Markets on Edge: Inflation, Oil Prices and Middle East Tensions Drive Volatility

Let's get to the big story breakdown while Wall Street is set to open higher following this morning's inflation figures.

We are seeing some relief in the markets after reports that Israel and Lebanon will pursue direct negotiations.

Now recent escalations have threatened to derail the ceasefire with Iran and tensions to remain high in the Strait of Hormuz where Iran is reportedly limiting tanker traffic to just a dozen ships a day and also charging tolls while crude is elevated and.

Political uncertainty is looming over the latest data points and this morning.

Joining me is Mary Ann Bartels, Chief Investment Strategist at Sanctuary Wealth.

Mary Ann, good morning and happy Friday to you.

What a week it's been.

So first and foremost, let's start out with those inflation figures.

What do you make of the reaction we're seeing across markets?

I have to say markets are handling this inflation number very, very well now.

This was expected.

And for now it's just one month, but if we continue to have inflation numbers like this in the coming months, I do think it will become a little bit more challenging for the markets.

So we are telling clients to position for continued volatility within the markets, and we remain. for the year, our S&P 500 target for the end of the year is 7500, but we don't think that's a straight line, and we do see risk that crude oil can continue to go higher if we don't get negotiations, and that's going to continue, I think, to put pressure on the equity market.

And speaking of oil in New York morning trade, we are looking at both WTI as well as Brent trying to hold on to that flat line, but as we all know, prices do remain elevated and without certainty regarding the Strait of Hormuz for the foreseeable future, at least for now it does look as though oil prices will remain elevated.

So how is that going to affect central banks and what does this mean for the economy.

So near term, what really is surprising for the month of March, this is not really negatively impact the consumer as wages have gone up and as their tax refunds have come in, the consumer is spending, and that's really a positive for the markets, and we came into this conflict with a strong economy.

Our internal data was showing that the economy was growing.

Now that's definitely going to have the higher oil prices will definitely have a negative impact, but as of right now we don't see recession as a major risk.

We really haven't seen that consumer pull in aggressively. so that at least in the near term that's positive.

What I'm really going to be looking for is we're really going into earnings season next week with the bank's reporting, and we'll be in earnings season for several weeks.

I really want to listen to what CEOs and CFOs are saying about the higher energy prices and how that's impacting their business model.

Mr. and as you mentioned Mary Ann, we will be paying attention to those earnings figures as the season kicks off next week with the big banks and taking a look at the economy, we just saw strong job growth in terms of non-farm payrolls and The unemployment rate did tick lower, but we have to keep in mind that wage growth has not been matching inflation.

So given what we saw, do you think this is a buying opportunity for bonds just given the reaction we've been seeing?

So I'm not a big the big fan of, of the fixed income market and for those that do need to be in fixed income, uh, we are uh at the shorter end of the curve.

In fact, we did raise some cash, um, and not even really deploying it out on the curve, so I, I think duration.

Uh, is really important here, and, you know, we always want to, um, own quality.

So in terms of fixed income, the direction over time, I do believe the Fed wants to try to get interest rates to come down at the front end of the curve.

They can come down a little bit at the back end of the curve, but I don't think they're going to come down that dramatically.

And so, um, in terms of investing, I don't think you get the highest returns within the fixed income market.

I think over time you're going to get better returns out of the equity market, but I do think that they will provide some income and some diversification as if inflation numbers can tame down and and and calm down, I do think rates will slightly, slightly decline.

Yes, and you mentioned a key word there, Marianne, and that is diversification.

So when we take a look at sectors within the S&P 500, it goes without saying that the energy sector is leading the way higher, followed by materials, industrials, as well as utilities.

But where are the opportunities right now and what does diversification actually look like?

So the question is, is technology still the leadership with artificial intelligence with AI, and, and I'm in the camp that tech is just in a correction.

Yes, maybe a bear market correction because many of the stocks are down 20% or more, but I still see them as leadership.

So I still want to own um technology, particularly semiconductors.

I still think that that really is the industry group that's truly the leader of this secular bull market.

But as you mentioned, energy, I do think the longer term leadership is starting to show early signs, and part of that pocket is energy now.

Many of these stocks are extended, but I do think you do want to own energy.

The other pockets of the market that I love are the metals gold, silver, copper, and the mining stocks that are related to them.

I like the industrials for pockets for infrastructure.

We're still building out data centers.

I don't think you're going to see a slowdown there, so I do like that aerospace and defense is inside industrials, and as you know, the president is looking for more spending on defense, and that's always bullish for those companies.

So there's a lot going on in the Market that you want to own.

I'd even nibble in small caps.

I do think we have early leadership in small caps, but the true new leadership is actually outside of the United States.

I really like the international markets, and with these pullbacks, I think we're getting great buying opportunities.

So for part of the diversification for our clients, um, we're really spreading our wings and going outside of the United States.

Finally, before I let you go, I do want to get your take on crypto.

So in New York morning trade, we are looking at the Bitcoin as well as a small gain and we're looking at Bitcoin above the 72,000 level, and I do want to get your take on price action given the conflict in the Middle East.

I won't be asking whether or not you think Adam Bach is Satoshi, but what is your outlook moving forward for Bitcoin?

So as you know, the crypto markets are very volatile right now.

Bitcoin is in a consolidation.

Um, if the equity markets take another leg down, I'd be concerned that you'd still continue to have some weakness within the crypto space.

But for investors that can take high risk, high volatility, I think diversifying your portfolio over time and part of the crypto market, I think would benefit a portfolio.

I'm not sure these are the absolute lows in crypto right now, but I think longer term we are going to see higher prices.

Well, Mary Ann, thank you so much for joining us on this Friday morning.

I appreciate your time as well as all of your insights.

Thank you.