As energy stocks waver amid global economic uncertainty and softening oil demand, one expert says investors should focus more on broad commodity trends rather than day-to-day price movements.
“I think it’s really important for people to understand commodities in bigger cycles,” David Szybunka, senior portfolio manager and co-managing director of the energy team at Canoe Financial, told BNN Bloomberg in a Tuesday interview.
“We keep telling our investors that commodities cycles last 10 to 15 years. We think that we’re in year four or five of a commodities cycle, and so when we look at these cycles, they never go in a straight line, everyone wants them to, but various commodities lead along the way.”
Szybunka noted that for most of last year, gold had fallen out of favour with many investors, but in the past few months the precious metal has soared to record highs.
“In the last 70 years there’s been three major uplifting gold cycles, this in now the fourth. This has never happened without it being a commodities cycle. It’s not just a gold cycle, it’s a commodities cycle,” he said.
“We shouldn’t get too focused on the day-to-day ticks within a certain commodity in our view, because this bigger structural cycle is playing out.”
When it comes to his outlook for oil demand, Szybunka said economic uncertainty spurred by U.S. President Donald Trump’s trade policies is unsurprisingly hitting gross domestic product (GDP) estimates around the world, but consumers aren’t being “pinched” yet.
He argued that demand for crude may be stronger than many forecasters expect in the coming months.
“As we relay this to the energy sector a little more,” Szybunka said, “you need to decide as an investor do you think that this is the start of a multiyear downturn for energy, or do you think this is a downturn measured in months or quarters?”
“We’re in the months and quarters camp,” he said, adding that from a balance sheet and operational perspective, energy companies have been very disciplined in their approach recently, and valuations are attractive.
“You should be building positions in periods like this, not looking down like everyone else,” he said.
