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Markets Whiplash as Oil Surges and War Headlines Shift · The Financial Exchange Show

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Speaker 1: and Fallane.
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Speaker 2: Well, I hope everyone was fully buckled in and safely
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Speaker 2: secured yesterday for the absolutely wild ride in markets that
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Speaker 2: started Sunday evening. I think it's helpful to contextualize that
1:22
Speaker 2: ride a little bit here as we kick off the show,
1:25
Speaker 2: because on Sunday night, if you know, opened your phone
1:27
Speaker 2: like I did, and took a look at the overnight
1:30
Speaker 2: futures markets, the Dow and SMP were indicating and open
1:34
Speaker 2: that was two percent lower than where we closed on Friday,
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Speaker 2: So the futures markets pricing Dow falling about a thousand points.
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Speaker 3: It opened up Monday morning down but not nearly as.
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Speaker 2: Much as it was in the overnight markets, and oil
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Speaker 2: prices overnight, by the way, hit over one hundred and
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Speaker 2: fifteen dollars per barrel.
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Speaker 3: Bounced around all day.
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Speaker 2: By midday, as we were closing out the program, markets
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Speaker 2: were still off, but not anywhere.
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Speaker 3: Near the lows that they were overnight.
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Speaker 2: At three pm, the President in a call to I
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Speaker 2: think it was CBS News, Yeah, three pm. President spokes
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Speaker 2: to CBS News, and he said a number number of
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Speaker 2: things that the main thing that got picked up by
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Speaker 2: markets was quote, the war is very complete. The actual
2:20
Speaker 2: statement was I think the war is very complete pretty much.
2:23
Speaker 2: Iran has no navy, no communications, they've got no air force,
2:27
Speaker 2: their missiles are down to a scatter. At that point,
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Speaker 2: markets surged, oil prices fell further, and so again you
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Speaker 2: went from a high price point of one hundred and
2:36
Speaker 2: fifteen dollars per barrel on West Texas crued, you finished
2:40
Speaker 2: the day around ninety hold on today's the tenth. Yesterday
2:44
Speaker 2: was the ninth ninety five dollars a barrel. Pretty big swing.
2:48
Speaker 2: Equity markets, which you know, again in pre market trading
2:52
Speaker 2: Sunday night, were off more than two percent end of
2:55
Speaker 2: the day, up eight tens of a percent on the
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Speaker 2: S and P five hundred. So suffice to say, I
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Speaker 2: still don't think investors have any idea what to do
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Speaker 2: with the events going on in the Middle East. Suffice
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Speaker 2: to say, they are really optimistic that it could wrap
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Speaker 2: up pretty quickly. And another piece that I just again
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Speaker 2: timing being everything here at the and the eleven twenty
3:16
Speaker 2: segment on the program, I brought something up with Chuck
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Speaker 2: that you know, I just was kind of bouncing around
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Speaker 2: my head because we were talking at the beginning of
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Speaker 2: the program about hey, best case and worst case scenario
3:30
Speaker 2: of the events for markets and how they could play out.
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Speaker 2: And the point that I made at eleven twenty was, look,
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Speaker 2: if we use the last year as kind of a
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Speaker 2: guideline for how the Trump administration may or may not
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Speaker 2: choose to wrap this thing up or pivot, it's going
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Speaker 2: to be once pressure mounts from markets to make change
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Speaker 2: their mind. There's a lot of evidence that the Trump administration,
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Speaker 2: this especially this second time around, is very responsive to
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Speaker 2: those market forces. For one, these strike the Venezuelan strikes,
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Speaker 2: the first Iran strikes all took place on weekends. In
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Speaker 2: April of twenty twenty five, the Trump administration acknowledged that
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Speaker 2: the bond market was the primary thing that forced them
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Speaker 2: to pivot away from their initial Liberation Day tariffs. There's
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Speaker 2: been a lot of evidence of this, and so I
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Speaker 2: pointed out, like, Okay, it doesn't feel to me like
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Speaker 2: markets have mounted that big of a concern, but you know,
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Speaker 2: when might the president go out there and pivot? And
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Speaker 2: to be fair, unlike tariffs, this one is not entirely
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Speaker 2: in the US administration's court, right, Like we could say, hey,
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Speaker 2: we're wrapping things up, and I really differently, yeah, they
4:41
Speaker 2: might strike start striking the straight of her moves and
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Speaker 2: continuing to close it Iran. Israel could say we're not
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Speaker 2: done with Iran and we're going to continue operations here.
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Speaker 2: So it is not entirely in the control of the
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Speaker 2: Trump White House. But I do think that we saw
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Speaker 2: a bit of that yesterday at three pm with the
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Speaker 2: comments that that they made of, Hey, you know, we
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Speaker 2: are seeing indications of this thing wrapping up. I continue
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Speaker 2: to say, I don't know. I think there's plenty of
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Speaker 2: indications that we are just getting started here. Obviously, with
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Speaker 2: Iran's selection of the new Supreme Leader not exactly a
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Speaker 2: conciliatory choice if you're trying to wrap things up by
5:20
Speaker 2: selecting the son of the assassinated leader. There's plenty of
5:24
Speaker 2: evidence that the war is spreading through Lebanon now, with
5:28
Speaker 2: is reel striking ground incursions there. Obviously we continue to
5:33
Speaker 2: target leadership. Israel posted a picture of the new Supreme
5:37
Speaker 2: Leader alongside his father and had something like father like.
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Speaker 3: Son on there.
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Speaker 2: So there are plenty of pieces of evidence here that
5:46
Speaker 2: this is just getting started.
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Speaker 3: And then I think there are a.
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Speaker 2: Few indicators you can take a look and say, okay, yeah,
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Speaker 2: the volume of strikes from Iran coming out. The number
5:56
Speaker 2: of rockets being sent out might indicate a slow down
5:59
Speaker 2: of n There was a statement made by someone in
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Speaker 2: Iran leadership. I can't keep track of it of you know,
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Speaker 2: some conciliatory comments about striking their neighbors and you know
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Speaker 2: how they wouldn't be doing that going forward. So I
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Speaker 2: don't think anybody has any firm idea, but I think
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Speaker 2: very clearly President Trump felt like there was a need
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Speaker 2: enough out there to come out and say something about
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Speaker 2: this thing maybe wrapping up, and you know, was certainly
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Speaker 2: enough to dramatically shift markets yesterday.
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Speaker 4: Yeah, once you see energy markets swinging thirty percent within
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Speaker 4: a day, I guess President Trump felt as if it
6:40
Speaker 4: was time to maybe fan the flames a little bit.
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Speaker 4: But volatility really was the story yesterday in terms of
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Speaker 4: ups and downs. It felt like if you looked away
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Speaker 4: from your screens trucking markets for an hour, the whole
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Speaker 4: sentiment shift could just be so different. And particularly for
6:55
Speaker 4: someone like myself. I was outmean with clients yesterday and
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Speaker 4: to go from Sunday night where the market's turning down
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Speaker 4: two percent to up at the end of the day
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Speaker 4: was just totally it was hard to even comprehend what
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Speaker 4: had happened. But this seems to be the major focus
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Speaker 4: is all the volatility.
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Speaker 1: Right now.
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Speaker 4: We have West Texas Intermediate on the oil front trading
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Speaker 4: at around eighty eight dollars a barrel, that's down about
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Speaker 4: seven and a half percent, and Brent crude is down
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Speaker 4: to ninety one dollars a barrel, also down seven and
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Speaker 4: three quarters a percent, and it's hard to have any
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Speaker 4: real insightful commentary and where things are gonna go. Mike,
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Speaker 4: I think we both have just admittedly mentioned that it's
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Speaker 4: impossible to sort of gauge where things are because you
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Speaker 4: can take certain sentiments and interpret them as perhaps progress
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Speaker 4: in one direction or another, but there's so many unknown
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Speaker 4: forces here that you're dealing with it's hard to get
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Speaker 4: a clear picture.
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Speaker 2: I mean, yeah, let's be clear, a drone strikes a
7:50
Speaker 2: ship anywhere in that age, in that area, and things
7:53
Speaker 2: could flip in the complete other direction. But for this morning,
7:56
Speaker 2: Dow Jones Industrial Average currently off two hundred and thirty
7:59
Speaker 2: points SMP off percentage wise about the same, Nasdaq down
8:03
Speaker 2: a little bit less about a quarter of a percent.
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Speaker 2: In oil prices this morning, shooting down seven percent down
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Speaker 2: to eighty eight twenty three per barrel. We're going to
8:12
Speaker 2: take a quick break here on the Financial Exchange. We're
8:15
Speaker 2: not going to move on from Iran quite yet. I
8:17
Speaker 2: think a few other pieces here about oil prices, specifically
8:21
Speaker 2: what this might all mean outside of the United States. Obviously,
8:25
Speaker 2: the United States today far more energy independent than it
8:28
Speaker 2: was in the nineteen seventies and eighties, and also far
8:30
Speaker 2: more independent than a lot of our closest allies. What
8:33
Speaker 2: all of this could culminate to mean for some of
8:35
Speaker 2: our Asian allies and those across Europe. That's next on
8:38
Speaker 2: the Financial Exchange.
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Speaker 2: As we enter the second week here of war in Iran,
9:48
Speaker 2: I think some context outside of markets is generally useful. Obviously,
9:53
Speaker 2: the United States has seen oil price swings on the
9:57
Speaker 2: West Texas crude and companies that sell into that market
10:00
Speaker 2: is a global commodity, and they are seeing that higher
10:02
Speaker 2: price point across the globe. Though obviously or maybe not obviously,
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Speaker 2: other countries other regions far more dependent on international oil
10:11
Speaker 2: in the flow of it through the region in order
10:13
Speaker 2: to make their economies work. At this point in time,
10:17
Speaker 2: shipping cost insurance costs rather for tankers not that are
10:22
Speaker 2: none of them can get insurance to navigate the straight
10:24
Speaker 2: up horm moves, but generally speaking, to ensure your ship
10:27
Speaker 2: including war insurance, right now is around ten to thirty
10:31
Speaker 2: times more expensive than it was prior to the events
10:36
Speaker 2: in Iran, so you can understand how volume of shipments
10:39
Speaker 2: don't move quite as much at that stage. There's obviously
10:42
Speaker 2: stuff that kind of has to move and will continue
10:47
Speaker 2: to do so, but by and large, shipping containers all
10:51
Speaker 2: across the Middle East and Europe have dramatically slowed down,
10:54
Speaker 2: and part of that reasoning is because of the cost
10:56
Speaker 2: of insurance, which has increased dramatically. When we talk about
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Speaker 2: the refining of oil into different products gasoline, diesel, jet fuel,
11:07
Speaker 2: et cetera, a lot of that today is done in Asia.
11:12
Speaker 2: There is pretty much no raw product moving to those refineries. Yes,
11:17
Speaker 2: there's been some coordination by G seven nations to release
11:20
Speaker 2: from strategic petroleum reserves, but again the pace at which
11:24
Speaker 2: that can happen is pretty slow, and therefore the concern
11:28
Speaker 2: for some parts of the world, not the United States
11:31
Speaker 2: in my personal view, but in some parts of the world,
11:33
Speaker 2: would be forget about price increases, what if there is
11:37
Speaker 2: an actual shortage of refined gasoline, diesel, jet fuel, et cetera.
11:42
Speaker 2: And what would that do to those economies. And so
11:44
Speaker 2: when we talk about certain areas of the world being
11:47
Speaker 2: more beholden to Middle Eastern oil, that's what we're referring to.
11:50
Speaker 2: And it's far more similar to what the United States
11:52
Speaker 2: was experienced in the nineteen seventies and eighties. Again, this
11:56
Speaker 2: only matters if this continues and drags on for an
11:58
Speaker 2: extended period of time. But that's what you know, that's
12:01
Speaker 2: what people are referring to when they talk about the
12:03
Speaker 2: sensitivity of say Japan's markets and economies to these oil shocks,
12:08
Speaker 2: or Europe's economy to these oil shocks. Is Yeah, they
12:11
Speaker 2: just don't produce or refine a whole lot, very few
12:15
Speaker 2: of them both produce and refine in the region, and
12:19
Speaker 2: therefore price shock, shortage shock could really lead to a
12:25
Speaker 2: very different economy in some of those areas.
12:27
Speaker 4: Yeah, And when you parts through some of these stories, Mike,
12:29
Speaker 4: I think it's important to just realize, however present, energy
12:33
Speaker 4: and oil is in everything that we do. Like you know,
12:36
Speaker 4: we think about it more from the traditional sense of
12:38
Speaker 4: fuel in a car or jet fuel or shipping containers,
12:42
Speaker 4: but also if you look at Asia in particular, a
12:46
Speaker 4: lot of the reason that they had had such a
12:47
Speaker 4: tremendous run up over the last six to twelve months
12:50
Speaker 4: is at the core of it, they're heavy in the
12:52
Speaker 4: semiconductor manufacturing space and something like that. You'd think of
12:56
Speaker 4: that as oh tech, that's not something that's as influenced
12:58
Speaker 4: by energy price socks, But those fabs, those manufacturing sites
13:02
Speaker 4: require a significant amount of energy to power everything that
13:06
Speaker 4: goes on with semiconductor manufacturing. So it's so connected, it's
13:10
Speaker 4: all interconnected, and so when you have rising energy prices,
13:13
Speaker 4: it touches everything in an economy, and particularly for those
13:16
Speaker 4: areas like you mentioned before in Asia and Europe that
13:19
Speaker 4: are heavily reliant upon this energy sources. That's the concern
13:23
Speaker 4: out there on the broader international markets is the longer
13:26
Speaker 4: this lingers, the more impacted.
13:27
Speaker 3: They are.
13:28
Speaker 2: An other piece that just kind of confusing on the surface.
13:31
Speaker 2: X On Mobile stock largest oil company in the world,
13:34
Speaker 2: largest energy company in the world. They explore, they drill,
13:38
Speaker 2: they refine, they're integrated. They do everything along, they ship it,
13:42
Speaker 2: they sell it to you at gas stations. They do
13:44
Speaker 2: just about everything. Their stock price closed at one hundred
13:48
Speaker 2: and fifty two dollars and fifty cents on Friday at
13:51
Speaker 2: four pm. Friday the twenty seventh, at four pm, that
13:54
Speaker 2: was the last trade price for their stock prior to
13:58
Speaker 2: the events of the U S stre around. Today, their
14:01
Speaker 2: stock is sitting at one hundred and forty nine dollars
14:02
Speaker 2: and ninety two cents. They are the ten thousand pround
14:07
Speaker 2: oil gorilla in the room here. They're their largest energy
14:10
Speaker 2: company in the in the well, other than Saudi a Ramco,
14:14
Speaker 2: which I don't really consider publicly traded, they are the
14:17
Speaker 2: big company, one of the largest US companies.
14:19
Speaker 4: Out in the Chevron.
14:21
Speaker 2: And so you take a look at that and you say, okay, okay,
14:24
Speaker 2: you've seen oil prices surge again, depending on the day,
14:28
Speaker 2: ten to thirty percent. What's the story here, shouldn't Exon
14:32
Speaker 2: MO will be reaping more profits in the future. And
14:35
Speaker 2: the answer is a little bit more complicated than that,
14:37
Speaker 2: I suppose.
14:38
Speaker 4: Yeah. So the way that you can frame it, roughly speaking,
14:41
Speaker 4: is that typically you'll see oil prices bottom and then
14:45
Speaker 4: what you'll see is on their rise, the energy stocks
14:49
Speaker 4: will rally. Because of the reasons that you would think
14:51
Speaker 4: that they would rally is that they were going to
14:54
Speaker 4: scale their profits as energy rises from what we were
14:57
Speaker 4: at geez fifty five dollars a barrel, a sixty dollars
15:00
Speaker 4: a barrel early this year, as we saw it rise
15:02
Speaker 4: up to seventy seven eighty dollars a barrel. That's when
15:05
Speaker 4: you did see Exxon's rise. It kind of corresponded with
15:08
Speaker 4: that movement. But then where you have it now, where
15:11
Speaker 4: energy prices are extremely high today but there are expectations
15:15
Speaker 4: in the future that they could come down. There's not
15:18
Speaker 4: a tremendous amount of certainty that they'll stay at these
15:21
Speaker 4: levels for two reasons. One could be the fact that
15:24
Speaker 4: this gets resolved sooner than anticipated. The other is the
15:27
Speaker 4: more sort of dire one where we go into an
15:30
Speaker 4: economic contraction of sorts and there's a recessionary period, and
15:34
Speaker 4: so that's what you see. Perhaps the more muted impact
15:37
Speaker 4: on energy companies is because the prices they get the
15:41
Speaker 4: initial bump from them, and the stock price goes up
15:43
Speaker 4: to correspond with that increase, but then it reaches a
15:45
Speaker 4: point of plateauing where there is more broader overall economic
15:50
Speaker 4: concern that they will continue to be as much demand
15:52
Speaker 4: for oil, or that the economy may slow down. And
15:55
Speaker 4: that's why it doesn't sort of pick up that one
15:57
Speaker 4: to one second bump that we've seen more recently.
16:00
Speaker 2: I'll also point out some degree of buy the rum
16:03
Speaker 2: or sell the news effect here, because Exon Mobile stock
16:06
Speaker 2: on January second of this year was sitting at one
16:08
Speaker 2: hundred and twenty three dollars per share. By early February
16:12
Speaker 2: it was up to one hundred and fifty five. So
16:14
Speaker 2: there were indications that things were not going great with
16:17
Speaker 2: around well before we actually struck them, and so I
16:20
Speaker 2: think some of what you saw here again, the price
16:23
Speaker 2: point that Exon Mobil is sitting at right now is
16:26
Speaker 2: a five year high by quite a bit. You know,
16:28
Speaker 2: for the last five years, the stock has been trading
16:30
Speaker 2: in the well anywhere from sixty bucks a share to
16:33
Speaker 2: you know, the one hundred and twenty range, and now
16:35
Speaker 2: it's sitting at about one hundred and fifty. And so
16:38
Speaker 2: it's not so much that they won't benefit from this,
16:41
Speaker 2: but a lot of people, I think already were betting
16:43
Speaker 2: on some sort of energy price shock that could benefit Exon's.
16:47
Speaker 2: The last piece on any of these major oil companies is, again,
16:52
Speaker 2: they don't just drill and sell their oil into markets, right,
16:55
Speaker 2: this is an integrated company, and if you have oil
17:00
Speaker 2: ill supply shocks occurring, and they can't refine quite as much.
17:04
Speaker 2: They have to shut down facilities for some reason or another.
17:07
Speaker 2: It can benefit one part of their business while hurting
17:10
Speaker 2: another part of their business, and you don't necessarily see
17:12
Speaker 2: it all play out to their bottom line.
17:14
Speaker 4: One last thing here with Exon, similar patterns that you
17:17
Speaker 4: can kind of see back in twenty twenty two were
17:19
Speaker 4: off hand. I think that price per gallon got the
17:23
Speaker 4: highest here in the US around July of twenty twenty two.
17:26
Speaker 4: Exon stock, you know, spiked up around one hundred in
17:29
Speaker 4: June of twenty twenty two, and prior to that, in
17:31
Speaker 4: the prior months had gone from you know, seventy five
17:34
Speaker 4: in February to that one hundred dollars peak in June,
17:37
Speaker 4: and then you saw it sort of sell off a bit.
17:39
Speaker 4: So the energy market, it keeps you on your toes,
17:42
Speaker 4: constantly moving in directions that you might not anticipate just
17:46
Speaker 4: looking at it from afar.
17:47
Speaker 2: Well, it's only been about a week of elevated gas
17:50
Speaker 2: prices and already Americans are squirming in discomfort, I think,
17:57
Speaker 2: and plenty is being written about how it's going to
17:59
Speaker 2: ruin their financial lives. Gas prices, according to Triple A,
18:02
Speaker 2: sitting now at three dollars fifty four cents a gallon
18:05
Speaker 2: compared to three dollars and ten cents a week ago,
18:09
Speaker 2: and to ninety two a month ago. And immediately upon this,
18:15
Speaker 2: and I understand why we talked about this yesterday. Americans
18:20
Speaker 2: hate higher gas prices. They I think, use gas prices
18:24
Speaker 2: as a barometer for the state of the economy and
18:26
Speaker 2: state of inflation more than any other product. And pretty
18:29
Speaker 2: much immediately we started seeing reporting from left, right, center,
18:34
Speaker 2: all over the place about how higher energy prices were
18:37
Speaker 2: going to hurt Americans. I heard reporting from a woman
18:42
Speaker 2: in Boston the other day who, you know, got in
18:44
Speaker 2: front of a camera that saying effectively that, you know,
18:47
Speaker 2: if things continue, she might have to drop out of
18:49
Speaker 2: school and go back to work to support her family
18:51
Speaker 2: if gas prices remain this high, which seems like a
18:55
Speaker 2: pretty extreme reaction after one week of slightly elevated gasoline prices.
19:01
Speaker 2: And so I want to talk a little bit more
19:04
Speaker 2: about this phenomenon on the other side of this break,
19:06
Speaker 2: Because one, gasoline prices have not moved a whole lot
19:11
Speaker 2: compared oil prices, like gasoline prices. Fifty cents on three
19:14
Speaker 2: dollars is not a massive shakeup in the gasoline market.
19:18
Speaker 2: But why do we associate gas prices so directly with
19:22
Speaker 2: how we are going to do poorly you know, well
19:25
Speaker 2: or poorly in the future. Is fascinating to me. Quick
19:28
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Speaker 1: Street Watch tracking the stocks, theodato and the headlines driving
19:57
Speaker 1: markets so far today right here on the Financial Exchange
20:00
Speaker 1: Radio Network.
20:01
Speaker 5: After yesterday's wild swings where markets ended the day in
20:04
Speaker 5: positive territory, markets today remained shoppy, with the price of
20:07
Speaker 5: oil and the war in Iran still at the forefront
20:09
Speaker 5: four investors. Right now, the Dow is edging higher, up
20:13
Speaker 5: only fourteen points, SMP five hundred up only one point,
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Speaker 5: Nasdaq is up nearly three tenths of one percent, or
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Speaker 5: sixty three points higher. Arrested two thousand is down about
20:23
Speaker 5: a tenth of a percent, ten Your treasure Reel down
20:26
Speaker 5: one basis point at four point one point one seven percent,
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Speaker 5: and oil down nearly eight percent today trading right around
20:33
Speaker 5: eighty seven dollars a barrel. Several travel stocks continue to
20:38
Speaker 5: take a hit as a result of the recent surge
20:40
Speaker 5: in energy costs. United American Delta all down anywhere between
20:44
Speaker 5: two and three percent, while Carnival stock also down by
20:47
Speaker 5: over two percent. Meanwhile, Hewlett Packard Enterprise shares are off
20:51
Speaker 5: one percent after the tech company posted mixed quarterly results,
20:54
Speaker 5: beating earnings expectations but narrowly missed on revenue. The server
20:58
Speaker 5: and cloud software provide did, however, raise its earnings outlook
21:02
Speaker 5: as AI and data center developers drove strong demand. Department
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Speaker 5: store chain Coles saw it's quarterly sales drop more than
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Speaker 5: expected despite the company's turnaround effort. However, that stock is
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Speaker 5: jumping eleven percent at the moment. Vail Resorts is flat
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Speaker 5: after the ski resort operator cut its annual guidance blaming
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Speaker 5: tough tough weather conditions in the Rockies, including record low snowfall.
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Speaker 5: And after today's closing bell, all eyes will turn to
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Speaker 5: more AI and tech earnings when Oracle unveils.
21:32
Speaker 1: Its quarterly results.
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Speaker 5: I'm Tucker Silva in that is Wall Street Watch, So.
21:37
Speaker 2: Paul, I'm kind of stuck on this one because I simultaneously,
21:40
Speaker 2: do believe that higher oil prices could be quite problematic
21:45
Speaker 2: and even catastrophic for US markets, the economy, the global
21:49
Speaker 2: economy sinks some areas into recession, should they remain elevated
21:54
Speaker 2: for a prolonged period of time, I think there's a
21:56
Speaker 2: path for that being pretty bad, especially with current inflation
21:59
Speaker 2: expectations built into these markets. At the same time, it
22:03
Speaker 2: seems to me that reporting over higher gas prices is
22:06
Speaker 2: being entirely way too dramatic and going a little bit beyond.
22:11
Speaker 2: We have a couple pieces here, one from CNBC of
22:15
Speaker 2: as the Iran war disrupts oil prices, consumers could be
22:19
Speaker 2: hammered an Economists says, and New York Times saying as
22:22
Speaker 2: war sends gas price is soaring, Americans wins. It's quote
22:26
Speaker 2: harder to exist, So can I. If I'm just going
22:30
Speaker 2: to come out here and say, and this is going
22:32
Speaker 2: to sound maybe a bit insensitive, but if the current
22:35
Speaker 2: scenario of higher gas prices is making it harder for
22:38
Speaker 2: you to exist, then you're being dishonest with yourself because
22:42
Speaker 2: you were already in a disaster financial scenario. If one
22:45
Speaker 2: week of higher gasoline prices is dramatically reshaping your entire
22:49
Speaker 2: financial life. Yes, sorry, that's insensitive, but if you do
22:54
Speaker 2: not have the savings built in to be able to
22:56
Speaker 2: deal with a fifty cent increase in the price of gasoline,
23:00
Speaker 2: then you were all hope is lost prior to I'm
23:04
Speaker 2: sorry that that sounds insensitive. It is insensitive, insensitive, but
23:09
Speaker 2: we just tend to use gasoline prices as a means
23:14
Speaker 2: to express our dissatisfaction with the political situation, the state
23:19
Speaker 2: of society and everything else, and you know, pining for
23:24
Speaker 2: the days of you know, ninety nine cent gas or
23:27
Speaker 2: just the good old days, as we put it, whenever
23:29
Speaker 2: we talk about gasoline prices, and it just it comes
23:32
Speaker 2: across as so disingenuous to me. I've talked to very
23:37
Speaker 2: you know, adamant conservatives who are complaining about gas prices
23:41
Speaker 2: during the Biden administration, who are silent now that they've
23:44
Speaker 2: you know, jumped up during the Trump administration, and obviously
23:47
Speaker 2: the opposite to people who are absolutely silent on gas
23:51
Speaker 2: prices and even talked about how it would be good
23:53
Speaker 2: for the ev industry if gas prices increased, who are
23:57
Speaker 2: obviously complaining left right and center about how gas prices
24:00
Speaker 2: now that they've increased under the Trump administration, and again
24:05
Speaker 2: I get why it is a very front and center
24:08
Speaker 2: price point. It is probably the most influential price point
24:11
Speaker 2: available in our economy today. I think probably more important
24:15
Speaker 2: to the American psyche than groceries.
24:17
Speaker 4: I was going to say they're up there too, but yeah,
24:19
Speaker 4: gasoline is probably I would very.
24:22
Speaker 2: Much argue that, you know, grocery prices are more important there.
24:27
Speaker 4: They don't have the volatility that we've seen. Not to
24:30
Speaker 4: say that they haven't been impacted by inflation significantly over
24:32
Speaker 4: the last four or five years, but outside of eggs.
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Speaker 2: Yeah, I mean, I'd be willing to bet that they
24:37
Speaker 2: have been very volatile. But the problem is, you don't
24:42
Speaker 2: the individual components are volatile, and it's not the the
24:46
Speaker 2: overall that you're used to. And also, you don't shop
24:50
Speaker 2: for a full basket of groceries every single day, whereas
24:53
Speaker 2: you probably come close to seeing gas prices every single day.
24:58
Speaker 2: As a component of inflation, like food and beverages make
25:02
Speaker 2: up fifteen percent of the overall you know inflation basket
25:09
Speaker 2: that we measure according to CPI, whereas gasoline prices, let's
25:12
Speaker 2: mean three to four let me see it.
25:15
Speaker 4: I know shelter is another third.
25:17
Speaker 2: It factors into transportation costs, which are a big chunk,
25:20
Speaker 2: but gasoline is like four percent, home heating oils another
25:24
Speaker 2: couple percent. So as a percentage of the importance, it's
25:28
Speaker 2: not there. But as a percentage of the importance.
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Speaker 4: To the sciological waiting is far high career but drives
25:34
Speaker 4: me crazy on some of these pieces. To your point
25:36
Speaker 4: is they write how these individuals are impacted, and I
25:40
Speaker 4: get what they're trying to do. They're trying to get
25:42
Speaker 4: the pulse of the nation as to people from different
25:44
Speaker 4: areas and how it's impacting their lives. But when they
25:47
Speaker 4: put out the a tank of gas typically costs, you know,
25:50
Speaker 4: Luke from Clint, New Jersey, thirty two dollars, but on
25:53
Speaker 4: Monday he said he paid forty three dollars.
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Speaker 2: It's like, yes, you couldn't deal with an eleven dollars
25:58
Speaker 2: surge in your energy.
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Speaker 4: Well, I don't want to judge Luke in his situation,
26:02
Speaker 4: but yes, thank you New York Times. Gas prices have
26:05
Speaker 4: gone up, and they write seven stories about these people
26:08
Speaker 4: who have impacted it. And you can summarize this whole
26:11
Speaker 4: thing by saying gas prices have gone up here are
26:14
Speaker 4: seven examples of people who are paying more. But like
26:17
Speaker 4: it drives to the same thing. Yes, things, things are
26:20
Speaker 4: more expensive now I would have I do have some
26:23
Speaker 4: more sympathy. We've talked about consumers, but businesses it's a
26:27
Speaker 4: different deal.
26:28
Speaker 3: If you're putting in.
26:29
Speaker 4: Diesel fuel to trucks that you have for a landscaping
26:33
Speaker 4: business or something like that, Yeah, it's a wider cost,
26:37
Speaker 4: you know, implementation to the whole thing. But that is
26:41
Speaker 4: just a blip. Like you said, it's one week, it's
26:43
Speaker 4: not a six month period.
26:45
Speaker 2: Here's why energy prices, oil prices specifically actually do matter
26:49
Speaker 2: beyond politics and just societies. You know, views on the
26:57
Speaker 2: state of inflation in the economy, oil prices, you can
27:02
Speaker 2: look at it. You know, absolutely oil prices do contribute
27:05
Speaker 2: to overall inflation. You know, there's been some who've commented that,
27:10
Speaker 2: you know, ten percent move in energy prices oil prices
27:13
Speaker 2: can result in a one percent move in overall inflation.
27:16
Speaker 2: It takes a little bit of time to get there,
27:17
Speaker 2: but if sustained, it can. You know, price shocks on
27:20
Speaker 2: the oil front can lead to higher overall inflation. The
27:25
Speaker 2: reason that is so problematic in my view for markets
27:29
Speaker 2: specifically like it's problematic for anybody seeking re election this November,
27:34
Speaker 2: but that's not really my purview. My purview is why
27:37
Speaker 2: it might be problematic for markets. Investors this year going
27:41
Speaker 2: into twenty twenty six had concerns about private credit, they
27:45
Speaker 2: had concerns about AI, but overall they were anticipating that
27:49
Speaker 2: inflation would continue to slow down and interest rates would decline.
27:55
Speaker 2: If that assumption or presumption, whichever one it is, gets
28:00
Speaker 2: flipped on its head and instead you have oil prices surging,
28:04
Speaker 2: I don't think it's going to cause the FED to
28:06
Speaker 2: hike interest rates. I don't think a new FED chair
28:10
Speaker 2: because Powell's going to be out by this later this spring,
28:12
Speaker 2: Kevin Warsh moves in. I don't think he's going to
28:14
Speaker 2: look at energy prices and say we need to hike
28:18
Speaker 2: interest rates in order to control overall inflation because of.
28:22
Speaker 3: An oil price shock.
28:23
Speaker 2: That's just not to be not likely to be an
28:25
Speaker 2: outcome based on everything he's said so far. But he's
28:30
Speaker 2: certainly going to have a much tougher time convincing eleven
28:33
Speaker 2: other voting members of the FED to lower interest rates
28:36
Speaker 2: in the face of higher gas prices. And by the way,
28:40
Speaker 2: it's not just the prices that you're paying themselves, it's
28:42
Speaker 2: people's expectations about prices in the future. We talked about
28:46
Speaker 2: how front and center gas prices are and how they
28:49
Speaker 2: influence people's views of the economy. If you start to
28:52
Speaker 2: have polls showing yeah, the average American thinks inflation is
28:55
Speaker 2: going to be three and a half or four percent
28:57
Speaker 2: over the next twelve months instead of two percent, that's
29:00
Speaker 2: going to influence FED members too. And so as we
29:02
Speaker 2: think this all through, there are disaster scenarios for oil,
29:06
Speaker 2: for shortages, for.
29:07
Speaker 3: The global economy. All of that could be really problematic.
29:10
Speaker 2: Even in a scenario though where it's relatively mute and
29:12
Speaker 2: it just means higher oil prices for the rest of
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Speaker 2: this year, that too could be very problematic for interest rates,
29:19
Speaker 2: mortgage rates, the housing market this spring, and even the
29:22
Speaker 2: development of AI data centers and all the borrowing that's
29:25
Speaker 2: required to fund all of that. So it is very interconnected.
29:29
Speaker 2: And I hate to be insensitive to the stories that
29:34
Speaker 2: are being reported about gas prices surging over the last week.
29:37
Speaker 2: I know that it eats into people's budgets, but it's
29:40
Speaker 2: been a week. Let's see where this thing goes before
29:43
Speaker 2: jumping to the conclusion that people are going to lose
29:45
Speaker 2: their homes due to gas prices, which is the tone
29:48
Speaker 2: of the articles that I keep seeing. Let's take a
29:50
Speaker 2: quick break when we come back. Markets have obviously been
29:54
Speaker 2: buffeted by all sorts of different stressors, nonetheless sitting very
29:58
Speaker 2: close to all time highs. Let's talk talk about what's
30:00
Speaker 2: been impacting markets, what might be turning it one way
30:02
Speaker 2: or the other.
30:03
Speaker 3: That's next on the Financial Exchange.
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30:07
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30:35
Speaker 2: All right, Paul, Well, once again, market's kind of bouncing
30:38
Speaker 2: all around here.
30:39
Speaker 3: S and P.
30:39
Speaker 2: Five hundred up one fifth of a percent after being
30:42
Speaker 2: down when we opened up the show at ten am.
30:46
Speaker 3: Again the I.
30:47
Speaker 2: Think important context here and in spite of any and
30:52
Speaker 2: all concerns that investors have had the all time high
30:55
Speaker 2: on the S and P. Five hundred was reached. Back
30:58
Speaker 2: in late January, we hit seven thousand on the S
31:04
Speaker 2: and P five hundred at some point in there. We're
31:07
Speaker 2: currently at sixty eight eleven. It barely budged from those
31:11
Speaker 2: all time highs. And I think what's interesting about that
31:13
Speaker 2: to me is again taking a step back from the
31:16
Speaker 2: war in a round, which is just the latest shake
31:18
Speaker 2: up in markets. We had the Vibe Coding events of
31:24
Speaker 2: I think early February maybe late January, where Anthropics release
31:28
Speaker 2: of a new software of a new AI assistant and
31:32
Speaker 2: agent allowed people to code and develop software on a
31:36
Speaker 2: much faster basis and much easier.
31:38
Speaker 3: Than was known previously.
31:40
Speaker 2: You had more and more concern about private credit markets,
31:45
Speaker 2: credit markets generally and the amount of borrowing that giant
31:48
Speaker 2: tech companies would be doing, combined with cracks in the
31:52
Speaker 2: foundation of private credit, and then this event is just
31:54
Speaker 2: the latest of them.
31:56
Speaker 3: And any and all of these have.
31:58
Speaker 2: Caused short term archiparel, but largely what we've been seeing
32:02
Speaker 2: is just kind of a reshuffling of where investors put
32:05
Speaker 2: their risky assets rather than a flee towards safety. And
32:11
Speaker 2: maybe that's normal, maybe it's not, but I'm curious, you
32:14
Speaker 2: know where we should look at this market right now
32:17
Speaker 2: because it's basically dealt with new stress point after new
32:22
Speaker 2: stress point and remained relatively healthy, at least from the
32:25
Speaker 2: headline numbers.
32:26
Speaker 4: Yeah, it seems like it has just been really resilient
32:29
Speaker 4: in the face of all this, and it seems to
32:31
Speaker 4: your point that investors have been more focused on shifting
32:36
Speaker 4: around the sectors that they're investing in and investing in
32:40
Speaker 4: other errors that they think will be less impacted from
32:44
Speaker 4: the ongoing concerns. Whether that may be piling more into
32:47
Speaker 4: energy stocks as some of the commodity prices and all
32:50
Speaker 4: the oil stuff we've talked about, whether it's de emphasizing
32:54
Speaker 4: some of the big tech exposure from the Magnificent Seven
32:57
Speaker 4: that have been really at the forefront of all of
32:59
Speaker 4: the stock market growth that we've seen the last few years.
33:03
Speaker 4: And that's reflected in a thing that we've talked about
33:06
Speaker 4: during the program in the last few months is that
33:08
Speaker 4: the S and P five hundred in general year to date,
33:12
Speaker 4: I had last seen it yesterday, we were off maybe
33:14
Speaker 4: a half percent on the year. With some of the
33:18
Speaker 4: market action today, we may be relatively flat, but there's
33:21
Speaker 4: been some sectors of business that have fared far better,
33:25
Speaker 4: and that really has sort of epitomized this year is
33:28
Speaker 4: sort of a shuffling of the decks and focusing on
33:30
Speaker 4: areas that were perhaps under invested or not focused on
33:33
Speaker 4: as much previously. The same thing applied with international markets.
33:37
Speaker 4: Obviously those inflows have weakened a little bit recently, but
33:42
Speaker 4: just the shell game of rotation that really has marked
33:45
Speaker 4: the first few months of the year of investors not
33:48
Speaker 4: selling off to cash necessarily, but finding other places to
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Speaker 4: put their money.
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Speaker 2: You'd be forgiven if you forgot given the events over
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Speaker 2: the course of this year, but President Trump is due
35:13
Speaker 2: to meet with Chinese leader Shijing Ping for a high
35:16
Speaker 2: stakes visit in Beijing from March thirty first through April second,
35:20
Speaker 2: which will be here before we know it. In spite
35:23
Speaker 2: of everything going on, it appears that this meeting will
35:25
Speaker 2: be occurring, and it's going to be occurring with the
35:28
Speaker 2: backdrop of big, big tariff changes obviously here domestically, so
35:33
Speaker 2: prior to I don't even know where the average effective
35:36
Speaker 2: tariff rate was on Chinese goods prior to the Supreme
35:38
Speaker 2: Court's actions, But I just know the broader one at
35:41
Speaker 2: this stage Chinese. You know, tariffs on Chinese made goods
35:45
Speaker 2: have come down to that ten percent global tariff rate
35:48
Speaker 2: that the President has put in temporarily here, which puts
35:52
Speaker 2: China on a level playing field with just about every
35:55
Speaker 2: other nation.
35:55
Speaker 3: In the world.
35:56
Speaker 2: And so what I expect is happening barely have data
36:00
Speaker 2: on yet, is a rush of orders from China into
36:03
Speaker 2: the United States. Probably exports from China picking up dramatically,
36:07
Speaker 2: Probably going to benefit the Chinese economy a bit, as
36:10
Speaker 2: this is again where the Chinese economy is built off of,
36:14
Speaker 2: is their manufacturing hub and their ability to export all
36:17
Speaker 2: across the globe. But I am very curious as to
36:22
Speaker 2: where this meeting might go. It seems that the longer
36:26
Speaker 2: time goes on, the less tariffs and a push from
36:30
Speaker 2: the Trump administration on China is not quite as front
36:35
Speaker 2: and center as it was last year. And given the
36:37
Speaker 2: Supreme Court's actions, one I hesitate to see why China
36:41
Speaker 2: would agree to any sort of trade deal with the
36:43
Speaker 2: United States right now, other than hey, you keep buying
36:46
Speaker 2: our stuff and we'll still keep sending you some rare
36:49
Speaker 2: earth materials. So I guess curious what this summit will
36:53
Speaker 2: really set up for. I think best case scenario is
36:57
Speaker 2: you have status quo in terms of the relationship and
37:00
Speaker 2: very little movement in one direction or another.
37:02
Speaker 4: Yeah, it's probably the other biggest geopolitical risk that is
37:07
Speaker 4: out there outside of the stuff that we've been talking
37:09
Speaker 4: about more recently with the war with Iran. But any
37:14
Speaker 4: sort of status quo or perhaps improvement on relations it
37:18
Speaker 4: would be something that would be positive from a market
37:21
Speaker 4: in market standpoint. Fascinating how it will be fascinating to
37:25
Speaker 4: see rather what the export numbers look like from China,
37:28
Speaker 4: Mike in the March and April months here or however
37:31
Speaker 4: long these ten percent tariffs are in place, because I
37:33
Speaker 4: do think you're going to see the similar to what
37:36
Speaker 4: we saw in what have would have been I guess
37:38
Speaker 4: that was Q one of twenty four, where there was
37:41
Speaker 4: just an influx of a significant amount of imports. Probably
37:45
Speaker 4: likely to see the same thing would be Q one.
37:49
Speaker 2: Five twenty five, right, Yeah, precisely as the anticipated tariffs
37:54
Speaker 2: hadn't yet come about. We've got to take a quick
37:57
Speaker 2: break here, but markets have surgeon to positive terear toy
38:00
Speaker 2: with the Dow up two hundred and thirty four points
38:02
Speaker 2: now half percent, in the Nasdak leading the way up
38:04
Speaker 2: one hundred and thirty three points, six tenths of a percent.
38:07
Speaker 2: We will be right back here on the financial exchange