Daily Commentary

MarketMinder’s View: China’s National Bureau of Statistics (NBS) released November’s economic data Monday, and readings weakened from October. Industrial output rose 4.8% y/y, slowing from October’s 4.9% and just below expectations, as state-owned enterprises’ output slowed (private firms actually accelerated, per FactSet). Retail sales 1.3% y/y growth also disappointed, cooling markedly from October’s 2.9%. Meanwhile, China’s fixed asset investment decline worsened to -2.6% y/y in the January – November period, on track for its first annual decline in decades. Now the article acknowledges China is still on track to reach this year’s GDP growth target of around 5%, but it warns the foundation is shaky entering 2026 with trade barriers rising and temporary stimulus petering out domestically. We don’t dismiss China’s challenges, but this makes the fundamental error of using retail sales as a proxy for consumer spending. In reality, the majority of consumer spending goes to services, not goods. China’s services output has grown faster than retail sales all year. As for the weakness in industrial production and fixed investment, it is pretty well known that the government is trying to correct the side effects of prior stimulus programs that created excess capacity in heavy industry, particularly among state-run firms that benefited from local government largesse. Recent government comments in state-run media and elsewhere suggest this will be a key focus in 2026. The article uses that to dial down stimulus expectations, but we are already seeing that China can grow and contribute to global growth without aggressive stimulus. That is generally what we think global markets care most about.

MarketMinder’s View: The US and UK’s “deal to make a deal,” signed back in May, has seemingly hit a snag. “The United States informed the British government this month that it would pause fulfilling a technology-related agreement between the two countries, which included more collaboration on artificial intelligence and nuclear energy, according to two people familiar with the decision who were not authorized to speak publicly.” US officials’ main problem, according to reports, is the UK not holding up their end of the agreement in lowering their respective trade barriers. We doubt this is a huge shock for markets, given the long-running publicity and well-known fact the commitments were rather loose. This isn’t the first time things hit a stumbling block. This piece highlights that background, illustrating the lack of surprise power for markets, and notes this is something of a theme globally: “The Trump administration has now struck limited trade agreements with 15 nations in an attempt to change what it perceives as unfair trade practices and boost U.S. exports. But negotiators have often hit obstacles as they have worked to turn verbal pledges between leaders into the text of a trade deal. Some agreements that have been announced verbally have yet to be finalized.” Yet even with these snags, reality is going better than investors feared when Trump first announced tariffs in April—for stocks, this is what matters most.

MarketMinder’s View: This isn’t a huge deal, but it should ease some uncertainty for some US businesses (which reminds us, MarketMinder doesn’t make individual security recommendations, and those mentioned here merely represent the broader theme). The One Big, Beautiful Bill Act (OBBBA) reinstated full up-front tax deduction for research and development (R&D) spending, which the Biden administration had allowed to sunset. Sweetening the deal, the OBBBA made the change retroactive, which sounds good, but some companies were hesitant to claim it because it risked shunting them into the corporate alternative minimum tax (AMT)—the blanket 15% rate on companies earning at least $1 billion annually, which was designed to curb avoidance. The OBBBA left the Treasury considerable latitude for how to implement the new laws, and guidance is reportedly forthcoming that should patch the AMT issue. “Corporations have also complained about the interaction between the R&D deduction and international tax rules from Trump’s first term that discourage companies from shifting profits to lower tax jurisdictions overseas. But it’s unclear whether the upcoming guidance would address that, or whether Treasury would have the statutory ability to do so.” Setting aside the politics here (we are always agnostic, preferring no party or politician and assessing developments for their potential economic and market implications only), the last two years have shown companies don’t need up-front deductions to continue investing. Corporate welfare isn’t powering growth. But having clarity is always helpful, and investors tend to welcome it. So whatever you think of this possible policy change, getting bright lines from the Treasury on it would be a plus.