To my clients:

It was an up week for North American stock markets with the Canadian TSX finishing up 3.6%; the U.S. Dow Jones Index up 3.0%; and the U.S. S&P 500 up 3.4%.

Short and sweet on three important topics:

- To my lens, President Trump is looking for an exit from the Iranian war and his speech last night, in my opinion, was an attempt, through the threat of further massive force, to extract whatever additional concessions he can from Iran. I reiterate this is my opinion only, and I could be off-base, but I’d be surprised if there weren’t some sort of resolution in the next two weeks. The so-called “TACO” trade (Trump Always Chickens Out) seems to be real insofar as Trump’s worst threats rarely seem to materialize (certainly true with respect to tariffs). This is not to say that Trump doesn’t follow through on many of his threats, but rather that his track record suggests he backs away from the most extreme of these. The recovery seen in markets this week was largely driven on growing optimism for a near term resolution.

- Spot oil prices (i.e. what you’d pay for a barrel of oil if you bought it today) at ~ $110/barrel are significantly elevated vs the ~ $65/barrel that prevailed before the war started. But here’s the thing – given the current situation in the Strait of Hormuz, of course current oil production and delivery has been heavily disrupted (hence the high prices). But as one looks out (via futures pricing for oil) three, six and nine months, its is readily apparent that oil traders do not expect this disruption to persist. As we turn into 2027, current expectations are for oil to be trading near $70 barrel.

- And a slow and steady return to $70/barrel oil by year end would be unlikely to derail an otherwise sound U.S. economy. At 52.7, the ISM Manufacturing Index posted its best result in 3.5 years and also marked the third consecutive month of expansion after a multi-year trend of contraction. Tomorrow (yes holiday Good Friday) will see the release of the U.S. Employment Report, but earlier this week it was heartening to see the ADP private sector employment report come in better than expectations, and at 202k the weekly jobless claims report is again plumbing the 200k bound, below which suggests there is no material erosion in the labor market (a reading of around 225k to 250k job losses per week is consistent with the natural ebb and flow of normal business needs and suggests a stable labor market).

Overall, the past month has been uncomfortable, but the markets have weathered the proverbial storm quite well. Further, client discretionary accounts have performed better than the overall market. Stay the course.

That’s it for this week. Have a great long weekend,

Nick

Nick Scholte, CIM, FCSI

Senior Portfolio Manager
RBC Dominion Securities Inc. │ Tel: 604.257.7569
2950 Glen Drive, 7th Floor │ Coquitlam, BC │ V3B 0J1
Toll Free: 1.844.665.9900 │Email: nick.scholte@rbc.com

Visit Our Website: www.nickscholte.ca

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