Forecasters promised us this would be the year AI capital expenditures drove equity valuations higher and positioned companies for next-level productivity gains. So far, that thesis has held, even as conflict in the Middle East has disrupted global oil supplies and pushed inflation higher.
Iran closed the Strait of Hormuz on March 2, following U.S. and Israeli military strikes on the country. According to Ninepoint Partners’ 2026 Mid-Year Market Outlook, the closure has removed an estimated 13–14 million barrels of oil from global supply each day. Even after accounting for strategic reserves and alternative shipping routes, the firm estimates the global economy remains short about 5.7 million barrels daily.
“Despite the severity of the energy crisis, broader markets (like the S&P 500) remain near all-time highs,” according to the report. “We attribute this complacency to two factors: effective political ‘jawboning’ that manufactures volatility through media reports of impending breakthroughs, and the market’s inability to price in reality until physical shortages become unavoidable.”
Whether or not Ninepoint’s explanation proves correct, investors held firm during the first half. The S&P/TSX Composite Index was up 9.7% at the close on June 30. The S&P 500 composite, Dow Jones Industrial Average and Nasdaq were up 9.5%, 8.9% and 12.8% respectively.
“Earnings are strong,” said Jonathan Lo, a portfolio manager who covers global equities for Ninepoint Partners, in an interview Friday. “They were abnormally strong last quarter. … We have a very constructive earnings backdrop.”
Lo rejects the stock market bubble narrative. He and senior portfolio manager Samarjit Mitter, who co-manage Ninepoint’s Global Select Fund, argue the current rally remains in its early stages.
“Valuations are not anywhere near what we consider bubble territory,” Lo said. “The S&P 500 forward [price-to-earnings ratio] right now is 20. It’s not unreasonable at all. … I think the market is climbing a wall of worry here. It’s still on sound footing from a valuation perspective.”
The largest technology firms have committed to roughly US$750 billion of capital spending this year, most of it tied to AI.
“That’s like 2.5% of U.S. GDP that’s being spent right now,” Lo said. “We are mid-cycle. … We are not close to the end of the bull market.”
Gold and crypto
Gold told a different story. A troy ounce of gold was trading at about US$4,175 on Friday, well off its January high of about US$5,600. Ninepoint believes this has driven speculators out of their positions, and returned the precious metal to its more traditional role as a secure asset in a less predictable global economy.
Gold stocks are trading “at attractive valuations to historical averages,” according to the report. This year’s pullback is a buying opportunity.
Crypto valuations are also down. Bitcoin and ethereum are off about 33% and 47%, respectively, in the first half, amidst geopolitical tensions, private credit worries and other drivers.
Ninepoint says this represents “one of the defining investment opportunities of this cycle.” It argues investors should focus less on short-term cryptocurrency prices than on the continued build-out of digital-asset infrastructure.
“The world has awakened to crypto’s first true ‘killer’ application: stablecoins,” according to the report.
The global stablecoin market cap is estimated to be more than US$310 billion, making it one of the fastest-growing segments of the digital asset ecosystem. Five years ago, the global market was worth about a third of that.
Over the same period, stablecoins went from being mostly a crypto trading tool to a proper settlement and payments infrastructure that now processes more than US$34 trillion in transactions each year. Financial institutions around the world are increasingly adopting the technology.
Next up, the tokenization of other real-world assets. This year, both the New York Stock Exchange and Nasdaq announced plans to build tokenized stock platforms.
Canada’s approach has been more measured. The TMX Group has been looking at distributed ledger technology for years. Several Canadian investment dealers and banks have signed on for tokenization pilots.
Inflation and interest rates
Ninepoint argues that one underappreciated consequence of the AI investment boom is its contribution to inflation, alongside the energy crisis.
The asset manager believes this increases the likelihood the Federal Reserve may need to raise interest rates if the Strait of Hormuz remains closed. Last year’s introduction of tariffs on goods from U.S. trading partners also contributed to inflation south of the border.
“There’s two rate hikes being priced in,” Lo said. “Kevin Warsh’s first press conference was a show of independence. … That was a signal to the market. He’s going to be independent. He’s going to fight inflation if it’s there.”
Warsh succeeded Jerome Powell as chair of the U.S. Federal Reserve on May 22.
The Bank of Canada can be more patient, Ninepoint’s report says, given Canada’s relatively high unemployment rate and downward trend in core inflation. That said, “if the energy shock persists and starts spreading to core inflation, then they will have to act with a series of hikes.”
