Daily Commentary

MarketMinder’s View: The deal US President Donald Trump struck with European Commission President Ursula von der Leyen last summer still hasn’t technically passed the European Parliament, a point of frustration in Washington and for many in Brussels. But it took a step toward that outcome Tuesday, as centrist groups (the European Parliament is populated by lawmakers from national parties that form more or less ideologically aligned groups) reached agreement on the broad brush strokes. “The meeting broke a weeks-long deadlock over the removal of tariffs on U.S. industrial goods and lobster. It was resolved after the top trade lawmakers ironed out specific safeguards to address the risk that Trump turns hostile again after his threats last month to annex Greenland. Among difficult items, lawmakers agreed to a clause mandating the European Commission to review the deal six months after its entry into force if the U.S. has not lowered tariffs to a 15 percent baseline level on EU products containing steel, instead of the current 50 percent.” There are some other wrinkles, including a mandated review and renegotiation in 2028. But all in all, this is a notable step forward toward potential EU approval of the deal in the coming weeks.

MarketMinder’s View: This interesting piece highlights a curious behavioral finance finding by blending together a new (if informal and unscientific) survey with older scholarly research. Namely, that many people who trade often say they beat the market but don’t actually know what the market did! This is one side of a two-pronged problem, in our view. That side is that you need a proper benchmark, an index or combo of indexes, for comparison to your portfolio (both as a measuring stick for performance and a blueprint for construction). And you must actually know what it did. The other side? You have to properly calculate your own, time-weighted performance. Too many think calculating that is about starting and ending value, without regard to inflows and outflows of cash. Too many mentally account and tabulate performance not of their whole portfolio, but just the equities—leaving out cash, bonds and other assets. A correct performance appraisal has to start by determining what your asset allocation is, which index (or indexes) corresponds to it and then tabulating time-weighted returns. Only then can you truly know how you did relative to markets overall.

MarketMinder’s View: This is awfully gloomy coverage of a flat monthly read in retail sales data, which cover a slice of US consumer activity. Yes, a flat month isn’t great, and it undershot expectations for 0.4% month-over-month growth. But it follows November’s 0.6% m/m and gains in five of the six months preceding December’s flatness, putting sales up 2.1% y/y. (Data from the St. Louis Fed.) This isn’t to say a positive year-over-year reading debunks worries over the lower-than-estimated read in December, but it does suggest the month’s reading doesn’t reflect the broader trend. That is vital perspective to keep considering the gloomy quotations in here about the flat month showing “‘Consumer spending has finally caught up with consumer sentiment, and not in a good way,’” based on sentiment’s dour levels over the past two years. The trend shows you that is very likely overwrought, especially considering consumer sentiment doesn't predict spending. (It would also be wise to wait for the personal consumption expenditures data to drop later in the month to even approach any real conclusion, considering that report is a) inflation-adjusted and b) contains much more data on services, the bulk of consumer spending.) The end of this piece paints a further dire picture by focusing on the bankruptcy of several retailers, like Saks and 1990s’ stalwart Eddie Bauer, as well as another firm slightly shifting its strategy in retail. It all paints a much darker picture than we think reality warrants at this point, illustrating a bullish gap between sentiment and the likely economic situation ahead.