Daily Commentary

MarketMinder’s View: Here are the basic facts, which illustrate a central point: Despite Iran’s efforts to close the Strait of Hormuz and hammer the oil market, oil is flowing out of the Gulf region. “Middle Eastern crude exports rebounded this month to around their highest level since the war began in February, oil data trackers say. Shipments via Hormuz and bypass routes were delivering just under 80% of their prewar regional flows as of last week, according to tracker Kpler. So far this month, crude exports from major Middle Eastern producers including Saudi Arabia, Iraq, the U.A.E. and others—moving through Hormuz and alternative routes—have risen to almost 13 million barrels a day. That is the highest total since February, when the region exported nearly 19 million barrels a day, according to ship tracker Huax. Saudi Arabia is also starting to pump crude through its damaged East-West pipeline and load it on tankers in the Red Sea, though volumes remain reduced, officials familiar with the operations said. Some of the current output will be destined for domestic refineries, they said.” The article goes on to cast this in a negative light, in the sense that this—plus Iran’s inability to get its own exports past the US naval blockade—could make the Iranian regime more desperate and lead to more attacks on regional neighbors. But we have already seen such strikes, mitigating the surprise power over markets. All in all, this shows the market isn’t as short of oil supply as some have feared throughout the war. This suggests to us presently elevated oil prices’ staying power is likely pretty limited.

MarketMinder’s View: Amid deepening fears of tariffs stymying Canada’s economy, data continue to emerge suggesting growth persists. While July’s industry-based monthly GDP was flat, with only half of industries reporting growth, “July's flat growth came after the economy expanded by 0.4 per cent month over month in June and 0.3 per cent in May. Flash estimates suggest the economy expanded by 0.2 per cent in August, led by increases in mining and quarrying as well as retail trade that were partially offset by decreases in oil and gas extraction.” Now, those months preceded US President Donald Trump’s latest tariffs, which took effect earlier this month, leading many to dismiss these data as stale. Yet those tariffs hit a very small slice of Canadian exports and aren’t likely to pack much punch. And, given they are well known, “Economists largely expect growth to slow in the third quarter of 2026 due to economic uncertainty from escalating trade tensions with the United States, after the economy rebounded and grew by 3.3 per cent on an annualized basis in the second quarter.” To us, this suggests markets have pre-priced those fears, making them unlikely to be a swing factor for Canadian stocks. For more, see our August 24 commentary, “Why Stocks Aren’t Sweating the US-Canada Tariff Turnaround.”

MarketMinder’s View: We think this is poor investment counsel that conflates two separate and distinct things: asset allocation and diversification. It argues the recent rise in long-term Treasury yields means they are finally paying interest sufficient to draw investors’ eyeballs, and therefore investors who avoided bonds due to low yields should reconsider and “diversify” their equity holdings with more bonds. This is a fundamentally flawed approach that doesn’t start from the investors’ goals and mistakenly views diversification as spreading your assets across various classes of securities to be “prudent.” No. This is asset allocation, the mix of stocks, bonds, cash and other securities you own and in what percentages. It is the most fundamentally important decision any investor makes and it needs to target your longer-term goals and objectives, with your comfort with volatility a final consideration. If you seek growth and have no or limited cash flow needs with a long time horizon (the length of time you need your assets to work for you), then diving into bonds simply because of higher yields could easily be a mistake. The reason to own bonds, which offer lower long-term returns, is to dampen near-term volatility and support things like cash flow needs. There is a science to this and it doesn’t involve simply looking at bond yields, past stock returns and buying because “you don’t know” what the future holds. No one knows that. The only known quantities in investing are your goals and needs. Let them be your guiding light.