Maley: Limited SPX Downside on U.S.-Iran War Caps Upside Potential

0:00Welcome back to Morning Movers of Diane Kinghall, live from the floor of the New York Stock Exchange. You want to welcome in our next guest, Matt Mail, Chief Market Stragis at Mailer Tayback and author of the Mailer Report. Matt, it's good to see you this morning. So let's talk about the latest with regard to oil and as the biggest driver right now of markets. Oil, higher once again, we're sitting above $94 a barrel for WTI, brand also shooting higher. Straight of our moves on our mind this morning after reports that Iran is considering essentially charging a toll. Talk us through what that signal looks like in terms of how markets are interpreting it. Well, I mean, it's, you know, the markets still are holding up pretty well. I mean, oil has stabilized, you know, kind of here in that 90, you know, mid 90s on the WTI and just above 100 on Brent oil. But this is quite a bit higher. I mean, we're talking almost 80% higher that it wasn't December and 50% higher than it was when the war started.

1:06And so I do think there's a bit of complacency out there given that the stock markets only down about 5%. So the point is, I mean, like we're hearing today from the president of BlackRock where he's saying that, you know, there's a little too much complacency out there. Even if the war ends very quickly, they're going to be some downstream impacts from what this higher level of oil prices and the fact that they're not going to be able to come down, you know, right back down to the 65 level where they stood before the war began. Does create, I think a situation where we have, you know, the risk-reward scenario or equation is weighted a little bit more to the side of risk right now. Okay, so what do you feel like the market's not fully priced again? The length potentially? Yeah, I mean, the one thing is when we see when oil spikes up, you know, 30, 40, 50% and stays there for a very short period of time, the market, you know, will also offer it quickly and that's what a lot of people are focusing on.

2:07But what they're not focusing on is that every time in the last 50 years, every time the more oil rises 80% or so like it has now and sometimes a lot more. And when you have it stay up there for more than just a couple of weeks and we're starting to get to that level where it's getting more than a couple of weeks, the market has gone down every single time. I think it's seven times in the last 50 years and has gone down about 20% sometimes a lot more. So I just think that they're looking at what the way the market's acting right now, looking past certain things that like the president of BlackRock said overnight and maybe looking a little too far past and should be a little bit more careful right now. If the Strait of Hormuz remains strained and effectively close, oil stays elevated, I know you're just talked about us being in this range, but still elevated considering where it was about a month ago. How does that ripple through inflation expectations and where the fed goes?

3:08Yeah, I mean, again, that's going to change the expectations. I mean, there's a lot of people and I tend to think that a lot of people are more worried about the deflationary aspects that it might create over time. But we know that the inflation except expectations are going to change. We've already seen them change in recent weeks. And so if people start talking about, you know, 50% chance of a rate hike. Again, I'm not that worried about a rate hike, but those odds are going to move higher. And at some point, I think investors are going to have to pay attention to that. Sorry, Matt. I jumped a little bit there. So the president posted on true social this morning, a little over an hour ago, saying that Iranian negotiators are, quote, begging us to make a deal. And that they publicly, he's pushing back on the fact that they publicly state that they are only looking at our proposal, meaning the US proposal. And that they better get serious soon. It seems like the market is not taking that into account today. What's your thought? Yeah, I mean, the futures are trading a little bit lower, but his rhetoric is getting a little bit more bellicose.

4:13I mean, he was, you know, obviously starting the week, much more dovish and extending the situation by five days. But, you know, there are people who thought he's really only doing that so they can get the pieces in place to have boots on the ground. Again, we don't know that for sure, but again, we have a situation where the stock market is down only 5%. It is rallied over 80% in the last three and a half years. I just think that, you know, people should be a little bit more cautious. I mean, you know, the fear of missing out after an 80% move, you know, how much more is the market going to bounce if it takes back that 5%, that's fine. But the downside could be 15 or 20%. That doesn't mean go to 100% cash. It just means, you know, maybe you have a little bit raise a little bit of cash here. And if you miss a few percent after an 80% move, it's not that big a deal. Matt will have to put a pin in our conversation for time because I certainly want to hear your thoughts on private credit. We'll talk about that in the future because it's been on the back burner, but, you know, maybe it shouldn't be on the back burner.

5:15Matt, Maley, Chief Market Stragist and Miller Tapeback, thank you, Matt.