Navigating Markets in the Age of Sensitivities

Good Morning Ladies and Gentlemen

””Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

John D. Rockefeller

Becoming socially acceptable historically involved adapting one’s behaviour to fit various settings, particularly when sharing those spaces with others. For instance, if you enjoyed putting your feet up on the sofa at home, you understood that such behaviour would be inappropriate on a train. Listening to music in a waiting room was typically done with headphones to respect those around you. However, with the rise of remote work, the use of noise-cancelling headphones, and a reduction in social interactions, leading to less time spent with others, including strangers, many seem to have developed heightened sensitivity to noise. A crying toddler can become distressing, and the sound of someone smacking their food can feel intrusive. This heightened sensitivity now has a formal designation: Misophonia. Some individuals are so acutely attuned to the presence of others that it becomes nearly unbearable for them.

In contrast, others may seem oblivious to the needs and existence of those around them. This dynamic presents a stark contrast in sensitivities, a phenomenon that can be frequently observed, read about, and experienced across all platforms, particularly social media. Now, why would I mention this? I believe these perceived sensitivities influence our thinking and behaviour in many aspects, including investing.

Fed’s Not Moving

Federal Reserve Chair Jerome Powell emphasised that inflation remains far from the target. He noted that a rate cut in September could be considered only if there are signs of an economic slowdown, which would include a weakening labour market emerging before that time. Interestingly, and perhaps not widely recognised by the general public, two members of the Fed’s board (Fed governors Christopher Waller and Michelle Bowman) voted against keeping rates at their current levels. This marks the first instance of such divergence with two dissenting votes in 32 years.

U.S. Car Makers as a Proxy

Following General Motors, Ford stands as another iconic U.S. automaker that was significantly affected by discussions around the introduction of tariffs, which have significantly impacted the manufacturing costs of their vehicles. Thus far, they have only experienced a portion of this effect. In the coming quarters, we will better understand the actual impact on costs, likely leading to price increases and subsequent inflation. I think price hikes will be inevitable, as the net margins on cars are not high enough to absorb such additional cost. The principles applicable to the automotive sector will likely extend to a broad spectrum of industrial goods. Although the imposition of applied tariffs may generate revenue for the U.S. government, it is essential to consider that these tariffs are also likely to result in price increases, exacerbating the financial burden on consumers.

Conclusion

Ladies and Gentlemen, as it was mentioned on Bloomberg, “while the economic growth has moderated, as the Fed statement said, the stock market is pricing in growth acceleration. Lately, the surge of cyclical/defensive stocks may reflect the stimulative part of the Big Beautiful Bill. That’s the risk for a Fed looking to resume the policy easing.” So, if you seek my two cents on the matter, I believe it is reasonable to expect that the Federal Reserve will make no policy changes for the remainder of the year, and therefore, interest rates will remain unchanged during this period. In a time characterised by sensitivities, staying focused on long-term investing is increasingly crucial rather than seeking short-term gains through speculation and being swayed by the constant noise around us.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
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9494 Schaan/Liechtenstein
Mail: smk@incrementum.li