Latest / Markets with Megan: A Quick Financial Markets Update / Strait Of Hormuz Shockwaves | S3 E135 | 04-06-26

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Strait Of Hormuz Shockwaves | S3 E135 | 04-06-26 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: We're starting to get some of that economic data that's reflecting the war with Iran.
• 0:05
  Megan Horneman: It's Monday, Mark, April the 6th, and this is Markets with Megan.
• 0:08
  Megan Horneman: If you like this podcast, subscribe, hit the alarm bell.
• 0:12
  Megan Horneman: You can share it with your friends, family, or colleagues.
• 0:14
  Megan Horneman: But we're here today to break down some of the economic data that we've been seeing specifically for the month of March.
• 0:21
  Megan Horneman: And this week's a big week when it comes to economic data to get an insight into what this war is impacting from a supply chain and inflation perspective.
• 0:31
  Megan Horneman: And let's talk about the supply chain for a second.
• 0:34
  Megan Horneman: And I know most people have been focused on oil moving through the Strait of Hormuz, but let's keep in mind that the Strait also is a waterway for many other supply chain types of items.
• 0:44
  Megan Horneman: And this could cause disruption in economic data and specifically lead into inflation.
• 0:50
  Megan Horneman: Investors don't, you know, it's not that long ago that we were dealing, six years ago, really this month, that we were dealing with some of these supply chain disruptions because of COVID.
• 0:59
  Megan Horneman: And it's still fresh in investors' mind what happened to inflation after that.
• 1:03
  Megan Horneman: Now we're not saying that the disruption in the Strait of Hormuz is a COVID-like event, but it does put some upside pressure on inflation, specifically here in the near term.
• 1:13
  Megan Horneman: The strait not only moves about a fifth of the global oil supply, but it does move about 25 to 30 percent of the world's helium.
• 1:21
  Megan Horneman: And helium is something that cannot be replaced.
• 1:24
  Megan Horneman: So the helium does need to move.
• 1:27
  Megan Horneman: It's used in things like MRI machines and then semiconductor chips, which we know are in high demand right now.
• 1:34
  Megan Horneman: Um, fertilizers as well are being impacted.
• 1:36
  Megan Horneman: About 20 to 45 percent of the different inputs that go into fertilizer move through that Strait of Hormuz.
• 1:43
  Megan Horneman: And while only 5% of the global aluminum moves through the strait, aluminum supplies are already tight.
• 1:49
  Megan Horneman: So any disruption there does cause some concern.
• 1:53
  Megan Horneman: We are seeing the day this show up in some of the reports we've gotten thus far.
• 1:58
  Megan Horneman: We've gotten both ISM Manufacturing and ISM Service Index for the month of March.
• 2:04
  Megan Horneman: Both of them showed prices paid that have spiked to the highest levels we've seen since 2022.
• 2:11
  Megan Horneman: And we're also seeing higher delivery times, meaning that they're waiting longer for the materials needed for products.
• 2:19
  Megan Horneman: And then employment in the service side, when you have higher prices, you do tend to see companies pause on employment.
• 2:25
  Megan Horneman: We saw employment in that service index drop to the lowest since December of 2023.
• 2:31
  Megan Horneman: Now, a couple other things that we'll get this week is um, first of all, the Fed meeting minutes from their March 18th meeting.
• 2:39
  Megan Horneman: Why are these important?
• 2:40
  Megan Horneman: Because this is the full full transcript of what we can get at that meeting.
• 2:44
  Megan Horneman: And we know that there were a lot of questions around the war and what it may mean for inflation, what the spike in energy prices may mean for inflation.
• 2:52
  Megan Horneman: So we want to get a better indication if the Fed is willing to let inflation run hot without hiking interest rates.
• 2:58
  Megan Horneman: If there's any talk about that, that could take really disrupt the rally we saw in the second half of last week.
• 3:05
  Megan Horneman: The consumer price index for March will also get that, and that is expected to see a pretty big jump in the CPI year over or I'm sorry, month over month data at the headline level because it includes energy.
• 3:18
  Megan Horneman: It's expected to rise 1%.
• 3:21
  Megan Horneman: Now, at the core level, which is what we're a little bit more concerned about, it's expected to be a little bit more subdued, up three tenths, but we do know that sometimes that acts on a lag defect into the core numbers.
• 3:31
  Megan Horneman: We may not see that for the next couple months, what some of these energy prices are doing there.
• 3:37
  Megan Horneman: Um, now, what does this mean from an investment standpoint?
• 3:40
  Megan Horneman: The markets had recovered last week.
• 3:42
  Megan Horneman: We saw pretty much all the global indices rally last week.
• 3:46
  Megan Horneman: There was some mixed reports about maybe the straight reopening, maybe some ending to the war.
• 3:51
  Megan Horneman: We can see today that these reports, again, there was some optimism this morning of a ceasefire that's now been reduced.
• 3:58
  Megan Horneman: So this can continue to make headlines and it does um create some jitterness in the market.
• 4:04
  Megan Horneman: But the secondary impact of a conflict like this will be what does it do to the economic data?
• 4:10
  Megan Horneman: So we still do think there's more chance of weakness in the markets in the coming weeks as we start to get that initial impact from the war, specifically how much is it disrupting the supply chain?
• 4:21
  Megan Horneman: What are businesses doing?
• 4:23
  Megan Horneman: What is it doing into inflation?
• 4:25
  Megan Horneman: We still haven't seen any kind of change to earnings estimates for this year.
• 4:30
  Megan Horneman: So we think that that's probably, especially since the war has continued longer than anticipated, that we'll start seeing that as well coming up is when the earnings season kicks off.
• 4:40
  Megan Horneman: You may see some reductions in earnings.
• 4:42
  Megan Horneman: So we're still in this phase of trying to revalue the market, what that means from an earnings perspective.
• 4:48
  Megan Horneman: So unfortunately, we think there might be some more downside.
• 4:51
  Megan Horneman: We'll still treat that as a buying opportunity because we don't think this is going to last forever.
• 4:56
  Megan Horneman: Um, but we just don't think that valuations where they are right now got cheap enough in order for us to really put a lot of cash to work.
• 5:03
  Megan Horneman: That's all we have today.
• 5:04
  Megan Horneman: And as we mentioned, there's a lot of data out this week.
• 5:06
  Megan Horneman: So we'll be back to discuss those headline numbers and what that means for the investments.
• 5:11
  Megan Horneman: Thank you very much.
• 5:11
  Megan Horneman: And if you want a history of our podcast, go to marketswithmegan.fm