Daily Commentary

MarketMinder’s View: This piece raises some (fair, in our view) questions around China’s latest government trade-in program aimed at boosting consumer spending. Some background: The program provides subsidies or discounts on a broad range of consumer goods, from smartphones to washing machines—similar to America’s “cash for clunkers” initiative. Now, the program may be encouraging consumers to spend to a degree—contributing to May’s retail sales’ exceeding expectations—but many also recognize the boost from subsidies isn’t likely long-lasting. “Despite the success of the trade-in program, economists fear that its impact on consumption will be short-lived and could lead to a decline in the second half of the year and the first half of next year. Nomura, a Japanese investment bank, estimates that retail sales in the second half of 2025 will decline 0.4 percentage points from the same period last year, and by almost one percentage point in the first half of next year.” The article supports its case for weaker spending ahead by citing several anecdotes—one is a shopper who is making her coffee at home due to higher prices, another is a car salesman who points out that orders aren’t as gangbusters as they were a few years ago. Fair enough, but personal anecdotes aren’t the most rigorous evidence, in our view—they reflect a single experience, which isn’t necessarily an economywide trend. That quibble aside, the big picture point is that China continues to contribute to global GDP growth. Also notable is that the government isn’t relying solely on the old playbook of boosting GDP growth through infrastructure buildouts and manufacturing initiatives, which have historically resulted in malinvestment and overcapacity. In our view, fear of consumer-oriented stimulus is a classic case of couching an incremental positive as a negative, which is a sign sentiment globally remains too dour.

MarketMinder’s View: Are stocks getting too pricey, thereby risking the titular “melt-up”—a scenario in which stocks irrationally spiral higher, generating big gains followed by a crash? This piece hints at that scenario perhaps playing out today, citing the S&P 500’s post-correction bounce to new highs (which reminds us, MarketMinder doesn’t make individual security recommendations). The signs investors are out over their skis? Rising shares among unprofitable firms and elevated valuation gauges, like price-to-earnings (P/E) ratios. While the former is a fine observation, it is also consistent with a broad-based rally—and not necessarily a sign of market froth. A lot of those companies got hammered hard not just in the correction but in recent years, and what falls the hardest often bounces disproportionately early. Cherry picking performance figures since this spring’s correction lows doesn’t say much about investors’ exuberance. We wouldn’t read too far into valuation metrics, either. Sure, P/Es are above their long-term averages. But the S&P 500’s trailing P/E has been above average for more than a decade now—not telling about what stocks will do next. But more importantly, valuations in general employ backward-looking data to make forward-looking forecasts. That is always a mistake. We aren’t ruling out additional stock market volatility ahead, but popular valuation metrics won’t tell you when the bounciness will begin. We would add that worries about a melt-up—a scenario that benefits stock investors—counterintuitively indicate skeptical sentiment persists and bullish wall of worry remains. Not every rally is a bubble. For more on this theme, see last Friday’s commentary, “Shake the Valuation Fixation.”

MarketMinder’s View: Here is a look at another way importers are mitigating the negative effects of President Donald Trump’s tariffs. Namely, more firms are stocking up on cash and using supply chain financing programs to stretch out their payment terms. “From large retailers to auto parts stores and manufacturers, buyers of both finished goods and raw materials, tariff pauses allowed importers to bring in more inventory. But once the inventory arrives, it may be bound for financing rather than straight to market. After an order has been shipped, an invoice is generated. Once that invoice is generated, an importer sends it to the bank where they maintain a supply chain financing program, and the bank pays the supplier. The importer then repays the bank under a timeline negotiated with the bank.” Mind you, supply chain financing isn’t new. Importers have used it for years. But its growing popularity—and adoption within unconventional sectors—today adds to a long and growing list of tariff mitigation practices. Now, this does add some costs and friction, which isn’t great—the absence of these trade hindrances would be more beneficial, in our view. But in an imperfect world, this tactic is yet another reason we think companies are faring better than many expected post-Liberation Day.