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Perspectives

Energy Is On The Rise and Geopolitical Tensions Remain High

by Fortem Financial May 21, 2018

Markets were mixed this week as small cap stocks rose while large cap stocks declined.  Oil prices continued to rise on the prospect of sanctions against Iran and reduced output from OPEC; Venezuela’s crude oil production, 800,000 barrels per day, is 65% below January 2016 levels.  Brent crude, the international benchmark, briefly surpassed $80 per barrel for the first time since 2014.  And, the PHLX Oil Service Sector Index rose 4.5% for the week to post a 24.5% gain since the end of March. Indeed, Energy has overtaken Technology as the leading sector in the S&P 500? Index year-to-date.  Bond yields also rose due, in part, to expectations for increased inflation stemming from higher oil prices; the yield on the 10-year U.S. Treasury Note reached a high of 3.11%, its highest level since July 2011.  The market’s relatively muted reaction suggests investors believe rising rates are not (yet) a serious threat to the economy.

Geopolitics, including the ongoing trade negotiations and developments related to North Korea, continued to dominate headlines.  On Thursday, the U.S. and China began a second round of trade talks; officials on both sides indicated a challenging process as the U.S. seeks to reduce its annual trade deficit with China by $200 billion.  House Speaker Paul Ryan’s unofficial deadline for a new NAFTA Agreement this week passed with major differences remaining; U.S. Trade Representative Robert Lighthizer commented that the three nations are “nowhere near close to a deal,” with major differences on issues related to intellectual property, agricultural access, labor and energy.  No date has been set for the next round of talks.  And, on Tuesday, North Korea cited South Korea’s military drills with the U.S. in cancelling high-level talks with South Korea and threatening to cancel the planned summit with the U.S. in June.  The drama will likely play out over the next several weeks as behind-the-scenes negotiations continue.  The uncertain trade and geopolitical outlook, along with the conclusion of earnings season, and its impressive performance results, may suppress the broader market’s near-term momentum.  Corporate and economic fundamentals, though, support the continued outperformance of small cap stocks and the Energy sector.

*Source:  Pacific Global Investment Management Company

Chart reflects price changes, not total return.  Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

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Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

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Five Star Professional Disclosure:
The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. The opinions expressed are solely those of the author, and do not represent those of Fortem Financial, LLC or any of its affiliates. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Forward looking statements are based on current expectations and assumptions, the economy, and future conditions. As such, forward-looking statements are subject to inherent uncertainty, risks, and changes in circumstance that are difficult to predict. Actual results may differ materially from the anticipated outcomes. Carefully consider investment objectives, risk factors and charges and expenses before investing. Fortem Financial is a registered investment adviser with the SEC. Advisory services are offered through Fortem Financial.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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