In June the markets managed to grind higher even with all the news surrounding tariffs and the increased hostility in the Middle East.
The tariff news has quieted down a bit with a July 9th deadline soon approaching and I expect more tweets coming as these trade deals eventually get done. The Middle East is a hot spot however with Iran weakened and their nuclear sites destroyed, this should provide a little more stability in the area as the threat of nuclear response is lessened. We continue to have conflict between Russia and Ukraine, and I expect more developments to resolve this as the year progresses.
The recent conflicts in the Middle East caused oil prices to move higher. This came off a very low base price (around $58 a barrel) and I would have expected this to climb closer to $100 a barrel yet this did not happen. We used the bounce in oil stocks to reduce our PIM portfolio exposure in oils as I expect lower oil prices moving forward with the U.S. administration holding adamant they want low oil prices.
The U.S. economy continues to do very well even with all the events out there. We still have potential for lower rates coming as well as the passing of an extension on tax breaks, which are good catalysts for U.S. growth.
In Canada, we have watched some of the steel and aluminum tariffs slow down our economy and create uncertainty on what is coming next. This is not good for companies deciding to spend and invest money into any projects in the near future. We have watched our government react by looking to fast track some big projects and reduce inter-provincial border restrictions. I do feel we will come to a resolution with the U.S. as the summer progresses.
Europe and China remain outsiders in my opinion. There is a lot of talk on how cheap European equities are, but I feel they are cheap for a reason. Europe has limited growth and lately it was a sell U.S. to buy everything else theme while China still has a lot of issues and therefore, we are not heavily invested in these areas. The themes mentioned in previous newsletters remain intact and we continue to invest around those themes.