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.


Euro Falls Below Parity With the Dollar. What’s the Impact?

MarketMinder’s View: For the first time since July 2002, one dollar is worth more than one euro in foreign exchange markets, and this article spills a ton of pixels on what it means, who wins and who loses. In our view, it commits the error of overrating exchange rates’ impacts to a very large degree. First, on the notion of why the euro tumbled, we think it has less to do with the energy crisis detailed here and more to do with interest rate differentials. Currencies tend to chase higher expected yields, and with the Fed tightening fast while the ECB dawdles, those differentials have grown. As for who wins, yes, American tourists may win, although larger companies like hoteliers and airlines could simply boost prices to offset the weaker euro. Lower import prices in the US are possible, but aren’t likely to have much effect. After all, the dollar has been strengthening dramatically for most of 2022, but inflation has surged. Imports just aren’t a big source of price pressures. That is doubly true in the euro’s case, considering eurozone imports constituted about 14% of total US imports last year. Furthermore, as for the idea that US multinationals lose, as “American companies that do a lot of business in Europe will see the revenue from those businesses shrink when and if they bring those earnings back to the U.S. If euro earnings remain in Europe to cover costs there, the exchange rate becomes less of an issue,” that last sentence is important, as it is generally a key practice of multinationals. But even beyond this, multinationals tend to source goods and labor globally and they often hedge to manage currency fluctuations. Finally, analysts know currency swings aren’t core to a business, so many of them either look past such swings or rely more on constant-currency adjusted earnings that eliminate these moves’ impacts. So the notion that the dollar rising versus the euro is bad for revenue is just too simplistic to matter much.

Spam Texts Are Surging. Here’s How to Avoid Being Swindled.

MarketMinder’s View: This is news you can use, as text message scams boom: “Federal law now requires carriers to combat robocalls with anti-spam technology. Such calls were down over the past year to 1.1 billion from 2.1 billion, according to U.S. Public Interest Research Group, a nonprofit consumer watchdog. An FCC spokesman said the commission is discussing similar action on robotexts, but it hasn’t gone into effect. Meanwhile, robotexts have swelled: The watchdog report shows text scams have increased 10-fold over the same period, to about 12 billion monthly.” So, some general pointers: First, like scam emails, if a text urges you to take an unexpected action (“You’ve won, click here to collect”), treat it as if it were a scam. Second, don’t click links in texts from unfamiliar sources. This may be phishing, just like links in emails. Third, don’t text back. Scammers will see this as you confirming the number is valid and that you are responsive. What can you do to limit your exposure? As this notes, you can use your phone’s filters to block unknown senders. If a text purports to be from a business you frequent, log in to your account at the business or call customer service to confirm legitimacy. Just be sure you navigate to the business’s site to do so—again, don’t click any link texted to you. Last, there are apps you can download to help block scam texts and calls. This article offers a few suggestions in that regard.

Euro-Zone Consumer Confidence Rebounds But Stays Near Record Low

MarketMinder’s View: “Euro-area consumer confidence unexpectedly improved, though it remained below anything seen during the pandemic as the rising cost of living hurts households and energy shortages threaten to curb economic output. A monthly gauge from the European Commission rose to -24.9 in August from -27 in July, according to data released Tuesday. Economists surveyed by Bloomberg had predicted a slight decline to -28.” Confidence gauges tend to be concurrent indicators heavily influenced by recent market movement and headlines, so it isn’t super-surprising that eurozone confidence inched up alongside a broad market rally over the past couple of months. This article goes on to warn of weak economic conditions and the potential for energy issues to compound further, which we don’t dismiss. However, when you consider the depths sentiment has declined to—alongside eurozone markets’ drops earlier this year—we think it seems fairly clear stock prices reflect those conditions to a great extent already. Fundamental conditions don’t need to materially improve for stocks to rally; it is all a matter of reality proving less dire than what stocks weighed previously.

Felixstowe Strikes: How Will They Affect UK Shop Shelves and Prices?

MarketMinder’s View: As always, we look past the sociological aspects of news like this and encourage readers to do the same when considering the economic and market impact. That is actually why we are highlighting this article, as it gives a clear accounting of how the latest supply chain interruption is likely to affect the UK economy and international trade overall—helpful context for analyzing data when they eventually come out. The Port of Felixstowe processes a little less than half of the UK’s shipping containers, typically handling primarily non-perishable items shipped from Asia. Therefore, there is ample concern that the ongoing eight-day work stoppage will have a severe impact on the global supply chain, not to mention supply of clothing, electronics, furniture and other goods in the UK. One outlet estimates it could affect $800 million worth of trade. But there are some mitigating factors: “Industry sources said shipments had been timed to arrive to avoid the strikes, with orders rushed to beat the start and others delayed to arrive afterwards. Trade is also expected to be diverted to smaller UK ports and EU ports, including Rotterdam in the Netherlands and Wilhelmshaven in Germany.” That should help reduce the risk of shortages, and more broadly, global markets are pretty used to supply chain disruptions by now. So beyond short-term hiccups in some monthly data, the impact is likely pretty muted for stocks.

IPO Market Faces Worst Year in Two Decades. ‘Really Hard Pill to Swallow.’

MarketMinder’s View: Much about this year’s shallow bear market is unusual, including its (in our view) largely sentiment-driven nature. But in some ways it is behaving like a typical bear market, and its impact on the market for Initial Public Offerings (IPOs) is one of those ways—a telling sign of how sentiment has evolved this year. Last year fetched a bumper crop, but now the market is largely frozen. “So far this year, traditional IPOs have raised only $5.1 billion all told, Dealogic data show. Typically at this point in the year, traditional IPOs have raised around $33 billion, according to Dealogic data that goes back to 1995. Last year at this point, these offerings raised more than $100 billion. The last time levels were this low was 2009, when the U.S. was recovering from the depths of the financial crisis and the IPO market reopened near the end of the year.” Few expect it to reopen quickly this time, given sentiment toward Tech companies is pretty abysmal still, fanning fears that late-stage startups will have to burn through cash to keep going, which may cull the herd a bit. Several have already implemented layoffs and other cost-cutting measures. Now, we disagree with the sentiment that it is necessary for all these companies to go public in order for retail investors to reap continued growth in the stock market. Much of today’s mature startups have already enjoyed that fast-growth phase, leaving early investors the primary beneficiaries (a legacy of Sarbanes-Oxley and a topic for another day). But this was a pocket of excess that is now getting wrung out a bit, which is a typical byproduct of a market cycle and may, counterintuitively, be yet one more indication that a global bull market recovery is nearby, if not already underway.

China Plans $29 Billion in Special Loans to Troubled Developers

MarketMinder’s View: More details are emerging about the Chinese government’s new support package for troubled property developers, which aims to fund the completion of pre-bought homes. This follows several weeks (at least) of a grass-roots mortgage strike, in which people who pre-bought these units are refusing to make mortgage payments—an obvious threat to social stability in the run up to this autumn’s National Party Congress, at which President Xi Jinping is reportedly gunning for an unprecedented third term. Typically, governments will seek to speed growth ahead of these party leadership “elections,” in order to boost the regime’s popularity. This year, it appears to be all about damage limitation and quelling potential unrest. There are a lot of political implications here, and this could sow the seeds of Xi’s rival faction’s eventual resurgence. But in the meantime, we guess this is what a Chinese government making every effort to avoid the long-feared hard landing looks like, and a plodding China still contributes to global economic growth.

Apocalypse Arrives for the ‘Zombie’ Companies Haunting UK Growth

MarketMinder’s View: And that isn’t necessarily a bad thing from a big-picture perspective, as this article highlights well. For one, as this shows, insolvencies typically result from broader economic trouble—they are a symptom, not a cause, so a wave of bankruptcies would mostly be a lagging confirmation of UK economic weakness markets have seemingly long since priced in. Two, a process the late great economist Joseph Schumpeter called “creative destruction” is a vital part of long-term economic growth and development. Simply, economies progress when unsuccessful companies fold, freeing up capital, labor and market share for more innovative competitors. That usually fosters faster growth and higher productivity, which are two things the UK struggled with in the 2010s. We hesitate to pin all of that on low interest rates and an abundance of so-called zombie firms (defined here as companies that earn just enough money to service debt but nowhere near enough to invest in the core business), but the relative dearth of insolvencies aside from some high-profile legacy retail businesses seems quite telling. It recalls, to a lesser degree, the weak growth and low productivity that have plagued Japan since the Nikkei bubble burst over 30 years ago, which stems largely from complex ownership arrangements and artificially low interest rates keeping large companies on artificial life support. Don’t get us wrong: When a business fails, it can be tragic for the owners and employees, and we don’t take that lightly. But for stocks and the economy overall, it is generally beneficial when pockets of excess get wrung out, making space for something new.

What $80 Billion More for the IRS Means for Your Taxes

MarketMinder’s View: We half-hesitated to highlight this given how politically charged the IRS funding portion of the Inflation Reduction Act is, and we certainly don’t intend any partisan political statements—we are neutral, as always. But we think understanding the context and what this part of the bill actually does could help defang one of the many political fears weighing on investors right now, and this article provides a just the facts, ma’am approach to this. On the IRS hiring front, while the plans to hire 87,000 workers got heaps of attention, this includes all positions over the next decade, “such as customer service reps and tech workers as well as agents.” Plus, with 50,000 IRS workers expected to retire over this span, the net increase in headcount will be much smaller than 87,000—and the number of armed special agents in the criminal investigation division will likely remain below 1990s levels. As for where in particular the new funding will go, while the current Congress channeled it to enforcement, future Congresses could shift it to customer service or cancel the extra funding entirely—as often happens with long-term budget appropriations. Lastly, regarding the potential for increased audits, that likely won’t happen any time soon: “It will take time for the IRS to staff up, especially in a tight labor market. By one estimate, new agents aren’t fully productive for three to five years. The Treasury Department has pledged to use the new funding to focus on tax underpayments by higher-income people. Their returns are often more complex than lower earners’ returns, and the IRS needs to devise new audit methods.” Also, simple logic dictates that complex returns with many itemized deductions are likeliest to get audited, which probably ensnares fewer people today, given 2017’s tax reforms streamlined deductions and doubled the standard deduction.

Why Are CEOs Suddenly Obsessed With ‘Elasticity’?

MarketMinder’s View: This piece highlights a number of publicly traded companies’ earnings calls, and as always, MarketMinder doesn’t make individual security recommendations. Our interest here is in the broader themes this highlights. The primary one: So far, companies are broadly able to pass their own cost increases on to customers, which explains why earnings have held up in the face of inflation. “If a small rise in price leads to a big fall in demand, the item is said to be more elastic. That makes chief executives tremble. But if a big rise in price has little effect on demand, the product is considered inelastic — and a good thing for companies’ profit margins because they can raise prices without risking a drop in sales.” In Q2 earnings calls, execs have seen only modest elasticity: Some have seen demand take a modest hit, but overall, most have pricing power. That suggests demand is a lot stronger than recession-watchers allege—a textbook case of reality beating expectations. Yet expectations aren’t catching up, as analysts now warn people will start substituting lower-budget choices for high-priced luxury products and services, essentially arguing inflation will have a delayed effect. Time will tell if that proves correct, but low sentiment should make the bar easier to clear. Lastly, we just really enjoyed the way this piece picked apart all the jargon that permeates earnings calls, and we appreciate the service it provides in translating all that jibber-jabber for normal people.

When the Stock Market Is Crazy, Invest Like a Millionaire

MarketMinder’s View: Specifically, a 401(k) millionaire, as this piece highlights one investment firm’s findings on how its 401(k) millionaires behave when markets get rocky—which provides timeless tips for everyone. The key, simply, is not to get agitated and make knee-jerk reactions after markets have dropped, and instead keep a longer-term perspective. The 401(k) millionaires’ club is primarily “long-timers, who, on average, have been investing for about 28 years, stick with the stock market through rough periods — the dot-com bust, the 9/11 terrorist attacks, the flash crash of 2010 and the [2007 – 2009 global financial crisis].” That isn’t to advocate a pure buy-and-hold approach, but rather to show that even if you don’t see a bear market (typically a prolonged decline of -20% or worse with a fundamental cause) correctly and end up participating in it, it needn’t be a permanent setback. To illustrate this, the study considers three hypothetical investors who entered October 2007 with $400,000, just as stocks were peaking. “The first two investors panicked when their accounts dropped to $352,000. The first investor jumped out of the market, going to all cash, and stopped making contributions. The second one also moved to cash but kept contributing to a workplace plan. The third investor kept the money invested and continued to contribute. The latter two investors each had $15,000 going into their 401(k) annually, including employer matching contributions. By February 2012, the investor who cashed out and stopped contributing had $353,400. The worker who went to cash at least returned to making 401(k) contributions and had $404,709. The third investor had $524,600 by sticking to the original investment mix.” It isn’t easy, but staying cool and focusing on your future—all the things you want to do in retirement—can bring big benefits over time.

Retail Sales in Great Britain Rise Despite Cost of Living Crisis

MarketMinder’s View: UK retail sales volumes rose 0.3% m/m in July, offsetting June’s -0.2% drop and hinting at consumers’ resilience to rising prices. But in a timely illustration of sentiment, the coverage here is preoccupied with the fact that the increase came primarily from a growth in e-commerce, with sales at physical non-food stores falling -0.7% m/m—implying this is a sign of entrenched weakness, particularly since one large Internet retailer’s annual sale likely boosted online shopping. Hence the view that only online discounting boosted sales, suggesting consumers aren’t in great shape. In our view, this sentiment is emblematic of what Fisher Investments Founder and Executive Chair Ken Fisher calls the “pessimism of disbelief”—the widespread tendency to couch good news with “yah, but” objections. It normally features after big market downturns, and it helps keep expectations low, giving reality an easier bar to clear. We see plenty of potential for this in the UK, considering retail sales don’t include spending on services, which is the majority of UK consumer spending. Demand for services tends to be steadier, and services price increases (outside energy-related services) have been milder than goods prices, which should help spending be more stable than many expect. Even just modestly negative results would likely qualify as positive surprise at this point.

Factory Shutdowns, Showers for Pigs: China’s Heat Wave Strains Economy

MarketMinder’s View: Heatwaves worldwide have been straining economies, and China is no exception. “Faced with China’s most searing heat wave in six decades, factories in the country’s southwest are being forced to close. A severe drought has shrunk rivers, disrupting the region’s supply of water and hydropower and prompting officials to limit electricity to businesses and homes. In two cities, office buildings were ordered to shut off the air-conditioning to spare an overextended electrical grid, while elsewhere in southern China local governments urged residents and businesses to conserve energy.” The rest of the article details the many industries impacted by the intense weather, from agriculture and energy producers to delivery and office workers (not to mention panda bears). While we sympathize with those enduring the intense heat (especially the pandas, due to the fur and all), our focus is on the broader economic impact—and extreme weather’s macroeconomic impact tends to be fleeting. Yes, factories going off line due to electricity shortages may knock manufacturing output and could even lead to slower GDP growth. But from an investing perspective, this isn’t necessarily a negative shock to markets, which have grappled with industrial output interruptions before, and weakness isn’t news in China at this point. Beyond energy shortages, Chinese manufacturers have also had to navigate supply-chain bottlenecks and the government’s draconian “zero-COVID” strategy over the past two years. We see little surprise power in a plodding Chinese economy for global investors at this point.

Congrats on Your First Job! Here’s What to Do With Your Money.

MarketMinder’s View: The pointers here are geared towards people entering the workforce, but we think these well-known financial practices are worth reviewing—especially if you know someone who may benefit from learning about fundamental money management practices. The five bits of advice: develop a savings habit now; establish different roles for your money; contribute to your retirement; reduce your debt; and watch your discretionary spending. On savings: “Right now, it’s more about establishing a lifelong habit of saving than how much you save. Push yourself. Start with saving a regular dollar amount or a percentage of every paycheck — 3 to 5 percent. If you don’t develop a savings habit now, it will be harder to practice later when your paychecks get bigger. More money, more temptation to live above your means.” Nothing revolutionary, to be sure, but while good advice may sound boring, it is still effective. In our experience, successful long-term investing isn’t about finding that diamond-in-the-rough investment—it is much more about discipline, saving and living within your means.

Philly Fed Index Unexpectedly Indicates Return to Growth in August

MarketMinder’s View: After contractions the past two months, the Philadelphia Fed’s Manufacturing Business Outlook Survey showed general activity turned positive in August, though the underlying was a mixed bag. “The Philly Fed said its diffusion index for current activity jumped to a positive 6.2 in August from a negative 12.3 in July, with a positive reading indicating growth. Economists had expected the index to rebound to a negative 5.0. The rebound by the headline index was partly due to a notable acceleration in the pace of shipment growth, as the shipments index jumped to 24.8 in August from 14.8 in July. The new orders index also showed a significant rebound but remained negative, surging to a negative 5.1 in August from a negative 24.8 in July.” The survey’s future indexes point to tempered growth expectations over the next six months, but as one analyst here put it, “… the latest data from the Philly Fed district implies that there remains a solid demand pipeline and a manufacturing slowdown should not cascade into an outright contraction in output.” Now, the broader takeaways from a regional manufacturing survey are limited, but we think the Philly Fed’s better-than-expected result counters some concerns from the weaker-than-anticipated New York Fed’s August manufacturing survey (which we highlighted earlier this week in our “What We’re Reading” section). The latest US economic data have been giving mixed messages, but contrary to many economists’ forecasts, they haven’t been screaming recession—one reason we don’t think stocks’ rally is out of touch with reality.

How to Tell a New Bull From a Bear Market Fakeout: Toss a Coin

MarketMinder’s View: We don’t recommend investors take the titular imperative literally, but there is some high-level truth to the argument presented here: distinguishing between a bear market rally and a new bull market in real time is near-impossible. In our view, a market recovery is apparent only in hindsight and often starts when sentiment is at a low—stocks don’t sound an “all-clear” signal when a bull market begins. Nor is there any one magic indicator to help. “In every blueprint that appears to contain insights, there’s either holes or one that contradicts it. Take the popular 50% retracement indicator, which states that once the S&P 500 recovers half its peak-to-trough decline -- a milestone it achieved Friday -- the index has almost always avoided making new lows. That’s nice, except that a different gauge kept by Bank of America Corp., one that combines the S&P 500 price-earnings ratio with US consumer inflation, is adamant that stocks have yet to bottom. Every market trough since the 1950s saw the measure fall below 20. During the selloff this year, it only got as low as 27. The model has ‘a perfect track record,’ BofA says.” Fine, but coincidence isn’t causality, and mashing two backward-looking measures together doesn’t create a forward-looking indicator. We see great value in looking at market history as a starting point from which to begin determining a reasonable range of probabilities, but widely discussed models get priced in, and past returns don’t predict. So on top of market history, it is important to layer the economic and political factors impacting corporate profits over the next 3 – 30 months and consider: a) how these qualitative factors mesh with the fundamental backdrops of any past cases you are comparing to and b) how the likely reality today aligns with broader expectations. This approach won’t tell you when exactly a new bull market has started, but identifying inflection points isn’t the key to successful long-term investing. Making sure you don’t miss participating in bull markets is much more critical, in our view. For more, see our 8/2/2022 commentary, “Our Perspective on the Midsummer Rally.”

Analysis: As Earnings Support U.S. Stock Rebound, Worries Over Future Profits Grow

MarketMinder’s View: As this article references specific companies’ earnings, please remember MarketMinder doesn’t make individual security recommendations. Particular examples are for illustrative purposes only, as we wish to highlight a broader theme: Skepticism about future earnings appears to be growing, even as Q2 earnings have come in better than expected. “Some market participants are growing concerned, however, that strong corporate numbers may not last, as companies face an array of challenges, including surging inflation and changing consumer spending habits. These may make it difficult for stocks to hold their recent gains or rise further, they said.” Thing is, markets aren’t unaware of these developments or other margin pressures. Stocks price in all widely available information, including broadly publicized forecasts like those aired here. We would add that earnings forecasts are opinions, so rather than take them—and their implications—as gospel, we think investors can use them as reflections of sentiment. Based on the views shared here, sentiment remains far from optimistic, which isn’t uncommon at new bull markets’ beginnings—though whether a recovery has taken hold will be clear only in hindsight.

It’s Easy for Investors to Get Caught Up in the Market Noise – Here’s How to Block It Out

MarketMinder’s View: Market booms and busts can loom large in headlines—and people’s minds—which, in our experience, can lure long-term investors “into thinking they will last forever.” This article offers some helpful guidance on how to avoid that common error: “... it is very easy to get caught up with the consensus view during both bull markets and bear markets. However, investors who can ignore market sentiment in favour of cold, hard facts could use the stock market’s boom/bust cycle to their advantage by purchasing shares when other investors are downbeat and selling them when others are in an ebullient state of mind. Cynics will argue that a contrarian investment strategy is obvious. Indeed it is. It simply entails using the overreaction of investors to buy shares when they are priced at levels that significantly undervalue their future prospects and sell them when the opposite is true. The challenge with such a strategy lies in its execution. It is incredibly difficult for any investor to ignore the views of their peers – whether bullish or bearish – and invest solely on the basis of facts and figures. However, it is possible for investors who are disciplined and have a long time horizon.” We also agree with this piece’s take on contrarian investing, which is more nuanced than simply doing the opposite of the crowd: “They should not simply buy the most unpopular or worst-performing stocks they can find.” Yup. As Fisher Investments founder and Executive Chairman Ken Fisher wrote about in his book Beat the Crowd, to do so requires thinking differently about what everyone else already knows—and is priced into stocks. Continually applying that discipline is difficult, but doing so can help investors achieve their long-term goals.

Biden’s New Climate Act Is About to Meet a Fierce Foe

MarketMinder’s View: Please note MarketMinder’s policy analysis is nonpartisan—we favor no party nor any politician. We aim to assess the titular legislation’s potential economic and market impact only. The issue raised here: “Unlike America’s longstanding partisan stalemate – not a single Republican voted for the Inflation Reduction Act that President Biden signed into law on Tuesday – the new conflict over climate policy will pit many environmental groups that have pushed hardest for the US to decarbonize against the administration’s efforts to do so.” As the article explores, IRA de-carbonization plans from natural gas pipelines and hydropower transmission lines to carbon capture and nuclear energy are “likely to run afoul of one environmental goal or another.” That queues up prospects for environmental reviews, though as the article notes, the IRA also includes some reforms that may relax some of those regulatory hurdles. For investors, we think this piece raises some basic reminders about legislation’s impact in general. For instance, losers’ sense of loss tends to outweigh winners’ sense of gain, and judging by some of the interviews here, many are unhappy with the perceived tradeoffs that pushed the IRA over the finish line. That implies many legal challenges to come—a big reason new laws’ economic impacts take a while to manifest, if they do at all. For more, please see last week’s commentary, “A Word on the Inflation Reduction Act’s Climate Spending.”

Survey: Over 60% of Japan Firms Negatively Impacted by Weak Yen

MarketMinder’s View: We think this article helps debunk the commonly held notion a weak currency is preferable for a nation’s businesses since it helps boost their exports. We always found the argument flawed because businesses import, too. Japanese companies confirm as much in the survey cited here: “Of the 11,503 small, midsize and large companies that responded to the survey, 28.2% answered that the yen’s sharp drop had a ‘significant negative impact’ and 33.4% said it had a ‘somewhat negative impact.’ By industry, more than 80% of companies in the ‘textiles, textile products, clothing wholesaling,’ ‘food and beverage, feed manufacturing,’ and ‘eating and drinking establishment’ responded that they suffered a negative impact. Many of those industries are vulnerable to the weak yen pushing up import prices of raw materials such as grains, lumber and energy.” This isn’t to say there are no weak-currency winners—see some of Japan’s chemical and machinery exporters, and “Companies in the real estate sector said they have been receiving a number of inquiries about Japanese real estate, which has become undervalued from the perspective of foreign investors.” In our view—and the surveyed firms’ here, too—a weak currency just isn’t the unalloyed good many make it out to be. For more on putting currency moves into context, please see our 7/26/2022 commentary, “Adjusting for Swings With Constant Currencies.”

Five Not-Quite Impossible Things the Market Believes

MarketMinder’s View: This argues stocks have bounced over the past two months because the market wrongly believes inflation will cool and the Fed will soon cut rates as the labor market cools off enough to slow wages—removing an alleged inflation contributor—but not enough to whack consumer spending. We think this gets a lot wrong about how inflation works, but more broadly, we think the overall argument doesn’t account for how markets work. It boils down to presuming inflation and rate hikes were fundamental negatives and that the market is over-optimistic in presuming those negatives will reverse. But recoveries don’t start when all negatives are gone—they start when sentiment has overshot to the downside and investors have overestimated the negative effect. So even if this simplistic view of why stocks were down this year were correct (which we disagree with), it wouldn’t mean easing inflation and rate cuts were necessary for stocks to recover. All it would take is stocks fully pricing those perceived negatives. With all that said, may we offer an alternate explanation? What if a panoply of fears weighed on sentiment earlier this year, making fear the chief driver, and now uncertainty is easing as the things investors feared gradually do or don’t come true, enabling the world to move on? Frame 2022 in that light, and we think the rally since mid-June becomes a lot more logical. Now, that doesn’t necessarily mean a new bull market is starting—that isn’t knowable now. But it does look like one in many ways.