Daily Commentary

MarketMinder’s View: Professional athletes possess special talents that wow us mere mortals, but they aren’t immune from making the same financial mistakes as regular folks: namely, not doing their due diligence and blindly trusting bad actors. This piece runs through a litany of well-known figures who lost large sums of money due to Ponzi schemes, risky investments and/or spending beyond their means. “Take the musician Sting, who was notified by an anonymous tip that his former accountant, Keith Moore, had stolen more than $9 million from the British rock star over four years in order to invest in global schemes and stave off personal bankruptcy. ‘He’d created something like 70 different bank accounts in different countries,’ Sting said in a 2002 interview with the Independent. ‘And the money was coming in different denominations — Deutschemarks, Japanese yen — from different sources ... touring, recording, publishing, merchandising, TV appearances. So for that kind of money to be siphoned away is not that surprising. And since it took forensic accountants about two years to sort through the complexities, how could a bass player figure it out?’” Indeed, the forensics can be tricky. But the safeguards are simple and universal. One, keep account management and custody separate. Two, be very skeptical of affinity marketing, whereby an investment professional will cater to certain circles—often social or religious—relying on word of mouth to substitute for proper due diligence. Three, don’t let anyone hoodwink you with complex jargon and strategies that don’t make sense. Make them explain everything to you, simply, and see if it smells. Four, if returns sound too good to be true, they probably are. And five, monitor your own accounts and statements.

MarketMinder’s View: Please note, MarketMinder is nonpartisan and prefers no political party or politician over another. Our analysis focuses on politics’ economic and market impact only. In discussing the titular investor fears, this article inadvertently highlights a broader theme: Fear often rises in a presidential election’s lead-up as shrill campaign rhetoric and speculation dominate headlines. Among today’s concerns: government spending, taxes, geopolitics and central bank governance. But scary talk isn’t the same as action—and is actually a counterintuitive reason to be bullish, in our view. Fear of potential changes may weigh on people’s minds, but the vote will happen and election uncertainty eventually fades, often resulting in an outcome that isn’t as poor as they initially thought. History shows recent bombastic elections didn’t knock markets. “In 2016, some investors feared a Trump win would jolt markets. It did—momentarily. Stocks swooned overnight while election results trickled in, before staging a U-turn the following day and kicking off one of the biggest stock rallies in the wake of a presidential election. Investors seemed to love Trump’s tax cuts and promise of deregulation. In 2020, some investors worried that a murky election result could stoke stock-market mayhem for months. The S&P 500 ended up soaring around 11% from Election Day in November through the end of the year.” Short-term volatility is always possible, but come Election Day 2024, we will get clarity—and we expect that falling uncertainty will buoy markets this year.

MarketMinder’s View: A popular financial headline narrative: US economic growth and the bull market depend on what the Fed does and says. This analysis takes that theme to another level, arguing the US economy avoided recession last year solely because of Fed chair Jerome Powell’s words. “At the press conference following the December meeting of the Federal Open Markets Committee, Powell struck a markedly dovish tone. Taking the markets by surprise, he acknowledged the Committee had discussed conditions for rate cuts and wouldn’t have to wait till inflation was at 2% in order to move. … For the markets – and the economy – Powell’s words matter. Anticipating an earlier than expected rate cut, the benchmark two-year Treasury yield fell from 4.7% the day before Powell’s press conference to a low of 4.1% in mid-January. The impact of those lower borrowing costs, and a renewed rally in the equity markets, rippled through the economy – giving a fresh impulse to growth.” The evidence: The three-month moving average of unemployment started to tick higher, close to triggering a supposed recession indicator, but Powell’s “December pivot” halted the downturn. Folks, this vastly overrates monetary policy’s impact. Put yourself in a business owner’s shoes: Are you going to add to your workforce simply because the Fed “… discussed conditions for rate cuts and wouldn’t have to wait till inflation was at 2% in order to move?” No! You likely have myriad other variables to consider, from the cost of labor to industry-specific trends. Prospective monetary policy, which hits the economy at a long, undetermined lag, likely isn’t top of mind for your December business decisions. (Oh and jobs data are late-lagging indicators, not leading.) Finally, the gauge here is beyond suspect: Using a tool that tallies headlines about the Fed isn’t a sign the Fed is this important or powerful. It is an echo chamber. In our view, the chatter here is the ultimate example of Fed rate cut obsession—and the misperception that an all-powerful Fed drives the economy. For some more perspective, see our January commentary, “The Bull Market Doesn’t Depend on Rate Cuts.”