We are just a few minutes away from Tuesday's trade with futures pointing to a lower open, though the Nasdaq is currently hovering right around the flat line.
Now the markets giving the ultimate fake yesterday.
The Dow saw an over 1100 point intraday reversal, while the VIX pulled from an intraday high of over 35, and oil prices were surging when the markets opened for trading yesterday.
Oil benchmark ended the day lower, falling from around the 120 level to below 90.
Now stocks and investors are also banking on Trump's words that this conflict could be over soon.
Meanwhile, retail investors demanding their money back from massive private credit funds.
Blackstone and its employees just had to inject their own money to meet withdrawal requests, and we are seeing similar squeezes at Blue Owl and BlackRock.
Joining me this morning to weigh in is Walter Todd, CIO of Greenwood Capital.
Walter, good morning.
Thank you so much for joining us.
Let's start out with the big story, and that is the conflict in the Middle East and that wild reversal in oil prices.
So we don't have a crystal ball here.
So what did you think of those moves that we saw from Sunday in terms of futures and now where we are in terms of oil prices?
Yeah, good morning, Remy.
Thanks for having me on.
Yeah, I guess the word I would use is breathtaking in terms of the volatility that we saw $30 up, $30 down, obviously sparked a rally in stocks on the downdraft in crude in the afternoon on President Trump's comments.
But I think as you've witnessed here this morning, you know, I think the lows overnight in oil were around 82.
And WTI, I think we're sitting around, you know, close to 90 now.
So I expect the volatility to continue and, and despite the words that were said yesterday, what's happening on the ground today from the headlines that we're seeing, you know, indicates that we're not, um, we're not near, it doesn't appear we're near the end.
Yes, and speaking of which, we do not have a crystal ball, so we do not know how long the conflict in the Middle East will continue, but one thing we know for sure is that we did get the employment report out of the US last week and we saw that pullback in terms of non-farm payrolls.
That negative 92,000 prints.
So given that we're seeing an increase in oil prices here in the US and the economic data for the latest month in terms of the labor market is clear, what does all of this mean for monetary policy and in turn the Federal Reserve?
Yeah, it's a great question, because now, you know, despite what Powell said at the last meeting of the Fed in terms of kind of he indicated that he wasn't concerned about the labor market or inflation at that point and was more concerned about the labor market, but the dual mandate is really in focus now because you've got the prospect of higher inflation with the move in oil prices that we've seen, but also, as you mentioned, a weaker labor market with the unemployment.
The rate ticking up still, you know, relatively low at 4.4%, but we've got, you know, a perfect storm is stagflation, right, where you have slowing growth and higher inflation, and that's the prospect of that, I think is what started to hit markets here recently with oil prices moving and weaker economic data that we've seen.
The NFIB, I would note, was out this morning.
It did fall in terms of small business confidence as well.
And I think at this point it is also important to take a look at what's happening in terms of sectors.
So despite the performance of the major US stock averages, notably financials are lower, software names did see a nice rebound last week though along with Palantir.
So do you think AI disruption fears have eased, or do you remain concerned?
And if so, why?
Yeah, they've kind of fallen into the background with the geopolitical headlines, of course, but I do think in aggregate, the hits that we saw at the software that was kind of indiscriminate selling at the peak was overdone.
And so you saw a rebound last week.
We're going to kind of get a look back into that in terms of the fundamentals with Oracle out this afternoon.
We get Adobe later this week, so we'll get some fundamental data on that and how they're doing.
We did start to nibble a little bit at software as it was, you know, selling off fairly aggressively.
Um, because I do, again, I do think the selling was indiscriminate.
So, but we'll get a, we'll get a fresh look at that as, as we move through this week with those earnings, uh, uh, prints.
I also do want to get your take on what we're seeing in private credit BlackRock restricting withdrawals on a multi-billion dollar fund after investors tried to pull over $8 billion last quarter and do you think this cap is a warning sign of a potential liquidity crisis in the $2 trillion private credit market.
Yeah, I mean, I think what we're seeing here is, you know, the mismatch of duration, right, with this, this product kind of being pushed into the retail space where, you know, retail investors are used to having, you know, kind of daily liquidity.
These, these instruments obviously don't, and I think they were, you know, sold, sold with the prospect that they don't have daily liquidity.
But of course, in periods of stress, people want their money, and so we're kind of seeing that.
Dynamic right now.
We'll see.
I, you know, I just think it's worth noting that we've kind of, this started, you know, slowly and it's kind of picking up with new stories kind of coming out every, every few days or every couple of weeks.
So it's definitely something to watch and obviously the individual stocks that play here, Apollo, KKR, etc. have been hit, uh, you know, fairly hard on this dynamic.
So it's definitely something to watch as we move through the rest of this year.
And speaking of the rest of the year, Walter, I do want to get your take on what we've seen so far in terms of Q1 2026 here in the US.
So has your base case changed?
Yeah, I mean, I think we came into this year with the expectation we were going to see, you know, some more volatility.
Obviously the year started off strong, particularly for, you know, small cap stocks, for dividend and value stocks.
Those have certainly pulled back here in this recent market turmoil.
International stocks started off very strong but have gotten hit, you know, even more so than the US on what's happening geopolitically.
So you know midterm election year.
Typically more volatile than the average year, bigger pullback we see on average.
So this is kind of, as crazy as it sounds, this is kind of the volatility is something we expected this year, perhaps not the level of day to day volatility that we're seeing like we mentioned in oil yesterday, but I would expect more of this as we move through to the spring and the summer and get closer to the midterm election.
Yes, in less than 60 seconds here, so I do want to get your take on what diversification actually looks like at this point in time.
Yeah, I think there's a couple of ways to slice that.
One, diversification in an equity portfolio means, you know, exposure to, you know, a variety of different sectors, not, you know, overly concentrated in one, or, you know, individual names.
And then stepping back from a portfolio level, I think having fixed income in there makes sense to diversify some of the equity volatility.
Volatility that we've seen, but the, the, the good news about the volatility is you can be opportunistic.
You can be more tactical on some of these moves within individual stocks or individual asset classes to take advantage of the volatility that we're seeing.
You just have to be a little bit more nimble than perhaps you're used to being in years past.
Well, Walter, we will have to leave it there for today, but as always, thank you so much for joining us and thank you so much for sharing your insights as well as perspective.
Thank you.
Have a great day.
