Daily Commentary

MarketMinder’s View: We are inclined to agree with the viewpoints here, but it is also important to bear in mind relative headwinds like this aren’t automatically bearish. In this case, a couple of UK executives report hearing from several contacts that investors—particularly US investors—are wary of putting money to work in the UK because of legal and regulatory concerns. A few months ago, a court ruling upended the established—and until then perfectly legal—auto finance selling practices. They were deemed illegal retroactively, forcing companies to make compensatory payouts and alter their selling practices and compliance procedures. That story, which we have followed, is still unfolding. And it is also an isolated case. But investors apparently see a concerning precedent being set for retroactive regulatory changes, increasing risk and liability. We see a fair likelihood this becomes a common viewpoint, as we recall a lot of risk aversion when India, for one recent example, made some retroactive tax changes about a decade ago. Shifting sand creates winners and losers and makes it hard to estimate a new project’s costs, risks and potential return—especially when that shifting sand upends decisions made years and years earlier. This can discourage risk-taking and weigh on returns. Yet in the UK’s case, this has been going on for months and is very well known, and UK stocks are at all-time highs and rising—and outperforming global stocks year to date. Let this be a good reminder that stock returns depend on a host of variables, and global forces often swamp local. While the UK’s regulatory landscape could be a headwind, it clearly isn’t strong enough to offset the many tailwinds at work.

MarketMinder’s View: This piece is a snapshot of sentiment surrounding gold, perhaps, but it doesn’t accurately present fundamental reasons for gold’s rise. For instance, it credits President Donald Trump’s tariff threats with boosting gold demand. But if tariffs are so bullish for gold, then why did gold prices fall in 2018, as Trump’s first-administration tariffs took shape, and then rise in 2019 as he started reaching deals and lifting tariffs? It then cites inflation fears, but gold fell alongside stocks in 2022 as inflation spiked. The price differential between New York and London—which is prompting people with means to remove physical gold stored at the Bank of England, fly it to New York and sell at a higher price—is another alleged reason. But this is a rush to sell, not buy (and anyway, for every buyer there is a seller). The last alleged reason is central banks’ gold buying, but gold has had plenty of sour runs during periods of high central bank buying. Gold swings on sentiment, pure and simple, making it volatile and fickle. If you seek long-term growth, there are steadier and higher-returning ways to achieve it. If you seek a safe haven, this volatile asset that pays no yield is rather inefficient at that, too.

MarketMinder’s View: Look, a 1.7% m/m rise in retail sales volumes is good news. However, we think the headline tells you all you need to know. This report is for January. Which means the four negative months preceding it spanned the entire holiday season. Did sales actually fall in real life? No—they just didn’t rise as much as they normally would, turning them negative once the seasonal adjustment factor kicked in. Then seasonal adjustments turned January’s normal post-holiday slump into a very nice rise. None of this is to say we are anti-seasonal adjustment. We aren’t! But the math remains skewed by COVID lockdowns and their aftermath, and it might be a couple more years before everything evens out. Frustrating, but data are kind of hard to read right now. And since we point this out when seasonal adjustments pull things lower, we think it is only fair to issue the same reminder when they are a positive force. In our view, the most important takeaway is that sentiment surrounding the release seems pretty dim, as this article’s focus on rising food sales and falling non-food store sales alludes to. When sentiment is so low, reality needn’t be stellar to beat expectations and deliver stocks bullish positive surprise.