Daily Commentary

MarketMinder’s View: Please note MarketMinder is nonpartisan and doesn’t prefer any politician or political party over another. Our political analysis focuses on the market and economic implications only. While Chancellor of the Exchequer Rachel Reeves’s Budget won’t come out for another 41 days, analysts are parsing her every word for clues of what her red briefcase (or ministerial box, if you like) will contain. The latest are Reeves’s comments at Wednesday’s IMF meeting: “I do think that those with the broadest shoulders should pay their fair share of tax, and I think you can see that through my actions last year at the Budget. … Wealth is obviously different from income. So wealth is not about your annual salary.” The article spills the majority of its pixels pondering what the Chancellor will and won’t tax (pensions are supposedly ripe for plucking while wealth levies and bank tax hikes aren’t on the docket). Some of the Chancellor’s comments may be trial ballons—a way for the Treasury to gauge the public’s appetite and markets’ approval (or lack thereof) for certain policies. But for investors, the key takeaway here is that the Budget—which is always more political theater than economic swing factor—has garnered a ton of attention recently, which saps its negative surprise potential and perhaps helps watered-down proposals qualify as positive surprise. We won’t outright dismiss the possibility the Budget will feature some proposals that stir uncertainty—as with all political matters, the human element is inherently unpredictable. But the ongoing public scrutiny allows stocks to pre-price the widely held opinions and outlooks—and move on.   

MarketMinder’s View: UK GDP grew 0.1% m/m in August thanks to manufacturing’s rebound (0.7% growth after July’s -1.1% contraction), though services—the lion’s share of GDP—flatlined a second-straight month. Things look even less rosy when you consider August’s slight growth followed a downward revision for July, from flat to -0.1% m/m. Combine the two months and it is a wash, which highlights the pitfalls of getting hung up on any single month for good or ill. The Office for National Statistics (ONS) accounts for this by tracking rolling 3-month growth rates, which hit 0.3% for the three months ending in August. To further hammer the point that monthly wiggles even out and economic data aren’t ironclad, “The ONS also flagged revisions going back as far as the months before the first Covid-19 pandemic lockdown, which found that the UK had grown at a faster pace than previously estimated. The ONS said growth since February 2020 was 5.5% rather than the 4.4% previously included in the official figures.” So UK GDP growth wasn’t as poor as many presumed, when headlines complained UK economic growth was the most tepid among G7 peers. Now, none of this is news to forward-looking stocks, which have long since moved on from August—they are looking ahead, to the next 3 – 30 months or so. Considering the MSCI UK Investable Market Index is up 25.7% to the MSCI World’s 17.4% year to date (both in USD, per FactSet), markets have confirmed UK GDP’s meh growth has exceeded low expectations. For more, see last month’s commentary, “A Midsummer UK GDP Wasn’t Dreamy.”

MarketMinder’s View: Yesterday would have been US Consumer Price Index (CPI) day, but the ongoing government shutdown continues to clog up the economic data flow. That said, September’s report will come out on October 24—the BLS unfurloughed some staff to work on the release—because the Social Security Administration has statutory deadlines and 2026 Social Security’s annual cost-of-living adjustment is tied to September data. That detail aside, this analysis points out that the Fed and everyone else aren’t completely in the dark when it comes to inflation. Besides private sector measures and internal Fed research, there are some nifty tools that can provide a snapshot of prices, including an online project called PriceStats. “PriceStats scrapes the web each day to collect price data from over 1,500 retailers, for more than 40mm products – then applies official CPI weights where possible to spit out a number. … PriceStats’ best guess has persistently undershot headline inflation over the past three years, and this might have something to do with the CPI’s huge shelter component. Owners equivalent rent counts for around 26 per cent of the actual CPI, with rent and lodging pushing the overall shelter component up just north of 35 per cent of the BLS’s inflation basket. And you can’t buy shelter from Walmart, Costco or any other online retailer.” We have pointed out issues with owner’s equivalent rent (OER) before—it is a largely meaningless figure nobody pays—and its skew is apparent here. While PriceStats’ results may not align perfectly with the BLS’s, they are in the same ballpark and tell a similar story—the world isn’t flying blind without official economic data, even if some of them are private, paywalled data feeds.