Daily Commentary

MarketMinder’s View: MarketMinder doesn’t make individual security recommendations (or vehicle suggestions), and we highlight this piece to discuss a broader theme: Hype and hope may drive returns initially, but over time, fundamentals matter most. In that spirit, let us review electric vehicles’ (EVs’) well-known struggles, which are tied to simple supply and demand. Specifically, weakness in the latter—as this article shows—goes a long way to explaining the industry’s issues. “The European Automobile Manufacturers’ Association (ACEA) said sales of new battery-powered electric vehicles (EV) in Germany plunged by nearly 70pc to 27,024 in August. In France, the EU’s second largest market for battery electric vehicles behind Germany, deliveries fell by 33pc to 13,143.” Now, this is a single snapshot in a volatile market, with seasonal skew. So we wouldn’t read a ton into the eyepopping numbers—they could bounce. However, there are also broader signs of demand weakness, and in our view, it is telling that the appetite in a supposedly ripe region for “clean energy” vehicles isn’t so robust. “The collapse in EV sales comes amid concerns about their range, high prices and the lack of charging infrastructure across the EU. Felipe Munoz, a global automotive analyst at JATO Dynamics, said: ‘The reality is that whether you look at business or private, electric vehicles do not convince yet.’” We aren’t saying EVs will go the way of the dodo bird, but from an investment perspective, take a step back whenever headlines proclaim the next big thing is on the way—as they did with EVs not too long ago. Especially when the typical rationale (in this case, government backing for electrification) is so widely known. For more, see this week’s commentary, “Clean Power Investment Hype Loses Its Charge.” 

MarketMinder’s View: An October 1 deadline looms as a partial government shutdown start date, and the fine folks on Capitol Hill are racing to reach a deal. Here is the latest: “A bill that would have paired six months of funding with controversial election-law changes opposed by Democrats failed in the Republican-controlled House of Representatives on Wednesday. House Speaker Mike Johnson said after that vote that he would try another approach but did not provide details. The two sides are also at odds over how long they should extend temporary funding. Johnson has advocated for a six-month extension, which would take the issue off the table until next spring, when his Republicans could potentially control both the White House and Congress. Democrats are pushing for a shorter three-month extension, which would require Congress to tackle the issue by the end of this year, when Democratic President Joe Biden will still be in the White House and Democrats are still in charge in the Senate.” Surprise, surprise, Congresspeople are debating how far to kick the proverbial can down the road. Maybe they reach a deal soon, maybe they wait to the 11^th hour or maybe we have a partial shutdown—these things aren’t predictable. But we do know no government shutdown in history has caused a bear market or recession, and we don’t think this time is different—the federal government’s economic influence just isn’t that sizable. For more, see last year’s still-applicable commentary, “33 Hours ‘Til Closure.”

MarketMinder’s View: A possible government shutdown isn’t the only thing with an October 1 deadline. The International Longshoremen’s Association is currently negotiating on behalf of 45,000 dockworkers at three dozen ports from Texas to Maine, and the union has set the start of October as a potential work stoppage date. That spurred forecasts projecting a range of possible outcomes should a labor disruption occur, from some short-term delays to ruined holiday shopping seasons, especially since these East Coast and Gulf ports account for about half of America’s imports. That said, this article shares a few details explaining why a “worst-case scenario” may not come to pass. For example, many retailers are working to mitigate a potential strike’s impact by bringing in products earlier—or even rerouting them to West Coast ports (the Panama Canal’s drought issues have eased). The federal government could also intervene and impose a cooling-off period that would put dockworkers back to work as negotiations resume (a tactic Canada’s federal government employed with its recent railway work stoppage). Headlines may warn major trouble is just around the corner, but businesses are pretty adept at adapting to uncertain conditions. For more, see last month’s commentary, “Labor Strikes Don’t Strike Down Economic Growth.”