Daily Commentary

MarketMinder’s View: With questions about global oil supply still rampant, this piece sheds some light on a largely overlooked factor: China’s supply glut. Though the Middle Kingdom cut oil imports by roughly one-third since the war’s start, “the crude stockpiles held by the country’s state-owned energy companies remain nearly full. Beijing appears not to have tapped its vast strategic reserves, and storage tanks at Chinese refineries are brimming with gasoline, diesel and other refined products.” As the article aptly explains, this is likely tied to China’s preemptive filling of its reserves pre-Iran war as part of a broader push for self-reliance amid potential supply disruptions (not to mention its long-term strategy of boosting oil imports when prices were low to build stockpiles and reduce its trade surplus). With these stockpiles available, analysts quoted herein suggest Chinese crude oil imports may not return to prewar levels for a while. Given China’s role as the world’s top oil importer, this likely frees up crude for other importers across Europe and Southeast Asia, helping Asia continue adapting to the drop in Chinese diesel and gasoline exports if shipments of refined products remain restricted. Pair this with expectations for rising oil and gas production globally, and there is plenty of evidence that global oil supply shortage worries are off base.

MarketMinder’s View: We found this piece mixed, and as it mentions several publicly traded companies, please note MarketMinder doesn’t make individual security recommendations. We generally agree sentiment is warming toward Tech stocks. High valuations, burgeoning IPO activity and more stock-based mergers and secondary offerings can signal rising expectations toward a certain sector, region or category of stocks—and some of these measures have been heating up, particularly for Tech. But critically for investors, none of these metrics are effective market timing tools, nor do their upticks necessarily signal euphoria has arrived. History shows bull markets can climb for a while alongside warming and even euphoric sentiment. The dot-com bubble is one example, as the charts herein show—gauges including deal value, stock valuations and stock-based M&A activity all began rising in the mid-1990s, years before the bull market ended in March 2000. Second, today’s stock prices don’t predict tomorrow’s. They can always get “more expensive” or “cheaper,” which even the article cedes. “Worse, the baseline for what counts as expensive can change over time as the structure of companies or accounting standards shift. In the case of book value, it now needs so many adjustments as to be virtually useless. One example: The S&P 500’s ratio of price to forecast earnings currently stands just below 20, well down from the 23 times reached both in 2020 and last year, and the record 24.5 times in the dot-com bubble.” On top of this, most widely watched valuation methods rely on backward-looking data, rendering them useless in predicting markets’ direction. So while we generally agree moods are sunnier toward big Tech and Tech-like companies, that doesn’t mean a downturn is around the corner.

MarketMinder’s View: As headlines herald America and Iran’s peace deal—paving the way to reopening the Strait of Hormuz—this article shares several sensible reasons why the conflict didn’t cause severe global energy shortages. As the first two points argue, countries were well-prepared—large importers had plenty of strategic reserves and commercial inventories—and producers adapted. “Middle Eastern energy producers found ways around the closure of the strait faster than many energy experts predicted, while other producers—including the U.S.—stepped up production and exports to plug some of the gap. Exports from Saudi Arabia’s Red Sea port of Yanbu have jumped to around four million barrels a day from less than one million before the war, according to commodities and shipping data provider Kpler.” Consumers altered their behavior, too—China reduced oil imports and drew from its reserves—and major economies in general are more energy efficient than they were in the not-too-distant past. We are less convinced the AI boom offset energy’s drag, considering the latter isn’t a major sector and growth driver for most developed economies, but overall, this piece nicely illustrates the global economy’s resilience over the past few months. That isn’t a surprise to stocks, which have long since moved on, but we think it shows what they have been pricing in since March’s end. For more, see our June commentary, “Are World Oil Reserves Dangerously Low?”