Daily Commentary

MarketMinder’s View: The 43-day government shutdown that sidelined numerous government agencies last fall is affecting some prominent economic datasets, with the Bureau of Labor Statistics’ (BLS) December CPI the latest example. Without BLS agents conducting their typical data collection last October and throughout much of November, the agency is opting to “carry forward” their last known price on several goods and services to December, which some experts interviewed here warn will lead to a “muddy” report. We can debate the merits of the BLS’s decision, but for markets, this is a benign issue. Markets price the economic factors most likely to sway corporate profits 3 – 30 months ahead, so the components baked into December’s CPI report—however accurate, come Thursday—are probably priced in already (outside of potential sentiment-based short-term wiggles). As comprehensive as the BLS’s measure may be, it isn’t the only source of price data, so markets were never flying blind on the inflation front.

MarketMinder’s View: It took 25 years of talks, but the EU finally has a free-trade deal with South America’s “Mercosur” bloc (Brazil, Argentina, Paraguay and Uruguay). It isn’t quite over the finish line, as it needs parliamentary ratification, but European Commission President Ursula von der Leyen secured the ok from a majority of EU heads of state, clearing the way for her to sign the pact next week. Like all trade deals, we don’t expect this to be an immediate boon for either side. Trade pacts take effect slowly, with gradual phase-in periods, which saps surprise power and delays the economic effects. To us, this one is significant more for what it shows: The US’s tariffs are motivating the rest of the world to push for freer trade among themselves—not retaliation and protectionist actions. The article details some of this (which reminds us, MarketMinder is politically agnostic, preferring no politician nor any party and assessing developments for their economic and market implications only), showing how reality on the trade front has shaped up far better than most expected when President Donald Trump announced sweeping tariffs last April. US trade may have more costs and friction, but trade getting freer elsewhere is a long-term positive and perhaps a near-term sentiment booster as positive surprise continues.

MarketMinder’s View: In happy—if backward-looking—economic news, Japan’s consumer spending rose unexpectedly in November, with a 2.9% y/y burst defying expectations for a -0.9% drop. The month-over-month print was even better, with spending up 6.2% (yes that is a seasonally adjusted figure), beating expectations for 2.7%. Now, this isn’t necessarily the start of a hot trend, as “an internal affairs ministry official said one-off, volatile categories, including automobile-related expenses, contributed to the November upside surprise.” But spending in core categories was healthy too, perhaps indicating Japanese domestic demand is recovering from its Q3 slump. Markets are looking well beyond that to the next 3 – 30 months, of course, but confirmation of a recovery can help sentiment and show stocks haven’t been pricing in hot air.