In this newsletter, I’ll discuss how your portfolio can withstand a war involving a major oil supply shock—what it means for the economy, and whether there are opportunities to take advantage of.
This piece will be very similar to the one I wrote during the Ukraine invasion a few years ago. Spoiler alert: my investing approach hasn’t really changed. For most small investors, doing very little is often the best course of action. Historically, stock market returns tend to remain fairly normal—even during world wars. Regional conflicts, in particular, usually have limited long-term impact on major indexes.
You might argue that this time is different because countries are fighting over oil, a critical global resource. While that does add complexity, it’s likely less severe than past wartime disruptions. Some believe that supply shocks in energy, fertilizer, and even helium could trigger a global recession. While that’s possible, it’s generally unlikely. We’ve experienced high oil prices before without falling into recession. A true global downturn usually requires multiple factors aligning.
It’s also worth remembering that recessions are a natural part of the economic cycle—they’re not the end of the world. In many cases, their effects aren’t even fully felt until after they’ve begun. More concerning than higher oil prices may be secondary effects, such as food security issues in poorer regions. The global food system depends heavily on energy, and shortages can lead to instability. That said, those broader consequences are beyond the scope of this newsletter.
So, I’m not overly concerned about the war itself. There are already several existing market risks that are just as important—if not more so—when it comes to future returns. As I’ve mentioned before, I remain cautious about high U.S. tech valuations and any overvalued assets in general.
Some have asked whether now is a good time to invest in oil—essentially chasing the latest “shiny object.” I’m not a fan of following the crowd. The best time to invest in oil was before the shock occurred. As many of you know, I previously held roughly three times the market weighting in energy, with nearly 10% of my portfolio in the sector. That position has performed well, but energy remains a relatively small part of the broader market, so its impact on overall returns is limited.
Over the past month, energy has been the only positive sector, up about 14%, while the rest of the market has declined by an average of 9%. Even traditionally defensive sectors, like consumer staples, are down—just not as much.
The changes I’ve made in response to the war have been only tactical see below for details. More exposure to oil and gas and less exposure to financials. Relatively small moves. I have started to take advantage of some down and out technology names that i already own.
These moves have worked well in the short term. However, I didn’t increase my overall energy weighting—only my exposure within the sector. If you’re underweight energy, this could still be an opportunity, as energy prices are likely to remain elevated over the long term and energy companies although rising in price have not reflected the full value of higher energy prices yet. While somewhat speculative, it’s a reasonable thesis, just do not overdue the weighting in case I am wrong.
Nuclear companies like Cameco have declined recently. One could argue that countries dependent on oil may begin expanding nuclear programs—or even reconsider coal. That said, be cautious with position sizing, as volatility remains high. The war could end tomorrow or drag on for years—no one knows.
With all the volatility, I’ve watched my portfolio fluctuate significantly. I am currently outperforming, but I expected to do even better in these choppy conditions. One key observation: on particularly bad days, almost all positions fall together. Most stocks are highly correlated with the S&P 500, meaning they tend to move in the same direction as the broader market.
Even defensive stocks—like grocery chains—can decline when investors rush to sell. On calmer days, however, these defensive positions tend to hold up better than the average.
As always, it comes down to supply and demand. When investors become fearful, they often stop buying—or worse, sell everything and move to cash, regardless of fundamentals.
So where is the market headed next? Time for the crystal ball. Historically, markets are positive about three out of every four years. However, as I mentioned earlier this year, I expect a moderate decline followed by a stronger rebound the next year. That remains my base case—but of course, no one can predict the future with certainty.
With that in mind, I’ve built a moderately conservative, well-diversified portfolio. I’ll continue making small adjustments to manage risk while aiming for solid returns.
The bad news
Consumer prices are likely to rise—not just at the pump, but across many areas that may seem unrelated to oil. Unfortunately, this insight isn’t always easy to act on from a portfolio perspective.
Some companies struggle to pass rising costs onto customers. Businesses with high debt and low margins are especially vulnerable. These inflation-sensitive companies may underperform.
That said, stocks in general are still one of the better hedges against inflation. Rising prices tend to lift company revenues over time, making equities preferable to holding cash, which steadily loses purchasing power.
It may feel like a chaotic world, and many small investors are understandably anxious. But when has the world ever felt completely stable? There’s always some looming crisis. The key is not to let fear drive poor decisions. If anything, it’s often better to do the opposite of what your instincts are telling you in these moments.
Tactical stock moves
I sold a large position in Bank of Nova Scotia (BNS.TO) and reinvested the proceeds into Shopify (SHOP.TO) existing position, CGI (GIB-A.TO), existing position and TD Bank (TD.TO), new position.
The rationale behind this move was:
- To reduce my exposure to financials back to a neutral weight
- To increase my allocation to technology, particularly in oversold names
- To shift into a stronger Canadian bank
My technology holdings had fallen to less than half the market weight due to recent selling pressure, so this was a good opportunity to rebalance and strengthen that segment of the portfolio.
Sold MDST and some of my Cameco CCJ.TO position. I invested the proceeds in White Cap Energy (WCP.TO), new position and Tourmaline (TOU.TO) existing position.
The rationale behind this move was:
- increase exposure to oil and gas
- lower my weighting of Cameco which had grown close to my maximum weight of 5%
- Sold MDST as it was simply too conservative and does not perform well in higher volatility markets
📊 Portfolio Performance (YTD)
- Portfolio Return (incl. currency gains): -1.6%
- Portfolio Return (excl. currency gains): -2.4%
Benchmarks
- S&P 500: -6.96%
- RSP ETF (S&P Equal Weight): -1.62%
- TSX: +0.78%
📌 Summary
The portfolio is outperforming the S&P 500 by 4.56 percentage points.
Money with Marc 