STO closed unchanged on Wednesday, close to its June swing low as tumbling crude oil prices weighed on the energy sector, although the stocks didn’t fair too badly under the circumstances. We believe the aggressive decline by oil over the last few weeks, even as war continues between Israel and Hamas, is a testament that investors and traders are voting for a global economic slowdown into 2024. This is one of the main reasons MM believes it’s time to have portfolios skewed to stocks/sectors that benefit from falling bond yields. Supply of oil is rising, with Russian shipments at 4-month highs as political hypocrisy abounds, but it’s demand worries, which have caused the economic bellwether to fall towards 4-month lows, telling us it’s too early to go heavily overweight the resources.
- Crude oil fell another -2% overnight to 3-month lows as demand concerns increased.
- We can see STO testing/breaking it’s 2023 low if oil and inflation fall through 2024/5.
MM is neutral towards STO, around $7.30
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