Latest / Markets with Megan: A Quick Financial Markets Update / Oil Above $100 — Why Markets Are Nervous | S3 E127 | 03-09-26

Transcript

Oil Above $100 — Why Markets Are Nervous | S3 E127 | 03-09-26 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: We're entering into the second week of the turmoil in the Middle East and the markets continue to sell off into the the ever the ongoing headline news that we get coming out of this of these events.
• 0:12
  Megan Horneman: Um it is Monday, March the 9th, and this is Markets with Megan.
• 0:15
  Megan Horneman: If you like this podcast, you can subscribe, hit the alarm bell, share with your friends, family, or colleagues.
• 0:21
  Megan Horneman: But we want to come today to talk about specifically the the focus right now, and that is in the Strait of Hormuz.
• 0:27
  Megan Horneman: Now, no one wants to see any lives lost, and it's a tragic, tragic event that we're seeing unfold in the Middle East.
• 0:34
  Megan Horneman: And we don't know exactly when this is going to end.
• 0:37
  Megan Horneman: It's looking like with the appointment of the new supreme leader that this may not end as quickly as the White House had anticipated.
• 0:43
  Megan Horneman: So markets are weaker today in anticipation for this to intensify, and also with the disruption we're seeing in one of the most the most important water waves around the world.
• 0:55
  Megan Horneman: The Strait of Hormuz carries 20% of the global seaborne oil trade.
• 1:00
  Megan Horneman: And right now, traffic is down about 90 to 95% here.
• 1:04
  Megan Horneman: It does carry about 20 million barrels a day.
• 1:06
  Megan Horneman: So if this continues at a standstill, we're talking about$20 million a day less of oil coming around the globe.
• 1:14
  Megan Horneman: Now, this this is a storage issue right now.
• 1:17
  Megan Horneman: It's not necessarily a supply issue because of the war.
• 1:21
  Megan Horneman: That's because that's most of the oil producers can still produce oil, but they just don't have anywhere to store it.
• 1:27
  Megan Horneman: So what they're doing is you're going to hear a lot of headlines about cutting production.
• 1:31
  Megan Horneman: There are some that are cutting production, but there also are countries that are instead of cutting it, are shifting production to other areas so that they either have more storage or maybe a better passage for the transportation than using the Strait of Hormuz.
• 1:46
  Megan Horneman: These details are coming out regularly, um, you know, hour by hour, really minute by minute.
• 1:50
  Megan Horneman: It could have changed since the time I came down here to report this, uh record this podcast.
• 1:55
  Megan Horneman: So what we're seeing on the market side is this uncertainty on how long the transportation issue will go on.
• 2:02
  Megan Horneman: Also, the fact there's hundreds of tankers sitting outside of the Strait of Hormuz with really nowhere to go.
• 2:07
  Megan Horneman: We've seen oil prices skyrocket above$100 a barrel.
• 2:12
  Megan Horneman: We're also seeing pain at the pump.
• 2:13
  Megan Horneman: Um, this is something consumers will start to be discussing.
• 2:16
  Megan Horneman: We're looking at the average price of a gallon of gasoline rising almost$70,$70, sorry, from its January low to about a$3.48 for a regular gallon of gasoline.
• 2:29
  Megan Horneman: The risk impact here from the equity side is broad-based declines we're seeing continue into today.
• 2:36
  Megan Horneman: We're still looking at somewhere between 5 to 10% pullbacks, and it depends on where.
• 2:41
  Megan Horneman: The US is one of the is not leading this weakness.
• 2:46
  Megan Horneman: It's being led by the emerging markets in Europe.
• 2:49
  Megan Horneman: In the US, we are seeing the bigger weakness in those high PE sectors, growth stocks.
• 2:55
  Megan Horneman: That's because we're seeing interest rates higher, and that threatens those high PE sectors.
• 2:59
  Megan Horneman: Um, when we talk about what we expect to go happen going forward, and we're we've been regularly coming to you with updates as they come out.
• 3:07
  Megan Horneman: Um, first of all, we've looked at a bunch of different scenarios where there's been aggression or tensions in the Strait of Hormuz.
• 3:14
  Megan Horneman: And nearly every one of these scenarios, going back to the early early 80s, proves to be a buying opportunity for equities, and oil prices do not stay that high for long.
• 3:24
  Megan Horneman: They're actually lower a year later.
• 3:26
  Megan Horneman: That's positive.
• 3:27
  Megan Horneman: Right now, the biggest concern is stagflation.
• 3:30
  Megan Horneman: Um, I know that when we hear stagflation, it's it's a very ugly word.
• 3:34
  Megan Horneman: I don't think this is a prolonged period of stagflation, and it still is just a risk.
• 3:38
  Megan Horneman: We're not saying we're there yet.
• 3:40
  Megan Horneman: The risk being that this can and most likely will impact consumer spending in the near term.
• 3:46
  Megan Horneman: A lot of the spending has been led by the you know upper end consumers spending.
• 3:52
  Megan Horneman: But when you start to talk about weakness in the labor markets, that's where that net wealth effect comes into play.
• 3:58
  Megan Horneman: So you're not only being hit on your investments, but you're also being hit now with pain at the pump.
• 4:04
  Megan Horneman: So that can result in a pullback in spending.
• 4:06
  Megan Horneman: But there still is a lot of good underlying fundamentals in the US economy that we don't think that you should sell into this.
• 4:13
  Megan Horneman: It's sit tight, remain patient.
• 4:15
  Megan Horneman: These things are ugly to see on a regular basis.
• 4:18
  Megan Horneman: The headlines are disturbing, but when we sit and remain disciplined and patient on the long run, history tells us these do not have very long-lasting effects.
• 4:28
  Megan Horneman: Um, the inflation, we have recommended a short duration in fixed income portfolios.
• 4:34
  Megan Horneman: We still do.
• 4:35
  Megan Horneman: This was regardless of what happened with Iran.
• 4:37
  Megan Horneman: Remain short though, because inflation expectations will result in longer-term treasury yields going higher.
• 4:44
  Megan Horneman: So be defensive there.
• 4:45
  Megan Horneman: The Fed's probably not going to be cutting rates anytime soon.
• 4:49
  Megan Horneman: We don't expect any changes at their March meeting.
• 4:52
  Megan Horneman: In fact, we may be in the summer before we start to get talk of if rate cuts are even still on the table.
• 4:58
  Megan Horneman: From an equity perspective, like I mentioned, we're looking at all of the different asset classes, all of the different equity sectors right now.
• 5:06
  Megan Horneman: And we're we're looking at valuations and have they fallen enough that warrant that long-term risk.
• 5:12
  Megan Horneman: We know that it's ugly what we're seeing every day with the, you know, the Dow down 500, 600 points.
• 5:17
  Megan Horneman: But remember, we came into this conflict with valuations extraordinarily high.
• 5:22
  Megan Horneman: And they, and even though we've seen a pullback, they're not really extraordinarily cheap yet.
• 5:26
  Megan Horneman: They may get there, but some of the things that we may we do have cash to put to work, and we've been looking at some um investments before this that we would love to see to get cheaper.
• 5:36
  Megan Horneman: And that's what we're looking at now.
• 5:38
  Megan Horneman: Are these things cheap enough to warrant that risk?
• 5:40
  Megan Horneman: It's not a rush.
• 5:41
  Megan Horneman: We still think that there's time.
• 5:43
  Megan Horneman: We're going to do our due diligence, and we will look at if we will be paying the appropriate price for the risk that is likely to continue in this market.
• 5:52
  Megan Horneman: That's all we have today.
• 5:53
  Megan Horneman: If you want a history of our podcast, you can go to marketswithmegan.fm.
• 5:56
  Megan Horneman: Thank you.