Oil securities continue to languish, but advisors are expressing new optimism that values will in fact creep upward. But when?
“There’s been a pullback of late in terms of energy – especially in Canada,” says Manash Goswami, a portfolio manager with First Asset. “It is not surprising that the (TSX) is sucking wind this year, as there hasn’t been a strong backdrop for energy.”
Several portfolio managers have been underrating energy in most of their diversified mandates – but Goswami adds that he doesn’t believe “that oil can trade at this level for a long time.”
The RBC Purchasing Managers’ Index has indicated a second consecutive month of improving business conditions in July though still at a very modest pace and slightly below that achieved in June. Still, oil remains the drag on Canadian markets.
Paul Ferley, the assistant chief economist at RBC, told WP
that as we enter the second half of the year, a strengthening U.S. economy and weaker Canadian dollar should provide a greater boost to exports – oil being among them – and business conditions for manufacturers.
While the unusually low commodity price for oil is now headed upwards, the move will be slow, says Goswami.
“Our oil production around the world is not economic at $50,” he says. “It’s going to take a while, but we’re going to see some inventories come back – from Iran as well – and in the longer term, we’ll see prices creeping up. But until that happens, it’s going to be tough for the TSX to perform on the commodities side. ”