Crude Currents 🏴

Markets were pulled in opposing directions as oil swung violently and geopolitical tension stayed high. 

Highlights From Last Week:

• 🛢️ Oil swung between US $90 and US $120, driving market direction.
• 📉 Stocks dropped sharply midweek as inflation fears resurfaced.
• ⚡ Energy prices are now steering broader market sentiment.

Transcript

SPEAKER_01 0:00

Wall Street saw a week where oil prices seemed to dictate nearly every move. On Monday, crude prices dropped from$102 to$93 a barrel, which pushed the SP 500 up about 1%, the Dow up 0.8%, and the Nasdaq up 1.2 cent, their best surge since the onset of the Iran conflict. Then Tuesday brought a little more optimism as airline stocks picked up on strong forecasts. But by midweek, those inflation jitters and some less than reassuring Fed talk pulled stocks right back down. The SP fell more than 3%, which definitely made us double-check our portfolio allocations. Thursday was just as unpredictable, with oil zigzagging again, really showing how this one commodity can set the entire market mood.

SPEAKER_00 0:46

All those ups and downs made me reflect on what it means for us as North American investors. The wild swings in oil, thanks to geopolitical tensions, are shaking things up far beyond the energy sector. We're seeing treasury yields and inflation swirling in response. And lately, even a dip in oil prices just seems to help stocks stabilize instead of rallying. It highlights just how much any shock to oil can ripple through our investments, and reminds me of the classic oil shock economists talk about. Let's switch our focus north of the border. Canadian stocks had their own roller coaster. At first, markets took off as falling oil prices and a rebound in tech helped the SP TSX index climb by over 300 points to start the week. Even inflation seemed to be easing a little. But just like in the US, rate announcements and those persistent Middle East worries quickly shifted the outlook. By midweek, the TSX found itself down more than 600 points and then lost nearly another 500 as Brent Crude got close to$119 a barrel. The interplay between fluctuating oil, inflation, and geopolitics has really kept us TSX investors glued to our screens.

SPEAKER_01 2:00

It's not just about oil and headlines, though. Canadian investors like us are feeling just how deeply these global events are interconnected with our local markets. Currency, commodities, equities, and bonds are all more reactive these days, especially when central banks pause or shift gears. It's as if every development worldwide has a direct line to our portfolios. Shifting gears, let's talk about crypto. Early last week, Bitcoin nearly hit$76,000, its best level in months, but by Wednesday, it backtracked towards$70,000 as new tensions in Iran and higher oil prices stirred up a broader market pullback. Ether and Solana couldn't escape the decline either. Despite that dip, there's still a wave of institutional interest. Spot Bitcoin ETFs in the U.S. had over$750 million in inflows last week. For short-term traders, Bitcoin's inability to sustain those rallies above$70,000 is a talking point, but signs of stabilization are emerging.

SPEAKER_00 3:01

If you're one of us weighing digital assets alongside traditional ones, it's interesting to see how much Bitcoin now moves in step with global risk sentiment. Last week's drop mirrored the overall market sell-off triggered by geopolitics and energy price shocks, so it's behaving more like everything else in our portfolios, rather than standing alone as a haven. Still, those ETF inflows are hinting at renewed institutional confidence, which could matter to our long-term thesis. Looking beyond North America, emerging markets had a tough week as well. The MSCIEM index dropped almost 3% after fresh unrest in the Middle East. Iran's missile launches at Qatar and Saudi Arabia after an attack on the South Pars gas field sent ripples worldwide, South African shares slid by more than 4%, and Asian markets from South Korea to India posted similar declines. Even major currencies in these regions felt the hit.

SPEAKER_01 3:59

That's really apparent when we track how interconnected the globe has become. With so many overlapping risks, geopolitical, economic, commodity related, there's a lot for investors to consider. Exposure to emerging markets now brings both direct conflict risk and country-specific economic factors, making it trickier to predict performance. Staying on the commodity theme, metals markets were also shaken up. The climb in oil prices linked to the U.S.-Iran tensions weighed heavily on gold, silver, copper, and palladium. There's growing concern that higher oil could stall broader economic growth, with a stronger U.S. dollar piling on more pressure for precious metals. For us commodity watchers, copper's downturn, for example, might hint at potential economic softness, while traders wonder if renewed interest in gold is just around the corner as talks shift to worries about government debt and deficits.

SPEAKER_00 4:55

For investors, that kind of volatility in both precious and industrial metals just underscores how much uncertainty we're dealing with. Fluctuating gold and copper prices often reflect bigger picture anxieties, slower growth, inflation pressures, which can impact everything from portfolio returns to broad market sentiment. Speaking of volatility, did you catch the latest in the world of meme stocks? Ubers teaming up with Rivian Automotive to venture into robotaxis, putting in plans to buy thousands of autonomous vehicles in the coming years while also investing in Rivian itself. Rivian shares jumped nearly 10% on the news before giving back some gains, a pretty clear example of how fast excitement can swing stock prices. The move highlights just how quickly companies in the autonomous ride hailing world want to leap ahead of rivals and keep investors engaged.

SPEAKER_01 5:50

The Uber Rivian partnership definitely points to some fresh possibilities for growth, especially in a sector as hyped as autonomous vehicles. But for us, it's also a reminder of just how sharply emerging tech can stir up both opportunity and volatility. That quick stock action is a cue to pay attention, but maybe not get caught up in the euphoria. On a different note, let's talk about some steadier ground. FedEx delivered an impressive third quarter, surpassing expectations and raising its outlook for next year. Their results showed more profits and revenue, and the company's ongoing work on streamlining operations, particularly with automation and AI, is starting to pay off. Investors liked what they saw, sending shares higher. FedEx also announced plans to spin off its freight division later in the year, which could add value for shareholders.

SPEAKER_00 6:43

FedEx's performance is reassuring, especially in a week full of turbulence. A clear investment thesis, a well-reasoned entry point, and a focus on strong fundamentals, these are what really help us manage risk and pursue sound portfolio strategies, even when the headlines are unpredictable. Bringing in an ESG perspective, several Canadian banks, including National Bank and CIBC, have started measuring how much they fund fossil fuels versus renewables using something called the energy supply ratio. Despite this progress, most aren't yet sharing those results with the public. Scotiabank has agreed to release its data soon, but the lack of uniform transparency makes it a lot harder for us as investors to compare banks' commitments and manage the long-term risks tied to climate strategy.

SPEAKER_01 7:33

That's something we're keeping a close eye on as investors who care about long-term value and clarity. Inconsistent data makes it more challenging to judge how well banks are preparing for the energy transition, which adds another wrinkle when we're considering ESG factors in our portfolios. Before we wrap up, let's really quickly demystify a common piece of financial jargon: commodity futures. These are contracts to buy or sell a certain amount of a raw material, like oil, gold, or wheat, at a set price on a future date. They're mainly used to lock in prices in advance, reducing the risk of unexpected price swings.

SPEAKER_00 8:11

For a quick example, she bought oil commodity futures, hoping to ride the next energy price swing. It's just another tool we investors use to manage risk and seize new market opportunities. And that's a wrap. Thanks for tuning in to this week's Finleady Podcast, where we explore the ever-changing landscape as part of our investment journey. Stay curious and keep investing smart. Just a heads up. Everything we talk about on this podcast is for education and general info only. We're not giving financial or investment advice, and we're definitely not telling you what to buy or sell. Finleady isn't a registered advisor, so if you're making money moves, talk to a pro who knows your situation. Cool? Now don't forget to sign up for our newsletter so that you don't miss a market beat.