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 come across many false fears in our coverage of financial headlines, so when a take is more or less sensible, we give credit where it is due. In this case, an inverted yield curve has been a reliable recession predictor, historically speaking. This is because banks borrow at short term rates to fund long-term loans, so the spread between short-term and long-term rates is a rough proxy for banks’ new loan profitability. When the yield curve is positively sloped (long rates top short rates), that suggests lending remains profitable; in contrast, an inverted curve discourages lending, which can slow or outright freeze credit conditions—stunting broader economic growth. Now, this article acknowledges the yield curve is flattening now, so monitoring for inversion is worthwhile—and we would agree with that. But we think the focus on 2- and 10-year Treasury yields detracts from the analysis, as 2-year yields don’t typically represent a big source of banks’ funding. As the piece admits, “While the 2- to 10-year curve is most frequently cited among bond investors, policymakers seeking a recession signal study others tied to three-month lending rates. The gap between 3-month Treasury yields and 10-year rates remains relatively steep.” Yep, 3-month yields more closely reflect what banks pay on deposits, and the 10-year minus 3-month spread is 0.96 percentage point (per St. Louis Federal reserve), steeper than a few months ago. So while hiking that pushes the three-month rate above the 10-year is indeed a risk in theory, there is wiggle room in practice.