Daily Commentary

MarketMinder’s View: Look, we agree with some of the theoretical arguments in this piece, which posits that regulatory pushes and listing requirements are dissuading companies from going public, particularly in the UK, where stocks trade at lower valuations than in the US. But the conclusion—that the publicly listed corporate model is at risk of falling by the wayside—is beyond a stretch, in our view. Let us start with the points of agreement. Regulatory requirements for going public have greatly increased in the last couple of decades, resulting in companies staying private longer. Those requirements are more stringent abroad, especially for startups, increasing New York’s appeal. And we agree with the general gist that regulating away risk is a fallacy and a dangerous one at that. But the idea this threatens the UK or world equity markets’ viability is dubious. For one, UK markets are much more value-oriented than America’s, and value stocks routinely trade at lower valuations. That is about economic and market structure, not the viability of listings. As for the number of falling listings, this has happened through consolidation, M&A, firms going private and relisting, and more. It isn’t bad for stocks, either. Always remember: Markets move on the supply and demand for equities. If the supply is down, even less demand can push prices up. This is perhaps partly behind the fact stock returns have been grand in the last two decades while supply declined. Lastly, if returns remain high, we are confident companies will, in time, list. Arguments to the contrary likely repeat the “Death of Equities” fallacy this article leads off with.

MarketMinder’s View: Chinese GDP logged 5.3% y/y growth in Q1 2024, accelerating from Q4 2023 and on track to meet or exceed the government’s goal of around 5.0% for this year. This article, however, highlights skepticism toward the data, citing March monthly data that show industrial production and retail sales rising 4.5% y/y and 3.1% y/y—far below analysts’ respective 6.0% and 4.8% forecasts. Furthermore, this largely pins the GDP acceleration on stimulus, which it presumes makes it unsustainable. Now, on one hand, we agree with skepticism about whether China can maintain such fast growth, to the extent you want to buy these specific figures. Stimulus via the infrastructure/industrial channel—which China has rekindled this year—has had diminishing returns in China for years, especially when it focuses on oversupplied areas like electric vehicles and solar panels. We are skeptical a boomlet is in the offing as a result. But at the same time, we largely think the specifics here are less important for global investors than the general gist: China’s economy, from all available reports, is still growing, adding to global demand, and stable consumption is in line with the developed world, where consumer spending is nowhere near as cyclical as commonly believed.

MarketMinder’s View: The Fed’s Industrial Production data show US output rose 0.4% m/m in March, the second-straight rise of that magnitude, with manufacturing—the largest industry group—rising 0.5%. Growth was broad-based, adding to signs this article documents that America’s heavy industry has turned a corner. Yet as this also notes, manufacturing is only around 10% of US GDP, so whatever happens here likely pales in comparison to the services sector, which has buoyed growth for much of the last year-plus. Hence, this is nice news, in our view, but don’t overrate it.