Daily Commentary

MarketMinder’s View: This longish piece captures tons of worried headlines over US Treasurys—and whether President Donald Trump’s trade policy delivered a major hit to America’s credibility in bond markets. Most think yields should be falling right now given US Treasurys’ reputation as a “safe haven,” so their jump since President Trump’s Liberation Day tariff announcement has spurred myriad purported reasons for the selloff. This piece (and many others like it) chalks it up to foreign investors losing faith in the US economy and dumping their holdings. It goes even further, suggesting higher yields could metastasize into a US recession: “If households are forced to pay more for mortgages and credit card bills, they will presumably limit spending, threatening businesses large and small. Companies would then forgo hiring and expanding.” In our view, this is all a bit overblown and an overreaction to recent events. First, consider how benchmark 10-year Treasury yields are down since January and well below levels seen in 2023 and the late 1990s. Secondly, other factors could be pushing yields up at the moment. Rising inflation expectations tied to tariffs and hedge funds’ short positions sapping liquidity (the latter noted herein) may reflect some short-term pressures, not a longer-run shift away from Treasurys. We will continue monitoring developments, but for now, we don’t think rising yields are signaling a monumental foreign selloff or dwindling faith in the US economy. For more on this, see last Friday’s commentary, “On Treasurys’ Post-Tariff Ride.”

MarketMinder’s View: One gauge of Americans’ economic expectations tumbled on Friday, continuing a trend of weakening sentiment we have observed for weeks. The widely watched University of Michigan (U-Mich) Index of Consumer Sentiment fell to 50.8 in April, down from March’s 57.0 and below analysts’ estimate for 54.6. As the title notes, inflation fears were a main culprit. “Respondents’ expectation for inflation a year from now leaped to 6.7%, the highest level since November 1981 and up from 5% in March. At the five-year horizon, the expectation climbed to 4.4%, a 0.3 percentage point increase from March and the highest since June 1991.” This, too, matches other data we have seen suggesting President Donald Trump’s tariffs are fueling economic worries, particularly around inflation. But keep in mind, none of this is predictive. Surveys reflect respondents’ feelings around the present or recent past. One point worth pondering: The U-Mich survey’s response period ended right before Trump announced a 90-day pause on tariffs for most trading partners. If that news occurred the day before, would some survey respondents’ moods have brightened? Perhaps. Looking more broadly, this poll provides more evidence inflation fears are resurging as broader sentiment sours, lowering expectations—a bullish development, as counterintuitive as that may sound.

MarketMinder’s View: With American factory jobs a popular topic of discussion these days, this piece gives a brief history of US manufacturing since the turn of the 20^th century—and why America’s time as the world’s manufacturing powerhouse is unlikely to come back. The primary reason: America has evolved into a services-based economy. “The U.S. now exports in excess of $1 trillion-worth of services—far more than any other country. Moreover, America’s services exports are undercounted as a result of companies moving overseas the rights to intellectual property developed in the U.S.—like patents and trademarks—for tax purposes.” Now, US manufacturing hasn’t ceased—rather, it has evolved alongside the rest of the economy, moving away from nondurable and light durable goods (e.g., clothing and household appliances) as other nations (with their lower labor costs) became more adept at nondurable goods manufacturing. But a consequence is that manufacturing employment has steadily fallen since its heyday in the middle of the 20^th century as factories have become more advanced and automated. That long-term trend has disproportionally affected certain regions and industries, and we are sympathetic to those displaced economically. But from an investment perspective, keep in mind that manufacturing isn’t the economic swing factor many view it as, regardless of the surrounding political rhetoric.