Daily Commentary

MarketMinder’s View: Here is something for investors to keep an eye on: The EU and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), two of the world’s largest free-trade blocs, are negotiating an economic alliance, “which would create a new trading bloc of 1.5 billion people,” according to Canadian Prime Minister Mark Carney. If agreed, it has the potential to “intertwine the supply chains of members like Canada, Singapore, Mexico, Japan, Vietnam, Malaysia and Australia with Europe. It would bring nearly 40 nations on opposite sides of the globe closer together with the aim of reaching a deal on so-called rules of origin. These rules determine the economic nationality of a product. A deal would allow manufacturers throughout the two blocs to trade goods and their parts more seamlessly in a low-tariff process known as cumulation.” Now, talks have just started, and it may take years before they reach fruition (if they do at all)—likely nothing to drive stocks in the here and now. We highlight this development because it cuts against prevailing doom-and-gloom sentiment regarding global trade, which as this shows, is far from giving up the ghost. While American tariffs are higher than last year, non-US trade barriers are falling—which is far less appreciated than many other headlines we read suggest.

MarketMinder’s View: Parts of this article are sensible, but we think it carries the thesis—that investors are adapting to unusual political and economic uncertainty—too far. Naturally, it dives into politics, so please note that we favor no party nor any politician, assessing developments solely for potential market effects. In that vein, the coverage here of tariff policy shifts stoking big market swings was spot on early last year. The negative surprise of broader and more bizarre tariffs than anyone thought likely was key to the correction last spring. And the fact some investors focused on non-US stocks as a result probably is, too. But investors have become more and more inured to this in time, as the pattern of threat-turned-deal or walk-back becomes clearer, as several quotes late in this piece illustrate. As one analyst notes, though, much of what this piece discusses (Venezuela, Freddie Mac buying mortgage bonds, etc.) is more noise than news for markets. It also goes too far in casting normal volatility or reactions to corporate announcements as unusual when that is all a regularity. The actual lesson from last year—with stocks up markedly and sitting near record highs now, despite the alleged surprises here—is that reacting rashly to headlines is wrong, wrong, wrong.

MarketMinder’s View: There has long been a trend among corporate leaders of tying the viral news story to corporate decisions and results as a way to deflect blame. This report suggests firms are doing that once again, this time claiming AI efficiencies are driving layoff announcements—and not excessive, unneeded hiring from the past couple of years. (In making this argument, the article namedrops several public companies, so please note MarketMinder doesn’t make individual security recommendations.) In this way, it makes AI look like the latest strong currency, political uncertainty or other factor businesses have cited. There likely is some effect from AI on layoffs at the margin. But we are a little skeptical you can pin a large amount of recent activity on this. And: “A report from Oxford Economics found there is little evidence that AI is driving large-scale job losses or a sharp rise in unemployment, despite significant focus on the risks. ‘It’s not clear from the data that we’re seeing that it’s the dominant force in the way that some narratives have perhaps suggested,’ says Ben May, director of global macro research at Oxford Economics.”