Daily Commentary

MarketMinder’s View: Over the weekend global oil cartel OPEC+ announced plans to raise production. “Key nations led by Saudi Arabia and Russia agreed to add 411,000 barrels a day next month, according to a statement on OPEC’s website following a video conference on Saturday. The hike mirrors a similar increase announced last month, when the group made the shock decision to bring back triple the planned volume for May.” (The article mentions some publicly traded companies, so please note, MarketMinder doesn’t make individual security recommendations, and our interest here is on the broader theme.) The titular surge sounds dramatic, but isn’t actually so tide-shifting. OPEC+ has started unwinding previously planned production cuts last month, and it still has around 3.6 million barrels per day (bpd) in separate cuts in place until 2026’s end. Secondly, this episode illustrates OPEC+’s struggles with adhering to production targets. “OPEC+ delegates have attributed the strategy shift to Saudi frustration with overproduction by members like Kazakhstan and Iraq, and have chosen to discipline them through the financial ‘sweating’ of a price slump.” Not only have member nations struggled to make past quotas, but several members are actually overproducing—including Iraq, the cartel’s third-largest producer. The bottom line for investors? OPEC’s targeted production cuts/hikes are just that—targets. They are subject to change, as we have covered before, and even those changes may not reflect on actual production shifts.

MarketMinder’s View: This anecdote-packed article mentions several publicly traded companies, so please note MarketMinder doesn’t make individual security recommendations. Their mention herein is coincident to a broader theme we wish to discuss: that uncertainty can put businesses in wait-and-see mode. “A stop-start trade war, sinking consumer confidence and dramatic cuts to federal funding in education, research and the sciences have piled up in the past month … During earnings calls over the past two weeks, companies big and small shied away from mentioning layoffs, but repeatedly said they would be more cautious before bringing in new workers.” Now, we caution against extrapolating the industries highlighted here as an economywide trend—e.g., universities are implementing hiring freezes in part due to planned reductions of federal funding. Also, don’t discount businesses’ tendency to blame weaker numbers on a big external headwind (in this case, tariffs) rather than company-specific issues. But generally speaking, we agree that today’s uncertain environment has likely caused many firms to pause. When businesses are unsure about the broader economic or political landscape, they may choose to delay investments (e.g., hiring new employees, refurbishing equipment) until they receive more clarity.

MarketMinder’s View: The Institute for Supply Management (ISM) US services PMI rose to 51.6 last month, up from March’s 50.8 and exceeding analysts’ expectations for a -0.6 point drop. The report was solid overall, including the forward-looking New Orders subindex’s jump from 50.4 to 52.3—a positive sign for future business activity. Input prices also rose, which the article pins (along with slower supplier delivery times) on tariff frontrunning. “With supply bottlenecks emerging, the survey’s measure of prices paid for services inputs jumped to 65.1. That was the highest reading since January 2023 and followed 60.9 in March.” Some of the report’s stronger components may be tied to that frontrunning, as the inventories gauge jumped in April—mirroring Q1 GDP—so at least part of last month’s rise could signal America’s services businesses are trying to mitigate tariffs’ additional costs. A sensible business move, though it could leave a pothole of activity in its wake. We will have to wait and see, but this is something worth considering as economic data continue rolling in.