Daily Commentary

MarketMinder’s View: Financial planning is theoretically pretty straightforward: In a simulated, hypothetical scenario, it is easy to map out expenditures and complex financial decisions. But as this article illustrates, reality is often far more complicated and emotional: Loved ones get sick unexpectedly; people change their minds about the care they want; expenses end up much higher than projected. “Not much discussion of financial planning is geared toward how to take care of other people and how to make it possible for them to care for you. The people who reach out to me for advice want to talk about optimizing rates of return and navigating market risks, about Roth conversions and when to claim Social Security. I had always been right there for these discussions, but now this sort of strictly financial maneuvering seems to miss the most important question: What’s it all for?” That question flares particularly brightly when late-life medical bills pile up. Now don’t get us wrong: We are advocates of thorough financial plans—ideally made when those affected are still of sound mind and body—so if you (or a loved one) may benefit from reviewing or creating a strategy, having that conversation sooner than later is wise. But in putting together those plans, remember costs are only one consideration—having flexibility to meet life’s many variables is arguably more critical. This is one reason why liquidity in an investment portfolio is such a valuable asset, as the author touches on.

MarketMinder’s View: Please note, MarketMinder doesn’t make individual security recommendations, nor are we inherently for or against most types of securities—in this case, special purpose acquisition companies (SPACs). SPACtivity (sorry) is on the rise again, and as this explainer lays out, “To some, SPACs are a smart way to get in on a new business doing so through a traditional initial public offering. Dozens of new SPACs have been created this year targeting the cryptocurrency and nuclear industries in particular. To others, SPACs remain a fad that seeks to take advantage of excitement among non-professional investors.” The bulk of the article runs through how SPACs work along with some recent history, noting that a couple years ago, “Enthusiasm cooled after the US Federal Reserve started raising interest rates and newly listed companies saw share prices sink. Appetite for SPACs further soured after US regulators raised red flags about potential risks to investors.” That isn’t quite right—stocks and interest rates don’t have a preset relationship—and SPACs’ struggles since 2021 likely had more to do with a frothy pocket of the market self-deflating than anything to do with the Fed, especially considering SPACs’ boom busted well before rate hikes began. As for the risks for individual investors, this piece points out many SPACs end up being big losers—fine perspective to keep in mind—but we would add another point not mentioned here. Those interested in SPACs should remember successful investing doesn’t require finding the path to quick riches—rather, it is a long-term endeavor, and trying to hit it big with one security (whether SPAC, IPO or any individual stock) can be a costly mistake. 

MarketMinder’s View: Will UK Chancellor of the Exchequer Rachel Reeves end a windfall profits tax on oil and gas companies earlier than expected? According to the always questionable “people briefed on her thinking,” the move is on the table. “Multiple industry sources said the Treasury had been seeking details of investment plans in recent meetings, as Reeves and [Prime Minister Keir] Starmer look to the North Sea to help boost growth in the British economy. … The independent Office for Budget Responsibility estimated last year that Reeves’ planned extension of the energy profits levy until the end of March 2030 would raise about £1bn, although it said there was uncertainty around that figure. If she reverses that decision, Reeves would try to persuade the OBR to include the prospect of more growth in the North Sea sector in its economic forecasts.” We have a couple takeaways from this possible about-face, and as a reminder, MarketMinder isn’t for or against any particular government policy—our interest is with policies’ economic and market implications. First, the chatter over how these changes could affect long-term economic projections highlights the amount of influence the OBR’s forecasts have over UK fiscal policy—a constraint Reeves is navigating today. While the wisdom of that influence is debatable, it is much more a political problem than an economic one. Second, the potential changes here reinforce the squishiness of these measures. Reeves extended the energy profits levy by a year to March 2030 in last year’s Budget—and is now thinking about reversing that decision, bringing the sunset date back to March 2029. Who knows how it may change in a future Budget? Point being, some uncertainty is inherent with any law or rule change, which investors should keep in mind.