Daily Commentary

MarketMinder’s View: Can you combine two misperceived takes to reach a sensible conclusion? That is the question we pondered after perusing this coverage of Canada’s May jobs report, which showed employment boomed higher, offsetting almost all the jobs shed earlier this year, with gains broad-based and focused on full-time workers. The article casts this good news as a signal that Canada’s economy isn’t as weak as two straight quarterly headline GDP contractions—which some dub a “technical recession”—suggest. We agree with that take on Canada’s economy. Claiming it is in a recession overlooks the fact that the Q1 2026 decline was chiefly centered in government spending and tied to rising imports, which the math of GDP treats as a negative to offset consumption. But labor market data are late-lagging, with major shifts coming long after growth trends change. So while we think that handwringing over prior declines in employment and GDP is overdone, we wouldn’t hang our hat on one jobs report to show why. Furthermore, the S&P TSX is up 10.6% year to date (in USD), edging past the world’s 10.5%—and that follows its huge 38.2% last year, which vastly outperformed the world (source: FactSet). Stocks are leading economic indicators. If Canada’s economy were truly in or about to enter a recession—or were in one before—you would ordinarily see markets pre-price that by falling for a prolonged period. That is absent.

MarketMinder’s View: “The US money-market industry now holds a record $8.29 trillion — almost twice the size of Japan’s economy — after inflows topped $1 trillion last year, according to Crane Data LLC, which tracks the industry. The strategy’s popularity has been accompanied by a Wall Street catchphrase, ‘T-bill and chill,’ which has come to signify investors’ preference for the short-term Treasuries these funds often hold.” To the extent that statement actually reflects investors stockpiling cash, which the first roughly two-thirds of this piece suggests is the case, it could be a sign of people making a vast mistake. Money-market fund rates may be higher than in the 2010s, but that doesn’t make the return good. For one, inflation is currently running at 3.8% based on the US CPI—and has annualized 4.5% in the past five years. Is that exaggerated by 2022? Yes. Likely to repeat? No. But it does highlight how inflation erodes money market returns and often leaves you with little to nothing. The notion that stocks are too high and assured to see poor returns ahead is a forecast, one that is tremendously uncertain and amounts to market timing based on past movement and widely known perceptions about the environment today. But the last third of this piece raises another point: Is the money market boom really a market call? People often see these data and presume it is cash parked on the sidelines, but many times it isn’t that at all and amounts to corporations and individuals holding increased cash for reasons tied to expenses (or inflation, as the figures are nominal). This is why those long expecting this “wall of cash” to boost stocks have been disappointed.

MarketMinder’s View: The headline is correct but requires critical context. First, the titular Irish GDP contraction (-12.1% q/q, much sharper than a previously estimated -2.0%) would be for Q1—ancient news for markets, given we are in Q2’s final month. Second, should eurozone GDP actually have contracted in Q1, that is less a reflection of the 21-member bloc and more illustrative of Ireland’s uniqueness. “Irish economic data is very volatile, since it is affected by the activities of a small number of very large U.S. companies. … The CSO [Central Statistics Office] said the contraction was largely confined to the activities of U.S. businesses based in the country, with the output of what it calls the MNE (Multinational Enterprise)-dominated sectors down 27.1% during the quarter. While U.S. technology companies are included in that category, the decline appears to have been led by pharmaceuticals, with industrial production down 35% on the previous quarter.” This is why the Irish statistics office publishes a specialized statistic to track the economy, called modified domestic demand, or MDD. MDD grew 0.6% q/q in Q1, which utterly shatters the notion that Irish economic activity is a drag on the whole. (Source: Central Statistics Office of Ireland) Besides, as the article explains, US tariffs last year prompted American businesses domiciled in Ireland for tax purposes to build up inventory—which buoyed exports (and made Irish GDP one of the fastest-growing last year). That activity is now cooling as things return to normal, so Irish GDP’s slowdown is no surprise. Though more recent data have indicated soft patches in Europe, mixed growth isn’t a negative for global markets, especially with expectations toward non-US markets relatively cool. For more, see last month’s commentary, “A May Global Economic Check-In.”