🛢 Oil giants paid shareholders billions

What’s going on here?

The Japanese yen has fallen 10% this year to reach a 34-year low.

What does this mean?

A weaker yen does have an upside. Many of Japan’s biggest companies are manufacturers, and a weaker yen attracts bargain-hunting foreign buyers to them, while also increasing the value of their overseas takings when they’re converted back into yen. That’s helped push stocks to record highs. Problem is, if the yen falls too low, it could shake investors’ confidence, weigh on small local firms that rely on imports, and even fire up inflation which, in turn, could squash consumer spending. So the Bank of Japan (BoJ) wants a weak yen, but not too weak. Striking that balance is easier said than done, though, which is probably why the central bank hasn’t meddled yet.

Why should I care?

For markets: Japan needs a favor.

The higher a country’s interest rates, the more attractive its currency looks to foreign investors. And right now, rates in the US are sitting at 5.5%, while Japan’s are at a flat zero. So the yen’s recovery doesn’t just hinge on the Japanese economy, but also – and arguably, even more so – on the American one. It’s hard to imagine the yen making up some of the difference between it and the US dollar unless the Federal Reserve can bring rates down a notch – and that will only happen if US inflation and economic growth both head south.

The bigger picture: The US dollar is on a tear.

The US dollar might just be the best hedge for your stock and bond portfolio. The greenback is seen by many as a safe-haven investment, so it could hold its value if financial markets throw a fit. Plus, if inflation picks up and wipes out stocks and bonds, that would likely encourage the Fed to increase interest rates, and that would nudge the US dollar even higher.

What’s going on here?

Exxon and Chevron announced their quarterly results, and it turns out that even slight problems with profit couldn’t stop them from doling out billions to their shareholders.

What does this mean?

Both Exxon and Chevron revealed that their sales from last quarter were lower than the same time last year. In Exxon’s case, that meant its profit came in at $8.2 billion, 6% below analysts’ forecasts. Meanwhile, Chevron’s profit fell 16% to $5.5 billion – but that was actually slightly better than expected. The declines were partly caused by natural gas prices falling 37% this year, while at the same time, higher costs and tighter margins on refined oil meant the duo made less from the pumps. Mind you, neither company was exactly strapped for cash: Chevron and Exxon’s bank balances still meant they could both pay shareholders around $6 billion in dividends and share buybacks.

Why should I care?

For markets: Buffett’s buying.

Energy has been the standout sector in the S&P 500 index this year, notching a 16% increase on the back of rising oil prices. And because energy – along with other commodities – can hedge against inflation, rather than being dragged down like bonds, the sector should be able to hold onto its momentum. That explains why Morgan Stanley and Goldman Sachs have upgraded their outlooks for energy stocks recently, and the resilience may also have factored into Warren Buffett’s decision to increase his holdings in Chevron and Occidental Petroleum at the end of last year.

The bigger picture: Oil’s life expectancy grows by the day.

Some investors have grown wary of the energy sector, concerned that the transition from fossil fuels to cleaner alternatives will be too unpredictable or turbulent for their portfolios to handle. But analysts keep pushing out the expected timing of oil’s peak demand, cautious that cleaner energy projects aren’t being built fast enough to fill the world’s appetite for energy anytime soon.