Daily Commentary

MarketMinder’s View: This article posits markets haven’t yet reacted to more Trump administration tariff actions and barbs against Fed Chair Jerome Powell, unlike three-ish months ago, because they either can’t figure out Trump’s actions or presume he won’t actually try firing Powell. Look, whatever you think of Trump or Powell or tariffs, set all that aside, as we do, since we favor no politician nor any party. The depiction in this article nearly completely misunderstands how markets work. It presumes that because markets may have wobbled earlier on a headline, they should when similar news flow emerges. No! Markets are adaptive. They pre-price things we all know, watch, fear and see—and then move on. When headlines re-emerge on the same subject, they have less surprise power and sway. Furthermore, markets also know full well that Trump cannot fire Powell. It is beyond his authority, which the Supreme Court even affirmed in late May, in a tangentially related case. Now, in our view, the US likely could benefit from lower short-term rates, but as this article notes, Trump’s pressure may motivate Powell & Co. to wait in defense of Fed “independence.” There is no way to know, and no way to forecast policy. But it is a possibility worth noting. However, the idea that Trump talk about Powell is a headwind for stocks is wrongheaded, in our view.

MarketMinder’s View: As the headline notes, America’s widely watched consumer price index (CPI) accelerated in June: “The consumer price index, a broad-based measure of goods and services costs, increased 0.3% on the month, putting the 12-month inflation rate at 2.7%, the Bureau of Labor Statistics reported Tuesday. The numbers were right in line with the Dow Jones consensus, though the annual rate is the highest since February and still above the Federal Reserve’s 2% target.” Here we feel compelled to note: The Federal Reserve doesn’t target 2% y/y CPI. It targets a wholly separate gauge, the Personal Consumption Expenditures Price Index (PCE). Stating it as this report does is wrong, which matters because CPI ordinarily runs north of PCE (it was 2.3% y/y in May). Regardless, there is no evidence the Fed can fine tune inflation rates down to the tenth of a percentage point, so we think it is fair to say this is close enough. Finally, for all the talk about tariffs influencing inflation, this is just the latest report showing the upward pressure is much smaller than feared. Most US consumption is in services, largely untouched by tariffs. And even imported goods are just a slice of CPI, and quite a few of those aren’t hit materially (those arriving under USMCA, for example). This is one area where false fears prevail, suggesting reality could easily generate positive surprise.

MarketMinder’s View: First, this article stems from developments in British politics, so we remind you MarketMinder favors no politician nor any political party, assessing developments solely for their market and/or economic effects. Over the years, a series of government-directed plans have given UK investors a myriad of tax-advantaged options—including one that allows them to plow £20,000 annually into “cash ISAs,” which pay interest tax free. But now the government sees this as problematic, defraying investment in equities that it thinks can boost British business. There is a lot of balderdash in this, in the sense that cash saved doesn’t sit idly—banks lend it. And that buying a stock doesn’t necessarily boost the underlying business. It is a share of ownership in future profits, but isn’t tantamount to supporting said firm (except, perhaps, at issuance). Anyway, Chancellor of the Exchequer Rachel Reeves was previously considering reducing or striking that cash ISA allowance—but is now seemingly backing a marketing push by banks instead. Look, much as there are misperceptions in the motivation for this, there is one sensible truth here: If you are plowing heavily into cash solely for tax benefits and with no eye on your goals or overall asset allocation (the mix of stocks, bonds, cash and other securities you own), you ought to rethink your approach. Cash yields little, especially after inflation, and having too much risks not achieving growth you may need.