Daily Commentary

MarketMinder’s View: First, this article dives into German politics and the harangue that is coalition building across disparate parties. So please note MarketMinder favors none of these parties nor any politician, assessing developments solely for potential market or economic effects. What this piece illustrates is quite simple: When you form a “Grand Coalition” of two parties that straddle an ideological divide, the result is often not grand activity—but gridlock. Only mere days after Germany’s center-right Christian Democratic Union (and its sister party, the Christian Social Union) and the Social Democratic Party (SPD) unveiled a coalition deal that seemed set to revamp the German budget, splinters are emerging. “While the coalition agreement includes such a measure, Merz stressed that all commitments are conditional on the funding available, referring to a clause in the 144-page coalition agreement stating that every policy — from tax relief to infrastructure spending — must be financially viable before it can be implemented. That is stirring confusion within his potential junior partner. SPD co-leader Saskia Esken responded that the tax cut was ‘a clear agreement,’ arguing that ‘workers and the economy’ need a signal of confidence. ‘It is firmly stated in the coalition contract,’ she told Rheinische Post.” It goes on to document further divides on things like Ukraine support and a young faction in the SPD that seems to reject the coalition deal itself. This is the sneaky form of parliamentary gridlock that has dominated EU politics in recent years. It may mean the big German fiscal package some anticipate isn’t at hand. Now, we don’t think such measures are really needed for growth or Germany’s stocks to lead. But others do, and gridlock like this could keep sentiment toward Germany low—a factor that could actually help markets more than a government spending boom would.

MarketMinder’s View: First, this article touches on politics, so please keep in mind MarketMinder favors no politician nor any political party, assessing developments solely for their potential market and economic effects. It covers the latest legal challenge to President Trump’s sweeping April 2 tariff announcements, taking aim at both the universal 10% tariff and “reciprocal” levies. The plaintiffs in the suit are five small businesses that import supplies from abroad, which the lawyers say are the grounds for the suit. They argue the authorization for imposing the tariffs without congressional approval—the International Emergency Economic Powers Act (IEEPA)—is insufficient to justify a global tariff. As the lawyers wrote in the brief, “The statute the President invokes—the International Emergency Economic Powers Act (‘IEEPA’)—does not authorize the President to unilaterally issue across-the-board worldwide tariffs. And the President’s justification does not meet the standards set forth in the IEEPA. His claimed emergency is a figment of his own imagination: trade deficits, which have persisted for decades without causing economic harm, are not an emergency. Nor do these trade deficits constitute an ‘unusual and extraordinary threat.’ The President’s attempt to use IEEPA to impose sweeping tariffs also runs afoul of the major questions doctrine.” This case, among others already filed, is worth watching.

MarketMinder’s View: This article is a big swing-and-a-miss on Bank of America’s Global Fund Manager Survey, which tallied investor attitudes and positioning across various markets and asset classes from April 4 – 10, a pretty non-boring period. This survey should be seen as one of many possible gauges of sentiment; it tells you what fund managers are reacting to and what is likely already priced into markets. But this article buries the lede by hyping the rising percentage of people bearish on the dollar, which is already down this year against a trade-weighted currency basket. Pre-priced. What it pays less attention to: This report revealed a huge swing from bullishness in February to what the bank called, “the fifth-most bearish reading in 25 years.” That, folks, illustrates what we have said about tariffs’ and this correction’s effects: While tariffs aren’t good, markets are pre-pricing a quite unlikely worst-case scenario. Which is excessive, in our view, and likely means sentiment is way too low. That should pave the way for recovery even if the fundamental backdrop isn’t fantastic or clear.