18 06/21 18/06/2021

Market Update Week 24

Global markets started the week higher. Oil prices where at their highest since the beginning of the pandemic with U.S. crude hitting $73.46 per barrel. Oil prices continued their move upward this week, after rising last week on the back of bullish demand reports by both OPEC (Organization of the Petroleum Exporting Countries) and the International Energy Agency (IEA). According to OPEC, global oil demand will rise by 6 million barrels per day this year from the lows of 2020, led by strong consumption in China and the United States, especially in the second half of 2021.What investors are actually betting on is that the going green initiative is leading to a decline in oil extraction spending which in turn will lead to oil supply shortages in the future. More and more investors a realizing this and are allocating capital in oil and oil services companies putting upward pressure on their prices.

Besides energy, another pandemic effected sector showing good signs of recovery is travel. The U.S. Transportation Security Administration (TSA) saw 2 million people go through U.S. airports in one single day. This is the highest since the beginning of the pandemic. For illustrative purposes, this number was as low as 87,534 in April 2020. The recovery is not complete however seeing that the 2.03 million passengers are only 74% compared to the same day in 2019. This is not only good news for the airline industry but also for all related industries such as hotel, entertainment, and retail industries. The economy is growing stronger and so will the undervalued cyclical stocks.

The Federal Open Market Committee (FOMC) convened this week and held interest rates near zero-levels in the short-term and committed to continue the $120 billion per month asset purchase program for the near future. Interest rates hike are expected by the end of 2023 according to the FOMC.

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