Oil prices slipping below key levels is a sign that markets are beginning to move past worst-case geopolitical risks, even as uncertainty around a final US-Iran deal remains, according to Matt Orton, Head of Advisory Solutions and Market Strategy at Raymond James Investment Management
Speaking to ET NOW, Matt said the decline in crude, with WTI below USD 70 and Brent under USD 73, reflects a shift in market sentiment. “We’re removing left-tail scenarios from the table,” he said, referring to extreme downside risks that had earlier driven prices higher. “Some of the worst-case outcomes that could have happened continue to be taken away, and that’s encouraging.”
He added that this shift is not limited to oil. “That’s being reflected in the price of oil… in currencies, commodities, and just a general optimism around equity markets globally,” he said. According to him, this improving backdrop supports a constructive view on equities. “It’s fuel for markets to continue to move higher,” he said, adding that he sees “reasons to buy the market on weakness and continue to hold it.”
On concerns around rising debt among AI and semiconductor companies, Matt pushed back against the narrative. “I really push back pretty actively against this idea that AI companies are tapping debt markets because they have to,” he said. “Most of these companies have incredibly low debt burdens.” He did caution that investors need to be selective. “You have to be specific,” he said, noting that balance sheets across major players remain “incredibly clean.”
He acknowledged that free cash flows are coming under some pressure due to heavy investments. “Free cash flows have been getting thinner,” he said, but added that monetisation is beginning to come through. “You’re already seeing it in some cases, which will help offset that capex investment going forward.”
On the dollar, Matt flagged it as an important factor for global markets. “The dollar is going to be the sleeper factor,” he said. He pointed out that a stronger dollar is weighing on emerging markets and commodities. “Until you start to see the dollar weaken…you’re going to continue to see pressure across emerging markets and precious metals,” he added.
He noted that currency pressures have also influenced investor flows. “Rupee weakness has been a key reason why foreign investors have been a little bit reticent,” he said, highlighting the broader impact of dollar strength.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
