Gas Prices and Global Tensions: What It Means for the U.S. Economy Moving Forward

Let's get to the big story.

Breakdown.

US stock futures are rallying this morning as Trump says the US military will postpone any further strikes on Iranian energy infrastructure for 5 days.

At the same time, Iran's Foreign Ministry is denying that any talks are taking place now.

We are seeing oil futures pull back, but Treasury yields do remain elevated, and odds for a rate hike this year are swinging wildly and are now hovering right around 20%.

Now we have to keep in mind.

That Fetcher Powell stated that the Iran conflict is making it incredibly tough for the central bank to predict what comes next.

And joining me as we kick off a new trading week is Luke Lloyd, CEO and founder of Lloyd Financial Group.

Luke, good morning.

Thank you so much for joining me.

While we are looking at Dow futures soaring by 1,000%, but we have to consider what we've seen as we do wrap up Q1.

So what do you make of the post on Truth Social this morning?

And what are your expectations for the Fed as we move forward?

Well, it's hard to make something of it because it feels like it changes every single day.

I mean, it sounds like one thing happens one day, the next day, it's complete opposite.

So, look, at the end of the day, I, I don't see this lasting long.

I, I think this is going to be more short-term lived.

I think it's very easy in today's world to get very anxious and think the worst case scenario very quickly.

It's very easy to think, you know, oil is going to remain above 100 bucks a barrel.

It's very easy to think that This is going to cause extreme inflationary pressure, but at the end of the day, if we do see oil come back down in the 80s and 70s, it's not going to be that inflationary.

So this, I think, 10 to 15% chance of a rate hike going into the next Fed meeting, I think that's just completely off the table.

I don't think there's any chance of a rate hike.

I think that that's going to be probably a bullish tailwind for the market.

I think oil is going to come back down in the 80s and 70s because it does seem like something.

Constructive is happening behind the scenes to some sort of standpoint.

So I think this is actually a buying opportunity in a lot of areas.

We bought Prudential Financial just last week.

We've had some cash on the sidelines, but we, like I said last time I was on here, we're buying software stocks.

This time we're buying some financial stocks because there's been a lot of negative news in the private credit space, but it's not 2008, 2009, you know, rhetoric right now.

There's nothing crazy happening that we see.

Liquidity is remaining strong, growth remaining strong, and, uh, you know, all the kind of signals are pointing to more of a bullish signal.

So I, I do think that this is a buying opportunity in a lot of different areas.

Add financials, add some software names.

Yes, the S&P is down now 6% from the top.

The NASDAQ is down 8%.

Mall caps are down over 10%.

So a lot of this is getting priced in a lot of different areas of the market.

I do think that we're the path for interest rates is lower, not higher. and building on what you just said, every morning it does seem as though there are plenty of announcements that are moving the markets.

So I do want to expand on how you're evaluating some of the discounts in sectors like banks, retailers, and big tech.

So tell us what you're watching and why.

Yeah, so right now if you take a look at the IGV, it's like, it's below 2021 levels.

You'll take a look at stock like Microsoft, it's like 10% above 2021 levels.

So basically for five years there's not been much money made in the markets.

And you take a look at historical PE ratios, a lot of areas in the market are actually below historical PE ratios.

So valuations that people were considering, considering to be stretched, a lot of those valuations. have come down a lot.

So a stock like OWL, which has kind of been a beaten down stock in the private sector, private credit markets, that stock might be a good area to add into.

A stock like Intuit, we added near the bottom.

So Intuit's been a software stock tax season here, you know, about 2 or 3 weeks ends.

I think, I think Intuit software is a good stock to add.

So, you know, I think at the end of the day you've got to look at some of these areas and just realize.

That we are actually below 5 years, you know, a lot of these areas have not made money in 5 years.

So there's a lot of these earnings.

The earnings in these areas in the, um, you know, uh, you know, actual profitability and revenue is a lot higher than it was 5 years ago.

So I think that tells you that there's a lot of money to be made and a lot of upside potential on these beaten down areas.

Yes, and Luke, while I have you here, one area of the market that we're paying attention to is the bond market.

So we're watching some quite some swings when it comes to global bond markets.

But shifting to the US, what do you think the bond market in the US is telling you, especially given the action in Treasury yields?

Well, it is interesting.

The bond market is telling you that there might be some inflationary pressure, and typically historically the bond market is more correct than the stock market.

So yes, the 10 year jumping from 4% to 4.3%, that's a little concerning.

Mortgage rates have gone from 60% to now 6.3%, 6.4%.

So everyone thought that it was a for sure thing interest rates are coming down.

That's why this is shocking the market, because what was a sure thing that we're going to get interest.

Rate cuts because you have the top administration really pushing for lower interest rates.

You have some, some yellow flags out there that are suggesting that interest rates should go lower.

That's why this is shocking the market so much so quickly, because now it's not a for sure thing, a for sure thing.

But at the end of the day, look, yields are going up a little bit because I think of government printing.

The government's not stopping spending their money.

We've talked about that before, but at the same time, the government printing money and Government spending ridiculous amounts of money on defense, whatever it be, that's all actual liquidity to the system as well.

So you always have this kind of at the top fighting each other.

You have interest rates going up, pricing in riskier debt, pricing in inflationary pressure, but then you have record amounts of liquidity coming in by governments spending money.

You have corporations investing in AI, so you have these two things fighting each other.

At the end of the day, historically, liquidity always.

Wins.

Money finds its way throughout the system.

So as long as liquidity remains strong and we track that every single morning, that's still a bullish signal.

So when liquidity comes out of the system, we're going to repossession, reposition completely differently in the markets.

Right now we're more aggressive than we ever have been in our portfolios at LFG.

That's going to change at some point this year because this liquidity bubble that we live in, it's not an AI bubble, it's a liquidity bubble we live in.

Eventually that bubble does go burst.

It's the question of when does liquidity come out of the system.

How does that happen?

Is it because interest rates continue to go up and we stop printing money?

Is it because the corporations stopped spending money on AI?

These are all things we have to pay attention to.

But as long as that liquidity remains strong, that's a bullish signal in the market. and Luke finally before I let you go right now we are looking at the national average for a gallon of regular gasoline hovering right above $3.95.

So we know all Americans are watching interest rates and wondering about bing rates as well.

So what would you tell viewers out there who are wondering the impact of this uncertainty moving forward?

I mean, it, it's kind of, in my opinion, look, I don't like paying $4.

A gallon of gas, like it cost me $60 or $70 to fill up a tank compared to $30 or $40 just a few months ago.

So no one likes it.

I get it that that that kind of, you know, inflationary pressure in the gas tank or in plastics or whatever oil goes into, which is a lot of things, that's something we have to pay attention to.

But you also have to remember compared to the 1970s when we had that oil shock, the economy is much less reliant actually on oil in terms of the percentage of GDP.

Output that is based on oil.

So my point is there is that it's not as impactful as it was back in the 70s.

Yes, your prices are going to go up in some areas, but if you're concerned just about gas, that shouldn't just be a reason to not be investing or it's not a reason for the economy not to grow.

There's a lot of other areas that matter more right now than just your gas prices going up.

And also this Middle East tension, if it does get figured out.

Uh, let's assume that this doesn't, doesn't last that long and the gas prices do come down.

Um, this is actually good for the long term if we figure this out.

I mean, you know, it's been 4 or 5 years now, decades now of what's going to happen with the Middle East.

If we can come to some sort of long-term solution in the Middle East, it's going to open up trade.

It's going to allow, you know, more deals to get done internationally, and I think that's a bullish signal for world assets.

Um, I will say that, you know, we were very bullish last year on international equities, and that worked out very.

Well, we've trimmed back the international exposure towards the end of last year, early this year.

That's actually worked out decently well because you see a lot of international areas selling off.

I do think the focus for the towards, you know, the rest of this year is going to be on US equities.

I think that, you know, international is kind of volatile and kind of uncertain right now.

When things get figured out, we might reallocate to international exposure, but in the long term this is going to be bullish because, you know, we'll figure out a solution hopefully in the Middle East.

Well, a lot of moving parts.

So thank you so much for joining us this morning and thank you so much for weighing in.

Thank you, Remy.