Latest / The Financial Exchange Show / An unsteady economy hasn’t shaken retail investors’ optimism about the stock market

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An unsteady economy hasn’t shaken retail investors’ optimism about the stock market · The Financial Exchange Show

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Speaker 1: and Paul Lane.
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Speaker 2: Morning, and welcome back here to the Financial Exchange. The
1:14
Speaker 2: wild ride on Wall Street is continuing this morning, and
1:18
Speaker 2: I think to contextualize everything, it helps to go back
1:20
Speaker 2: to yesterday after noon, when we were still digesting the
1:26
Speaker 2: potential retaliation from Iran on the US air strikes on
1:30
Speaker 2: nuclear sites in Iran.
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Speaker 3: We saw around one.
1:33
Speaker 2: Pm Eastern time in the US that Iran struck a
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Speaker 2: US base in Qatar. It was unclear at the moments
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Speaker 2: just how severe a strike it was. We learned a
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Speaker 2: few hours later that it was not a terribly meaningful strike.
1:48
Speaker 2: Guitar Air Defense has successfully struck down any of those
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Speaker 2: missiles heading Ford there found out later. I believe that
1:55
Speaker 2: after noon that Iran had pretty much forecast and tipped
1:59
Speaker 2: their hand on the fact that the strike was coming,
2:02
Speaker 2: and so later that evening a ceasefire was announced by
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Speaker 2: the President, not really confirmed by Iran or Israel. They
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Speaker 2: seemingly both broke the ceasefire, but in the moment today
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Speaker 2: at least, it seems that they each broke the ceasefire.
2:21
Speaker 2: But there has not been a continued shelling or continuation
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Speaker 2: of escalation here between Israel and Iran since the announcement,
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Speaker 2: and so for the moment, markets are off to the races.
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Speaker 2: It's Mike, Paul and Tucker with you this Tuesday morning.
2:36
Speaker 2: In terms of market action, yesterday afternoon as well, you
2:39
Speaker 2: had oil prices rapidly down six or seven percent in trading.
2:43
Speaker 2: You had stocks rally yesterday, and we're seeing a continuation
2:47
Speaker 2: of that two days. So we've got West Texas crude
2:50
Speaker 2: prices sitting at about sixty five dollars per barrel. That's
2:54
Speaker 2: down more than four percent on this seeming good news.
2:58
Speaker 2: As a reminder, they were ten dollars a barrel higher
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Speaker 2: just you know Friday of last week. We have the
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Speaker 2: S and P, five hundred, Dow and Nasdaq all in
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Speaker 2: positive territory, with the NAZAC as is typical on a
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Speaker 2: day like this leading the way higher. And in the
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Speaker 2: bond market, we've got yields kind of recovering from where
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Speaker 2: they were yesterday, not moving a whole lot, but the
3:20
Speaker 2: ten year treasure you're yield moving up slightly to four
3:23
Speaker 2: point three three six percent. It seems at this moment
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Speaker 2: that again things are certainly calmer than they were Sunday night.
3:35
Speaker 2: We seem to be in a place where there's a
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Speaker 2: possibility at least of a continued cease fire, a continued
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Speaker 2: de escalation, and a move to some degree of normalcy
3:49
Speaker 2: across the Middle East. But again, I think everyone's kind
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Speaker 2: of waiting with baited breath here because it's really unclear.
3:56
Speaker 2: You know, why did Iran strike Israel after the ceasefire
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Speaker 2: was announced? Was that actually approved by the highest levels
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Speaker 2: in Iran? Are there factions within Iran that are not
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Speaker 2: agreeing to all of this and wanting to escalate things further?
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Speaker 2: Do Frankly, Iran's ability to conduct a traditional war is
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Speaker 2: not great, and so will you see other things such
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Speaker 2: as you know, terrorism attacks in different parts of the
4:23
Speaker 2: world as a result of all of this, and so
4:25
Speaker 2: a lot of unanswered questions at this moment. I wouldn't
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Speaker 2: say that the Iranian regime is in a very stable
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Speaker 2: position at the moment. There are hardliners that want them
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Speaker 2: to rush to develop a nuclear weapon. There are obvious,
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Speaker 2: you know, all sorts of factions within that country at
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Speaker 2: the moment, and so I think for the moment, at
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Speaker 2: least equity investors have been correct. They've kind of seen
4:48
Speaker 2: through all of this and said, hey, this isn't going
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Speaker 2: to be the thing that sucks all of the oxygen
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Speaker 2: out of the room, and for the moment at least,
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Speaker 2: that is the path that we were on. But I
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Speaker 2: think we are probably going to need to talk about
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Speaker 2: this for the next several weeks and potentially longer as
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Speaker 2: this all gets sorted out.
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Speaker 4: Yeah, you hit a lot of the major points there
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Speaker 4: in terms of the impact on the energy markets and
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Speaker 4: also just some of the uncertainty that we have in
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Speaker 4: confirming some of the cease viral reports. Here the timeline,
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Speaker 4: it seems like so much has happened just within a
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Speaker 4: span of twenty four hours, But it does seem like
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Speaker 4: from a market perspective, you don't tend you don't have
5:27
Speaker 4: a tremendous amount of volatility. If you look at the VIX,
5:31
Speaker 4: which is kind of the fear gauge that's used by
5:35
Speaker 4: the stock market in order to gauge just the volatility
5:38
Speaker 4: associated with it, we sit at a level that is
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Speaker 4: very much in line as to where we've been over
5:45
Speaker 4: the course of the last couple months. We saw a
5:48
Speaker 4: tremendous amount of more volatility in early April, you know,
5:52
Speaker 4: along the tariff announcements, and this has been paled in
5:56
Speaker 4: comparison in terms of the market volatility that we've seen
6:00
Speaker 4: in a reaction to all this news.
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Speaker 3: So, I don't know.
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Speaker 2: I think there are still a ton of outstanding questions.
6:05
Speaker 2: Can the government of the Islamic Republic of Iran retain
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Speaker 2: power in Iran? Can they fend off threats to their power?
6:13
Speaker 2: Will Israel stand for them retaining power? Or will they
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Speaker 2: push for regime change? This is you know, a party
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Speaker 2: that has since the Iranian Revolution of nineteen seventy nine
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Speaker 2: called for the downfall of Israel. From what I understand,
6:26
Speaker 2: they have a counting clock of when the country of
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Speaker 2: Israel will will fall. I think they had a prophecy
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Speaker 2: that was done in like twenty forty.
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Speaker 3: Like.
6:36
Speaker 2: This is still a key enemy of Israel, and you
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Speaker 2: know they are in a moment of weakness. So does
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Speaker 2: Israel push for regime change? Does the US participate in that?
6:46
Speaker 2: And will there be some more back and forth or
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Speaker 2: will we head for this de escalation? I think remains
6:51
Speaker 2: an open question. But for the moment, investors taking a
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Speaker 2: big sigh of relief here and for the moment at
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Speaker 2: least saying, hey, this this is not going to escalate
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Speaker 2: as as badly as it could have in terms of
7:06
Speaker 2: the worst case scenarios such as the closing of the
7:08
Speaker 2: strait of Horn moves and just the flow of energy
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Speaker 2: across the world. Anything else from either of via Paul
7:14
Speaker 2: or Tucker on the subject, anything that we missed that
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Speaker 2: I think is relevant. Again, you don't tune into the
7:19
Speaker 2: Financial Exchange to get the latest and greatest up to
7:22
Speaker 2: date on the geopolitical strikes and you know, war tensions
7:27
Speaker 2: between these two. But in terms of the economic fallout,
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Speaker 2: it has been very light. The market fallout has been
7:34
Speaker 2: very small. The biggest thing you can point to is
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Speaker 2: that move and energy prices, which are already correcting themselves
7:39
Speaker 2: to a large degree this morning exactly.
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Speaker 4: I mean, that's what we have to hit leanon, or
7:43
Speaker 4: at least all lean on. Core competency is more focusing
7:46
Speaker 4: on the market and economic impacts. And the area that
7:51
Speaker 4: was of most focus was the energy market, and like
7:54
Speaker 4: you said, a lot of that pricing changes have subsided.
7:57
Speaker 4: And we'll talk a little bit more about, you know,
8:00
Speaker 4: the call for more production and some of those other
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Speaker 4: impacts on the energy market you know later in the show.
8:05
Speaker 2: Here Jerome Powell is reaffirming his weight and see approach
8:09
Speaker 2: in front of Congress. Now he's in front of congressional hearings,
8:14
Speaker 2: and there seemed to be a bit of an emerging
8:17
Speaker 2: rift between Jay Powell some other members of the Federal Reserve.
8:23
Speaker 2: Rifts within the Federal within the FED are always very polite,
8:28
Speaker 2: so you don't see these coming immediately to the forefront.
8:31
Speaker 2: But I want to talk a little bit more about
8:32
Speaker 2: Jay Powell and the FED next here on the Financial Exchange.
8:36
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9:12
Speaker 2: As we sit today, the national unemployment rate is sitting
9:15
Speaker 2: at four point two percent for the last twelve months.
9:18
Speaker 2: The consumer price index is clocked in at two point
9:21
Speaker 2: four percent. The core components of what the FED looks
9:26
Speaker 2: at for their measures of the economy are approximately imbalanced.
9:32
Speaker 2: And that's what you're going to hear from Jerome Powell.
9:34
Speaker 2: That's what Congress is going to hear as he speaks
9:37
Speaker 2: at the moment regarding the state of the economy amidst
9:41
Speaker 2: a few different things going on for the FED. One,
9:44
Speaker 2: you know, sharp criticism from the President, although I don't
9:46
Speaker 2: think it's any sharper today than it was a few
9:49
Speaker 2: months ago when he's been calling for rate cuts all year,
9:52
Speaker 2: as well as a bit of a division within the FED.
9:54
Speaker 2: And that division within the FED is among two members
9:57
Speaker 2: Waller and Bowman who have been calling publicly for rate
10:02
Speaker 2: cuts now that the quiet period is open, I'm going
10:05
Speaker 2: to actually position this as I don't think this rift
10:08
Speaker 2: matters quite honestly.
10:11
Speaker 3: So these are two you know the.
10:12
Speaker 2: Federal Reserve, if you're unaware, they do everything via a
10:17
Speaker 2: governing body.
10:18
Speaker 3: It's you know, done via votes.
10:20
Speaker 2: The chairperson is the speaker and does all the press
10:23
Speaker 2: conferences and he's the one you hear from.
10:24
Speaker 3: But it's done via vote, and.
10:27
Speaker 2: The FED chair is generally looked at the person who
10:30
Speaker 2: you know, gets everybody in line. They like to act
10:34
Speaker 2: unanimously when they can because it, you know, sends a
10:37
Speaker 2: really clear message on you know, where the economy is.
10:41
Speaker 2: There's starting to be that division and quite Honestly, why
10:45
Speaker 2: I don't think it matters is One, everything's done via
10:49
Speaker 2: vote and these two are seemingly in the minority at
10:52
Speaker 2: the moment. Two, I think a lot of it's just
10:54
Speaker 2: posturing and trying to get themselves into that chair position,
10:59
Speaker 2: or at least to be a candidate for that chair
11:01
Speaker 2: position when Jay Powell's term comes up in May. And
11:03
Speaker 2: quite honestly, I don't think Jay Powell will be terribly
11:06
Speaker 2: disappointed with either of these two candidates taking the role
11:09
Speaker 2: of chair come May twenty twenty five. They are both
11:12
Speaker 2: well educated people that he has worked with. I don't
11:15
Speaker 2: think that they have butted heads. I think that he
11:16
Speaker 2: would be quite content if one of these two, who
11:19
Speaker 2: are existing CHAID FED governors, gets appointed as chair. Maybe
11:24
Speaker 2: I'm wrong, maybe I'm misreading the politics, but I think
11:27
Speaker 2: that would be far more appealing to him than say
11:31
Speaker 2: Scott Besseno or another person who is you know, close
11:34
Speaker 2: to the administration who might be more of a parrot
11:38
Speaker 2: in his mind.
11:39
Speaker 3: So yeah, we'll see.
11:40
Speaker 4: President Trump has called for, you know, the lowering of
11:42
Speaker 4: rates several times, and the term is up for Jerome
11:46
Speaker 4: pal May of twenty twenty six, so those looking to
11:50
Speaker 4: sort of nestle in to try and take over that
11:53
Speaker 4: appointment that will come available next year. It would make
11:56
Speaker 4: sense that, first of all, these two were both appointed
11:59
Speaker 4: by President Trump in his first term in office. And secondly,
12:03
Speaker 4: it would make sense for them to at least in
12:05
Speaker 4: a measured manner, echo some of his sentiments for the
12:09
Speaker 4: calls for lower rates. And that's what they've done over
12:12
Speaker 4: the course of the last couple of days is come
12:14
Speaker 4: out and support this idea of lowering rates from a
12:18
Speaker 4: future's perspective. We talked about this a little bit on
12:21
Speaker 4: the show yesterday. The next FED meeting isn't until the
12:24
Speaker 4: end of July, July thirtieth. At the moment, according to
12:28
Speaker 4: the CME Probabilities Market, it seems as if there is
12:32
Speaker 4: a very slim likelihood less than twenty percent chance that
12:36
Speaker 4: we would see a rate cut in July. It seems
12:39
Speaker 4: more likely that in the middle of September we would
12:43
Speaker 4: see that first rate cut.
12:45
Speaker 2: There's two kind of interesting things to me about the
12:48
Speaker 2: FED right now in the position that they're in. One is,
12:51
Speaker 2: I've thought about this quite a bit, and I'm more
12:53
Speaker 2: convinced now than ever that were Terrists not in place,
12:57
Speaker 2: were they not sucking up a lot of the oxygen
12:59
Speaker 2: in the room. I do believe that the FED would
13:01
Speaker 2: have already been cutting rates. Chuck and I kind of
13:04
Speaker 2: disagree on this, but I've kind of come to the
13:06
Speaker 2: conclusion that FED probably would have been cutting rates at
13:09
Speaker 2: the most recent meeting in the absence of these tariff
13:14
Speaker 2: escalations and threats on the horizon, because the data has
13:17
Speaker 2: been quite honestly good. You know, the unemployment rate has
13:21
Speaker 2: been low, the inflation data has been unremarkable, right, And
13:27
Speaker 2: so I do think that the FED would have been
13:29
Speaker 2: cutting in the absence of the threat.
13:31
Speaker 4: Of understand why he would disagree with that, because if
13:33
Speaker 4: you look at what the rates were trending at at
13:36
Speaker 4: the end of twenty twenty four, that's basically the direction
13:38
Speaker 4: they were going in.
13:39
Speaker 2: It was, but they had announced a very big pause
13:41
Speaker 2: towards the end of the year. They were going to
13:42
Speaker 2: pause regardless of the tariff outcome, right, And so you know,
13:46
Speaker 2: the terriffs came as a surprise, and so I think
13:48
Speaker 2: that they were likely to pause for a few months.
13:50
Speaker 2: Regarding the cuts anyway, it's just a question of when
13:53
Speaker 2: did they pick back up. And in either case, it's
13:55
Speaker 2: a mood point, because tariffs are in place, they do matter,
13:58
Speaker 2: and the counterfactual is not a useful exercise. Where I
14:03
Speaker 2: do think it's helpful is look, if you don't start
14:05
Speaker 2: to see the inflationary impact show up in the data
14:09
Speaker 2: within the next few months here, that is pretty clear
14:11
Speaker 2: what the Fed should do.
14:12
Speaker 3: They should cut rates.
14:14
Speaker 2: We'll be speaking with embry Kante in the second hour
14:17
Speaker 2: of the show today. She actually tracked the pricing on
14:20
Speaker 2: forty different wirecutter picks for the last sixty days in
14:23
Speaker 2: terms of where prices went partially in response to tariffs here.
14:27
Speaker 2: So I'm mentioned interested to hear from her on some
14:30
Speaker 2: of this stuff. But by and large, we have not
14:32
Speaker 2: seen the massive price increases across the board that people
14:35
Speaker 2: were worried about, and so where is that being eaten up?
14:39
Speaker 2: Is an interesting question. The piece that I'm interested in
14:43
Speaker 2: as a second part of this, which I don't hear
14:45
Speaker 2: anyone really talking about to this point, is are we
14:49
Speaker 2: going to start to see labor market pressure from the
14:53
Speaker 2: combination of these tariffs as well as immigration policy.
14:58
Speaker 3: Yeah, I've heard people.
14:59
Speaker 2: Write about I've seen, you know, hotel industry groups talk
15:04
Speaker 2: about the fact that they can't find labor.
15:06
Speaker 3: I've heard that construction is.
15:07
Speaker 2: Going to be a problem, but quite honestly, I haven't
15:10
Speaker 2: seen it shown up any show up anywhere right right, Like,
15:13
Speaker 2: I have somebody doing work on my house right now,
15:16
Speaker 2: and I haven't heard them say, hey, you know, can't
15:18
Speaker 2: come this week because we don't have the guys to
15:20
Speaker 2: do it. I haven't heard from you know, hospitality groups
15:24
Speaker 2: on the Cape that hey, we can't find the labor
15:26
Speaker 2: to fill these jobs right now.
15:27
Speaker 3: So I'm not seeing it yet.
15:30
Speaker 2: But at the same time, I am hearing from.
15:32
Speaker 3: A lot of those people that they're worried about it.
15:34
Speaker 2: And so where I mean that could show up would
15:38
Speaker 2: be we we have this mismatch, you know. You go
15:40
Speaker 2: take a look, for instance, at the Massachusetts unemployment rate,
15:43
Speaker 2: which bumped up in the month of May to four
15:46
Speaker 2: point eight percent. The national unemployment rates at four point
15:49
Speaker 2: two percent right now. That speaks to this mismatch in
15:52
Speaker 2: the labor market of hey, we have a need for
15:56
Speaker 2: all these sorts of services and manufacturing jobs in mass
16:00
Speaker 2: choose sits. We have the highest rate of college education
16:04
Speaker 2: in the country, and the hiring market for white collar
16:07
Speaker 2: jobs has been weak. That's what's been you know showing
16:11
Speaker 2: up in the weakness in the labor market. Do you
16:14
Speaker 2: actually start to have some tightness in the labor market
16:16
Speaker 2: in the second half of this year due to immigration policy,
16:19
Speaker 2: and could that prevent the FED from cutting rates. I
16:22
Speaker 2: have my doubts, but it is a possibility.
16:25
Speaker 4: That's what's been the hardest piece of all this is
16:28
Speaker 4: the recurring sentiment that you get from looking at Fortune
16:31
Speaker 4: five hundred companies and even small businesses as well, is
16:35
Speaker 4: that they have been under a sort of freezing of
16:39
Speaker 4: capital expenditures. There has been not a tremendous amount of
16:42
Speaker 4: focus on building new factories or hiring new employees. It
16:46
Speaker 4: has very much been keep stasis, keep the same job level,
16:49
Speaker 4: and not layoff people, but also not hire. And to
16:53
Speaker 4: your point, it has it's been hard for me to
16:57
Speaker 4: try and look through any of the labor data that
16:59
Speaker 4: we get and conclusively say that the labor market is
17:02
Speaker 4: far worse than it was heading into this year. Now
17:05
Speaker 4: there are cracks that we've hit on professional services, white
17:08
Speaker 4: collar jobs, college graduates having difficulty finding jobs, but these
17:12
Speaker 4: are all more minor pieces. The headline numbers still haven't
17:17
Speaker 4: budged tremendously. There's been some revisions on some jobs reports
17:20
Speaker 4: that we've seen where initially they indicated higher editions of
17:24
Speaker 4: jobs and then those were revised back after But that
17:28
Speaker 4: has been challenging, as well as the cost increase, which
17:31
Speaker 4: we'll get into in the second hour. It's been frustrating
17:34
Speaker 4: to not get numbers to back up what sentiment has
17:37
Speaker 4: been for it feels like the last two months.
17:39
Speaker 2: Here The New York Times is reporting along these lines,
17:42
Speaker 2: not directly with immigration, but speaking to the manufacturing boom
17:46
Speaker 2: in this country that could be to come and just
17:48
Speaker 2: where the labor market sits right now. They interview a
17:51
Speaker 2: few different people in that area. But you know, there's
17:54
Speaker 2: one estimate that's been done according to the Bureau of
17:57
Speaker 2: Labor Statistics, that there are four hundred thousand manufacturing jobs
18:01
Speaker 2: that are currently unfilled. Why are they unfilled? I mean,
18:05
Speaker 2: you can blame a number of different things. I think
18:07
Speaker 2: one of the key ones, as Ron Hettrick and economists
18:12
Speaker 2: with light Cast is quoted saying, quote, we spent three
18:16
Speaker 2: generations telling everybody that if they didn't go to college,
18:19
Speaker 2: they're a loser.
18:20
Speaker 3: Some truth to that. We did spend three.
18:22
Speaker 2: Generations telling everybody that didn't go to college they're a loser,
18:25
Speaker 2: and now we are seeing this mismatch where there's a
18:28
Speaker 2: bunch of college adjudicated kids graduating right now with good
18:32
Speaker 2: degrees from good colleges that can't find jobs and a
18:35
Speaker 2: four hundred thousand employee shortage in the manufacturing world. Baby
18:40
Speaker 2: boomers are retiring from those jobs. They are not easy jobs,
18:44
Speaker 2: and quite honestly, if we want to keep prices down
18:48
Speaker 2: for manufactured goods, those manufacturers can't afford to pay people
18:51
Speaker 2: a whole lot more than you would get at McDonald's.
18:53
Speaker 3: Well.
18:53
Speaker 4: Also, the job is evolving too, where technology is becoming
18:56
Speaker 4: a much more critical part of that field, where you
19:00
Speaker 4: don't have the necessary requisite training from college education or
19:03
Speaker 4: to translate it over. I love the quote here from
19:05
Speaker 4: the CEO of Carrier, which is a huge air conditioner
19:08
Speaker 4: and furnace employer, where they have four hundred and twenty
19:11
Speaker 4: five technicians but need to hire four to five hundred
19:14
Speaker 4: thousand over the next ten years. They're mentioning that for
19:16
Speaker 4: every twenty positions that they have opened, they can only
19:19
Speaker 4: find one qualified candid to match it. And it's always
19:21
Speaker 4: good to hear from someone who's on the ground looking
19:23
Speaker 4: for these types of employees.
19:24
Speaker 2: A lot of work to be done on that side
19:26
Speaker 2: of the labor market. Quick break Wall Street watches next.
19:41
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19:44
Speaker 1: TFE show. Breaking business news is always first right here
19:49
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall Street.
19:54
Speaker 1: Watch a complete look at what's moving market so far
19:57
Speaker 1: today right here on the Financial links Change Radio Network.
20:01
Speaker 5: All markets are well into positive territory after President Trump
20:04
Speaker 5: proclaimed to cease fire between Israel and Iran, now in effect,
20:08
Speaker 5: albeit on chiky ground overnight. Wall Street is also monitoring
20:12
Speaker 5: testimony from FED Chairman Jerome Powell before Congress, occurring right now. Earlier,
20:18
Speaker 5: in prepared remarks, Poll said the Central Bank remains focused
20:21
Speaker 5: on making sure any one time increases in prices from
20:25
Speaker 5: higher terraffs won't turn into an ongoing inflation problem. Right now,
20:30
Speaker 5: the Dow is up by three quarters of a percent
20:33
Speaker 5: or three hundred and twenty one points, SMP five hundred
20:36
Speaker 5: up also three quarters of a percent or forty seven points,
20:40
Speaker 5: and the NAZAC up over one percent higher two hundred
20:43
Speaker 5: and twenty points. We're also two thousand, also up by
20:45
Speaker 5: over three quarters of one percent. Ten year treasure reeled
20:49
Speaker 5: down by one basis point now at four point three
20:51
Speaker 5: zero percent. In crude oil down by five percent today,
20:56
Speaker 5: now trading at sixty five dollars a barrel. With today's
20:59
Speaker 5: drop in oil prices, Exxon Mobile, Occidental Petroleum, and other
21:04
Speaker 5: energy stocks are seeing losses on the day. Defense stocks
21:07
Speaker 5: including Lockheed, Martin, and RTX are dipping as well. Several
21:12
Speaker 5: airlines included United American Delta and Jet Blue r seing
21:15
Speaker 5: gains of anywhere between three and five percent following a
21:18
Speaker 5: drop in oil prices driven by news of the ceasefire. Meanwhile,
21:23
Speaker 5: home builder KB Homestock is down about half of one
21:28
Speaker 5: percent after the company posted lower profit and sales for
21:31
Speaker 5: the previous quarter, resulting in another cut to its annual outlook. Elsewhere,
21:36
Speaker 5: online pet e commerce company Chewy shares are off nearly
21:40
Speaker 5: one percent after our secondary sale of one billion dollars
21:43
Speaker 5: in new Class A shares through JP Morgan. Chew also
21:47
Speaker 5: authorized the repurchase of one hundred million dollars of its
21:50
Speaker 5: stock after rallying eight percent on the heels of its
21:53
Speaker 5: robotaxi launch in Austin over the weekend. Tesla shares are
21:57
Speaker 5: retreating about two percent today, and delivery Giant FedEx sometimes
22:02
Speaker 5: seen as an economic bell. Weather will report earnings after
22:05
Speaker 5: today's closing bell. I'm Tucker Silvan. That's Wallstreet Watch.
22:10
Speaker 2: Wall Street Journal report in Middle East is in turmoil.
22:12
Speaker 2: US frackers see no reason to pump more oil. They
22:16
Speaker 2: were right, very very quick payoff on that, Like funny
22:20
Speaker 2: how that works. Yeah, they were absolutely right twenty four hours. Yeah,
22:25
Speaker 2: oil prices can spike and then crater in twenty four hours,
22:30
Speaker 2: to the tune of ten dollars a barrel in one
22:32
Speaker 2: direction or another. I was asked this question during a
22:36
Speaker 2: Fox twenty five interview yesterday that I was doing, and
22:41
Speaker 2: it was the question of, like, what does it do
22:43
Speaker 2: if oil prices do spike? What does that do to
22:46
Speaker 2: our economy today? Because a lot of us, I think,
22:49
Speaker 2: still have that framework, especially the baby boomer generation, have
22:53
Speaker 2: that framework of what that was like during the nineteen seventies,
22:56
Speaker 2: which was complete and utter economic devastation. Today it's a
23:01
Speaker 2: lot more nuanced, I think, is the answer. And that
23:03
Speaker 2: was kind of how I paraphrase it. And you know,
23:06
Speaker 2: it's irrelevant for the moment because oil prices are back
23:08
Speaker 2: down to sixty five bucks a barrel. But I think
23:11
Speaker 2: most especially those in the oil industry would acknowledge that
23:14
Speaker 2: one hundred dollars barrel oil is not impossible, and you know,
23:17
Speaker 2: a few additional crises anywhere and you can get there.
23:21
Speaker 2: What that actually does to the US economy, though, is
23:24
Speaker 2: really interesting. Around the Northeast. It's devastating, i think, is
23:28
Speaker 2: my answer. Anywhere in the northeast of the United States,
23:32
Speaker 2: where we produced no real oil to speak of, we
23:35
Speaker 2: consume a lot of it because we hate pipelines or
23:40
Speaker 2: other intelligent ways to get energy into the Northeast. We
23:43
Speaker 2: like to ship all of our energy that we use
23:46
Speaker 2: to heat our homes via giant oil tanker or via truck.
23:50
Speaker 3: To your home.
23:52
Speaker 2: And so here in the Northeast, when oil prices spike,
23:55
Speaker 2: if they spiked a one hundred bucks a barrel and
23:58
Speaker 2: gas prices shoot up over four bucks a gallon, it
24:01
Speaker 2: is a big effective tax increase on every resident of
24:05
Speaker 2: the Northeast. You go and you know, explore the premium
24:10
Speaker 2: basin here, and you go talk about where we are
24:11
Speaker 2: in Texas and parts of the Midwest, and it's a
24:16
Speaker 2: very different story. Yes, gas prices shoot up there as well,
24:19
Speaker 2: but the employment opportunities should oil prices get up to
24:23
Speaker 2: one hundred dollars a barrel and stay there for any
24:25
Speaker 2: sort of prolonged period of time are also pretty substantial.
24:29
Speaker 4: The one hundred one that you're using, I know, it's
24:31
Speaker 4: a good round number to use. It is a pretty
24:33
Speaker 4: dramatic example from where we are today. You're right, it
24:36
Speaker 4: spiked that quickly. It would be really difficult. When did
24:40
Speaker 4: it do it last? It did it in twenty twenty two,
24:42
Speaker 4: But the economic circumstances were far different than that time around,
24:45
Speaker 4: in terms of the surge of demand and consumption that
24:47
Speaker 4: we were seeing at that point in time, and the
24:49
Speaker 4: bout of inflation that we were bounding that we hadn't
24:51
Speaker 4: seen in forty years. Goldman Sachs does estimate that a
24:55
Speaker 4: ten dollars a barrel increase in oil prices would low
25:00
Speaker 4: or US GDP growth by zero point one percent. That's
25:03
Speaker 4: one of the numbers that they came out with.
25:05
Speaker 2: You know, yes, I can't even imagine what that would
25:07
Speaker 2: be back in nineteen eighty.
25:09
Speaker 4: Oh, it's got to be far more significant. I mean,
25:11
Speaker 4: to your point, the US is pumping out thirteen point
25:15
Speaker 4: five million barrels a day of US crew to oil.
25:19
Speaker 4: That was a record. It's start it's set to pare
25:22
Speaker 4: down a little bit to thirteen point three million at
25:24
Speaker 4: the end of twenty twenty six, but a far bigger
25:26
Speaker 4: producer than they were back then. And then you also
25:29
Speaker 4: have OPEC it's increased its output a little bit more
25:32
Speaker 4: recently too. So the dynamics in place for you know,
25:37
Speaker 4: any sort of oil shock, barring you know, dramatic action
25:41
Speaker 4: from Iran, it's hard to foresee at this point.
25:44
Speaker 2: Into Yeah, it's also again, you know, volatile circumstances can arise.
25:50
Speaker 2: Oil prices could shoot back up to one hundred dollars
25:53
Speaker 2: a barrel, like you know, any of those things can happen.
25:56
Speaker 2: But the idea of oil prices and gas, you know,
26:00
Speaker 2: prices going up above ninety dollars a barrel and staying
26:03
Speaker 2: there for multiple years, gas prices shooting back up to
26:07
Speaker 2: four dollars and fifty cents a gallon and staying there
26:09
Speaker 2: for three years, it's a little bit more difficult today
26:13
Speaker 2: for me to envision those circumstances. Given US production capability,
26:20
Speaker 2: the ability for fracking to come online really quickly shut
26:25
Speaker 2: back down in reaction to lower prices is pretty revolutionary
26:28
Speaker 2: compared to a traditional oil well. And it just makes
26:33
Speaker 2: me wonder what sort of not short term cap, but
26:37
Speaker 2: long term cap do we have on oil prices in
26:40
Speaker 2: this global economy today, again, absent a World War three
26:45
Speaker 2: type scenario, it's an interesting question today.
26:48
Speaker 4: Well, in the Wall Street Journal here this piece that
26:49
Speaker 4: we're covering Diamonback Energy, which has a tremendous amount of
26:53
Speaker 4: resources for its drilling capabilities in the premium basis era
26:58
Speaker 4: the area. They've mentioned that if it prices got to
27:01
Speaker 4: sixty five dollars a barrel consistently, they would consider pumping
27:04
Speaker 4: more So, just think about that. If they were to
27:06
Speaker 4: go even further than that sixty five dollars, there would
27:09
Speaker 4: be a tremendous amount of capacity to pump out more So.
27:14
Speaker 2: That's not an endless scenario, right. You know, twenty years
27:17
Speaker 2: from now, we're going to be in a very different position.
27:19
Speaker 3: Oh sure.
27:19
Speaker 2: For the moment, yeah, it's really difficult for me to
27:23
Speaker 2: envision a scenario where oil prices get to ninety dollars
27:25
Speaker 2: a barrel and stay there for multiple sustain period time
27:28
Speaker 2: outside of you know, terrible, terrible geopolitical uncertainty. Let's take
27:33
Speaker 2: a quick break. When we come back. I want to
27:35
Speaker 2: come back to the housing market. We've got some new
27:38
Speaker 2: data out on both sales as well as listings. Where
27:42
Speaker 2: are we seeing strength and weakness in the housing market?
27:44
Speaker 2: That's next here on the Financial Exchange.
27:46
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28:40
Speaker 2: Paul, I've got good news and bad news When it
28:43
Speaker 2: comes to markets and investors, what would you like first?
28:46
Speaker 4: You can always go with the bad news first, MIC.
28:48
Speaker 2: So the bad news is that seventy percent of polled investors,
28:53
Speaker 2: according to Finemize, expect global stock markets to grow over
28:56
Speaker 2: the next twelve months. Sixty seven percent expect cryptocurrencies to grow.
29:01
Speaker 2: I don't find that to be notable. That is the
29:05
Speaker 2: highest level of stock market optimism they've well, the highest
29:09
Speaker 2: level of market optimism they've ever registered is between seventy
29:12
Speaker 2: two and seventy four percent. Why I consider that to
29:15
Speaker 2: be bad news is because every time investors start to
29:18
Speaker 2: get really optimistic about where markets are growing, it is
29:22
Speaker 2: a reverse indicator. Typically when when retail investors especially are
29:27
Speaker 2: very bullish on equities, tends to be a very bad
29:30
Speaker 2: indicator for stocks.
29:32
Speaker 3: The good news is.
29:33
Speaker 4: That Accordize, Yes, can we really trust this true?
29:41
Speaker 2: Bank of America actually has a very long term bull
29:44
Speaker 2: versus bears indicator that they publish every once in a
29:46
Speaker 2: while they get a daily reading on it. They only
29:49
Speaker 2: publish it, you know, usually after the fact. So I
29:52
Speaker 2: like that one a little bit better. But it's fair
29:54
Speaker 2: that I've never heard of finomize. I don't know how
29:56
Speaker 2: reliable this data is, but you know, they have data
29:59
Speaker 2: going back to twenty twenty one, and this is pretty
30:02
Speaker 2: high level readings. The better news is that investors seem
30:05
Speaker 2: to be actually cutting back on spending and saving a
30:07
Speaker 2: little bit more in this moment out of concerns about
30:10
Speaker 2: the economy. So that's a bit of good news. But
30:13
Speaker 2: I think the main message that I take from this one,
30:16
Speaker 2: and that I want people to recall, is that when
30:20
Speaker 2: everybody is expecting a really bullish time in markets, remember
30:27
Speaker 2: that that is usually a contrary indicator. When nobody sees
30:31
Speaker 2: any reason for concern, when everything is going perfectly, when
30:35
Speaker 2: equity markets are great and there's no risk on the horizon,
30:39
Speaker 2: is usually when that unforeseen risk comes about. It's great
30:43
Speaker 2: that people are saving a little bit more money and
30:45
Speaker 2: investing with a long term view in mind, but be
30:49
Speaker 2: cautious when everyone is getting greedy and when everyone is
30:52
Speaker 2: really bullish on how things go next, because those tend
30:55
Speaker 2: to be the moments that white people off the map.
30:59
Speaker 2: That said, I know there's a lot of folks over
31:00
Speaker 2: the that I've spoken to personally over the course of
31:02
Speaker 2: the last couple of years, that you may have sold
31:05
Speaker 2: a home, may have taken a break from investing, may
31:09
Speaker 2: have built up some savings that they are trying to
31:11
Speaker 2: figure out, Hey, what do I do with this? Depending
31:14
Speaker 2: on my time horizon, I'm thinking about this as retirement money,
31:17
Speaker 2: or I'm looking at this as my future down payment
31:20
Speaker 2: on a home. How do I go about investing this
31:23
Speaker 2: in an intelligent way that actually has a purpose behind it.
31:27
Speaker 2: If you're falling into that camp, you're sitting on some
31:30
Speaker 2: bucket of assets that you're trying to figure out, Hey,
31:33
Speaker 2: how do I best approach markets at this point in
31:36
Speaker 2: time given what we've seen over the course of the
31:38
Speaker 2: last three years. Give the folks at Armstrong Advisory Group
31:41
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31:44
Speaker 2: of how you're going to utilize the money. To dictate
31:47
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31:49
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31:52
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31:55
Speaker 2: We'd be happy to sit down with you two and
31:57
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32:01
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32:04
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32:07
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
32:09
Speaker 1: registered investment advisor. Nothing in the ad or in any
32:12
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
32:15
Speaker 1: your own financial, tax into state planning advisors before making
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32:22
Speaker 2: So home sales did tick up a bit in the
32:25
Speaker 2: month of May. I think by all accounts, however, the
32:29
Speaker 2: housing market is still just kind of ugly out there
32:33
Speaker 2: in terms of what we are seeing. I've talked about
32:36
Speaker 2: these numbers a few times, but we got updated numbers
32:40
Speaker 2: for the month of April now, excuse me, for the
32:43
Speaker 2: month of May now, and so have additional data on
32:46
Speaker 2: just where the housing market sits on a national level.
32:50
Speaker 2: I always find it interesting to compare the market to
32:53
Speaker 2: right before COVID, because COVID kind of broke everything with
32:56
Speaker 2: the housing market. It caused rates to shoot up, it
32:59
Speaker 2: caused people to move to different places. It was a big,
33:04
Speaker 2: just kind of bifurcation in the overall market. So taking
33:08
Speaker 2: a look state by state here, I was just kind
33:10
Speaker 2: of curious, like, over the course of the last six
33:13
Speaker 2: years now twenty twenty five, back to twenty nineteen, where
33:17
Speaker 2: have we seen the biggest price moves, and so this
33:19
Speaker 2: is just taking a look at the median listing price,
33:22
Speaker 2: not the actual sales price. But some are unsurprising to me,
33:25
Speaker 2: like my Wyoming, Montana, Idaho. These are all states that
33:30
Speaker 2: saw big surges in demand from people saying, hey, you know,
33:34
Speaker 2: I want to spend COVID out in the mountains and
33:37
Speaker 2: you know, breathe fresh air and get out in New
33:39
Speaker 2: York City in LA and spend some time there. So likewise,
33:43
Speaker 2: you know, you saw Wyoming prices up ninety two percent,
33:47
Speaker 2: Montana up eighty Idaho up sixty eight percent. Interestingly here Maine, Vermont,
33:52
Speaker 2: New Hampshire also in those top six lists. So Maine
33:56
Speaker 2: median listing price up eighty six percent over the course
34:00
Speaker 2: the last six years, Vermont eighty two percent, New Hampshire
34:03
Speaker 2: up seventy four percent. Really speaking to the lack of
34:06
Speaker 2: affordability in some of those states, as primarily you know Massachusetts,
34:12
Speaker 2: can I say no, I don't think I can say
34:13
Speaker 2: that word. Massive Chusetts folk moving to Maine, Vermont, and
34:18
Speaker 2: New Hampshire, driving prices up considerably an inventory down considerably
34:23
Speaker 2: across the board.
34:23
Speaker 4: The affordability piece, I mean We've hit on this for
34:26
Speaker 4: years now, but there was this statistic out of the
34:30
Speaker 4: Wall Street Journal piece here where households that were earning
34:33
Speaker 4: over one hundred thousand dollars six years ago. If you
34:37
Speaker 4: looked at all of the listings available back in twenty nineteen,
34:42
Speaker 4: those couples making over one hundred thousand could afford about
34:45
Speaker 4: sixty five percent of the listings that were out on
34:47
Speaker 4: the United States real estate market. You look at that
34:51
Speaker 4: same couple today earning over one hundred thousand, only thirty
34:54
Speaker 4: seven percent of the homes on the market are affordable
34:58
Speaker 4: or would be able to be afforded by that couple
35:00
Speaker 4: earning over one hundred thousand. However you slice it from
35:04
Speaker 4: a metrics perspective, the interest rate increase over that span
35:09
Speaker 4: of time, as well as the price increased mic that
35:11
Speaker 4: you were just hitting on, has made things really challenging.
35:14
Speaker 4: It is interesting to note that's been a more longer
35:17
Speaker 4: term trend, so I think everyone's pretty aware of that
35:19
Speaker 4: at this point, is that we are seeing a lot
35:21
Speaker 4: more inventory on the markets. It does seem like as
35:25
Speaker 4: much as things aren't affordable, it's much more so a
35:29
Speaker 4: buyer's market than it is a seller's market, not some
35:32
Speaker 4: robust you know, everything is twenty percent off buyers market.
35:35
Speaker 4: But there is now one point five to four million
35:38
Speaker 4: homes that are up for sale or under contract. That's
35:41
Speaker 4: up twenty percent from where we were in May of
35:45
Speaker 4: last year. So there are more options out there, and
35:48
Speaker 4: we're also seeing a higher percentage of those listings experiencing
35:52
Speaker 4: price cuts since twenty eighteen.
35:54
Speaker 3: This remains a very concentrated story.
35:56
Speaker 2: But you're right, Paul, so again, even comparing to twenty nine,
35:59
Speaker 2: the big jump in listings compared to last year, even
36:02
Speaker 2: compared to twenty nineteen. Now May of twenty twenty five
36:04
Speaker 2: versus May of nineteen, there's now only thirteen percent fewer
36:08
Speaker 2: listings across the country. We were at like half a
36:12
Speaker 2: few years ago. So this is a pretty substantial improvement
36:16
Speaker 2: from where we have been. However, that regional piece is
36:21
Speaker 2: what's important here. Yes, in DC, the listings have doubled.
36:27
Speaker 2: In Colorado there's thirty four percent more listings than twenty nineteen,
36:31
Speaker 2: Texas thirty two percent, Florida twenty six percent more listings
36:34
Speaker 2: than what we saw back in twenty nineteen. However, here
36:39
Speaker 2: where a lot of people are I'll just take the
36:41
Speaker 2: top ten worst inventory markets in the country. We've got
36:47
Speaker 2: Connecticut seventy three percent fewer homes for sale today than
36:51
Speaker 2: in twenty nineteen, Illinois sixty four percent, fewer, New Jersey
36:56
Speaker 2: sixty three percent, Vermont sixty two percent, Rhode Island and
37:00
Speaker 2: sixty percent. West Virginia fifty four percent, Alaska fifty one percent,
37:05
Speaker 2: North Dakota, New Hampshire, Wisconsin, Maine, Pennsylvania. All of these
37:10
Speaker 2: states are looking at, you know, inventories that are half
37:17
Speaker 2: to a quarter of what they were seeing prior to COVID.
37:22
Speaker 2: And these are also states where, you know, outside of
37:26
Speaker 2: a few of them, you know, I can't say that
37:28
Speaker 2: I have any sort of real expertise on what the
37:30
Speaker 2: building requirements are in West Virginia, but these are primarily
37:35
Speaker 2: markets that are very difficult to build in, and you
37:40
Speaker 2: face a really uphill battle to improve affordability in these
37:45
Speaker 2: states where there just aren't any homes for sale. So
37:50
Speaker 2: interesting to see how this resolves itself. Certainly in certain
37:52
Speaker 2: parts of the country, you can see prices moving down,
37:55
Speaker 2: and we already have I think my guess is that
37:58
Speaker 2: you still see you know, median prices fall this year,
38:01
Speaker 2: but not substantially because of what we're seeing in other
38:04
Speaker 2: parts of the country.
38:05
Speaker 4: National medium price now at four hundred and twenty two,
38:07
Speaker 4: eight hundred dollars throughout the United States.
38:10
Speaker 2: Let's take a quick break, but a lot more to
38:12
Speaker 2: cover in the second hour of the show. We'll be
38:14
Speaker 2: right back, folks, stay tuned.