Daily Commentary

MarketMinder’s View: While this piece lacks direct stock market takeaways, it helps put into context an increasingly popular supposed long-term economic driver: an allegedly forthcoming massive wealth transfer from Baby Boomers to GenX and Millennials as fortunes and businesses are inherited or sold to young entrepreneurs. This piece deals specifically with businesses, showing why this is probably overstated. “According to the Small Business Administration, there are approximately 33m small businesses in the US. But fewer than 7m actually employ people. The rest comprise freelancers, side gigs and independent contractors. I’m sure many of these people are making a living. But are they building assets? A brand? Probably not. If that ‘business owner’ suddenly disappears, their business disappears with them. No one wants to buy a business like that. There’s no value.” The author draws on his own experience building and running a small business as an example, concluding that even his customer list isn’t a valuable asset to sell. Passing a business to the next generation sounds like a possible succession plan, but it doesn’t always work out. The kids could run it into the ground, or they might have no interest in joining the family biz. Owners can try to build a sellable asset by building “an actual business with value. This would involve changing their billing models. Enforcing contracts. Buying property. Creating processes. Building infrastructure. Hiring a great management team. Creating a sustainable brand. Sounds great, but there’s a problem with this approach: it’s exhausting. Ask any person over the age of 60 to do this and they’ll be like: Who has the energy?” Hence, many small businesses simply close when the principal ages out, with new businesses coming along to replace them. This is doubly true in today’s day and age, as independent contractors are an increasingly common employment class and a likely source of many of these businesses—probably in part due to the expense involved in direct hiring. The aging of these folks isn’t some massive generational wealth transfer. That strikes us as a false hope, not one of the (many) reasons we see to be bullish.

MarketMinder’s View: Some politics here, so please note MarketMinder is nonpartisan. We focus solely on economic and market outcomes. We think this is a measured look at how global trade has shifted since President Donald Trump’s April 2 “Liberation Day” last year. Most developments have fallen into the three scenarios we laid out as most probable immediately following Trump’s announcement last year. The first: Legal blowback weakening tariffs’ effects as the US Supreme Court ruled last month that Trump’s blanket and reciprocal tariffs were unconstitutional, cueing up talk of refunds. Now, as the article sensibly points out, Trump responded with new tariffs almost immediately. But those are temporary unless Congress extends them, markets seemed to get over it pretty quickly, and the judicial process was always going to take time to play out. The second scenario—US trade partners compromising—has also materialized in the form of several US trade deals, most notably with the UK and Japan. Yet most of these left tariffs in place, simply lowering rates. The third scenario—non-US countries reacting with hostility, banding together and retaliating—hasn’t totally come true. Rather than acting with hostility, Trump’s tariffs have inspired trading partners to strengthen ties among themselves (see the pending EU-Mercosur deal or EU–Japan Economic Partnership Agreement). This is an underappreciated positive not many saw coming—bullish. Mind you, this isn’t a “we told you so.” But for those needing a refresher on global trade’s key developments over the last year, this is a decent rundown. It has been mixed, but we think markets’ rise from April 8 through the Middle East conflict’s reflects a better-than-feared global economic response.

MarketMinder’s View: According to the European Commission’s Economic Sentiment Indicator, economic and consumer confidence fell sharply this month: “The figures, measuring economic sentiment across five key sectors of the European economy, also reveal employment expectations are under pressure across the EU and euro zone. Employers in the retail trade, services and industry sectors are all adjusting their employment plans against a backdrop of ongoing war in the Middle East.” This, alongside weakness in recent eurozone business surveys, has sparked fears of “looming ‘stagflation.’” The rest of the article speculates about how the situation in Iran may evolve from here, which we don’t offer an opinion on—our interest is more on the economic and market implications. While we don’t dismiss the possibility of an escalation in the conflict, it is critical to think in terms of probabilities when it comes to investing. History suggests war in the Middle East may spook markets in the short term, but over the long term, stocks recognize the broader economic fallout is limited. That sentiment surveys already reflect worst-case scenarios indicate to us that it won’t take much to positively surprise to the upside.