Daily Commentary

MarketMinder’s View: Former President—and current Republican de-facto nominee—Donald Trump was convicted on all 34 felony counts in a New York state court Thursday. This is, quite obviously, the biggest news in a while. And it is highly politicized, so we remind you MarketMinder favors no party or politician, weighing matters solely for potential market impact—or lack thereof. This story, in our view, falls into the “lack thereof” camp. As explained herein, despite all the fireworks surrounding this ruling on both sides, the impact on the campaign likely isn’t huge. One, Trump can still be president. As the article explains, nothing in the Constitution bars a convicted felon from being president. Two, it isn’t clear from polling that the ruling will diminish Trump’s support, and fundraising is allegedly flowing in its aftermath. Maybe the story has more impact on poll numbers in some unpredictable way when and if Trump is sentenced to jail time, but that seems highly speculative to us. After all, the two main candidates are very well known to voters and opinions of them are largely crystallized and unlikely to shift much. Anyway, we offer this piece as a handy way to assess what this ruling means and where things head from here. We guess this ruling reduces uncertainty to an extent, but that is a very small extent—one we don’t think impacts markets meaningfully.

MarketMinder’s View: First, this article mentions a few specific securities, so please keep in mind MarketMinder doesn’t make individual security recommendations. The broader theme here—discussing the problems with backtested financial product or portfolio returns—is highly sensible. Using a reconstructed Dow Jones Industrial Average as the jumping off point, it shows you the practice’s central fallacy: “What’s the catch? Why can’t you pulverize the market just by buying the stocks with the highest share prices? Because of backtesting. The Supersized Dow would have outperformed only if, at the beginning of the period, you bought the stocks that happened to have the highest share prices at the end of the period—something no one could possibly predict. If, 10 years ago, you had bought the stocks with the highest share prices then, you’d have underperformed the S&P 500 by an average of 1.3 percentage points annually.” It then concludes with some sensible questions for you to keep in mind when assessing returns shown on a portfolio or product. “If this idea is so great, why weren’t these guys using it at the beginning of the period instead of only at the end? Why wasn’t everybody using it? How long has the strategy actually been used, and with how much money? Has it been tracked over even longer periods than reported in the backtested data? How many other strategies were backtested but abandoned? Do the past numbers include trading costs?”

MarketMinder’s View: This article delves into an important study from the New York Fed and Georgetown University using data from Medicare and Equifax. It explored the timing of Alzheimer’s diagnoses and credit scores, concluding that people often become delinquent on payments or radically change their borrowing habits in the years before and after memory disorders are diagnosed. “Credit scores among people who later develop dementia begin falling sharply long before their disease is formally identified. A year before diagnosis, these people were 17.2 percent more likely to be delinquent on their mortgage payments than before the onset of the disease, and 34.3 percent more likely to be delinquent on their credit card bills. The issues start even earlier: The study finds evidence of people falling behind on their debts five years before diagnosis.” Given the aging populace, this issue deserves more attention and is vital for investors of all ages to carefully consider. As one doctor quoted herein said, “‘We should be thinking about the possibility of financial difficulties linked to a disease we don’t even know we have,’ she said. ‘Knowing that, people should be on the lookout for these symptoms among friends and family members.’”