MarketMinder’s View: From a personal finance perspective, are recent tax hike proposals anything to worry about? Before freaking out, we suggest reviewing the details. For example, the plan currently on the table in Congress would “... increase the top individual rate to 39.6 percent. This marginal rate would apply to single filers with taxable income over $400,000, heads of households over $425,000 and married couples over $450,000, according to the House plan. The top capital gains rate would increase from 20 percent to 25 percent. For most people, these changes shouldn’t affect their retirement accounts, said Mark Hamrick, senior economic analyst at Bankrate.” On that score: “The limit on [retirement account] contributions would apply only to single taxpayers (or taxpayers married filing separately) with taxable income over $400,000, heads of households with taxable income over $425,000 and married taxpayers filing jointly with taxable income over $450,000.” We would also stress nothing here is law yet—and even then, future Congresses may end up undoing any legislative changes. Tax developments bear monitoring, but we caution investors against overstating their impact, too. Additionally, while proposed tax changes aren’t likely to touch the vast majority of Americans, we suspect they may not net the highest-income households as intended either. The highest earners generally have ample means to defer compensation—and say, borrow against their net worth instead—which is one more reason why we think tax overhauls often don’t play out as hoped or feared (when they even come to pass).

Fraudsters Have Unlocked a New Way to Steal From Your Bank Account

MarketMinder’s View: Two-factor authentication may help deter criminals, but their constant probing creates a never-ending escalation—and behooves you to be ever vigilant and watchful for their latest tactics. If you access your bank account online or use a debit card attached to one, the bank often sends you a one-time passcode to enter alongside your regular identification and password credentials. As this article relates, “Thieves have called customers pretending to be from their bank and asked them to read out the codes. The scammers then use the passcodes to make fraudulent purchases with the customer’s card details. June alone saw £400,000 worth of transactions being attempted with stolen codes, known as one time passcodes because of their single use. The codes are received when an online purchase is made to ensure it is the card owner who is making the purchase. The text message usually carries a warning to never tell anyone the code and states that the bank will never ask for it.” Don’t divulge this or any other information to anyone calling! Scammers can use this sensitive data to impersonate you, leaving you more vulnerable to further damaging identity theft, which “can also be used by scammers to fool targets into believing that they are being called by their bank or even the police. ... They were each then called by fraudsters pretending to be from the bank who said the code would be used to stop an impending fraudulent transaction, or to recover the funds. But the code was instead used to authorise fraudulent spending.” Ever more creative cons, sadly, are a fact of modern life, but by keeping your defenses up—e.g., by maintaining a healthy skepticism—you are less likely to be compromised. For more on how, please see our 3/25/2021 commentary, “Simple Steps to Defend Yourself Against Financial Predators.”

EU Raises 5 Billion Euros From Debut Auction of Joint Debt

MarketMinder’s View: If you were wondering how the EU’s joint debt issuance was going, wonder no more: pretty good! “The bloc raised 2.999 billion euros from a sale of three-month bills and 1.997 billion euros in six-month bills, the top amount it was targeting. The three-month bill priced at an average yield of -0.726% while the six-month issue was at -0.733%, the European Commission said in a statement. Demand relative to the amount on offer, the bid-to-cover ratio, was 3.39 times on the shorter bill and 5.76 times on the longer bill. ... Matt Cairns, head of credit strategy at Rabobank, said the bills came at a lower yield than the bank had expected after looking at similar bills from the European Stability Mechanism, which is the euro zone bailout fund, and Germany ahead of the auction.” A few takeaways for investors: First, and most obviously, the EU is having no trouble borrowing—indeed, negative yields indicate investors are paying the EU to issue debt. Second, low, low, subzero yields in Europe point to ongoing demand for higher-yielding debt elsewhere—e.g., US Treasurys (after currency conversion). That dynamic keeps US yields anchored, which is one reason why we didn’t expect Treasury rates to run away like many suspected in the spring. We wouldn’t overstate the benefits or drawbacks of EU debt, as the plan is focused primarily on funding pandemic relief—EU bonds’ long-term future is still unknown. But in the here and now, robust demand for EU bonds is part of a global trend—and the resulting low- and even negative-yield world isn’t a bad environment for markets, in our view.

China’s Economy Weakens on Delta Outbreak and Wary Consumers

MarketMinder’s View: China’s latest economic figures for August are backward looking, but they are coloring economists’ outlooks contained herein (e.g., the National Bureau of Statistics of China said the environment is “grim.”) Some of the data: Retail sales slowed “drastically” to 2.5% y/y from July’s 8.5% and well below estimates for around 7%, while industrial production decelerated to 5.3% from 6.4% the prior month. Also, “Construction investment contracted 3.2% in the eight months of the year, a reflection of the government’s steady tightening of property restrictions as part of a campaign against financial risk.” Meanwhile, “China introduced stringent new curbs on travel to squash an outbreak of the delta variant from late July, leading restaurant & catering sales to contract 4.5% in August from a year ago after climbing 14.3% in the previous month. While China quickly brought the outbreak under control, a new virus cluster has developed in southern China this month, suggesting consumers will continue to remain cautious.” With consumer spending slowing and home sales slumping, some economists expect “a broad downtrend in the next couple of quarters.” As dour as this all sounds, though, China’s slowdown isn’t new. Floods, outbreaks and credit constriction aren’t coming out of the blue. For markets, this may weigh on sentiment, but expectations seem low enough to us that reality doesn’t have too high a hurdle to clear, especially as, “global demand has remained strong, supporting China’s vast industrial sector despite port congestion problems and high shipping costs. China posted record monthly export figures in August as U.S. and European buyers increased their orders before the Christmas shopping season.” Renewed COVID restrictions may weigh on output, but markets are well aware of those headwinds in China and worldwide—and they have likely moved on, in our view.