Wall Street Bulls Are Staring Down $100 Oil, Tariffs, AI Angst

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessWall Street Bulls Are Staring Down $100 Oil, Tariffs, AI AngstEvery bull market has a recurring cast of villains. Oil shocks. Inflation. Rising bond yields. Trade wars. This week, investors had to contend with all of them at once.Author of the article: You can save this article by registering for free here. Or sign-in if you have an account.e[54nrqtjysbkem9lx59lb0m_media_dl_1.png Bloomberg(Bloomberg) — Every bull market has a recurring cast of villains. Oil shocks. Inflation. Rising bond yields. Trade wars. This week, investors had to contend with all of them at once.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountBrent crude broke above $100 a barrel on Thursday for the first time in two months as the Middle East conflict spread from the Strait of Hormuz to the Red Sea. President Donald Trump rebuilt part of his tariff wall, imposing duties of 10% to 12.5% on imports from about 60 economies. Long-dated Treasury yields climbed. Big Tech stocks tumbled after Alphabet Inc. raised its artificial-intelligence spending plans, reviving questions about whether the industry’s enormous capital outlays will ultimately pay off. The S&P 500 notched a second straight weekly decline after its biggest one-day drop this month. The Magnificent Seven tech stocks shed nearly 6%. The 30-year Treasury yield traded just below its highest level since 2007. Credit spreads remained near their tightest levels in years.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againWall Street’s advice: get tactical. Barclays Plc this week turned neutral on risk assets, citing renewed US-Iran hostilities alongside concern about AI capital spending, while remaining underweight duration. Goldman Sachs Group Inc. stayed neutral across asset classes over the next three months while remaining modestly constructive over twelve. HSBC Holdings Plc rotated away from semiconductors toward European banks and the equal-weighted S&P 500.Taken together, this week’s shocks challenge an investment case built on resilient earnings, contained inflation and confidence that the AI-spending boom can continue. Whether they prove durable enough to change all that remains an open question.Higher oil has to feed inflation. Inflation has to alter expectations for interest rates. Higher rates have to tighten financing conditions for companies already in the middle of one of the largest capital-investment cycles in technology history. Each link in that chain takes time, and any of them can break.“The bottom line is that you need to diversify your diversifiers,” said David Lebovitz, a global strategist for multi-asset solutions at JPMorgan Asset Management. “When it comes to hedging, we like certain hedge fund strategies as a way of mitigating market volatility and real assets as a way to deal with higher inflation and interest-rate volatility.”To Lebovitz, the level of oil matters less than its staying power. If crude remains around current prices through the end of the summer, he said, the firm would begin reassessing its positioning because a higher risk premium would then be warranted. For now, he’s watching earnings revisions as a negative turn would likely widen credit spreads and fan volatility beyond technology. Charlie McElligott, a cross-asset strategist at Nomura, sees crude as the most likely trigger. Higher oil reprices the inflation tail — the probability of a more persistent inflation outcome rather than the central forecast — unsettling rates markets before spilling into other assets. Markets can begin repricing that risk well before it shows up in earnings.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Ellen Hazen at F.L.Putnam Investment Management is, for now, sanguine. Her firm has not changed allocations. Temporary oil shocks, in her view, rarely reach the companies driving US earnings and are felt first in oil-importing economies. The equation changes only if higher energy prices persist long enough to squeeze margins, weaken consumption or reignite inflation.“I just don’t see how oil is going to really impact the hyperscalers,” the chief market strategist said.Josh Kutin, head of multi-asset solutions for North America at Columbia Threadneedle Investments, is watching inflation expectations because they determine how investors value different asset classes. If they rise materially, nominal yields would move higher and investors would have to reassess both equities and credit. “We should distinguish between equity and credit investors,” he said. “With spreads so tight, there’s more of a cap on upside for credit investors at the moment. Expectations for equity markets are not constrained in the same way.”The implications extend well beyond the bond market. Companies at the center of the AI buildout are committing unprecedented sums — by some estimates, nearly $1 trillion for 2027 — to projects whose returns may not be known for years. Higher rates raise the return those investments ultimately have to earn.Lebovitz already sees that shift beginning. Funding remains available, he said, but investors are becoming increasingly selective about which parts of the AI value chain they are willing to finance. “The biggest disconnect is the idea that AI spending can go to the moon,” he said. Not everyone is prepared to wait. Sebastian Raedler, head of European equity strategy at Bank of America Corp., expects equities to fall 7% to 8%, arguing markets are priced for everything going right and leave investors uncompensated for the combined risks from the Middle East and the AI spending cycle.The next test arrives quickly. The Federal Reserve meets midweek, followed by the Bank of England and the Bank of Japan, while large AI spenders including Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc. report earnings in the same week, offering investors fresh updates of their spending plans.“The way AI-related risk is spreading across asset classes — and the scale of capital being deployed into the theme — makes it the ultimate risk factor in this market,” said Raphael Thuin, head of capital markets strategies at Tikehau Capital. Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.