By James Hirai, Bloomberg, 1/21/2025
MarketMinderâs View: Watch what people do, not what they say. It has been cool lately to claim the rise in UK long-term bond yieldsâpart of a fully global trendâproves markets are growing edgy about UK debtâs sustainability, given uncertainty over Chancellor of the Exchequer Rachel Reevesâs Budget, which has little wiggle room for higher-than-forecast interest payments. But just days after a weak auction fed this narrative, âThe ÂŁ8.5 billion ($10.4 billion) offering of debt due in 2040 drew excess of ÂŁ119 billion of demand on Tuesday, beating the previous record for the securities originally sold in September. The pricing on the sale was tightened to four basis points over comparable bonds, according to people familiar with the matter who asked not to be identified. Such debt syndications are typically more expensive than auctions, but they allow governments to raise large sums quickly while diversifying their investor base.â This comes after 10-year yields have dropped by nearly -30 basis points in the last couple weeks, yet we see relatively few headlines spiking the football over fiscal success. Record demand at lower rates? Doesnât seem like a crisis to us and really highlights that the recent moves are likely much more about sentiment tied to politics than a fundamental shift. For more, see our 1/13/2025 commentary, âPutting British Bondsâ Alleged Budget Blues in Context.â
The IRS Now Knows a Lot More About What You Sell
By Ashlea Ebeling, The Wall Street Journal, 1/21/2025
MarketMinderâs View: If you are a frequent seller of goods or services via online marketplaces like Etsy, StubHub or anything of the sort, this article is worth referencing. After dragging its feet for several years, the IRS is set to gradually begin implementing rules requiring such marketplaces to report such sales. It was supposed to do so in 2021 for sales exceeding $600 annually. But there were quite a few complaints about the suddenness and complexity. âInstead, the IRS chose to phase in the change, setting the $5,000 threshold for the 2024 tax year, $2,500 for 2025 and $600 for 2026.â This means you could be seeing 1099-K tax forms later this year if you breached that $5,000 mark. And it means those frequently selling goods and services online should keep good records about cost and profit or loss on the activity. Failing to pay tax on this newly reported income will result in penalties, if applicable. There are exceptions, naturally. âThe tax rules for selling personal stuff online are different. If you get a 1099-K for something you sold for less than you originally paid, you wouldnât owe tax, but you would need to disclose it to the IRS.â But overall, expect more paperwork, more reporting and, potentially, more taxes from this ruleâs implementation.
Canadaâs Inflation Rate Fell to 1.8% With Prices Declining During GST Break
By Staff, Reuters, 1/21/2025
MarketMinderâs View: Prime Minister Justin Trudeauâs decision to enact a national sales tax holiday on select goods including food, clothing and alcoholâa controversial move some cast as popularity-seekingâhelped feed slowing in Canadaâs headline consumer price index (CPI) to 1.8% y/y in December. This, plus falling gasoline prices, saw CPI actually fall -0.4% m/m in December. That cut extends through January and into mid-February, so there is potentially another reading or two with skew from this one-off. However, while that aspect of the slowing is illusory, it is worth noting that all the measures of core inflationâCPI excluding food and fuel, median CPI and the trimmed meanâwere in the low 2%-range. That is within the Bank of Canadaâs targeted range, and it all suggests the disinflationary trend of the last year-plus persists, sales tax holiday or no.
Editorsâ Note: This article mentions a few individual stocks in the course of discussing a broader theme we wish to illustrate. Please note that MarketMinder doesnât make individual security recommendations. Remember March 2023, when Silicon Valley Bank failed and many feared its problems would spread, wiping out Americaâs regional banks? The panic faded so quicklyâand so much has happened since thenâthat it feels far longer than 22 months ago. But it got an interesting capstone last week, courtesy of a Wall Street Journal writeup of some banksâ earnings results and forecasts. We think it highlights the benefits of the accounting rule tweak that helped end 2007 â 2009âs global financial crisis. Back in early 2023, Silicon Valley Bank was in deep trouble. Not because its loan portfolio was suddenly imploding, but because it had a lot of US Treasury bonds on its books and the vast majority of its deposits were industry-concentrated and uninsured. So as long-term rates rose and bond prices fell, these big depositors got antsy about the bankâs health and liquidity. In need of capital, the bank released plans to sell Treasurys at a loss, which ratcheted up concerns about liquidity, leading to more deposit flight and, ultimately, driving the bank into receivership. Eventually, First Citizens bought its ashes and continued operating the business, but for a time it was unclear whether or when large depositors would get their money back. As another regional bankâNew Yorkâs Signature Bankâfailed the same weekend, investors and depositors alike grew concerned about a run on regional banks (or, in industry terms, contagion). Analysts worked overtime trying to suss out which banks were at risk of failure, with many pointing to unrealized losses on US Treasury bond portfolios as a metric. But broad meltdown didnât happen. Giant Swiss bank Credit Suisse failedâa victim of its own, unrelated and ...
More DetailsEditorsâ Note: MarketMinder is politically agnostic, preferring no party nor any candidate. We assess developments for their economic and market effects only. Halfway through January, political and sentiment drivers remain in flux, shrouding the outlook in fog. As elections abroad come and go and Congress gets down to business, things should solidify and clear, but in the meantime, we see reasons to be bullish and reasons to be skepticalâwith pundits frequently miscasting both. One example: the widely hyped Department of Government Efficiency, better known as DOGE. On its face, DOGE sounds like something out of a political satire. It is led by a Tech exec who already has several jobs, Elon Musk, and a businessman and former presidential candidate, Vivek Ramaswamy. Its name is oxymoronic, as if it were a project expanding the civil service in the name of shrinking the civil serviceâbut that isnât the case. DOGE isnât an official government department, which would require an Act of Congress creating the office and appropriating funding for it. Instead, it is a volunteer committee, a blue-ribbon commission, in line with the blue-ribbon commissions appointed by pretty much every administration preceding it. Every White House has legions of âadvisers,â paid and unpaid. The Trump 2.0 payroll isnât set or public yet, but we reckon it will be the same. Since the election, we have seen a lot of cheer from small government-types about the prospect of DOGE making government leaner, less bureaucratic and easier for people and businesses to deal with. Opinion writers and think tanks coast to coast have published suggestions and wish lists of regulations to scrap, spending to cut and red tape to vaporize. We have seen detailed analyses of government bloat and the pennies that could be saved by trimming the fat. But here is the thing about markets: They pre-price all widely known informationâincluding opinions of incoming ...
More DetailsStoking fear, US 10-year Treasury yields hit 4.8% this week, their highest since ... October 2023.[i] Now, those who remember then may wish to point out October 2023 wasnât exactly an awful point to own or buy stocks, but nevertheless, worries are rising. And, while Americaâs rates are higher than in the rest of the developed world (except the UK), a similar dynamic holds globally. Rates may be upâand weighing on sentimentâbut nothing about it seems fundamentally game changing for stocks. What has folks so alarmed? Loads of people think rising yields will draw investors away from stocks, considering there is theoretically less compensation for their higher volatility. If true, stocks and yields should have a reliable negative correlation that stretches back further than the last handful of trading days. Problem is ... they donât. Consider the historical weekly correlation between 10-year Treasury yieldsâ movements and the S&P 500âs. A correlation of 1.00 means they move in lockstep and -1.00 exactly opposite. Since May Day 1953 (when weekly data begin) through last Friday, it was 0.07.[ii] Their correlation basically rounds to zeroâthere isnât any. That means yields rise and fall together about as often as they diverge. Those warning about rising rates also allege the S&P 500âs âequity risk premiumâ (ERP) shows stock valuations are unfavorable versus Treasurys. There are different ways to measure ERPs, but one popular method is to use the gap between the S&P 500âs earnings yieldâthe inverse of its price-to-earnings (P/E) ratio or E/Pâand the 10-year Treasury yield. As many point out, it has turned negative for the first time since 2009. Sound scary? Historyâs longest bull market began that year. This shouldnât be surprising. Rates donât drive stocksâand ERPs remain unpredictive. As Exhibit 1 shows, Treasury yields have often topped earnings ...
More DetailsThe first jobs report of 2025 was a banger after nonfarm payrolls blew away expectations. And of course, in response to the strong numbers, the S&P 500 ⊠fell? Yep, US stocks slid -1.5% on Friday before a modest rise Monday.[i] The alleged culprit: Strong hiring will slow or stop future Fed rate cuts, robbing the economy of needed monetary support. But cool down. We have already seen Fed rate cuts arenât critical for markets or the economyâand nothing about this report foretells the Fedâs 2025 moves. Decemberâs report was solid. The unemployment rate ticked lower to 4.1% from Novemberâs 4.2%, but the headline grabber was nonfarm payrolls rising by 256,000âtrouncing expectations for 153,000.[ii] Hiring in the health care, government and social assistance sectors led the way while manufacturing dipped by -13,000 (its fourth decline in the past five months).[iii] Overall, payrolls rose by 2.2 million in 2024 (averaging 186,000 per month), behind 2023âs 3.0 million but ahead of 2019âs 2.0 million gain.[iv] Even the less-reported U6 unemployment rateâwhich includes people working part-time for economic reasons and discouraged workers who havenât sought a job in four weeksâfell to 7.5% from 7.7% a month earlier, the lowest since June.[v] Instead of celebrating resilience, though, pundits immediately began fretting over the implications. Most landed on the notion stronger-than-expected data will push the Fed to delay rate cuts, removing a key source of economic support. This stems from the misperceived notion the economy requires rate cuts and lower borrowing costs to support growth. We think this conventional wisdom is off base. One, monetary policy doesnât have a predetermined economic effectâfor good or ill. The Fed began hiking rates in March 2022 and kept raising them (including some âjumboâ 75 basis point [bp] hikes from June â November 2022), with the final one ...
More DetailsHere we go again? Long-term UK bond yields have jumped to their highest since mid-2008. Which means they are above levels seen amid the so-called mini budget crisis of autumn 2022, when spiking yields prompted a fiscal policy U-turn by then-Prime Minister Liz Truss. Headlines claim this time could be even worse, with the confluence of high borrowing costs, elevated public spending and flatlining GDP growth poised to ignite a fiscal crisis. Sounds dire. Reality looks a lot more mundane to us. It is true UK 10-year Gilt yields are up over a percentage point since mid-September. It is also true this has raised interest costs, as the UK has relatively more floating-rate debt than its peers. And it is true yieldsâ rise coincided, in part, with the Halloween release of Chancellor of the Exchequer Rachel Reevesâs Budget, which brought higher spending and taxes. And it is true that, during this window, the UKâs monthly economic indicators have had some setbacks while Q3 GDP was revised down to a flat reading. At the same time, we donât think it is accurate to say there is an airtight causal relationship here. As Exhibit 1 shows, UK ratesâ rise is part of a broad, global rate move. 10-year Gilt yields have moved in virtual lockstep with 10-year US Treasury yields. Yet US GDP growth has shown little weakness. Taxes arenât rising, and there is little to no realistic talk of an impending US fiscal crisis. French and German yields, while lower, have trod a similar path. Both are locked in political crises with budget uncertainty a central feature. The fundamental situation in each nation is different, but their rates are highly correlated. Global forces appear to be holding sway over local. This isnât like 2022, when UK yields rose 2.74 percentage points (ppts) in a little over two months while US Treasury yields rose just 1.1 ppt.[i] Exhibit 1: UK Gilt Yields Arenât an Outlier Source: FactSet, as of 1/13/2025. Benchmark ...
More DetailsEditorsâ Note: This article deals with political matters, so we remind you MarketMinder favors no politician nor any political party, assessing developments solely for potential market and/or economic effects. While investorsâ attention has mostly shifted to the incoming Trump administration, President Joe Biden still has a couple weeks left in the big chairâand is still dotting some last Is and crossing some final Ts. A seemingly big policy move came Monday: a permanent ban on new offshore oil drilling in some federal waters. President-elect Trump is vowing to rescind the executive order once he takes office, but it may not be that simple, given a 1950s law preventing presidents from using executive action to cancel permanent bans. Hence, there is a lot of chatter about threats to long-term US oil production. But it all misses the mark. This ban is more symbol than substance, posing little threat to oil production or Energy stocks. Those arguing this is a threat point primarily to projections for UK North Sea oil production, which nosedived after Energy Secretary Ed Miliband announced a similar ban across the pond. But the US isnât the UK. Britainâs oil industry relies on offshore production due to its complicated geology and the fact that mineral rights vest with the crown, negating landownersâ incentives to let drillers experiment with new technology. But here, the vast majority of oil production is onshore, on private or state land, with less than 15% in offshore federal waters.[i] Oil producers havenât been unable to drill offshore. They just havenât wanted to. Bloomberg columnist Liam Denning had a great discussion of this Wednesday, including a nifty graphic showing oil producersâ chronic refusal to lease available offshore offerings.[ii] As he showed, when new leases resumed in 2023 after the Biden administrationâs temporary pause, there were 146 million acres up for grabs. Producers leased just 3 ...
More DetailsOn New Yearâs Day, Russian gas stopped flowing to Europe via Ukraine. Some politicians heralded the development as âa new victoryâ for the Continent, while others warned it was bad news for both the EU and Russia. But this symbolic move is ancient history to forward-looking markets, which have long since moved on. Russia and Ukraineâs gas ties go back decades. In the 1990s, Russiaâs only path to send gas to EU nations was a Soviet-era pipeline through Ukraine.[i] It flowed many, many years. Occasionally it would cease, usually as Russian retaliation when Ukraine would siphon gas for its own needs or couldnât pay its bills. But it always came back, even through the Maidan revolution that felled Ukraineâs former pro-Russian leadership 11 years ago, Russiaâs ensuing invasion of Crimea (then Ukrainian territory) and the subsequent war in Ukraineâs eastern regions. And when Russia outright invaded Ukraine in 2022, starting a war that continues now, the gas still flowed. Until last week, that is, when a five-year transit agreement signed in 2019 expired. As war raged, Ukraine and its Western allies hoped to kneecap Russia financially by ending the EUâs reliance on Russian gas and thus robbing Russiaâs government of a key revenue source, while Russia used threats to end gas flows as leverage in a (failed) attempt to end Western sanctions. Long before the deal expired, its end was a foregone conclusion. However, weaning off Russian energy was easier said than done. Since Russia provided almost half of EU gas imports, many experts warned Europe risked much higher energy pricesâwith potentially dire downstream consequences (e.g., power rationing and/or blackouts).[ii] Some pain points did materialize. Natural gas prices soared at times in 2022, lashing European industry and heaping pain on households trying to keep the lights and heater on. Some manufacturing plants had to cut production and put employees ...
More DetailsEditorsâ Note: MarketMinder prefers no politician nor any party. We assess developments for their economic and market effects only. A rather busy, uncertain stretch for international politics keeps trucking along, with new developments in Canada and Austria hitting headlines Monday. In our view, neither of theseânor Germanyâs snap election, Franceâs upcoming budget battle, Belgiumâs marathon government formation process, Koreaâs impeachment adventures, or, or orâhas some inherently good or bad outcome for markets. None are particularly make or break. But how they affect sentiment will be key as 2025 gets going in earnest. Justin Trudeau Bows Out Perhaps the biggest lesson from Canadaâs news is that uncertainty often fades slowly. Ever since Prime Minister Justin Trudeauâs Liberal Party lost the support of the New Democratic Party following its intervention in labor disputes, investors have been wrestling with the prospect of a government collapse and snap election. The speculation fire got more fuel when (now former) Deputy Prime Minister and Finance Minister Chrystia Freeland resigned, citing disagreements with Trudeau over fiscal policy and how to handle US President-Elect Donald Trumpâs tariff threats. This was kind of a big deal, given she was one of his original top cabinet appointees in 2015. It isnât quite a Lennon/McCartney split (or Waters/Gilmour, if you prefer), but not far off. Next to no one expected Trudeau to last until the next general electionâs October 2025 due date, but there was an utter lack of clarity. Now we are starting to get it ⊠kind of. Trudeau resigned Monday, citing deep intraparty opposition, and prorogued Parliament until March 24 while his party holds a leadership contest. So now we know Trudeau isnât hanging around. But we donât know who will replace him. Polls point to Freeland and the former head of both the Bank of England and Canada, Mark ...
More DetailsIn these twilight days of 2024, it is a time to look back and reflect on the year that was. Yet we are also a day shy of having full-year returns, making it a mite too early for a proper report card of sector and regional performance. But there is one thing we do have juuuuust about enough data to discuss: seasonality. Whatever else happened in 2024, this year showed once again that seasonal sayings donât predict. When covering seasonality, we usually focus on the big four. There is The January Effect, which holds that as January (or its first five days) goes, so goes the year. Sell in May and Go Away, which holds that selling at the beginning of May and staying out either until the St. Leger horserace or Halloween is the way to avoid a slump. September Is the Worst Month, which is as it sounds. And The Santa Claus Rally, which supposedly predicts a rollicking good time in December (or its final five trading days plus Januaryâs first two). None of these is a reliable indicator. All work some of the time, enough to confirm the popular biases. But not with any regularity, and in any given year, you might have some, all or none work. This year, with one trading day left to go, they get an F. The January Effect half-worked. The S&P 500 returned 1.7% that month, and given it is up 25.5% on the year through Mondayâs close, it seems safe to say an up January predicted an up year.[i] Hip hip! But the first-five-days version didnât work. The S&P 500 closed down -0.1% for the year on Januaryâs fifth trading day.[ii] Sell in May was a clear-cut dud. From April 30 through September 13âthe day before the St. Leger Stakesâthe S&P 500 rose 12.3%.[iii] From April 30 through Halloween, it jumped 14.1%, generating over half the full yearâs return.[iv] The seasonal myth says this six-month stretch is historically the yearâs weakest, but that wasnât the case in 2024. Rather, of the six-month samples in the books ...
More DetailsA common theme this year? The US economy, while not perfect, sidestepped a recession again while largely surpassing expectations. The slate of November dataâretail sales, industrial production and business inventoriesâmirrored this: Not gangbusters, but continuations of trends that have been good enough for stocks this year. November Retail Sales Beat Expectations. The Census Bureauâs latest report showed US retail sales rising 0.7% m/m in November, their third consecutive monthly rise and ahead of analystsâ estimates. Core sales, which exclude automobiles, gasoline, building material and food services, met expectations with a 0.4% m/m jump.[i] Under the hood, strong sales for autos and online retailers offset a -3.5% m/m decline in the catch-all âmiscellaneous storesâ category. Now, auto sales have been quite volatile post-pandemic tied to seasonal adjustment difficulties, which could be at play here. But robust online sales suggest holiday shoppers opted to buy more presents on the Internetâa long-running theme. And for all the punditsâ chatter over âa tapped US consumerâ paring spending back to only the essentials this holiday season, November didnât support their case. Sales growth concentrated in discretionary categories like autos, furniture and sporting goods, while the essentialsâfood and beverage and clothing storesâstruggled. Overall, Novemberâs report continued a nice run for retail salesâOctoberâs were revised up, too.[ii] Good news, but donât overrate the broader economic effect here. The majority of consumer spending is on servicesâthink insurance, gym memberships, healthcare, utilities or landscapingâmost of which arenât captured here. Plus, these data arenât inflation-adjusted, making retail sales but an incomplete preview of the full consumer spending report. That came out during the holiday home stretch: Novemberâs ...
More DetailsWith 2024 wrapping up and 2025 providing a fresh, clean sheet, here is how those nearing or in retirement can start the New Year strong. Save Moreâand Easily! As we mentioned earlier, several provisions from 2022âs Secure 2.0 Act take effect in 2025 that are worth being aware of. Among the most important, in our view: the big bump in the 401(k) catch-up contribution limit for those turning ages 60 to 63. This is fairly substantial and, as such, may require advance planning. In addition to the standard $23,500 limit, those aged 50 or older can top off with a $7,500 catch-up contribution. But starting in 2025, there is an added twist: 60- to 63-year-olds get a supersized catch-up: $11,250âpotentially allowing them to sock away as much as $34,750 into tax-advantaged retirement accounts. But to do it, you need to notify your plan administratorâand budget accordingly. And the sooner you start, the better: It would ease the impact on your take-home pay to divide the sum across more paychecks. 2025 also brings some other notable retirement plan upgrades: Automatic enrollment for all 401(k) or 403(b) plans, with the initial amount set to at least 3% of paychecks, but no more than 10%, and rising one percentage point each year to at least 10% or a maximum of 15%. Part-time employees working 500+ hours annually are eligible to participate in their employersâ 401(k) or 403(b) with two years of work experience (down from three). While not yet up and running, a federal Retirement Savings Lost and Found database should launch in 2025, letting people search for funds they may have lost track of (e.g., from job changes). Check Your Withholding Also look out for your W-2 and check your withholding (W-4). Employers must send workersâ W-2 tax forms by January 31. When you get yours, the tax filing clock starts ticking. You will want to ensure there arenât any errors and that it matches your records, but beyond that, how much did ...
More DetailsHappy Boxing Day! Traditionally, this is the day the âdownstairsâ portion of the house would spend with their families to celebrate the season after serving âupstairsâ on Christmas. And being your humble servants, what better day for us to open your Qs and, hopefully, give you some As? Who are the largest holders of US government debt? US investors and the Fed. Current gross public debt is about $36.2 trillion.[i] Of this, the US government owns about $7.3 trillion, via the Social Security trusts and other government vehicles.[ii] This is money Uncle Sam owes himself, which effectively cancels, leaving net public debt at $28.9 trillion.[iii] As of September, the latest data available, foreign investors (governments and private investors) owned $8.7 trillion (with $3.9 trillion owned by governments and the rest of the âofficial sectorâ and the rest by investors).[iv] This leaves just over $20 trillion with Americans and the Fed.[v] Among foreign holders, the largest is Japan at about $1.1 trillion.[vi] China is number two at $770 billion, followed closely by the UK.[vii] So for all the headline talk about China owning our debt, it is actually a bit player in the grand scheme of things. And for all the fear of it selling spiking US debt costs? A decade ago, direct holdings were nearly $1.3 trillion.[viii] It steadily sold over that span, cutting holdings by roughly $500 billion. Did you notice? How should I allocate my portfolio during a bear market? There isnât a one-size-fits-all solution, alas. All bear markets are different, and it also depends on the outlook for fixed income markets at the time. If you see a high likelihood there is a deep, long downturn ahead of you, reducing equity exposure probably makes sense. But whether you would want to emphasize cash, bonds or other securities would generally depend on interest ratesâ likely trajectory and inflation (which erodes cash returns). If you identify a bear market ...
More DetailsAre rate cuts finally set to arrive in Australia? According to the common interpretation of the Reserve Bank of Australiaâs (RBA) early December meeting minutes, the answer is yes. While RBA Governor Michele Bullock didnât, of course, explicitly say as muchânor did any of the other participantsâmany pundits read into commentary involving the trend of inflation proceeding back to target as expected. They see this as a sign long-awaited cuts the bank has seemingly flip-flopped on several times loom in 2025. Our question: What evidence suggests the Lucky Countryâs stocks need cuts? And in that is a broader lesson: Donât overrate monetary policy. Many economists, including the RBAâs, argue Australia is among the developed worldâs most rate-sensitive nations. On the demand side, the evidence is rather compelling. According to the RBAâs February 2023 Statement on Monetary Policy, Australia trailed only Norway in the share of variable-rate mortgages, with nearly 70% of outstanding home loans carrying floating interest rates.[i] Canada is next highest at around 35%, followed by the UK at roughly 15% and the US around a measly 5%. This, of course, hits when rates and inflation riseâas they did over the past few years. In April 2022, when tightening had yet to begin, outstanding Australian mortgages carried an average 2.9% interest rate. Today it is north of 6%.[ii] (Is âhigher thanâ ânorth ofâ Down Under?) With the majority of households paying variable rates, this transmits a higher ratesâ punch on household finances quite rapidly. Far faster, say, than in America, where the preponderance of 30-year fixed home loans means rising rates donât affect existing homeowners with a mortgage at allâan issue that may have chilled existing home sales and cut inventory, but also limits financial pressure on them.[iii] We are sure many Aussie households are feeling financial pressure ...
More DetailsIt is December 23, and you know what that means: Well, yes, two days to Christmas and Hanukkah! Yes, yes, three until Kwanzaa. And, yes, yes, yes, only eight days remain in 2024. But there is something moreâsomething that deeply resonates with us huge fans of most things 1990s: December 23 is Festivus. And here we intend to bring you a traditional Festivus âairing of grievancesâ in which we share our chief gripes with things we have read in the financial press this year. It is a way we aim to enter the new year unburdened by what has been, if you will forgive us invoking Vice President Kamala Harris. For the uninitiated, the story of Festivus starts in 1966, when author Daniel OâKeefe dreamed up a holiday repudiating what he saw as the holiday seasonâs increased commercialization. He launched a family tradition involving nailing a clock in a bag to the wall, eating a turkey or ham and then âairing the grievancesââtelling friends and family all the things they did to annoy you that year. The popularity took off in December 1997, when his son Danâa television writerâworked on a now-famous episode of Seinfeld that turned the clock-in-bag into an aluminum âFestivus pole,â the dinner meat to meatloaf ⊠but kept the grievance-airing. As the legendary Jerry Stiller kicked it off, âI got a lot of problems with you peopleâand now youâre going to hear about it!â In that noble spirit, we have a lot of problems with some of the financial punditryâs work ⊠and you can read all about it! State Market Movement in Percentages! When markets hit turbulence last Wednesday, headlines predictably shrieked âDOW FALLS 1,100 POINTS!â Earlier, on the upside, many hyped bitcoin breaching $100,000. We have long had a bone to pick with âpointâ or value metrics. The reason: Is that big? Is it supposed to be big? Without context, you canât know. And ...
More DetailsEditorsâ note: MarketMinder is nonpartisan, favoring no party nor any politician. Political bias can blind and drive investing mistakes. Our focus is only on political eventsâ potential market ramificationsâor lack thereof. While most talk in America fixates on the incoming Trump administrationâor maybe the wobbling probability of a holiday season government shutdownâpolitics are seeing much more action outside America. Wednesdayâs political headlines dwelled on Brazilâs budget wrangling and talk of a speculative attack on the real, which strikes us as an overblown reaction to deficit worries. More significant developments happened elsewhere in recent days: Germanyâs government lost a confidence vote, setting up a February snap election; Canadaâs finance minister resigned, placing its government on shaky ground; and South Koreaâs president was impeached, although that wasnât exactly startling. What to make of it all? Read on! Unwieldy German Coalition Proves ... Unwieldy On the heels of Franceâs government dissolutionâand reformationâGermany is following suit. As expected, Chancellor Olaf Scholzâs minority Social Democrat-Green Party coalition lost a confidence vote Monday, triggering a February 23 snap vote that many have penciled in for a while. This was all more or less known in early November when the formerly tripartite coalition lost a member, leading the opposition Christian Democratic Union (CDU) to call a confidence vote. The electionâs timing was basically the sole unknown. Prior discussions pointed to March. Now we have an earlier date. While the CDU and its sister partyâthe Christian Social Union (CSU)âare currently leading polls, their 30% support implies they would likely need at least one other party to form a government. With Social Democrats polling in the high-teens alongside the far-right Alternative for Germany (AfD), and Greens in the ...
More DetailsBy James Hirai, Bloomberg, 1/21/2025
MarketMinderâs View: Watch what people do, not what they say. It has been cool lately to claim the rise in UK long-term bond yieldsâpart of a fully global trendâproves markets are growing edgy about UK debtâs sustainability, given uncertainty over Chancellor of the Exchequer Rachel Reevesâs Budget, which has little wiggle room for higher-than-forecast interest payments. But just days after a weak auction fed this narrative, âThe ÂŁ8.5 billion ($10.4 billion) offering of debt due in 2040 drew excess of ÂŁ119 billion of demand on Tuesday, beating the previous record for the securities originally sold in September. The pricing on the sale was tightened to four basis points over comparable bonds, according to people familiar with the matter who asked not to be identified. Such debt syndications are typically more expensive than auctions, but they allow governments to raise large sums quickly while diversifying their investor base.â This comes after 10-year yields have dropped by nearly -30 basis points in the last couple weeks, yet we see relatively few headlines spiking the football over fiscal success. Record demand at lower rates? Doesnât seem like a crisis to us and really highlights that the recent moves are likely much more about sentiment tied to politics than a fundamental shift. For more, see our 1/13/2025 commentary, âPutting British Bondsâ Alleged Budget Blues in Context.â
The IRS Now Knows a Lot More About What You Sell
By Ashlea Ebeling, The Wall Street Journal, 1/21/2025
MarketMinderâs View: If you are a frequent seller of goods or services via online marketplaces like Etsy, StubHub or anything of the sort, this article is worth referencing. After dragging its feet for several years, the IRS is set to gradually begin implementing rules requiring such marketplaces to report such sales. It was supposed to do so in 2021 for sales exceeding $600 annually. But there were quite a few complaints about the suddenness and complexity. âInstead, the IRS chose to phase in the change, setting the $5,000 threshold for the 2024 tax year, $2,500 for 2025 and $600 for 2026.â This means you could be seeing 1099-K tax forms later this year if you breached that $5,000 mark. And it means those frequently selling goods and services online should keep good records about cost and profit or loss on the activity. Failing to pay tax on this newly reported income will result in penalties, if applicable. There are exceptions, naturally. âThe tax rules for selling personal stuff online are different. If you get a 1099-K for something you sold for less than you originally paid, you wouldnât owe tax, but you would need to disclose it to the IRS.â But overall, expect more paperwork, more reporting and, potentially, more taxes from this ruleâs implementation.
Canadaâs Inflation Rate Fell to 1.8% With Prices Declining During GST Break
By Staff, Reuters, 1/21/2025
MarketMinderâs View: Prime Minister Justin Trudeauâs decision to enact a national sales tax holiday on select goods including food, clothing and alcoholâa controversial move some cast as popularity-seekingâhelped feed slowing in Canadaâs headline consumer price index (CPI) to 1.8% y/y in December. This, plus falling gasoline prices, saw CPI actually fall -0.4% m/m in December. That cut extends through January and into mid-February, so there is potentially another reading or two with skew from this one-off. However, while that aspect of the slowing is illusory, it is worth noting that all the measures of core inflationâCPI excluding food and fuel, median CPI and the trimmed meanâwere in the low 2%-range. That is within the Bank of Canadaâs targeted range, and it all suggests the disinflationary trend of the last year-plus persists, sales tax holiday or no.