Falling oil prices, resilient earnings growth and moderating inflation expectations are helping support equities despite concerns about interest rates and geopolitical uncertainty. Investors are also closely watching upcoming semiconductor earnings reports for signs that AI-driven growth remains intact.
BNN Bloomberg spoke with Michael Zinn, managing director and senior portfolio manager at UBS, about the impact of lower oil prices on inflation, the outlook for semiconductors and artificial intelligence, and why health care is becoming increasingly attractive alongside technology and energy.
Key Takeaways
- Oil prices have retreated faster than many expected, reflecting spare capacity, resilient supply networks and softer demand conditions.
- Lower oil prices, falling housing costs and limited tariff pass-through effects could help reduce inflation expectations despite a hawkish tone from the U.S. Fed.
- Semiconductor stocks remain supported by strong fundamentals, but investors are debating how to value earnings as AI growth matures and expectations rise.
- Upcoming semiconductor earnings reports could become the most important catalyst for technology shares in the near term.
- Select opportunities remain in health care, particularly large-cap pharmaceutical and biotechnology companies benefiting from AI applications, drug innovation and acquisition activity.
Read the full transcript below:
MATT: Let’s look at oil prices again, fluctuating after the U.S. and Iran met in Switzerland for continued peace talks. Ships are moving through the Strait of Hormuz, with Iran elevating oil exports as the U.S. lifts that naval blockade. Here to talk about that and more is Michael Zinn, managing director and senior portfolio manager at UBS. Morning, Michael. Thanks for being here.
MICHAEL: Morning, Matt. Good to be with you.
MATT: So, oil prices coming down a little bit. It’s encouraging, at least today. It was not necessarily the case over the weekend about those talks and what was actually going to happen in Switzerland with an end to the Middle East conflict. Where are we going here? How low are the prices of oil going to go, do you believe, in the short term?
MICHAEL: Oil prices could go lower, I would say. They began the war at around US$60 a barrel, and even when you look at the contracts further out in the year, they’re getting well into the low US$70s. So, our general expectation is we’ll continue to see oil prices fall.
The resilience demonstrated by the oil markets in response to the war, I think, was pretty noticeable. We really got that initial first spike at the onset of the war, but that was really the peak. Since then, despite a lot of the hand-wringing we’ve seen, prices have come down. That probably speaks to the extra capacity that was in the system that we didn’t know about, some of the resilience and alternative pipeline measures, and, of course, a bit of demand destruction as well.
So far, oil has not been a big impediment to the market’s move upward, and I think it has additional relevance as we’ve had our new U.S. Fed chair here in the U.S. speak. He’s talked about a hawkish view on inflation, and that may give the market some pause. But what we may find is that because of oil, because of falling housing prices and because of more limited tariff pass-through increases, we see inflation expectations come down. That could be an additional leg upward for the market if that happens.
MATT: You’re right. I think it has been a little bit surprising how quickly the price of oil has dropped. A lot of the expectation was that it was going to take a little while. I’m not saying there’s still not lots to be done with all the ships moving through the Strait of Hormuz and some of the infrastructure that’s been damaged. But you touched on a couple of the factors. Expand upon that, too. It is surprising how quickly we’ve seen it pull back.
MICHAEL: Yeah, I think it has surprised a lot of the experts, and I think it speaks to understanding complete capacity, which is, of course, a worldwide phenomenon, not just here in the U.S., in terms of what we drill, what we consume, how much reserve capacity China has, for example, and how much they consume.
These are all big swing factors. Of course, we saw along the way during the war maybe not the dissolution of OPEC, but some fracturing of OPEC, which allows some of the non-OPEC members to increase capacity if they want. So that’s all been part of the picture.
We have still maintained a slight overweight to energy, which is a pretty small component of the S&P 500. I think it’s important to hedge, and it’s not super costly. Even at these prices, oil stocks are not particularly expensive.
But it has been surprising, and I think it’s just been a measure of the market’s resilience and the economy’s resilience overall. We have been in a slightly higher interest-rate regime. We’ve issued a good deal of debt in this new four per cent world of interest rates, and the market has absorbed it relatively well. We’ve issued a lot of equity in the market, as was spoken about extensively last week, and the market has absorbed that relatively well too.
So, we may find that more headwinds come up in the second half of the year that the market has to deal with, but so far it has demonstrated a lot of resiliency.
MATT: I’m curious about your thoughts on semiconductors right now, too, Michael. Intel is up again today. We heard the news about the partnership with Apple last week and the news from the president too. But are things starting to get overcrowded? Is there any concern from you on that front?
MICHAEL: There is concern. I think there is certainly a lot of crowding, that’s for sure. There’s still healthy debate, though, and when we look at bull-bear measures of sentiment, we don’t see anything that’s irrationally exuberant, to pay homage to departed chair Greenspan.
But the stakes are getting higher and higher. I think any time you have what historically has been a very deeply cyclical industry transition to what’s thought of now as a longer-term growth industry bordering on secular growth, there is going to be debate about how to price earnings and whether we should put a higher multiple on peak earnings or whether the multiple should stay closer to historical averages.
As we speak to various analysts and industry experts, there’s still healthy debate on that topic. We do have a very big earnings report coming up in the middle of the week, and I think that is going to be the big headline of the week — how that information is received, what the guidance is and how many willing buyers there are if a dip comes.
MATT: Very true. It’ll be interesting to see at that point. I’m also curious to quickly hear, Michael, in about a minute. You’re bullish on a few other sectors. Give us the finishing notes.
MICHAEL: Sure. Health care is now about eight per cent of the S&P 500. That’s roughly a 30-year low in terms of weighting, and I don’t think it’s been perceived to be an AI winner in any real way, so it’s kind of been passed by.
It has had its challenges, but we do think large-cap pharma is interesting. We do think AI is going to be a bigger and bigger driver there, and, of course, the GLP-1 phenomenon just seems to have broader and broader applications.
We think biotech is attractive as well. You made note of some of the acquisitions going on today. We’re seeing a lot of acquisitions in that space and a lot of drug-discovery innovation. So, we’re getting more excited about health care on a selective basis.
MATT: It feels like there has been a lot of action recently in the health-care sector. Michael Zinn, managing director and senior portfolio manager at UBS. Michael, appreciate your time today. Thanks so much for this.
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This BNN Bloomberg summary and transcript of the June 22, 2026 interview with Michael Zinn are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.