Daily Commentary

MarketMinder’s View: Moods continue thawing in Europe’s largest economy, Germany. “The Ifo Institute said its business climate index rose to 90.2 in October from 89.9 in September. Analysts polled by Reuters had forecast an increase to 90.0 … The index for economic expectations rose to 91.6 in October from 90.4 in September.” Ifo officials tie this to manufacturing’s recovery and Chancellor Freidrich Merz’s planned economic reforms, which is understandable. Politicians’ plans receive more hype than warranted. And given Germany’s history as Europe’s manufacturing powerhouse, many associate factories’ health with the country’s broader economic picture (see the index’s “current situation” gauge slipping in October as elevated energy prices weighed on factories’ margins). Overall, this sentiment reading is further evidence folks are recognizing Germany is in better economic shape than projected. Note, though, none of this is predictive for stocks or the economy. Merz’s reforms can’t alleviate Germany’s longer-running economic headwinds (i.e., high energy prices), and gridlock in Berlin likely waters them down anyway. Plus, manufacturing comprises around 30% of German GDP (per World Bank). Factories’ recovery is a positive, but services hold more sway. And, more generally, sentiment surveys don’t predict. They reflect feelings about the past or present, which have no bearing on corporate profits 3 – 30 months ahead—stocks’ key focus. Still, improving moods is a positive, especially considering how sentiment outside America has been relatively much more dour.

MarketMinder’s View: We found this piece mixed. Sensibly, it warns daily portfolio monitoring can inspire greed- or fear-based portfolio decisions. Stocks’ spiking (whether up or down) may tempt you to react emotionally. But past moves don’t predict. Stocks’ falling or rising today—no matter the magnitude—doesn’t mean they will continue doing so. By that logic, stocks would move in one direction perpetually. They don’t. More generally, you should guard against allowing greed or fear to dictate your portfolio decisions. Beyond this, we also wouldn’t argue for ignoring your portfolio altogether. Doing periodic checkups (e.g., quarterly or semiannually) can help you catch outsized weights—which can then help mitigate concentration risk. Owning too much of one category or stock can be problematic if said category or stock suffers. All good points. Our quibble? One professional quoted here suggests portfolio checks amid volatility can “create opportunities to buy good investments at lower prices.” But this is just market timing veiled as “buying the dip” … reacting to past movement! Consistently timing the market by “buying low and selling high” is impossible. It isn’t an investment strategy. There are many reasons to check and review your portfolio. But beware of fear and/or greed it may inspire and keep your long-term plan in mind.

MarketMinder’s View: Some politics here, so please remember MarketMinder is nonpartisan. We assess developments for their potential market and/or economic effects only. Results from Bloomberg’s Markets Pulse survey earlier this month show how political biases can shape investors’ expectations. According to the majority of respondents, a Democratic sweep would support bond returns as a gridlocked Washington lowers already low policy volumes. Conversely, Republicans’ maintaining Congressional control would supposedly boost stocks as AI regulation remains low. We won’t try to predict any election outcomes here. But this underscores investors’ long-running (and false) assumptions that Republicans are pro-market and vice versa. Neither party is best for stocks. Presidents from both parties have overseen bull and bear markets. Both have passed sweeping legislation creating winners and losers. Thus, letting partisanship guide your portfolio decisions is off base—and risky. Take the gridlock example here. Historically, the three quarters following midterm elections are overwhelmingly positive for stocks because of gridlock. 92% of these stretches feature positive returns (per FactSet and Finaeon, Inc.). The opposite, single-party control, is usually a market headwind. Both realities cut against respondents’ views. Take this as a reminder to think as stocks do. Not about which party is best—which is subjective and is more a reflection of partisan bias. But how likely Congress is to pass sweeping legislation, which tends to raise uncertainty and fog businesses’ investment plans.