Daily Commentary

MarketMinder’s View: While we would quibble with the notion of the global oil market being “oversupplied,” this is an otherwise good look at why crude prices eased so quickly after spiking when Israel’s conflict with Iran began. Oil prices move on supply and demand, and the conflict had little likelihood of constraining supply. For one, even with the conflict, Iranian oil continues to flow—despite fears otherwise. Then, “across the Persian Gulf, Saudi Arabia, Kuwait, Iraq and the United Arab Emirates are all pumping more than a month ago. True, a large chunk of the increase was expected after the OPEC+ cartel agreed to hike production quotas. Still, early shipping data suggests that exports are rising a touch more than expected, particularly from Saudi Arabia.” Where we differ a little is with the ensuing discussion of US output, which cites anecdotal evidence that last week’s temporary price jump led producers to lock in high prices using futures contracts, which will enable a supply boom. Maybe, but that is a longer-term driver, and anecdotal evidence isn’t all-telling. Either way, rig count has fallen to multi-year lows, which suggests supply should continue slowing in the near term. To us, it all suggests supply and demand are roughly in balance, keeping oil prices in their recent range.

MarketMinder’s View: Homeowners being “underwater”—owing more on their mortgage than their home’s estimated market value—was a major theme during and after the 2007 – 2009 financial crisis, leading many to see it as a major economic risk. This article does a nice job debunking that, though it takes a while to get to the salient points. For one, the whole notion of being “underwater” is abstract, with little bearing on the homeowner’s day-to-day. Essentially, it makes selling more costly and refinancing more difficult. Folks who still make their monthly payments and have no intention to sell might not even realize they are “underwater.” There is no linkage to consumer spending, stock investment or anything else. We are also talking about a very, very small subset of homeowners here: the cohort who bought in rapidly rising markets during the COVID lockdown real estate boomlet. Most of this happened in Sunbelt cities where homebuilding is easy, enabling new supply to meet high demand and tame prices. If anything, this is a good reminder that real estate isn’t a one-way asset.

MarketMinder’s View: This study, while only one datapoint, is an interesting look at how Thing X can have downstream effects. In this case, analysts have tied falling UK grocery sales to a rise in GLP-1 use, echoing earlier reports from the US that note weaker demand for alcohol, sugary drinks and snacks. While this can drag on retail sales in the near term, we can see the potential for it to shift spending to other categories, including clothing and exercise equipment, not to mention more fresh produce. But also, the article illustrates how companies are nimble and able to adapt to shifting demand by creating products more in line with what shoppers on a health and fitness kick want. In doing so, it names several, so we remind you MarketMinder doesn’t make individual security recommendations—we highlight this for the broader theme only. That theme: New trends can create winners and losers in interesting, sometimes hard-to-see ways, but don’t underestimate how the profit motive will incentivize businesses to keep up. Pretty cool.