Daily Commentary

MarketMinder’s View: Since this touches on politics, we remind readers MarketMinder is nonpartisan, favoring no party nor any politician, as we seek only to determine developments’ potential market ramifications—if any. And with that, the non-resignation heard around the world: “Federal Reserve Chair Jerome Powell said on Wednesday he will stay on as a central bank governor for an undetermined period of time when his leadership term ends next month, amid hopes that ongoing political attacks on the institution will start to settle down.” While we have our doubts his staying on will lessen political attacks on the Fed, we also don’t think that changes much. Even as Fed head, he was only 1 of 12 voting members, so it isn’t like he held sway to begin with. Mostly, this just extends the status quo Federal Open Market Committee (FOMC) markets are familiar with, and the broader obsession seems overrated. Not only are FOMC members’ decisions unfathomable—fruitless to try and figure out beforehand—they hit with a long and variable lag. Monetary policy isn’t the be all, end all for economic growth. Assessing a policy change’s potential implications after the fact seems far more reasonable to us than guessing at members’ (invariably flawed) crystal balls. Meanwhile, central bank maneuvers are among markets’ most watched factors—as coverage like this attests. Markets move most on surprise. Doing what most already expect—and markets already priced—is the opposite of that.

MarketMinder’s View: After Russia’s Ukraine war upended Europe’s energy supply chains, the Continent rapidly adapted, mitigating once-feared disruptions. Many now fear the Strait of Hormuz’s closure and its effects, but as Spain shows—after working out some initial teething pains with more diversified energy sources—its power infrastructure has become even more resilient. As this story relates, Spain suffered widespread blackouts last year, which many first pinned on its renewable energy adoption. While grid regulation may be harder to manage given renewables’ inconsistent power generation, the added resources can also help—with more experience managing them. “One of the reasons voltage oscillated outside normal bounds this time last year was because Spain’s grid operator has traditionally limited the capacity for wind and solar generation to contribute to voltage control. ... this has very recently changed, with renewable technologies providing voltage compensation services since April.” So with better knowledge on how to handle power surges, “Spain added 13.8 gigawatts of new solar in 2025, compared with 12.3 gigawatts in 2024,” leaving it “relatively protected [against spiking gas prices] compared with other countries because of its existing investment in renewable energy.” The lesson for investors here: Incoming freight trains of fear (energy supply disruptions from war, tariffs, etc.) seldom prove catastrophic because when everyone sees the problem looming, they take steps to soften the blow if not work around it altogether. Reality proves better than feared, and markets move on.

MarketMinder’s View: Are US bond markets sending mixed messages? This article argues they are, but the evidence is frankly thin gruel. It cites the fall in high-yield credit spreads—the difference between yields of US high-yield corporate bonds and comparable-maturity Treasurys—from a recent war-driven peak of 346 basis points on March 30 (bps, or 3.46 percentage points) to 286 bps today as “divergent” from 10-year Treasury yields at 4.3% and forecast to rise by a couple of pundits quoted herein. Ditch the forecast, which is just an opinion. Look at actual movement and you see fairly sensible and blasé action. For one, high-yield spreads’ decline puts them back near historical lows, which makes sense to us given two factors: One, regional wars have historically never caused a recession on their own. Two, high-yield bonds are highly correlated with stocks. Hence, stocks bottomed in the mini-correction the same day spreads peaked. And now they reversed it as stocks hit new all-time highs. The comparisons here to past spread blowouts last spring or in 2008’s financial crisis are also a stretch, considering those equity market moves were far greater and a far more severe risk to credit quality. (We mean, the latter is the biggest bear market and recession of the last half century at least. Why are we comparing a mini-correction to that?) On the Treasury side, yields are also down from late-March peaks! And at no point have they spiked and signaled huge inflation risk. 10-year yields rose from 3.97% pre-war to a high of 4.44% and are now back to 4.30%. Such yields are within the well-trafficked range seen since 2023’s start. Bigger moves up and down since didn’t tell you much about prices. You can chuck the “divergence” narrative, in our view. It is all fear-based and overwrought.