Daily Commentary

MarketMinder’s View: With the increase in “alternative consumer lending” powered by nonbank lenders (aka private credit), this article worries unseen risks may be brewing. The concern is understandable, but a passage here helps debunk the fear: “Thus far, though, even broader measures of consumers’ health aren’t showing major weakness. Researchers at the Bank of America Institute, which analyzes anonymized bank data, found that while spending in October was growing more slowly year-over-year for lower-income households than wealthier ones, their checking and savings deposit balances remain above inflation-adjusted 2019 levels. Many consumers could also start seeing additional tax savings next year.” Though nontraditional lending may be less visible, private credit shops are still incentivized to do their due diligence when extending loans—after all, they don’t profit if loans aren’t repaid. Now, some bigger banks fund private lending, and those exposures could conceivably channel risks into the broader financial system. (As the article lists some specific names, please keep in mind MarketMinder doesn’t make individual security recommendations.) But while this introduces some uncertainty, markets seem to be taking this into account, too. “Even with limited or mixed signs of consumer weakness or broad credit weakening, shares of many companies in the lending business have trailed large banks this year, as measured by the KBW Nasdaq Bank index. ... Large managers of private-credit vehicles that could fund consumer lending ... have also lagged behind.” Private credit may be more opaque, but markets—and other interested parties—are aware of the credit dynamics driving their bottom lines.

MarketMinder’s View: Houses are great to live in, but tougher to flip for a profit, as related here. Don’t get us wrong, we have nothing against investing in real estate. But for those considering it, give this a read. A snippet: “Yes, you can make a killing. But also, lots could go wrong: Repairs can take longer than you predicted. The house has bigger, hidden problems that you missed. You misjudged the market, or it simply turned sour while you were renovating. We’re in one of those tricky times now. Despite Fed interest-rate cuts, mortgage rates are still high. ... Meanwhile, housing inventory is low, and costs are rising for material, labor and home insurance.” All investments have their time in the sun as well as the rain. Residential real estate is no different. But given its idiosyncrasies—many of which this article delves into—investors should approach it with eyes wide open. This is doubly true with any illiquid asset-like property. Liquidity is key to manage for all investors. But that is arguably even more true for retirees. Ultimately, we find this—plus the so-called “sweat equity” it takes to be successful long term—isn’t for everyone.

MarketMinder’s View: This piece name drops a few individual stocks in its discussion of 2025 Initial Public Offering (IPO) activity and expectations for 2026, so please note MarketMinder doesn’t make individual security recommendations. Our interest here is more in the slight uptick in 2025 IPOs and the expectations for 2026, which are worth watching. Supply and demand for shares is always, at the highest level, what drives market movement. So you must factor in new issuance as a supply increase (a potential negative). To wit: “The 2025 haul would be a substantial increase over last year’s volume, but still well behind the $100 billion-plus years in 2020 and 2021 when easy money flowed during the Covid-19 pandemic. Few bankers are willing to predict a return to those levels next year, but they do see plenty of companies doing the lead-up work to go public in 2026.” That is worth watching, particularly since it is typical for IPO activity to pick up following strong returns, as firms try to capitalize on warmer sentiment and sell shares to the public at richer prices. Still, how IPOs are received matters, too. And in that vein: “The dismal debuts of StubHub Holdings Inc., Navan Inc. and Gemini Space Station Inc. have contributed to IPOs as an asset class underperforming the S&P 500 Index this year. That sits uneasily with the notion that companies that go public are supposed to have cheaper valuations than their listed peers.” So don’t rush to bearishness on the idea maybe IPO supply will jump.