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MarketMinder Daily Commentary

Providing succinct, entertaining and savvy thinking on global capital markets. Our goal is to provide discerning investors the most essential information and commentary to stay in tune with what's happening in the markets, while providing unique perspectives on essential financial issues. And just as important, Fisher Investments MarketMinder aims to help investors discern between useful information and potentially misleading hype.

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Japan’s Largest Opposition Calls for Lowering BOJ’s Inflation Target

By Toru Hanai, Reuters, 6/10/2025

MarketMinder’s View: This article is kind of sign-of-the-times-y, but the monetary policy implications are pretty overrated. The Bank of Japan (BoJ) has long targeted 2% y/y inflation, in keeping with many other central banks worldwide. Of course, policymakers initially set this rate way above prevailing inflation, as the country spent many years trying to find ways to counter flattish or falling prices, which many (wrongly) thought were a key headwind to Japanese domestic demand. They thought it would demonstrate some kind of commitment to keeping prices stable and slow-rising and break an alleged “deflationary mindset” that prevailed among Japanese consumers. It didn’t really achieve much of anything. But today, inflation has been running above the 2% target after the BoJ ballooned money supply during COVID lockdowns. And the political winds have shifted. Here the opposition Constitutional Democratic Party of Japan (CDPJ) is pushing for revision of the BoJ’s inflation target 
 to zero. Now, that is all fine and dandy and understandable in spirit, given the country’s overshooting its targeted rate since 2022. Whether this would actually give the BoJ leeway to hike rates further is an open question, though. If the bank wanted to, it could hike today on above-target inflation logic (the consumer price index rose 3.5% y/y in April, the latest figure!). But they haven’t hiked rates since February. Why? The target doesn’t dictate policymakers’ interpretation of the data. Raising a target doesn’t meant the interpretation shifts, either.


Moody’s Sounds Alarm on Private Funds for Individuals

By Matt Wirz, The Wall Street Journal, 6/10/2025

MarketMinder’s View: This article documents Moody’s analysis of the risks involved with Wall Street’s emerging push to expand the use of private assets by individual investors using instruments like pooled funds that mix and commingle public and private investments. But rather than focus on the risks to the individuals—which are notable, in our view, and worth very carefully considering—it adds a look from the perspective of the financial system. For example, the funds in question will likely have to deploy cash raised faster than the usual private fund, as there is no similar “lock up” period of years. That can mean stretching for deals that turn out to be poor. Additionally, the liquidity the funds add to this space may, “
make private markets more similar to public ones, reducing the ‘illiquidity premium,’ or the higher returns private funds can charge for holding assets that hardly ever trade and don’t require public financial reporting.” There is also the risk of a mismatch between the assets’ underlying illiquidity and the funds’ liquidity, which is something of a double-edged sword. Instruments like ETFs can create liquidity of their own, in the sense a sale of shares from one party to another may not require redeeming any underlying assets. But if we reach a point where redemptions spike, illiquid underlying assets may heap pressure on the issuers—and could require freezing redemptions for a period, which has happened a couple of times in Europe in recent years. For more on this, see today’s commentary, “Inside Wall Street’s Private Equity Push.”


Citing Trade Wars, the World Bank Sharply Downgrades Global Economic Growth Forecast to 2.3%

By Paul Wiseman, Associated Press, 6/10/2025

MarketMinder’s View: This touches on politics briefly in the course of discussing the World Bank’s updated 2025 global economic growth forecast, so please note we favor no politician nor any party—our interest here is more the growth outlook than the alleged causal factors. Citing tariffs, the World Bank ratcheted down its global growth forecast by -0.4 percentage point to 2.3%—which would represent a slowdown in growth from 2024’s 2.8%. Furthermore, the bank cut the US growth outlook more, from a 2.3% forecast this January to 1.4% in its semiannual update. That all seems logical and fine to us—it is quite possible the tariffs and uncertainty surrounding their rollout has slowed growth, and this likely hurts the US more than other nations. But markets largely already told you that, falling sharply as the plans rolled out and with the US significantly lagging non-US stocks this year. So in essence, the World Bank is really telling you what markets already showed. The forecast is perhaps a reflection of and influence on sentiment generally, but that is about it.


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In The News

06/10/2025

Touting a long history of high returns, Wall Street is pushing for everyday investors to gain access to unlisted, private investments. Proponents claim they want to benefit the masses by bringing this previously exclusive, lucrative option to 401(k)s and more, via revising rules governing retirement accounts and requirements governing private investments. But behind the scenes, we see another possible explanation for the push: Many private or hedge funds are facing a cash crunch. In our view, today’s liquidity issues highlight why investors should think twice before diving into private equity if it becomes more accessible—and are reminders of everlasting considerations investors must weigh in approaching these options. Recently, private equity returns have cooled significantly, lagging broader markets and driving funding issues. For context, these funds boasted flashy returns for decades, often leveraging up big and making concentrated investments. From 2000 – 2023, some estimates put their net annualized returns at 13%, topping public equity’s roughly 8% over that span.[i] But they aren’t assured to outperform. By many accounts, global stocks outperformed private equity from 2022 to 2024—the first time since the dot-com bubble.[ii] Today’s lower returns are tied to several factors. Some blame slower dealmaking and initial public offering (IPO) activity. Others cite broad writedowns of stakes taken in 2021, before trouble in Silicon Valley’s private markets came to a head.[iii] Costlier credit can play a role, too, raising funds’ interest expenses. And given unlisted assets’ opaque nature, these factors—along with broader economic uncertainty, inflation and geopolitical conflict—are making it tricky for buyers and sellers to agree on valuations for these unpriced assets. This may be particularly true in funds that invest in commercial real estate—but it isn’t limited to that. As a ...

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Market Analysis

06/09/2025

Over two months on from Liberation Day, US tariff collection continues missing worst-case-scenario forecasts by a country mile, which we think has a lot to do with US stocks’ ongoing recovery from the springtime tariff shock. Markets pre-priced those worst-case estimates quickly, then recovered as things didn’t go as bad as feared. We see a few reasons for the positive surprise, and the latest trade data from Asia hint at a big one: transshipping. Exhibit 1 shows China’s exports to the US, Taiwan and the Southeast Asian trade bloc (ASEAN) since the start of last year. As you would expect, shipments to the US nosedived after Liberation Day. The decline deepened last month despite both sides backing down from triple-digit levies as businesses here scrambled to avoid the still-high 30% charge. Meanwhile, Chinese exports to ASEAN and Taiwan stayed strong. Exhibit 1: Chinese Exports by Geography Source: FactSet, as of 6/9/2025. Bilateral Chinese exports, January 2024 – May 2025. During Trump’s first term, businesses skirted higher Chinese tariffs by transshipping products through lower-tariffed neighbors. Vietnam was a huge beneficiary. In some cases, it seems goods just took a quick pitstop for unpacking and relabeling as Vietnamese products. In others, businesses sent components from China for assembly in Vietnam, then on the journey to the US. Data now hint pretty strongly that this is happening again in Vietnam and elsewhere in Southeast Asia. US import data for May aren’t out yet, but as Exhibit 2 shows, a lot of that April bump seems to have made its way to our shores. And Taiwanese data, out today, show its exports to the US jumping an astounding 87.4% y/y in May.[i] Similarly, Singapore reported a 113% y/y boom in “re-exports” in April.[ii] (Data for May aren’t out yet.) Some of this is probably frontrunning the potential return of reciprocal tariffs next month, but it wouldn’t surprise if Chinese ...

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Behavioral Finance

06/05/2025

Negative volatility can shake the confidence of any investor, regardless of experience—especially right after a correction or bear market. Many understand exiting markets during or immediately after a drop could easily be a mistake that locks in losses. However, many also see the exits looking sunnier when markets reach a certain level. One common trigger: stocks returning near earlier highs. That allows investors to “breakeven”—you get out and don’t “lose” anything. We refer to this thinking as breakevenitis, and succumbing to it isn’t just one mistake robbing you of potential future growth. It is the accumulation of multiple mistakes that, in our view, flies in the face of why you are investing in the first place.  This article aims to explain the mistakes you make (and risks you take) when you sell at breakeven. We will first review each step of the investment process, from identifying investment goals and objectives to determining the blend of stocks, bonds and other securities best positioned to reach those goals over your entire time horizon. Focusing on breakeven runs counter to this entire process. We will also discuss the times you should sell (hint: not after solely breaking even) and end with a look at the risks tied to selling after breakeven—chiefly, the long-term returns you may give up. In conclusion, if you give in to breakevenitis, we think you are making a behavioral mistake. Maybe you get lucky and it works out short term, but this isn’t a recipe for repeat success—and the time to carefully consider that is before committing such an error. Let’s begin. Why Are You Investing? Selling at breakeven goes directly against why you are invested in the first place: achieving your personal investment goals and objectives over your time horizon. This is always the place to start when considering a major action: Revisit why you are investing. You want your money to provide something ...

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Economics

06/05/2025

False fear morphs are hallmarks of bull markets—which, after all, climb walls of worry. With tariffs siphoning attention from inflation, there is a new worry dominating. But as inflation shows, once markets get the measure of a story, even when it is fundamentally bad, they can quickly look through it and move on. Let us run through some recent inflation data to show you how and why. Eurostat released eurozone inflation data Tuesday showing the bloc’s harmonized index of consumer prices (HICP) easing to 1.9% y/y in May. (Exhibit 1) The return to sub-2% inflation—below the ECB’s target—while notable, isn’t new. HICP hit 1.7% y/y last September. The blip upward from there, though, caused many to fret—and fight the last war, worrying renewed price pressures would sink stocks anew. Exhibit 1: Eurozone Inflation Rates Back to Historical Norms Source: FactSet, as of 6/5/2025. But as you can see, while post-traumatic inflation stress can embed itself in people’s mindsets, it doesn’t dictate the future. The past isn’t prologue. Successful investing, in our view, requires looking forward—like markets do—and seeing how reality is likely to differ from the crowd’s expectations, which are often unduly shaped by prior events. Back in the USA, the Bureau of Economic Analysis reported the Fed’s targeted measure of inflation last Friday. The headline personal consumption expenditures (PCE) price index dynamically weights its components based on consumers’ monthly purchases—versus CPI’s fixed weights—better accounting for households’ actual inflation experience. Exhibit 2 shows the latest April headline reading at 2.1% y/y, back at last September’s rate. Like the eurozone, this seemingly spells relief.[i] After the PCE price index’s brief blip higher, it is within spitting distance of the Fed’s (squishier) 2% average inflation target. In our view, it ...

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Market Analysis

06/04/2025

Waiting is one of life’s most important skills, and investing offers copious opportunities to practice it. Waiting for compound growth to bear fruit. Waiting for short-term volatility to even out. Waiting for an investment thesis to play out. And one we practice a lot: waiting for data to confirm a theory. Like this one: Two months ago, as the UK’s payroll tax hike took effect, we studied historical data and determined that—contrary to widespread fears—the increase was unlikely to cause mass layoffs and economic trouble. But there is always a period of limbo where we must wait to see if that proved right. And while UK stocks are up bigtime since early April, that also coincides with global stocks’ rebound from this spring’s correction—and reading into short-term volatility is as much of an error when the volatility is good as when it is bad. But now, happily, we have a smidge of actual data. We refer to S&P Global’s Services Purchasing Managers’ Index (PMI), a survey measuring the percentage of businesses reporting better, steady or worse conditions across a range of metrics. Readings over 50 indicate a majority of businesses reported improvement, which generally corresponds to growth. The tax hike was supposed to hit services firms hard, hammering employment and demand while forcing companies to raise prices. That was the narrative. Yet in May, the UK Services PMI rose to 50.9 from April’s 49.0—returning to expansion after a very brief contraction.[i] Output rose, new orders’ decline slowed to an “only marginal” rate, and businesses reported a rise in demand from European clients that offset weaker demand from tariff-spooked Americans.[ii] Survey respondents blamed April’s weakness on those tariffs and the uncertainty they generated, not domestic tax changes. And while headlines spent months warning those modestly higher taxes would force businesses to cut back and raise ...

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In The News

06/04/2025

The fine folks at the Congressional Budget Office (CBO) have been busy bees, releasing not one but two reports on US fiscal policy’s projected effects Wednesday! Oh what fun! And as per usual, coverage is playing fast and loose with the details, throwing around big numbers with little context. While we think this is all moot for stocks, considering these forecasts are opinions and exercises in straight-line math, understanding what they do and don’t say is key to assessing whether sentiment matches reality. The reports in question aim to assess the budgetary effects of new tariffs and the House’s “Big Beautiful Bill” to (among other things) extend 2017’s tax cuts. If you take most of the corresponding headlines at face value, you will get the impression that the House bill increases the deficit by $2.4 trillion 
 but that this is ok, because the tariffs cut it by $2.5 or $2.8 trillion, depending on the CBO’s forecasting methodology. Big number, bad, but made better by another big number. Eek? Woohoo? We say: None of the above. First off, despite what numerous outlets claimed, the CBO doesn’t project the tax bill adding $2.4 trillion to “the deficit” in the way people would normally interpret that language—it doesn’t raise the annual budget deficit from $1.8 trillion in fiscal 2024 to $4.2 trillion in 2034. Instead, the CBO projects that if the House bill were to take effect, the total of all deficits from 2025 through 2034 would be $2.4 trillion higher than it would be if Congress did nothing. For 2025, the CBO projects spending cuts would exceed revenue cuts, so the deficit would be $107.6 billion smaller than its baseline do-nothing scenario. In 2026, it anticipates the deficit would be $484.5 billion larger. In 2027, $536 billion larger. Sum every year’s projected change from the do-nothing scenario, and that is how you get to $2.4 trillion. It is a projected $2.4 trillion debt ...

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Politics

06/03/2025

Editors’ Note: MarketMinder prefers no politician nor any party. We assess developments for their potential market impact only. Summer may be global politics’ traditional “silly season” of vacations and boredom, but spring seems to be the season of things happening. The past few days brought a flurry of activity, with elections in Emerging Markets Poland and South Korea and a government collapse in the Netherlands, likely setting up a snap election. In our view, all fit with this year’s general themes of gridlock and falling uncertainty, benefiting international stocks. Here Comes Another Dutch Election The Netherlands’ fragile, four-party coalition government splintered Tuesday, after the populist Party for Freedom’s Leader Geert Wilders yanked his support. The issue that set Wilders off is a longstanding divide between his party and the rest of the coalition over policing and controlling immigration. This particular debate is what we consider sociology—important to society but beyond markets’ purview. More relevant is the fact that this government collapse led to Prime Minister Dick Schoof’s resignation, which likely tees up a snap election. For markets, a snap election ordinarily increases political uncertainty—and we guess that holds here to an extent. But this is also basically the status quo in the Netherlands. This coalition only “ruled” for 11 months, barely longer than the 223 days it took to form it—and the government barely achieved anything of note. Maybe the results from the next vote make this faster, but polling from Ipsos suggests another splintered Parliament is likely, perhaps even more fractured than the current, as the New Social Contract party looks to have virtually disintegrated after its founder and leader resigned in April. That said, whether you have a caretaker prime minister in power like the present—or a coalition of parties doing little more than ...

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In The News

05/29/2025

Ah, friends, the end of May! That magical time in the northern hemisphere when school years are winding down, summer is nigh, the best NBA and NHL teams are duking it out, baseball fans still have hope (well, some baseball fans) and fast cars are zipping around Monaco and Indianapolis. And a time for your friendly MarketMinder editors to pop open the mailbag and see what you fine folks are asking about that has nothing to do with tariffs. Tariffs matter, but we have covered those so much! And there is so much more to think about. China and India are increasingly big global economic players. What do you think about this? We think it is an interesting development and a timely reminder that the economy isn’t the stock market. The IMF estimates India’s nominal GDP at a shade below $4.2 trillion, the fourth-largest country.[i] But India’s market capitalization is only about $1.9 trillion, ranking it ninth in the MSCI All Country World Investible Market Index.[ii] China is #2 on the global GDP leaderboard, at $19.2 trillion, but its market cap is just $2.6 trillion, good for fourth in the world.[iii] Meanwhile, the IMF sees US GDP hitting $30.5 trillion this year, while its market cap is $57.0 trillion.[iv] Taiwan, Japan and Canada also punch well above their GDP in global markets. The size of a country’s economy, in GDP terms, has little to nothing to do with its corporate landscape. In developing economies, which China and India are still considered, GDP can grow quickly alongside population growth and urbanization. That may represent a sizable increase in living standards, which is a great thing, but it doesn’t necessarily mean corporations are growing and generating returns hand over fist. It may mean a nation of small businesses and one or two giant companies, perhaps state-owned. It may mean a nation has a sizable stock market hampered by protectionism and unpredictable regulation. GDP alone won’t tell you anything. Now, both ...

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Politics

05/29/2025

Please note: MarketMinder favors no politician nor any party, assessing developments solely for their potential market and/or economic effects. And just like that, the Trump administration’s Liberation Day tariffs were dead. Or were they? After the US Court of International Trade (CIT) declared all the tariffs enacted under the International Emergency Economic Powers Act (IEEPA) illegal and void, the administration appealed, and the Federal Appeals Court issued a stay on the ruling while the legal process plays out. So while we think the CIT’s ruling is a major step in the right direction from a market perspective, it isn’t an immediate gamechanger and doesn’t ease uncertainty hanging over US stocks much—which we think markets’ muted reaction demonstrates. On its own, the court’s ruling—which we discussed as a possibility in the immediate wake of April 2—is a big deal. The CIT isn’t an in-house court like the Federal Trade Commission’s tribunals—it is a full-fledged US Federal Court, with appeals rolling up to the Appellate Court for the Federal District and the Supreme Court. In the wake of the ruling, the administration argued it is an “activist” court striking down tariffs on partisan grounds, but that dog doesn’t hunt, in our view. Its three judges, which ruled unanimously, were appointed by Presidents Reagan, Obama and Trump. Heck, the Trump administration pushed to have challenges to the tariffs consolidated and heard there, believing this improved its chances.[i] But in the end, the judges ruled the fentanyl-related tariffs don’t relate sufficiently to the declared national fentanyl emergency, while the reciprocal and blanket tariffs fall entirely outside IEEPA’s scope. For now, this curbs the Executive Branch’s ability to broadly regulate trade and taxation using emergency powers. In addition to giving US businesses and consumers relief presently, ...

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Economics

05/28/2025

From the Pacific to the North Atlantic, retail sales data from New Zealand to Canada and on to Britain show the anglosphere’s economies are holding up. Here are some takeaways—both tariff and non-tariff-related—about the latest retail sales from the UK, Canada and New Zealand. Sun’s Out, Wallets Out in the UK? UK retail sales volumes (which reflect the quantity bought) rose 1.2% m/m in April, the fourth straight month of growth and far above the forecast of -0.6% contraction.[i] Five of seven sectors expanded, led by food stores (3.9% m/m)—which retailers credited to the sunniest and third-warmest April on record.[ii] The detractors were “other non-food stores” (e.g., computer, sports equipment and cosmetics stores), where sales fell -3.1% m/m, and clothing stores (-1.8%).[iii] However, some analysts said the latter’s dip reflected seasonal adjustment quirkiness due to the timing of the Easter holiday and pointed out spending rose on a year-over-year basis—implying shoppers spent on new springtime threads.[iv] It is possible weather and seasonal adjustments affect these data. That being said, when you see four straight months of growth that analysts largely dismiss as tariff frontrunning, warm weather, statistical quirks or temporary blips, you start seeing a picture of sentiment that looks detached from reality. If we continue seeing sales volumes notch growth, those “fleeting uptick” narratives are going to start looking a lot like “transitory inflation” from 2022—only a positive surprise in this case. Beyond this, others warn an uptick in April inflation along with slowing wage growth and weakening consumer confidence are headwinds to sales—though most expect growth this year, and weak confidence worldwide hasn’t correlated with falling sales.[v] It is worth monitoring how sentiment evolves from here, but this narrow indicator points positively, outshining lingering ...

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Politics

05/27/2025

Editors’ note: MarketMinder is nonpartisan, favoring no party or politician, and analyzes legislation only for its potential market ramifications, if any. Last Thursday, the House eked the One Big Beautiful Bill Act through on a 215 – 214 vote, sending it to the Senate. With the long-awaited budget taking a step forward, it is time to take a closer look at what is in the bill the Senate will weigh. In our view, it amounts to mostly extensions of the status quo, with a few additions, a few deletions from past legislation and a few curious inclusions. We doubt the market effects are very big from this—if it even emerges from the Senate as written. Let us explore. The budget passed under reconciliation rules, which lets it avoid Senate filibuster for potential passage with a simple majority. The main thrust of it extends the 2017 Tax Cut and Job Act’s (TCJA’s) expiring provisions—namely, higher standard tax deductions and, for most households, lower tax rates. In this sense, it is the status quo and, if adopted, would mostly prevent higher rates from snapping back at yearend. Pretty boring stuff, really. But the Big Beautiful Bill also includes some additional changes. The main ones: Raises the state-and-local tax (SALT) deduction cap from $10,000 to $40,000 for those making less than $500,000—whether individual taxpayers or those filing jointly—and gradually phases out thereafter. (This was a major point of contention within the House GOP caucus.) Exempts federal income taxes (not payroll taxes for Social Security and Medicare) on tips and overtime pay for workers earning less than $160,000, a provision that would sunset in 2028. Cuts Medicaid by roughly $700 billion and food stamps (aka the Supplemental Nutrition Assistance Program or SNAP) by about $300 billion over 10 years, while imposing work requirements for eligible participants in these programs beginning in 2027 (though some states may start ...

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In The News

05/23/2025

Japanese Prime Minister Shigeru Ishiba made headlines Tuesday, claiming his country’s fiscal standing is “worse than Greece.”[i] This, plus weak demand at the country’s most recent bond auction and rising long bond rates, is fanning fear a Japanese debt crisis lies in waiting. But in our view, this talk is largely politicized rhetoric from an embattled prime minister. And it is obscuring Japan’s long-awaited return to fiscal and monetary normality—no bad thing. Ishiba’s Greece comparison followed Japan’s weakest bond auction demand since 2012, as 20-year Japanese Government Bonds (JGB) garnered a bid-to-cover ratio—a measure of demand comparing bids for bonds to the number sold—of 2.5.[ii] Meaning, there were around 2.5 bids per bond offered, down from January’s 3.8, February’s 3.1, March’s 3.5 and April’s 3.0. Japanese long-term yields rose quickly in response, with 20- and 30-year JGB yields jumping 10 and 14 basis points (bps), respectively, to reach highs for this century. Ultra-long 40-year yields hit 3.61%, an all-time high.[iii] Unsurprisingly, pundits pounced on the volatility near instantly, implying markets are finally starting to sweat high Japanese debt. If we are looking purely at select figures, it is true Japan’s debt is “worse” than Greece (in its mid-2010s crisis—not now). For instance, Japan’s gross debt-to-GDP ratio, at 234.9%, is the developed world’s highest (on net terms, which excludes government-held debt, it is 134.2%).[iv] Greece’s gross debt-to-GDP was around 189.6% at its crisis-era peak in 2018.[v] So, by this surface-level metric, perhaps Ishiba’s comments have some factual foundation. However, we see some major differences today. For one, Japan’s allegedly bad auction pales in comparison to what Greece faced during its debt debacle. In late 2009, Greece revealed its deficit figures were ...

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Market Analysis

05/22/2025

Here are four sets of numbers: First: 0.08, 0.07, 0.05. Second: 0.38, 0.35, 0.11. Third: 0.45, 0.37, 0.12. And, fourth: 0.51, 0.41, 0.11.[i] These, friends, are the cumulative change in 30-year, 20-year and 10-year Treasury yields, respectively, in percentage points (ppt) since Tuesday’s close (first set), three months ago (second), six months ago (third) and one year ago (fourth). What do you see in them? Do they seem large 
 or small? Do they indicate panic or calm? Nothingness or crisis? We ask these questions because it appears to us pundits have decided a 0.08 ppt or 0.07 ppt move in very long-dated Treasury yields since Tuesday’s close are a sign something in bond markets is awry. They point to an auction of 20-year bonds Wednesday, which allegedly saw “weak” demand, causing “sharp declines in [bond prices],” which would spike yields (since the two move inversely).[ii] Many pinned Wednesday’s US stock market selloff on this exact point. Zoomed in, on a Y-axis that goes all the way from 4.3% to 5.2%, maybe the upturn in 30-year yields looks big.[iii] To some, the spike this chart seems to show even indicates the often-feared, rarely seen “bond vigilantes” of yore are back to wreak havoc on the overindebted US. But zooming in to less than a percentage point is a ridiculous scale to use, too small to give proper perspective on the subject. Hence, our series of numbers. In our view, stripping out the emotion in this fashion reveals the reality: Yes, yields are up over the last two days, three months, six months and year. But the magnitude isn’t alarming—these moves are far from large by historical standards. Nor are these rates’ levels particularly high when viewed longer term. You can say the same of the allegedly “weak” demand at Wednesday’s auction. In all the coverage we read, few mentioned the bid-to-cover ratio. This metric compares the dollar amount of bids to ...

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Market Analysis

05/22/2025

Student loan delinquencies are back. Not that they ever went away, but now they are really back. With the government’s moratorium over, delinquencies began showing up on credit reports in Q1 2025. Interestingly, we haven’t seen much chatter about the broader macroeconomic implications tied to them—a stark contrast to prepandemic times and evidence of how this previously common, false fear evolved. For a refresher on the US student loan market, over 90% of student loans are government-owned, after the effective nationalization of them in 2010.[i] Later, in response to the pandemic, the government’s emergency moratorium paused payments until September 1, 2023. Though payment requirements resumed then, the Biden administration provided a 12-month “on-ramp period,” which meant late, partial or missed payments weren’t reported to the three national credit bureaus. That grace period expired on September 30, 2024. Delinquencies have since started appearing on credit reports. According to the New York Federal Reserve’s latest Household Debt and Credit Report sourced partly from the credit bureaus, 23.7% of student loan borrowers were behind on their payments in Q1, higher than the 22.1% in Q1 2020 (when the moratorium took effect).[ii] Unsurprisingly, with the on-ramp period over, seriously delinquent debt (90+ days past due) jumped from less than 1% in Q4 2024 to 7.7% last quarter.[iii] Some mainstream financial outlets picked up on the news, worrying about renewed pressures (from falling behind on other payments to potential wage garnishment later this summer) facing borrowers. A handful of pieces cast it as a potential headwind to consumer spending. But those were few and far between. In contrast to prior years, the conventional analysis isn’t arguing that student loan delinquencies are likely to pack a cyclical economic punch. Student debt delinquencies rose in the aftermath of the global financial crisis, and many ...

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Market Analysis

05/21/2025

Here is a sentence you may have seen, in some form, throughout the coverage of the Trump administration’s tariffs: When the current account is negative, the capital account is positive, making tariffs pointless. The trade deficit makes up the bulk of the current account, while financial flows are the bulk of the capital account. So this statement means that if a country imports more goods and services than it exports, more money flows in than out, making it silly to use tariffs to reduce the trade deficit. And more importantly for our purposes, it illustrates one reason why US stocks endured a tariff shock.  To those who know the nuances of trade and capital flows and “balance of payments” national accounting, it is an easy concept. But that doesn’t really include most people. In our experience, most people like data to back up such general statements. So here is a picture with some data. This is the US’s annual current account balance (again, mostly—and sometimes entirely—the trade balance) and net financial inflows since data begin in 1960. As you will see, they are just about mirror images of each other. Exhibit 1: Trade Accounting Identities, Illustrated Source: FactSet, as of 5/21/2025. Annual current account balance and net financial inflows (inflows minus outflows), 1960 – 2024. We (and many others) have written before that these items must balance. So you may wonder why they are not a perfect offset. There are a few reasons for this. One, the general statistical discrepancies you get from differing accounting methods and exchange rate fluctuations, which the Census Bureau helpfully includes in a line item called “Statistical Discrepancy.” Financial derivatives also add some skew, as can reserve asset activity. Nothing major, nothing disrupting the overall mirror image, just the side effects of having a really, really, really big US economy. In this context, we think tariffs’ folly ...

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Japan’s Largest Opposition Calls for Lowering BOJ’s Inflation Target

By Toru Hanai, Reuters, 6/10/2025

MarketMinder’s View: This article is kind of sign-of-the-times-y, but the monetary policy implications are pretty overrated. The Bank of Japan (BoJ) has long targeted 2% y/y inflation, in keeping with many other central banks worldwide. Of course, policymakers initially set this rate way above prevailing inflation, as the country spent many years trying to find ways to counter flattish or falling prices, which many (wrongly) thought were a key headwind to Japanese domestic demand. They thought it would demonstrate some kind of commitment to keeping prices stable and slow-rising and break an alleged “deflationary mindset” that prevailed among Japanese consumers. It didn’t really achieve much of anything. But today, inflation has been running above the 2% target after the BoJ ballooned money supply during COVID lockdowns. And the political winds have shifted. Here the opposition Constitutional Democratic Party of Japan (CDPJ) is pushing for revision of the BoJ’s inflation target 
 to zero. Now, that is all fine and dandy and understandable in spirit, given the country’s overshooting its targeted rate since 2022. Whether this would actually give the BoJ leeway to hike rates further is an open question, though. If the bank wanted to, it could hike today on above-target inflation logic (the consumer price index rose 3.5% y/y in April, the latest figure!). But they haven’t hiked rates since February. Why? The target doesn’t dictate policymakers’ interpretation of the data. Raising a target doesn’t meant the interpretation shifts, either.


Moody’s Sounds Alarm on Private Funds for Individuals

By Matt Wirz, The Wall Street Journal, 6/10/2025

MarketMinder’s View: This article documents Moody’s analysis of the risks involved with Wall Street’s emerging push to expand the use of private assets by individual investors using instruments like pooled funds that mix and commingle public and private investments. But rather than focus on the risks to the individuals—which are notable, in our view, and worth very carefully considering—it adds a look from the perspective of the financial system. For example, the funds in question will likely have to deploy cash raised faster than the usual private fund, as there is no similar “lock up” period of years. That can mean stretching for deals that turn out to be poor. Additionally, the liquidity the funds add to this space may, “
make private markets more similar to public ones, reducing the ‘illiquidity premium,’ or the higher returns private funds can charge for holding assets that hardly ever trade and don’t require public financial reporting.” There is also the risk of a mismatch between the assets’ underlying illiquidity and the funds’ liquidity, which is something of a double-edged sword. Instruments like ETFs can create liquidity of their own, in the sense a sale of shares from one party to another may not require redeeming any underlying assets. But if we reach a point where redemptions spike, illiquid underlying assets may heap pressure on the issuers—and could require freezing redemptions for a period, which has happened a couple of times in Europe in recent years. For more on this, see today’s commentary, “Inside Wall Street’s Private Equity Push.”


Citing Trade Wars, the World Bank Sharply Downgrades Global Economic Growth Forecast to 2.3%

By Paul Wiseman, Associated Press, 6/10/2025

MarketMinder’s View: This touches on politics briefly in the course of discussing the World Bank’s updated 2025 global economic growth forecast, so please note we favor no politician nor any party—our interest here is more the growth outlook than the alleged causal factors. Citing tariffs, the World Bank ratcheted down its global growth forecast by -0.4 percentage point to 2.3%—which would represent a slowdown in growth from 2024’s 2.8%. Furthermore, the bank cut the US growth outlook more, from a 2.3% forecast this January to 1.4% in its semiannual update. That all seems logical and fine to us—it is quite possible the tariffs and uncertainty surrounding their rollout has slowed growth, and this likely hurts the US more than other nations. But markets largely already told you that, falling sharply as the plans rolled out and with the US significantly lagging non-US stocks this year. So in essence, the World Bank is really telling you what markets already showed. The forecast is perhaps a reflection of and influence on sentiment generally, but that is about it.


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