Synchronized global economic growth firmed through all four quarters of 2017. We believe growth could accelerate in 2018 to nominal growth rates not seen since the 2000s.
The number of countries now participating in the current global economic expansion reached levels last seen in the mid-2000s. With such breadth, the global economy is now lifting PMI and other leading indicators higher, confirming the early sign that the global economy has reached a point where growing capital expenditures can be sustained.
Inventories are continuously drawn down across the full commodity complex. We believe that any potential supply constraints, even at the margin, will put upward pressure on prices.
During the quarter, oil prices pulled back over concerns of higher inventory levels. Oil prices dipped below US$50 briefly during March but ended the quarter marginally over $51. Our holdings in California Resources and Whiting Petroleum both pulled back materially with oil prices coming off. The two companies remain levered to higher energy prices. We believe the firms remain undervalued in an environment of $60 oil prices.