Daily Commentary

MarketMinder’s View: Taking a trip down memory lane, the author reflects on some of his old financial writing from December 1999, months before the dotcom bubble popped. The piece also mentions a number of companies, some out of business, some still around, so as a reminder, MarketMinder doesn’t make individual security recommendations—especially on defunct ones, ha—we share this to discuss the broader themes touched on here. After highlighting the FOMO (fear of missing out) rampant at the time, the article shares a few lessons learned from a quarter century ago: Don’t ignore excessive valuations, today’s winners won’t be so in perpetuity, where you invest will influence your feelings of the past (depending on the country or region’s relative return) and “stock picking is hard.” We agree with these points to a degree, though we take issue with some, too. Yes, extreme valuations can be telling about sentiment and leadership rotates (there isn’t any one sector/industry/stock that will always lead). But none of this is a timing tool, and looking at valuations alone won’t tell you whether the market or certain corners of it are too stretched now, making the article’s applications to today suspect, in our view. Beyond that, to us, it goes without saying where you invest affects your opinion of your portfolio, which is why we advocate for a global approach—focusing on your home country (or any one country in general) can mean missed opportunities elsewhere. Finally, stock picking is indeed difficult, but focusing on individual companies is myopic and can distract investors from the bigger picture. Rather than trying to find the needles in the haystack over the next 25 years, we think investors are better served looking only about 3 – 30 months out and using a broad market outlook as well as sector/country/style forecasts to narrow the funnel. In our view, higher-level positioning matters more to your portfolio’s overall return than trying to find the next big thing.   

MarketMinder’s View: Please note MarketMinder is nonpartisan and prefers no political party or politician over another. Our analysis focuses on politics’ economic and/or market effects only. Canada’s Prime Minister Justin Trudeau recently announced a C$6.3 billion ($4.5 billion) “affordability” package aimed at aiding Canadian households. The measures include temporary relief on the federal goods and services tax and a one-time rebate of C$250 (for workers who earned less than C$150,000 in 2023). Considering the former will start on December 14 and last until February 15, the government’s goal seems to be to provide families with a little extra spending money this holiday season. Perhaps, though we caution investors against thinking this will provide a big boost for the Canadian economy as 2024 comes to a close. Yes, some may spend their small windfall on Christmas gifts—but others may choose to deploy the funds in other ways (e.g., pay down debt, save). There will probably be different winners and losers, as with any government spending package. From a political perspective, the news may decrease the likelihood Canadians will be going to the polls soon. As the article notes, “The plan has the support of the New Democratic Party, an opposition party that pulled out of a power-sharing deal with Trudeau’s government earlier this year. The agreement on the tax-and-rebate package shores up the government’s stability in parliament, reducing the likelihood of an early election.” Now, a Canadian federal election must take place on or before next October, so a vote will be happening at some point by then—but at least for the very near term, the status quo (Trudeau’s do-little minority government) looks likely to persist.

MarketMinder’s View: The Conference Board’s US Leading Economic Index (LEI) fell -0.4% m/m in October, a tad worse than economists’ expectations for -0.3%. Of the gauge’s 10 components, 6 detracted—led by the ISM manufacturing PMI’s new orders (-0.18 percentage point)—3 added and 1 was flat. As The Conference Board’s analyst quoted here notes, “In October, manufacturing hours worked fell by the most since December 2023, while unemployment insurance claims rose and building permits declined, partly reflecting the impact of hurricanes in the Southeast US.” Overall, not a great report, but also not a surprise considering LEI has been in a downturn since December 2021. In our view, LEI hasn’t been telling about the US economy’s prospects for a while—in part due to the index’s construction, which skews toward manufacturing and goods-producing industries. These areas don’t reflect America’s services-dominant economy, and they remain quite skewed by pandemic-era trends. Now, we aren’t saying LEI is forever broken, but it also isn’t super useful right now—a tidbit worth keeping in mind for investors. For more, see last month’s commentary, “On LEI: Is a Popular Recession Indicator Broken?”