Market Week in Review

Does the rise in oil prices tell a wider commodities story?

On the latest edition of Market Week in Review, Mark Eibel, director, client investment strategies, and Sophie Antal-Gilbert, consulting director, discussed the rising trend for the price of oil and other commodities.

Eibel labeled commodities the forgotten asset class and presented oil as a classic example of supply-and-demand. According to Eibel, there have been oil output cuts, particularly from Saudi Arabia and Russia, while global demand has picked up. He said: “You’re in one of these periods where supply is trying to catch up with demand and oil prices move up. Throw in a little geopolitical risk around the world. Get Syria in the headlines. And that certainly adds to it.”

Eibel explained that the commodities story is even broader than just oil. In the face of tariffs and trade wars, basic materials—like aluminum, steel, nickel or copper—increase in cost. In addition, Eibel noted that gold prices move up in response to inflation. “Everything has its day,” said Eibel, “and commodities seems to be having that right now.”

Earnings season highlights

The current earnings season appears to be a mixed bag of results. Eibel stated that, in general, a majority of companies beat their estimates or sales targets, while others disappointed. “So, good environment for active managers, where, if you can avoid the ones that are having negative earnings, that’s a good lift.” Eibel also pointed toward Europe, emerging markets and U.S. small-cap as sectors where earnings are, in general, coming in strong.

Mixed economic data in Europe

Turning to Europe, Eibel noted down numbers for UK retail and a decrease in consumer confidence in Germany, but contrasted those negative results with the good news of muted European inflation. He said, “I think what we’re continuing to see in Europe—and really, for the emerging markets—is accommodating central bank policy, cheaper valuations around the globe, and strong earnings. So even though the data might be mixed a little bit, those markets are holding up well, because of these other factors.”

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