Daily Commentary

MarketMinder’s View: Will UK Chancellor of the Exchequer Rachel Reeves end a windfall profits tax on oil and gas companies earlier than expected? According to the always questionable “people briefed on her thinking,” the move is on the table. “Multiple industry sources said the Treasury had been seeking details of investment plans in recent meetings, as Reeves and [Prime Minister Keir] Starmer look to the North Sea to help boost growth in the British economy. … The independent Office for Budget Responsibility estimated last year that Reeves’ planned extension of the energy profits levy until the end of March 2030 would raise about £1bn, although it said there was uncertainty around that figure. If she reverses that decision, Reeves would try to persuade the OBR to include the prospect of more growth in the North Sea sector in its economic forecasts.” We have a couple takeaways from this possible about-face, and as a reminder, MarketMinder isn’t for or against any particular government policy—our interest is with policies’ economic and market implications. First, the chatter over how these changes could affect long-term economic projections highlights the amount of influence the OBR’s forecasts have over UK fiscal policy—a constraint Reeves is navigating today. While the wisdom of that influence is debatable, it is much more a political problem than an economic one. Second, the potential changes here reinforce the squishiness of these measures. Reeves extended the energy profits levy by a year to March 2030 in last year’s Budget—and is now thinking about reversing that decision, bringing the sunset date back to March 2029. Who knows how it may change in a future Budget? Point being, some uncertainty is inherent with any law or rule change, which investors should keep in mind.

MarketMinder’s View: Please note, MarketMinder is nonpartisan, and our analysis focuses on politics’ economic and market implications only. We also don’t make individual security recommendations, and the auto producers cited here are coincident to a broader theme we wish to highlight: that tariffs and recent trade deals are much more about politics than economics, with a lot of symbolism built in. As the article states upfront, “Japanese automakers are considering importing some of their US-built cars to Japan—a costly and impractical move that comes as Tokyo tries to placate President Donald Trump over its vast trade surplus with the United States.” From an economic perspective, this makes little sense. Japanese consumers aren’t clamoring for the vehicles popular with American drivers, and steering wheels are on the other side there. Also, “reverse imports” with vehicles aren’t likely to make much of a dent to America’s trade deficit with Japan, especially since the latter produces many vehicles stateside already. So why is this under consideration? “‘Rather than doing it for business reasons, it’s more about showing that the auto industry is also cooperating to reduce trade friction and the trade deficit,’ said Takaki Nakanishi, a veteran auto analyst who runs the Nakanishi Research Institute.” None of this is news to markets, but it is a reminder of how America’s tariffs and protectionist trade policy makes doing business more, not less, difficult. They can inject and encourage inefficiency. For more, see this week’s commentary, “Trade War Fears Get Even Less Spooky.”

MarketMinder’s View: This quick tale shares the author’s personal finance journey, from learning about the limits of holding cash to harnessing the power of stocks’ long-term growth. (It also mentions a specific company, and as a reminder, MarketMinder doesn’t make individual security recommendations—it is coincident to a theme we wish to highlight.) As the piece details, inflation erodes wealth in a not-so-subtle-manner. “My parents were exclusively a cash using family; if there was ever any excess it ended up in a bank savings account or credit union. … That pittance of interest felt good until I thought deeper. Inflation was running near 12% at the time and I was earning 10% on my savings book. Even at that age I figured out I was losing money. Every time I held those crisp notes, I was no longer seeing ‘potential’ or ‘treasure’; I was seeing reduced value.” The post then relays how “shares in wealth-producing businesses” is key to generating true wealth—which we agree with—before concluding that cash is a “false prophet.” That isn’t entirely fair, for as far as we can tell, cash never promised to generate the growth many investors need from their portfolio. Rather, a few specific cases (e.g., an emergency fund) notwithstanding, cash drags on investors’ portfolios over the longer term—it isn’t meant to be more than a medium of exchange and source of liquidity.