Latest / Markets with Megan: A Quick Financial Markets Update / From Cuts to Hikes? Markets Reprice Fast | S3 E129 | 03-19-26
Transcript
- 0:00Megan Horneman: Everybody knows the impact that we've seen in both the oil and the gasoline markets because of the conflict in the Middle East.
- 0:06Megan Horneman: But what we've seen over the past two days is that we're getting some concern from central bank officials, specifically some very hawkish comments coming out of this, the leading central banks around the world.
- 0:17Megan Horneman: It is Thursday, March the 19th, and this is Markets with Megan.
- 0:21Megan Horneman: If you like this podcast, subscribe, hit the alarm bell, share it with your friends, family, or colleagues.
- 0:27Megan Horneman: But we're here to break down some of the headlines that we've gotten from whether it's economic data or in this specific instance, central bank chiefs and what it's doing and why it's impacting the market.
- 0:37Megan Horneman: So we're seeing that energy prices continue to rise today.
- 0:41Megan Horneman: That has everything to do with just the broadening conflict that we have in the Middle East, as well as really no imminent solution here.
- 0:49Megan Horneman: So we're hovering around$100 a barrel of oil.
- 0:53Megan Horneman: We've been like this for a couple weeks now.
- 0:55Megan Horneman: Now remember, the concern about the economic growth specifically relies around how long that we continue around$100 a barrel.
- 1:04Megan Horneman: If this continues for a prolonged period of time, it can have a negative impact on economic growth.
- 1:10Megan Horneman: But for now, we are looking at the fact that we do have a very favorable tax season right now as far as refunds going out.
- 1:17Megan Horneman: It could help cushion some of that for consumers, but we are approaching April and that will end up subsiding for consumers.
- 1:24Megan Horneman: Now, where this is filtering into the central bank's view is because everyone's worried about inflation now.
- 1:31Megan Horneman: Um we are that yesterday the Federal Reserve Chairman Jerome Powell came out, left interest rates unchanged, and they their comments were very hawkish out of the committee meeting.
- 1:41Megan Horneman: Um, Powell is very concerned about higher energy prices and that they will push up inflation.
- 1:46Megan Horneman: He's not as concerned about the labor market anymore, and that he sees a series of shocks, whether it's been tariffs or oil prices, that has interrupted their inflation progress.
- 1:57Megan Horneman: They think the current stance is appropriate, but when you read into the headlines or listen to the press conference, they're not open.
- 2:04Megan Horneman: They're not, they're not um completely against raising interest rates this year.
- 2:08Megan Horneman: The futures market now has priced out any interest rate cuts for this year.
- 2:12Megan Horneman: But then we also had the ECB president, Christine Lagarde, Bank of England.
- 2:17Megan Horneman: Both of these central banks are looking at raising rates this year because of the inflation pressures, specifically around these this rise in um Brent oil and crude oil.
- 2:28Megan Horneman: We've seen the biggest impacts here in the fixed income markets, two-year yields specifically.
- 2:33Megan Horneman: The US two-year is at a seven-month high at about a 3.9%.
- 2:38Megan Horneman: But if you go over to England, the two-year guilt is up the highest we've seen in over a year at 4.4%.
- 2:46Megan Horneman: The one thing that we are seeing as well is that break-even levels or those inflation expectations, these continue to skyrocket.
- 2:54Megan Horneman: So there is a lot of concern in the near term that this isn't going to end.
- 2:57Megan Horneman: Two-year break-even levels here in the US are now at the highest level we've seen since 2022 at a 5.2%.
- 3:06Megan Horneman: So, what that's telling us is that the market is pricing in an expectation of about 5% average inflation over the next two years.
- 3:14Megan Horneman: This is definitely something that's taking some of the steam out of the equity markets.
- 3:18Megan Horneman: We're seeing equities across the board weaker, but we're also seeing profit taking in some of those very um, you know, those areas of the market that have been the most loved.
- 3:27Megan Horneman: If you look at gold, um, gold has broken some technical levels now.
- 3:31Megan Horneman: It's down below its 50-day moving average, it's it's sitting at its 100-day moving average, and then the next technical level could have it fall as much as to down around 4,100.
- 3:42Megan Horneman: So we're seeing some profit taking, um, some flight to quality a little bit going into the US dollar, which has done better since of this with the Iran war.
- 3:51Megan Horneman: But we are seeing some just overall risk sentiment um being taken off the table here in the markets.
- 3:57Megan Horneman: Now, we we have often said that we don't think the Fed has the flexibility to cut interest rates the way the market has was expecting.
- 4:04Megan Horneman: And that was regardless of the war.
- 4:06Megan Horneman: So we think the only change here is that the Fed is most likely not going to cut interest rates.
- 4:12Megan Horneman: We will continue to monitor how this filters into inflation.
- 4:16Megan Horneman: And again, this all depends on how long oil prices stay this high.
- 4:21Megan Horneman: If they continue to persist at these levels for for the next couple months, then we may actually be on that camp where they might have to tweak by raising interest rates.
- 4:31Megan Horneman: We're not there quite yet, but it is on our horizon, and we're keeping an eye on that.
- 4:35Megan Horneman: That's all we have today.
- 4:37Megan Horneman: If you want a history of our podcast, you can marketswithmegan.fm.
- 4:40Megan Horneman: Thank you.