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: This article dives into politics, so please keep in mind we favor no party nor any politician, assessing developments solely for their potential market impact (or lack thereof). Voters in Canada’s francophone region head to the polls to elect a new provincial government on Monday, with polls favoring the separatist Parti Quebecois (PQ) with a slim majority. Predictably, this spurs fears they will call another independence referendum akin to the hard-fought one in 1995 that ultimately failed. Many fear this will raise political uncertainty north of the border even further, adding to the referendum on whether to hold a referendum in Alberta. But there are some caveats to this. One, as this article documents, support for Quebec secession isn’t very strong. “Support for Quebec independence has stayed at roughly 30% across numerous surveys amid US President Donald Trump’s ongoing tariffs and threats against Canada. Even many PQ voters would vote ‘no’ to secession in a referendum. In fact, only 14% of Quebecers believe an independence vote could win, according to a poll conducted by Synopsys Recherche Marketing for the media outlet La Presse.” Two, in August, PQ leader Paul St-Pierre Plamondon ruled out holding any referendum until after Trump leaves office in 2029. Markets look forward about 3 – 30 months into the future and weigh the next 12 – 18 the most carefully. That puts this out a little far for markets to begin weighing probabilities in the here and now. We doubt Quebec independence is an issue for investors in 2026 or really even 2027.

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.