Daily Commentary

MarketMinder’s View: “Havoc” sounds bad! But here is what underpins it: “UK investors pulled more than £10bn out of global stock markets over the last six months, the longest and most severe period of selling on record, according to data provider Calastone. October was a record month for ditching stocks, with net £3.6bn of outflows. November was the second-worst month on record, with £3bn withdrawn from equity funds. Edward Glyn, head of global markets at Calastone, blamed the unusually long build-up to November’s Budget, which was punctuated by repeated leaks of possible policies and about-turns.” That tracks, as UK Budget uncertainty did drive some investors to react emotionally (perhaps by selling out of the market). However, as we pointed out last month in our “Headlines” section, outflows don’t indicate what investors did with that money (e.g., what if they shifted some capital from one fund to another?). Though UK investors may have driven the “longest and most severe period of selling on record” over the past six months, the MSCI United Kingdom Investable Market Index (which includes medium- and small-sized firms) is up 11.2% while the MSCI World has risen 15.5% over that timeframe (gross returns for the former, net dividends for the latter, in GBP for both, via FactSet). So where, exactly, is the havoc? We agree Budget uncertainty weighed on some businesses’ and investors’ willingness to take risk to an extent. But considering how widely discussed the Budget has been over the past several months, its ability to negatively shock markets was close to nil. The outflows documented here simply added evidence to that point—and they further remind you markets don’t move because of flows. For every buyer, there is a seller. For more, see last week’s commentary, “Few Surprises: Leaks and Trial Balloons Mute the Market Effects of Britain’s Tax Shifts.”

MarketMinder’s View: As a reminder, MarketMinder doesn’t make individual security recommendations (so any firms mentioned here are coincident to a broader theme we wish to highlight). We also aren’t inherently for or against cryptocurrencies. However, bitcoin’s recent plunge illustrates how demand is tied to sentiment rather than any clear, repeatable fundamental driver (e.g., the economic cycle). Consider the scenario laid out here: “The Securities and Exchange Commission dropped lawsuits against many major crypto companies, lifting a legal cloud that had halted the industry’s progress for years. And Mr. Trump announced that the United States would establish its own Bitcoin reserve, a government-run stockpile of digital coins. On Oct. 6, Bitcoin reached a high of $126,000. Then came the crash. On Oct. 10, Mr. Trump announced that he would impose a new tariff on China, sending shock waves through the global economy. Bitcoin dropped about 10 percent, while other coins plunged even more.” So apparently, a fresh US tariff on China—which isn’t anything new, especially this year—had the power to send bitcoin reeling while global equity markets held up fine? (The MSCI World did slip on 10/10, but it ended October up from September, per FactSet). We thought bitcoin was supposed to be a “fear asset,” i.e., something that holds up during uncertain times? Seems to us like it isn’t doing its job. Beyond this, we would humbly suggest those thinking the liberalization of regulation is bullish for coins missed the point: Many crypto enthusiasts saw it as outside the government’s reach, so this encroaches on a thesis to own. And while some of the moves increase investor access, theoretically boosting demand for coins, they could also encourage vast supply creation. So again, it all boils down to whether investors were enthusiastic enough to bid coin prices up. In 2025, they haven’t been. For more, see our November commentary, “Bitcoin’s Wild Ride to Nowhere.”

MarketMinder’s View: Here is an interesting observation worth noting for what it doesn’t mean for investors, though we think it provides useful insight into central banking mechanics. As explained within, the Fed has been “losing” money for a while, tied to its emergency pandemic response. But central banks aren’t commercial banks—the former can’t go bankrupt. Their losses amount to an accounting entry. However, it appears those unrealized losses may be reversing soon. As Fed watchers have noticed, “Since November 5, the size of the Fed’s so-called deferred asset has gotten smaller, moving from $243.8 billion to $243.2 billion on November 26. It’s ‌a small change, but it’s also a clear shift in a long-term trend.” With the Fed likely to earn about $2 billion this quarter, it will probably be years before it runs down its “deferred assets” and starts forking over its profits to the Treasury again. Now, that was never much to begin with. Per the St. Louis Fed, it averaged $84 billion annually from 2011 – 2021 (before deferred assets began racking up in 2022), which is pretty much peanuts compared to federal receipts north of $5 trillion in fiscal-year 2025. Moreover, “Fed ⁠officials have said repeatedly that profits and losses at the central bank have no bearing on its ability to conduct monetary policy.” As the lender of last resort, whether the Fed is technically making or losing money doesn’t affect its ability to operate since it can never go insolvent. So while not nothing, Fed profits’ absence—and eventual resumption—don’t move the needle much either way.