Amid global economic uncertainty and weakening oil demand causing volatility in energy stocks, David Szybunka, Senior Portfolio Manager and Co-Managing Director of the Energy Team at Canoe Financial, advises investors to shift their attention to long-term commodity trends rather than daily price movements.
In an interview on Tuesday, Szybunka emphasized the importance of understanding the macro cycles of commodities. He reiterated the view that they consistently share with investors: commodity cycles typically last 10 to 15 years, and currently, we are in the fourth or fifth year of such a cycle. Historical evidence shows that these cycles never follow a straight line in their progression.
Using the gold market as an example, Szybunka highlighted that although gold was out of favor with most investors for much of last year, the price of the precious metal has surged to record highs in recent months. He explained that there have been three major gold bull cycles in the past 70 years, and now we are in the fourth. Crucially, every one of these past gold cycles coincided with a broader commodity cycle. In other words, this is not just a gold cycle but part of a larger commodity cycle. Consequently, Szybunka believes investors should not focus too much on the daily price movements of a specific commodity; instead, they should recognize the larger structural cycle underway.
Regarding the outlook for oil demand, Szybunka analyzed that while U.S. President Donald Trump’s trade policies have triggered economic uncertainty and impacted GDP forecasts globally, consumer demand has yet to experience a substantial decline. He predicts that oil demand in the coming months could be stronger than most forecasts currently suggest.
On the energy sector as a whole, Szybunka stated that investors must evaluate whether this is the beginning of a multi-year downturn for energy or merely a short-term adjustment spanning months or quarters. Their assessment leans toward the latter. He underlined that energy companies have recently demonstrated significant discipline in terms of both balance sheets and operations, and their current valuations are attractive.
Szybunka concluded with a key piece of advice: times of widespread market pessimism offer the perfect opportunity to gradually build positions.
