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.


Positive U.S. Real Yields Will Rip Up Global Markets Playbook

MarketMinder’s View: So-called real (i.e., inflation-adjusted) Treasury yields are starting to peek above zero. As this article notes, this is a sign “bond markets have taken another step toward pre-pandemic normality, with benchmark inflation-adjusted Treasury yields climbing above zero.” So far, so good! But it then makes a gigantic leap, in our view, that this somehow dooms markets: “Back in positive territory for the first time in more than two years, the real yield move threatens to remove a key pillar of support for risk assets like stocks and credit and spark a reassessment of sovereign debt.” The underlying assumption: If you can’t earn a positive inflation-adjusted return in bonds, then “there is no alternative” (TINA) for investors but to venture into riskier assets (e.g., stocks). But once “safe” bonds feature positive real returns, watch out—investors will then ditch stocks and higher-yielding corporate bonds for Treasurys. Sounds intuitive, except history argues against the TINA hypothesis. Look back at the last time real rates flipped positive on June 7, 2013. Did stocks crash? On the contrary, the S&P 500 rose 16.8% to yearend (per FactSet). Note, too, that this article’s thesis depends on the notion bond markets know something stock and currency markets don’t—and are moving ahead of them. But all sufficiently liquid markets price in information at the same time, in our view. They may have different demand drivers, but one market isn’t more forward-looking than the other.

Are Buybacks Signaling a Stock Market Top?

MarketMinder’s View: No, to answer the titular question. Supposedly, as this article argues, buybacks are a contrarian indicator—i.e., buybacks hitting fresh records last year could be signaling a toppy market, perhaps setting up lousy returns, if not a peak, this year. “Previous multiyear peaks were seen in the third quarter of 2007 and the first quarter of 2000 with year-over-year gains of 57% and 43%, respectively. Both quarters saw stocks hit a record and begin sliding into a bear market. By contrast, big retreats in buyback activity occurred in the second quarters of 2020 and 2009 with year-over-year drops of 46% and 73%, respectively. Both quarters saw bear-market bottoms.” One problem with this analysis is that it doesn’t scale the amount of buybacks to the stock market’s overall market capitalization. As we noted in 2018, though buybacks surged, they didn’t deviate much from their market cycle average as a percentage of total US market capitalization—then, buybacks were running about 0.8% of total market cap, which wasn’t terribly high. Using Q4 2021’s high-water mark of $270 billion (per S&P Global) and last year’s total US market cap of $52 trillion (per SIFMA), the buyback rate is just over 0.5%—nothing to write home about, in our view. While this piece goes on to acknowledge company share repurchases aren’t necessarily timing tools and reveal more about past winners than future ones, we would go further and dispute the conclusion that today’s big buybacks are reason to be nervous—when scaled properly, buybacks don’t signal anything worrisome, in our view.

How a Cryptocurrency Project Lost $180m to a Get-Rich-Quick Scheme

MarketMinder’s View: As we have pointed out before, cryptocurrencies present a new Wild West frontier for those looking to strike it rich. While we aren’t for or against cryptocurrencies, buyer beware. Since there isn’t a legal authority to appeal to if something goes wrong, the risks of losing your investment without recourse are high. This article walks through a recent crypto “heist” (which we recently covered in this space), though there was nothing technically illegal about it. Siphoning off other cryptoholders’ cash was within bounds of how the “stablecoin” discussed here works. In cryptoland, there is no law against it: “... by the rules of the crypto world, it’s not entirely clear what wrongdoing was committed. The attacker acquired voting rights in a way explicitly allowed by the code of the project, voted for a proposal explicitly allowed by the code of the project, and took money in a way explicitly allowed by the code of the project. ... By the rules of the real world, there is almost certainly a crime here, although it’s not easy to identify which one. Maybe fraud? Probably you cannot hand someone computer code that says in quite clear English that it is a proposal to donate $250,000 to Ukraine but which actually donates $180m to you, and then when they run it, say ‘haha suckers’ and not get in some sort of legal trouble. But the deeper you get into the crypto sector, the less the rules of the real world apply. In the real world, you also cannot start a wildcat bank that mints its own currency to pay double digit interest rates out of customer funds.” While perhaps an extreme example, we think this episode offers a timely cautionary reminder: Make sure you employ thorough due diligence before committing any funds to any crypto-related endeavor.

Brexit Friction Pushes UK Companies to Set up Dutch Trade Hubs

MarketMinder’s View: This piece provides some concrete examples illustrating why the Brexit disruption pundits warned about since its inception has largely failed to materialize. Businesses (shockingly) want to do business, and any obstacles to commerce tends to get attention—with a fix or adjustment usually forthcoming in some fashion. Businesses are nothing if not practical—and adaptable. In this case, “An influx of British-based companies to the Netherlands has swelled as they struggle with the disruption of a customs border across the North Sea. More than 90 investors have built or rented distribution space since 2017, half of them in 2021, according to government agency Invest in Holland. ... Since 2017 the amount of warehouse space at the port has doubled to 4mn sq m, or 400 hectares. ‘There is a lot of demand, and Brexit is one of the factors,’ said Danny Levenswaard, director of break-bulk at the port. But he said many international companies also wanted ‘buffer stock’ because of the disruption to supply chains caused by the pandemic. Rotterdam, which had record container traffic of 15.3mn 20ft equivalents (TEUs) in 2021, was Brexit ready after updating its processing systems and educating traders. Truckers, freight forwarders and customs agents must register with Portbase, a non-profit company, which pre-clears all cargo. The only checks are on food and animals, and when customs spots something suspicious.” Is this environment ideal? No, but life rarely is. For markets, we think what matters is whether outcomes are likely to be better than expected. Investors focusing on that gap are likely better served than fretting worst-case scenarios playing out exactly as feared, as businesses often find ways to avoid the most dire outcomes from becoming reality.

Sentiment Versus Spending

MarketMinder’s View: This article references a few individual stocks, so please remember that MarketMinder doesn’t make individual security recommendations—those mentioned here are simply included to help illustrate a broader point. Pretty much every sentiment survey taken in recent months has shown consumers’ views of the economy absolutely tanked after Russia invaded Ukraine, which conventional wisdom says augurs poorly for spending ahead. And, since consumer spending is somewhere around two-thirds of US GDP, that is presumed to be bad for growth. Thing is, folks often say one thing and then do another. “Case in point: Credit Card spending. In their Q1 earnings reports, all of the big banks break out their customers’ card spending. The numbers are not reflective of dour consumers, but rather, of an economy that is on fire: Citigroup credit card spending is up 23%; Wells Fargo is 33% higher; JPMorgan Chase +29%. In fact, the WSJ reported that JPMorgan customers spending in Q1 were ‘37% higher than in the first quarter of 2019, and up 59% from its 2020 nadir.’ Chase’s credit card customers spent $236.4 billion ….” Now, this doesn’t mean consumer surveys are useless, in our view. They give you a snapshot of where sentiment is today, a helpful-if-imperfect gauge. But, as this notes, they don’t effectively predict behavior.

Defense Stocks’ Ukraine Premium Needs Handling With Caution

MarketMinder’s View: This article is a bit mixed, but one sensible point it effectively makes is this: Don’t buy stocks based on widely known theses, as they are likely to be reflected in stock prices already. As it pertains to defense stocks, “Those who value a historical perspective, however, should recognize another risk: buying at the peak of the wave. For the last 20 years, every big military conflict has triggered a jump in defense stocks, including Russia’s invasion of Crimea in 2014 and the North Korean nuclear crisis of 2017, as well as 9/11 in 2001. Yet these gains were often eventually erased, as the initial sense of danger dissipated. The same could happen now, particularly given Russia’s failure to achieve a swift victory.” Less sensibly, it goes on to claim that Russia’s invasion of Ukraine “seems more geopolitically game-changing than any recent conflict” so perhaps countries will allocate significantly more to defense spending than in the past. But that thesis seems more like speculation than anything. After all, if Russia fails to achieve its aims in Ukraine, does that suggest more advanced militaries—connected via a mutual defense treaty—will actually need to spend more? Or does it suggest they are a-ok? We don’t know the answer to this, but the presumption Ukraine is such a paradigm shift is unproven, and investing based on what governments may or may not do over the long run seems perilous.

Global Economic Forecasts Are Dropping Fast

MarketMinder’s View: The title is spot on and, for stocks, that is bullish. Why? Consider: The IMF, World Bank, Peterson Institute, World Trade Organization, Bank for International Settlements and other forecasters cited here all basically cite a range of risks that, in no particular order, include the war in Ukraine, rising prices (in the developed and emerging world) and continued zero-COVID lockdowns in China. Yet these are the most widely known and discussed issues among not only economic commentators, but investors, fund managers and more. Markets are efficient, pre-pricing common fears, forecasts and concerns. The IMF and World Bank ratcheted down growth estimates from 4.4% to 3.6% and 4.1% to 3.2%, respectively. Others are following suit, with articles like this one touting the big slowdown from fast 2021 growth, fanning economic fears. The thing is, those estimates are still for fine growth, and a slowdown from 2021’s reopening-juiced surge was always likely. The more these forecasts and the worries they hinge on lower sentiment, the easier it will be for markets and economic data to deliver relief, which is the kind of positive surprise bull markets thrive on.

The Truth About How Much Politicians Can ‘Manage’ the Economy

MarketMinder’s View: Most of this article reads like a breath of fresh air. Ahead of the Australian Federal Election—set for May 21—policy debate is churning, with a lot of it targeting which party is best equipped to “manage” the economy from the perspective of keeping unemployment low, growth advancing and wages rising. Such issues frequently dot political campaigns, but there is a problem that this article effectively highlights: “Economies, after all, are simply collections of human beings who, on a day-to-day basis in our modern era, tend to manage themselves. Individuals, not governments, get out of bed each day and decide how much to earn, spend and invest. After decades of hard-won reforms, however, today these decisions are, by and large, outsourced to either independent agencies or free markets. And that’s a very good thing. Can you imagine the pressure on politicians not to raise interest rates when needed? Indeed.” This piece also sensibly reframes the issue, as tax policy and other shifts usually amount to changing the incentives for individuals and businesses to act—in other words, they create winners and losers. This isn’t to say governments can’t pass policies that aid or harm economic activity. They can. But it is quite rare. Now, the conclusion gets a little into policy prescription and critiquing the lack of debate on which microeconomic policies to implement, which seems like a stretch to us, but that is a very minor quibble with an overall smart piece.

The Stock Market’s Future Ain’t What It Used to Be

MarketMinder’s View: This uses a lot of words to meander its way through a simple, tired argument that stock returns will be lackluster from here because the market is near all-time highs and valuations are up. Hence, investors should avoid the temptation to ratchet up risk by chasing heat and piling into illiquid assets in hopes of generating excess return. We agree on the heat-chasing front, but that is more of a constant viewpoint than one tied to a near-term market forecast. Similarly, we agree that it is vital to consider whether low liquidity is a match for your goals and personal situation—another constant pearl of wisdom. But the weak-returns-because-stocks-are-near-all-time-highs thesis? Nope, we don’t buy that one. It presumes past performance is predictive, which just isn’t true. All-time highs aren’t ceilings—they are arbitrary signposts in stocks’ long-term journey upward. Returns come in zigs and zags, with slowdowns and pullbacks during bull markets as well as some bear markets. Maybe a bear market strikes in the next couple of years, leaving average annual returns in line with the ~3% forecast offered by one analyst herein. But even if that forecast is correct, it doesn’t tell you how to navigate this period or when the bear market will occur—and it doesn’t do anything to predict returns over any sufficiently long time horizon. Moreover, bull markets often include dozens—and sometimes hundreds—of record highs before the last one that becomes the market’s peak. On valuations, stocks have been pricey by several measures for most of the last decade, yet they boomed overall during that span. Succumbing to fear of heights can mean missing returns.

Beanstalk Cryptocurrency Loses $182 Million of Reserves in Flash ‘Attack’

MarketMinder’s View: Errrr we guess this is another thing to add to your pro/con list if you are considering the cryptocurrencies known as stablecoins, which claim a fixed value and are backed by a basket of reserve assets. That backing, in theory, makes them more money-like and, well, stable than the free-floating cryptos like bitcoin. It is all well and good until someone comes in and steals the reserves in a way that might be technically legal. That is what happened with the titular coin known as “Beanstalk” when an unidentified investor executed a hostile takeover and made off with the reserve assets. “A still-unidentified attacker had borrowed $80m in cryptocurrency and deposited it in the project’s silo, gaining enough voting rights in exchange to be able to pass any proposal instantly. With that power, they voted to transfer the contents of the treasury to themselves, then returned the voting rights, withdrew their money, and repaid the loan – all in a matter of seconds.” It was all consistent with Beanstalk’s rules, which grant voting rights to depositors, and there will likely be little to no recourse for the remaining investors, who now own tokens that have no backing and trade at 12 cents. Lesson: Always know exactly what you are buying and what the rules are so that you can determine and weigh the risks—especially when you are in a very lightly regulated and newly established area.

The Chip Crisis Is Killing Tech Innovation

MarketMinder’s View: Don’t worry, the article isn’t nearly as dour as the headline suggests. It is actually a good look at how the chip shortage is affecting Tech companies big and small. In some ways, it is actually driving innovation, as it forces companies to compensate for a lack of updated chips by making their software more efficient and finding incremental improvements without big hardware upgrades. Those small gains can compound and eventually yield big results when next-generation chips are more abundant. In the meantime, the shortage creates winners and losers, and as the article notes, the winners appear to be the “industry giants [who] can generally source what they need from the chip foundries.” Yes, that unfortunately shuts out small companies and startups, but from a coldhearted, market-oriented perspective, it underscores why we think large growth-oriented Tech and Tech-like companies look poised to do well as this bull market continues. They have the clout and economies of scale to weather speedbumps like chip shortages, which helps keep production up and earnings growing.

A Russian Default Is Looming. A Bitter Fight Is Likely to Follow.

MarketMinder’s View: There is plenty of interest here, including the exploration of when and how Russia will officially default on its foreign debt. Technically, repaying dollar-denominated bonds in rubles—as it did earlier this month—should be a default, as the bond contracts don’t allow payment in alternate currencies. But there is still a grace period to wait out. Usually the ratings agencies would make the official default declaration when that window runs out, but EU sanctions will bar them from weighing in then. So will the default be official when investors declare it so? Or when derivatives like credit default swaps pay out? This will be interesting to watch, and we agree that it is unlikely to cause major market ripples globally given Western investors’ tiny exposure. With that said, we do have a quibble with this line of logic: “If [default] should occur, it would raise Russia’s cost of borrowing for years to come and effectively lock it out of international capital markets, weighing on an economy that is already expected to contract sharply this year.” Yes, under normal circumstances, expulsion from international markets would be the primary consequence of defaulting on foreign debt. But sanctions already effectively bar Russia from issuing debt in dollars, pounds and euros—the three primary Western markets. So, this seems mostly like putting a hat on a hat.

Companies Size Up Their Losses on Russian Operations

MarketMinder’s View: Please note, MarketMinder doesn’t make individual security recommendations—the ones mentioned herein simply illustrate a broader theme we wish to highlight. Businesses will soon start reporting Q1 earnings, providing some insight into the Russia-Ukraine war’s impact on companies’ bottom lines. “Russia-related impairments are likely to have the biggest impact on earnings of European companies, according to Carla Nunes, a managing director at risk-consulting firm Kroll LLC. ‘In the U.S., inflation and global supply-chain disruption are together likely to have a bigger impact,’ she said. The question of whether a company has to take a Russia-related earnings hit depends partly on whether it is disposing of assets, mothballing them, or just stopping sales in Russia, according to John McInnis, an accounting professor at the University of Texas at Austin. Under international and U.S. accounting rules, decisions about whether to impair an asset are based on its expected value over its lifetime. For assets that are being idled temporarily, that may mean companies ‘could ride out for quite some time’ without taking impairments, Mr. McInnis said.” While accounting methods aren’t the most riveting financial topic, we do think they highlight the complexity surrounding the war’s fallout on corporate profits—the actual impact isn’t as clear-cut as headlines make it seem. Moreover, we reckon Russia’s invasion will dominate upcoming earnings calls, and many business executives will blame the conflict for any bit of bad company-specific news: We have seen that movie before with tariffs and currency swings. With the volume likely to reach 11 as companies talk up what just happened and what they see ahead, we suggest investors remember that all the talk about the Russia/Ukraine impact helps stocks get over those factors. Yes, it can cause short-term swings. But the more well understood the effects of Russian exposure (which looks small, considering BP’s is the largest, as noted herein, and it isn’t huge), the less sway the story has. That should eventually allow markets to look past the war and on to factors impacting earnings over the next 3 – 30 months, in our view.

Last-Minute Tips as the April 18 Tax Deadline Looms

MarketMinder’s View: We are at the 11th hour of US tax season, which concludes on April 18, and if you haven’t filed yet, this is a helpful roundup of timely reminders, from available tax breaks to tips on filing electronically versus snail mail. However, the most useful points right now: If you owe taxes, “Keep in mind that there is a penalty for not filing on time and paying late. The IRS charges interest on any tax not paid by the due date of your return. The interest rate, which is adjusted quarterly, is currently 4 percent for underpayments, compounded daily.” Also, “Filing an extension does not give you more time to pay: Even if you’re filing an extension, you still need to estimate how much you owe and pay that amount by the tax deadline. You can electronically request an extension on Form 4868, which gives you until Oct. 17 to file your return.” As always, consult with your tax advisor on your specific, unique circumstances—and good luck!

Labour’s Energy Windfall Tax Idea Will Not Fix the Crisis

MarketMinder’s View: Please note, this article dives into some political and sociological waters on a hot-button topic—in this case, windfall profit taxes on UK oil and gas companies—so we urge readers to set their personal ideological views aside. As always, our analysis is nonpartisan and focuses on a policy’s potential economic and market impact only, as that is what stocks care about. In our view, this piece raises several fair points on the limitations and unintended consequences from a proposed “one-off” levy on energy profits. While many windfall tax proponents argue it is only “fair” for energy producers to pay more when profits are up (in part due to tragedies in Ukraine or from COVID), “It seems just as reasonable to argue that it is ‘fair’ for a company to benefit from higher prices when the goods or services that it supplies are in high demand. ‘Profit’ may now be a dirty word, but it is one of the foundations of free-market capitalism—and all the social benefits it brings.” Beyond the theory, though, there are practical reasons why windfall taxes may bring more harm than benefits. “Profits normally ebb and flow over the business cycle and the precise amounts are usually ‘unexpected’ to some degree. The losses in 2020 were presumably ‘unexpected’ too. Luck works both ways. However, if companies come to believe that profits might be taxed at a higher rate in better years, their projected returns from investment will be lower, and so there will be less of it. … Why should any company go the extra mile during a crisis if they fear they might be whacked with a punitive tax? In the meantime, windfall taxes will reduce the incentive to increase supply. Even the taxman shouldn’t expect a free lunch.” We don’t advocate for or against any policy, but as the old saw goes, the more you tax of something, the less you get of it—worth keeping in mind when considering the merits and drawbacks of a windfall profit tax. For more, see Elisabeth Dellinger’s column, “Don’t Let the Politicking on Gas Prices Fool You.”

IMF to Lower Global Growth Forecasts Due to Ukraine War and Covid

MarketMinder’s View: The IMF will release its updated global economic forecast next week, but Managing Director Kristalina Georgieva is already setting expectations for a growth downgrade both this year and next. “The IMF would cut its forecasts for 143 countries around the world, representing 86% of global GDP, she [Georgieva] said.” The primary reason behind the projected downgrade shouldn’t shock anyone: Elevated inflation, Georgieva argued—exacerbated by Russia’s war in Ukraine and ongoing COVID issues—will squeeze household spending worldwide, weighing on output. Moreover, “The head of the IMF warned that countries which are net importers of food and fuel—in Africa, the Middle East, Asia and Europe—risked the biggest growth downgrades. Ukraine would suffer ‘catastrophic economic losses’ from the war, while Russia would see a ‘severe contraction’ due to sanctions, she said. However, other nations will also struggle under the weight of higher commodity prices, trade friction and rising debt servicing costs.” We don’t dismiss the IMF’s (or any other research outfit’s) forecast, and a slowdown or even economic contraction in certain countries and regions may occur. But we think the focus on weakness in Europe overlooks how some parts of the world—namely, commodity-heavy economies like Australia, Canada or Brazil—may actually benefit economically from higher energy prices. Moreover, the latest PMIs suggest economic activity in services-heavy developed nations—which contribute the lion’s share of global GDP—is holding up despite the war’s disruptions. Surprises move markets most. If growth persists in Europe and other major regions, it seems likely to present a pretty big positive surprise. But even if economies weaken, the IMF, central banks and others downgrading their economic outlooks for largely the same reasons suggests stocks have likely pre-priced the potential impacts, which should allow them to move on anyway.

U.S. Oil Drilling, Output Moving Higher With Energy Prices

MarketMinder’s View: Earlier this year, many feared oil prices would soar and stay high, with producers in America failing to respond to high prices. In our view, those concerns appeared based more on recency bias than a review of supply drivers on a forward-looking basis. US oil output’s climb off post-pandemic lows—and the prospects for more, given the profit motive—seemed overlooked. Now though, industry experts are changing their tune. “U.S. output will end the year up 1.29 million barrels per day (bpd), at 12.86 million bpd, according to consultancy East Daley Capital, which closely tracks energy supplied to U.S. pipelines. Its latest forecast increase is roughly 300,000 bpd, or 23%, higher than in its December outlook. The bulk of the projected annual rise—1.13 million bpd—comes from the Permian Basin, the top U.S. shale field that has propelled the United States to an energy powerhouse. There were 332 oil rigs drilling there last week, the most since April 2020.” Now, forecasts are neither uniform nor prescient, but that amounts to a pretty stark shift in tone. Also noted here: “Not everyone expects robust gains. The U.S. Energy Information Administration (EIA) this week left unchanged its outlook for an 800,000 bpd increase to 12 million bpd this year. BTU Analytics, a Factset Company, puts U.S. output rising by 962,000 bpd to 12.2 million bpd by the year-end, slightly down from a prior forecast.” Yet even these estimates have a noteworthy caveat: Both still projected output to rise in 2022. This doesn’t mean oil prices will fall overnight or that consumers should expect pressures at the pump to alleviate soon. But we do think underappreciated US production is a big reason why global oil prices should eventually stabilize—producers, responding to prices, are allocating their resources to increase output and meet demand.

Corporate Profit Is at a Level Well Beyond What We Have Ever Seen, and It’s Expected to Keep Growing

MarketMinder’s View: As Q1 earnings season commences, analysts will be scrutinizing reports for signs higher costs are squeezing profits. As this article notes, last year’s corporate profit margins stood at record highs. “Companies in the S&P 500 index reported a record collective net profit margin of 12.18% in the past 12 months of financial reports, which largely correlates with the 2021 calendar year, according to a Dow Jones Market Data Group analysis of FactSet data based on generally accepted accounting principles, or GAAP.” Based on the latest estimates, experts anticipate more of the same this year. “Wall Street still expects a higher net profit margin for the S&P 500 this year, and the next two after that. On average, analysts predict that the S&P 500 index will produce a 13% net profit margin in 2022, according to FactSet, as they prepare for a wave of first-quarter numbers in the coming weeks, with similar projections for 2023 and 2024.” Analysts’ estimates are far from definitive, so don’t take these figures as gospel, but they also aren’t ignorant of cost pressures. “‘We know companies are facing all sorts of costs, higher energy costs, labor shortages,” [FactSet Senior Earnings Analyst John] Butters said. ‘Seventy-four percent of companies that had conference calls [last quarter] cited inflation and supply chain. These are big topics. Some can raise prices, some can offset it. It will be interesting to watch, and see what companies say about their ability to raise prices to offset costs.’” Yet despite these issues, “while analysts reduced their first-quarter estimates, they actually raised their forecasts for the subsequent three quarters and the full year, as companies pointed toward the potential for better returns later in 2022.” We think this provides a pretty good glimpse of how markets form expectations and what it takes to move consensus opinion substantially—and stocks generally. What matters isn’t the most recent results, which are largely priced in already, but how projections 3 to 30 months out shift with new information and whether reality is likely to conform with those evolving expectations. Given how dour sentiment is today, reality has a low bar to clear to surprise to the upside—reason to be bullish, in our view.

Smaller US Ports Offer Potential Solution for Supply Chain Delays

MarketMinder’s View: Supply chain chaos understandably receives loads of attention, but when things improve, they often go overlooked. But those little-noticed signs that conditions are better than many appreciate is the stuff bull markets are made of, which is why we highlight this article. “The Port of Cleveland, which ranked 49 out of 50 on the Bureau of Transportation Statistics’ 2020 list of top U.S ports, reported a 69% increase in ‘tonnage’ in 2021. Officials at the Port of Cleveland told FOX Business a significant increase in goods both in and out of containers, as well as iron ore shipments, drove the increase. Jade Davis, the executive vice president of external affairs at the Port of Cleveland, said more shipping companies used the inland port last year to avoid crowded east and west coast hubs.” In our view, this adjustment illustrates how businesses adapt to the big problems that people fear—and those solutions help power the relief that drives stocks up the wall of worry. Now, going back to the current port situation, “Across the country, other small ports are angling for some of the additional business overflowing from major U.S. ports.” This may not seem like a huge deal, but we think it illustrates one small area of progress—and how little things can add up.

U.S. Producer Prices Jump 11.2% From a Year Ago, the Most on Record

MarketMinder’s View: While inflation is a politically polarizing subject today, please note our analysis focuses solely on its economic and market impact. That said, is more inflation in the pipeline? As the article describes, the Producer Price Index (PPI) rose a record-high 11.2% y/y in March, though we appreciate this bit of historical background for context: “In 2014, the BLS changed how it calculates the PPI to incorporate prices for services, construction, government purchases and exports, which only provides historical context dating back about a decade. Under the old calculation, the year-over-year increase in March would have been 15.2 per cent, the highest since 1975.” Many think upstream producer prices will get passed on to consumers, meaning further hits to household pocketbooks coming down the pike. But as we have pointed out before, that isn’t necessarily in store: PPI mostly moves together with the Consumer Price Index (CPI). PPI is also heavily commodity-oriented—and hence more volatile—so its big swings aren’t usually mirrored in the services-skewed CPI. Now, that isn’t to say CPI has peaked or won’t stay elevated—more that PPI won’t tell you where CPI goes from here. The latest PPI figures just confirm what everyone is well aware of: Food and energy prices are high. That isn’t great, but it is neither a surprise nor a huge negative capable of torpedoing today’s solid economic environment, which is what matters most for forward-looking markets.