Daily Commentary

MarketMinder’s View: Not only did Canadian GDP grow 3.3% annualized in Q2, but Q1 got revised from a slight contraction to slight growth (0.3%). This is key because it erases the sequential quarterly slides some called a “technical recession,” putting the economy on even stronger footing than everyone suspected heading into the latest tariff spat. (We never really bought that labeling and this revision illustrates why.) As for Q2, while the FIFA World Cup gets some credit for boosting hospitality, that doesn’t explain business investment’s 2.3% annualized growth. Businesses’ continued willingness to take risk defies warnings of tariff madness raising uncertainty and knocking growth. Those worries linger, as the article’s final paragraphs indicate, illustrating Canada still has plenty of room between reality and expectations—a bullish backdrop for local stocks.

MarketMinder’s View: The meaning here is a little hard to parse if you don’t know how the UK’s capital gains tax system works, so here are the basics. The UK’s tax year runs from April 6 – April 5. So capital gains taxes collected in tax year 2024 – 2025 would include taxes paid on gains realized between April 6, 2024 and April 5, 2025. Complicating matters, the UK’s capital gains rates rose for assets sold on or after October 30, 2024, to 18% for lower tax brackets and 24% for higher. The tax-free allowance also dropped in April 2024. So this record tax haul in 2024 – 2025 stemmed partly from people racing to sell ahead of feared capital gains tax changes and partly from the tax base widening as rates rose. The lack of granularity makes it hard to parse the frontrunning from the tax hike, but a government writeup notes almost half of the tax take came “from those who made gains of £5 million or more,” which may hint at frontrunning feared changes. (See the “Capital Gains Tax Commentary” at Gov.uk for more.) This would all be trivia, but the government is reportedly mulling another capital gains tax hike in October, leading some to warn doing so will reduce revenues as it discourages selling. These data don’t address that claim, and we won’t get a clearer look until the 2025 – 2026 tax figures come out in a year (they are always delayed because Brits report and pay capital gains taxes on stocks in the tax year after the sale). We have crunched some numbers and found capital gains tax revenues correlate more with market cycles than tax rate changes, which may be some handy information if tax rates do rise and fears of it backfiring on public revenues knock sentiment. At any rate, for now, note that UK stocks did just fine alongside 2024’s capital gains tax hike, handsomely beating the rest of Europe (an apt comparison given regional fundamentals and the relative lack of Tech, which boosted US and global returns that year).

MarketMinder’s View: This piece takes the historical comparison between now and 1901 a little too far, for our taste, linking high retail investor enthusiasm and abundant speculation then with a banking panic that occurred six years later and implying the same risk lurks now. But we like the historical look and are big fans of Hetty Green and Edwin Lefèvre, who get shout-outs here. The article cites today’s enthusiasm for leveraged ETFs, prediction markets and fast trading and draws parallels with 1901’s “speculative fever. … Lefèvre—who later became famous for the book ‘Reminiscences of a Stock Operator’—published a collection of short fiction in 1901 called ‘Wall Street Stories.’ Intoxicated by ‘the wine of gambling,’ one of Lefèvre’s characters no longer sees any difference between trading ‘50,000 shares of a stock’ or betting ‘$50,000 on the turn of a card.’ He even offers ‘to wager a fortune that he could guess which of two flies that had [landed] on a table would be the first to fly away.’” Bucket shops—off-Wall Street trading venues common at the turn of the century—let people make leveraged bets on binary market outcomes, giving gambling the veneer of investing. The article likens this with today’s prediction market bets on bitcoin’s short-term moves and the like, which is sound enough. Human nature never changes, and a rude awakening tends to loom at the end of such frenzies. Yet it also clearly isn’t a timing tool, given the party lasted six years beyond 1901. We would also add that this this excess doesn’t necessarily cause the next downturn. The Panic of 1907 was a classic bank run. Trust companies’ margin lending to stock speculators was part, but not all, of that story (about which entire historical volumes have been written). Banking and financial industry regulation and capital rules have changed a lot since then, and we didn’t have a Federal Reserve. The push for each largely stemmed from that experience. So you can’t draw a thread between bucket shops and prediction markets and pencil in a banking crisis six years from now. Mostly, we see this as a reminder that euphoria risks blinding folks to creeping risk.