Daily Commentary

MarketMinder’s View: The eurozone’s harmonized consumer price index inched lower to 2.5% y/y in June from May’s 2.6%, with core inflation (prices excluding energy and unprocessed food) holding steady at 2.9%. The latter, buoyed by a 4.1% y/y rise in services prices, is drawing all the eyeballs here, with many sweating those hot services figures mean inflation isn’t licked yet. “Some argue that services developments merely follow other components with a delay and a moderation is in the pipeline, also to be helped by an economic rebound that should improve competitiveness. Others, however, fear that labour shortages, rapid wage growth and poor productivity indicators in services could entrench rapid price growth and this could keep overall inflation above target for an extended period.” Consider us in the former camp. For one, inflation is about prices economy wide. Not in isolated pockets. There are no monetary tools to target services prices and not hit others. Two, as Milton Friedman taught 60 years ago (and recent developments prove), labor markets and wages don’t drive inflation—they follow it. Look only at the slowing in CPI globally these last two-ish years, which has come with high wage growth and low unemployment. Three, CPI is just north of the ECB’s targeted 2% rate. That we are still sweating over these rates—which central banks have never proven able to fine tune to any degree—is a sign investors are fighting the last war. That, in our view, shows you sentiment may be warming, but it isn’t euphoric.

MarketMinder’s View: First, this article dives into politics, so we remind you MarketMinder favors no politician nor any party, assessing developments solely for their market impact (or lack thereof). Six months after the Biden administration halted permitting of new liquefied natural gas (LNG) export terminals (and about four months earlier than we expected), the pause is over after a federal court in Louisiana shot it down Monday. The Department of Energy had argued it was pausing permitting to review and replace the environmental impact assessment process it has historically used, but the court found the counterargument from 16 states—that there are insufficient grounds to pause permitting while a process review takes place—more persuasive. Now, this article is chock full of people claiming this is a landmark ruling. Not so. This measure affected only new LNG facilities that weren’t already permitted. There are enough permitted already to double exports over the next 10 years, as this piece notes. And that shows what the pause was really about: Political appearances. In an election year, it is highly likely the administration drafted the pause to reinvigorate part of its base. Hence, we would have expected this to run through November and then disappear. But now we don’t have to wait and that is fun and fine.

MarketMinder’s View: This article mentions a few individual companies on its way to discussing a big slowdown in sales of grills and smokers just ahead of July 4, the traditional peak to BBQ season, so we remind you the broader slowdown is our focus here—we don’t make individual stock recommendations. At any rate, the article positions this slowdown partly as a function of inflation and economic stress, but most of it illustrates quite clearly the issue is an inflated base during COVID lockdowns. As with many durable goods, consumers snapped up grills and smokers in droves during the pandemic, aiming to make life at home more pleasant. That pulled forward demand and left a pothole in its wake—hence the slowing sales of grills but consistently strong demand for charcoal, pellets and the like this documents. That is doubly true here because grills are consumer durables—goods meant to last at least three years. This is obviously an isolated story, but it speaks to a broader lesson regarding data skew for investors. You can’t simply look at sales, earnings and economic data in a vacuum, see a slowdown and think the industry’s trends are apparent. Context matters.