Daily Commentary

MarketMinder’s View: Despite tariffs and geopolitical uncertainty, “The latest trade data from some of the world’s largest economies, including the U.S. and China, show that cross-border commerce is rising at a much faster clip than economists had previously envisaged.” You might think this would be cause for celebration, but no: “in many cases, the increase in activity and surprisingly strong headline ‌export figures were driven primarily by higher prices. These reflect the inflationary spike triggered by the Iran war, especially in oil and other energy markets.” Before you get concerned anew, though, note that higher prices may be sending trade values higher, but that doesn’t mean volumes are broadly weak. “To be sure, it’s not just price doing the heavy lifting. Physical export volumes from Canada are back to where they were before the U.S. ⁠presidential election that returned Donald Trump to the White House in November 2024, setting off trade tensions between the neighboring nations. In fact, exports in April were second only to February last year, when companies were front-running Trump’s loomingtariffs, according to CIBC [Canadian Imperial Bank of Commerce].” Add everything up and “Overall, ⁠global trade is showing remarkable resilience that few observers would have thought possible against the volatile backdrop.” Now, the piece questions at the end whether this can continue, but the skepticism and pervasive feeling the other shoe is about to drop suggest sentiment isn’t too far over its skis. When trepidation meets overall fine news, investors aren’t getting ahead of themselves on the expectations front—which means reality is less likely to disappoint.

MarketMinder’s View: Despite ongoing fighting in the Middle East, economic reality is once again proving more resilient than feared. Increasing amounts of clandestine Persian Gulf shipments are “part of a growing number of tankers that are turning their transponders off to lift oil flows through the Strait of Hormuz from a trickle to a stream. While conventional vessel-tracking data show little change in shipments, senior shipping executives, Asian oil buyers and satellite images paint a different picture: That Hormuz is now a lot less blocked, with transits becoming more steady and greater in volume.” As the article details (and we covered earlier), Middle East oil flows have persisted thanks to US-led assistance in getting select ships through the gulf and, crucially, via other workarounds (e.g., utilizing pipelines that avoid the strait). Of course this is far from ideal: “About 2 million barrels a day of oil and related products are now flowing out of the Gulf, according to Rapidan Energy Group—a level that’s far below normal, but much higher than earlier in the conflict.” But here again, this misses that some five to seven million barrels are using pipelines, which utterly avoid the strait. So the decline isn’t nearly as great as feared earlier. Moreover, bull markets don’t require perfection, only for things to go a bit better than expected—a reason oil prices have cooled (and haven’t resurged) since their April high.

MarketMinder’s View: Please note our interest here is only in the titular discussion; the news roundup following it is beyond our scope. We highlight this because it encapsulates the market fears currently swirling. (Also, as it mentions specific companies, we remind readers MarketMinder doesn’t make individual security recommendations.) So what is supposedly eating investors? According to the article: 1) “the return of overt hostility in the Middle East,” 2) potential IPO indigestion and 3) “... the most important factor driving market nerves is probably also the most ‘routine’ one. All else being equal, markets don’t like it when interest rates go up.” Although all three developments can weigh on sentiment, only one is a fundamental factor we think is worth watching: the second. IPO hype—and an equity supply glut—are certainly some things to watch for since areas where reality may underwhelm 3 to 30 months ahead can face headwinds. That they are centered in AI and Tech highlight the high sentiment confronting these stocks today. But outside those categories, expectations are far more subdued—there is plenty of room for positive surprise to drive the global bull market, particularly outside America. Beyond this, the Iran war may ding sentiment occasionally but lacks much punch. From markets’ perspective, regional wars aren’t bear market fuel and the resumption of Persian Gulf hostilities has loomed for months—it isn’t shocking—and anticipation is mitigation. Last, but not least, rising rates’ threat is an old, “routine” myth that has never held water. Simply, rates don’t drive stocks, which move on the gap between earnings’ fundamentals and how well markets have priced them. Rates hardly enter into that equation. Then, from a higher level, ask: When has stocks’ big picture backdrop not looked “messy”? From this vantage point, the wall of worry looks high—reason enough to remain bullish.