The Dominos Falling if Crude Oil Stays High

0:00I want to get a look at the bigger picture and this woman actually doesn't need much of an introduction. She's been a face on Wall Street for decades with me. Tracy Burns, vice president of Labanthal Global Advisors. Tracy, welcome back to your stomping grounds. You've been here throughout the years. You're seeing the action and the volatility. What are the folks over at Labanthal saying? What do you see? Today's the day that diversification gets to wave its, you know, happy flag, right? Because what we're seeing today is clients that are bright into death. They don't know what's going to happen next. But yet when you have a diversified portfolio, you realize it's not going to hit. It's not in the toilet. You're doing okay. I think oil is the biggest thing right now in a coal, right? What happens with oil? Does it hit 100? If it hits 100, we start to feel that. You feel that in your wallet. You feel that then in shipping costs. You feel that then in the grocery store. So that has ancillary effects that we have to pay attention to. In the interim though, I think the headline risk is probably worse than all of it. That's true. We have a knee-jerk reaction, but it's interesting because if you look over time, Art Hogan who

1:01we know well was saying how since World War II, if you look back, that in fact over, you know, later, it's up 70% the market over six months, you know, 70% of the time it is higher. You had Mike Wilson over at Morgan Stanley saying, look, over a short period of time, whether you're doing a few months or longer, that the market then moves higher. One month, six months, 12 months, then he said, two percent, six percent, eight percent. You might see this stock market gain. So expect volatility, right? Right. And so then that means no knee-jerk reactions. Be smart. You know, we went to cash a little bit before the weekend even started, because we knew this was on the table, right? You had the 12, the 12 days back in June. Of course, you had back to October 7th, we knew this was brewing. So we had some cash on the sidelines waiting for something like this, and that's kind of what you have to start. You can't be all in all the time. You have to be smart about this, and things like this remind us of that. Actually, one of the guests today said, take some profits in energy, because you've had a boost in energy.

2:02Is that maybe a good idea? Absolutely. And what about all the, quote, unquote, fang stocks, all those, all the tech stocks that have been high flyers, the AI stocks that everyone's made a lot of money on. Let's not be greedy. Let's take some. They pulled back a lot, and we were talking about, and yeah, you can take profits. I mean, there's profits to be had. I'm sorry to have interrupted you. But there are some of those mag seven names that actually have been beaten down. And the question is, is tech oversold? Do you get in now or sort of keep that cash on the sideline? I mean, it's hard to time the market. Let's know. Well, you know that. And it's hard to tell when the quote, unquote, AI little bubble or whatever you want to call it, will, I don't want to say burst, because I don't think it's going to. But I think that it's going to have, it's Dave reckoning at some point. And I think we have to wait and see, but you and I both know, AI is not going anywhere. And so if you are in the mag seven, just be careful, again, let's not be greedy about these things. I think you also made a point in your notes about inflation, right? And that's actually where the oil comes back to. Oil goes up, inflation stays, inflation stays, rates don't come down.

3:02That means your mortgage rates aren't coming down. Your car loan rates aren't coming down, your credit cards are still going to be ridiculous. And so all that plays again back to this oil trade. It's a wait and see. Look, you and I reported back in the day when oil was $300 a barrel. We're not seeing that any time soon. If it gets to 80, if it gets to 100, that's also a consumer sentiment risk too. You feel that in your wallet and you start to make decisions based on that. And I think that's important as well. Yeah, and look, I mean, when oil goes up, when gasoline goes up, it's almost another tax for folks. 100% generally, whether you're no matter what bracket you're in, you're paying more. The president has done an incredible job of bringing energy down. And even we saw five, a five handle on mortgage rates briefly last week. But now it looks like this is going to be going on. They're not stopping. It's going to be, it's obviously a conservative effort for another at least four weeks. The president did say we are ahead of schedule for whatever that's worth as far as this goes.

4:03But yes, I think this coupled with everything else before this just reminds us that we're going to have a volatile year. And you need to be prepared for it. And so, you know, your producer has asked me, what did we learn the first quarter? We learned that that is here to stay. And we learned that diversification now is really super important and you could see it first hand. Because your energy stocks are up, everything else could potentially be down. And to your point, the AI trade is wobbling. Right. I mean, we did see a lot of love for AI in the last few days. For example, Nvidia just became a topic today over at, I think it was Morgan Stanley. That was big news. You know, there's still love. You saw all the capex spending from Taiwan semi and the deals that are still making going forward. So it looks, and Nvidia's numbers were great. So it shows the AI frenzy is still underway, but there's still that uncertainty. So what is a good diversified portfolio look for? I know different age groups, different risk tolerance, but what is maybe a good diversified portfolio look like to you?

5:03So I think first and foremost, it's how do you sleep at night? What is your risk tolerance depends on how you put your head down on your pillow at night? If you are very nervous being in the market, you shouldn't be in it at all. If you are one of those people that is just like, do it, go, then you're talking about a little bit of everything at some point, equities, fixed income, and amongst equities, we have to start to see more broadening in this market. Midcaps are starting to do really well again. You should have a bond piece in your portfolio days like today tell you exactly why. So I think again, this beginning of this second quarter here, let's get back to the drawing board, diversify your portfolio if it's not already. I'm sure there's imbalances if you've been heavily into the growth stocks. Now's the time to, as we said, not be, you know, they say pigs get slaughtered. There's a reason why. Right, understood. When we think about this diversification cash on the sidelines, should we have the cash? Always. Always. Especially for moments like this, right? We started going a little to cash. I'm guessing that we probably will do a little bit more because then you never know where

6:06the opportunity presents itself. To your point, thank the mag seven. Look potentially like buying opportunities again. So you have to have it on the side. And we don't know whether the Fed's going to cut rates now. I mean, if you have elevated inflation, does the Fed cut rates, does the Fed cut rates because they're worried about the economy or things like that. It's hard to say and Kevin Warch will be coming in ideal, you know, that seems to be the plan for May. Right. Thoughts on the Fed at all? I think that they'll probably hold. I don't think we'll see a rate cut immediately, but I think the Fed has to prove to the American people that it's independent because there's a big worry about that that we're getting. It's getting a little too gray. The crossovers getting a little too much. People want this new Fed share to be independent and stake is claim in independency. And I think that's super important. And don't forget, I don't need to cut you off now that midterms are coming to. And that also creates a lot of uncertainty leading up to that. Right. And sometimes a midterm year will not necessarily be a booming year for Wall Street. You've had three years in a row of 20% plus gains.

7:06You've had three years of a bull market. We'll see whether or not, you know, it's looking like it could be a fourth, but no one really knows. And as far as oil, it's all about the Strait of Hormuzant now at this point. All the boats are sort of waiting. I saw the graphs and that one nook, that 21 mile spot is quiet. So, you know, because they don't want to go through, they could get bomb. There could be mines until they get the okay to really get that going once again. The final thought, I guess, for investors and viewers. They can't write. Those boats are not getting insured. That's part of the problem, right? Yes. I think, again, you know, patients just keep panic is terrible, terrible emotion to have right now. Don't panic. Make sure you're properly diversified. And just we're going to have to all wait this out together. And Tracy, we wanted to congratulate you on your book, deduct everything by Tracy Burns. Of course, she has, she's all about taxes and you're an investment advisor and financial expert. So, congratulations on this and it's wonderful to have you on the show. Tracy Burns of Labanthal Global Advisors, nice to see you again.