Economic Implications of the U.S.-Iran Ceasefire: A Deep Dive with Michele Schneider

Wall Street is breathing a cautious sigh of relief this morning.

A fragile two-week ceasefire involving the U.S.-Israel and Iran has triggered a massive market reaction, pushing U.S. stocks higher and oil lower.

But a two-week pause does not immediately undo The economic fallout now.

The Strait of Hormuz is still severely bottlenecked and gas is sitting at a high of $4.16 a gallon.

And consumer inflation figures rising last month due to the double-digit surge in oil prices.

Well, joining me to discuss how to navigate this complex macro environment is Michele Schneider, Chief Market Strategist at Market Gauge, a financial publishing company.

Mish, good morning and happy Friday to you. a lot to pay attention to this morning.

The White House is sending a high-profile delegation to Pakistan for critical peace talks with Iran.

So what do you make as we head into this weekend, and what would you say is the base case at this moment in time?

Well, what's interesting is that the market was already basing out long before we got to the point of negotiation.

And so it was sniffing that the worst of it was over.

But is that really the case?

So I'm looking at this more as a trading range.

And a trading range, by the way, is not really unusual considering if we look back when the last time we were really breaking out into a big geopolitical situation was in the 60s. we went into a 15-year trading range from 68 to 82.

So it's possible, with obviously things very different, that what we're going to see now is this resistance 68, 69, 100, maybe 7,000 in the S&P as the top.

And we could still see a test of the bottom of the range, and that would be closer to about 6,000, 6,200.

And of course, that would be because Not only the Iranian war situation isn't quite as easily solved as one would hope, number one.

Number two is there's a trickle effect of what's already happened, considering with oil and gas prices.

And then number three would be the fallout from other things that could happen just in the U.S. economy alone, like the private credit.

And also there's a couple of things we're watching, like the dollar, which looks very vulnerable right here.

Yeah, and I'm glad you mentioned all of that because I do want to get your take on what we're seeing in terms of hard economic data.

We got that labor report out showing that nonfarm payrolls advanced and the unemployment rate was lower, but wage growth is still stagnant.

Now, given the fact that we saw the February PCE figures yesterday and we got CPI coming in mostly aligned with expectations, do you think the ceasefire that's holding right now in the Middle East will make it more likely that the Federal Reserve leaves rates higher for longer?

Well, I think if they do nothing, it's actually almost like lowering rates because there was such great expectations into these higher oil prices that they would raise.

They may not necessarily lower at this point, but that doesn't mean they won't.

I think they're really watching their fragility, as you mentioned, the labor market, but that's all backwards.

We don't really know what's going to happen now as a result of these higher oil prices.

What's going to be the impact not just for companies that not necessarily able to afford as many staff that they have we've already seen that trend.

So I think in terms of the bonds, that's really one of my bigger focus here is because we'll be able to tell soon enough. if you're looking at long bonds that have been in a holding pattern, if they start to, yields start to fall and the TLT start to rise as a result, what does that mean for the Fed?

It means that they could do nothing, but then in essence, they've sort of lost control because they can't fight inflation and they have to figure out how to save the economy if we start heading towards recession.

Yeah, and I do want to get your take on other sectors as well.

You mentioned the fact that you're paying attention to the bond markets, but one other sector that I do want to get your take on is ag.

So, this conflict in the Middle East has severely choked the global fertilizer supply, sending prices up.

40% and forcing farmers to change their planning strategies.

And although we might not be paying attention to this right now, it does have an effect on consumers around the globe and for Americans as well.

So how tough is the setup for the ag sector right now?

This week into the possibility of some kind of a peace negotiation, but that's probably a buy opportunity, not just because, again, it's going to take a while for things to come through, but farmers have been having issues for a bit of time.

And the USDA reports signal that the plantings are lower this year than they've been.

And then on top of that, we're entering a potential drought season because of El Nino.

So if you put all that together, I haven't really seen the futures prices reflecting what we're paying in the grocery stores, and I think that could actually start to reconcile.

So if you're looking at something, let's say, like DBA, that's a good ETF.

It's an aggregate of all the agricultural wheat, corn, soybeans.

It also is the softs, coffee, cocoa, sugar.

And that has broken out.

And as long as it holds really above, let's say, $26.50, it's trading under $27.

It actually briefly rose above $27 if it continues to go up.

That is something that I would keep an eye on, not just as a potential investment.

And remember, investment, I use the word loosely because these are commodities, not companies. but also a signal to what could happen with the consumer getting even more pinched.

And another area we're paying attention to is borrowing costs on the heels of your take on Fed rate expectations.

Now, mortgage rates shot back up during the conflict, and that is keeping many buyers frozen here in the U.S.

So beyond just housing, you're also flagging private credit as a major risk, as you mentioned.

But what stress are you seeing beneath the surface there if rates do not fall back down to that 5.5 percent level?

Well, if you combine that with tariffs, where we are starting to see or were starting to see some growth in the industrial manufacturing sector in the United States, that would certainly be an impact, because these companies need lower interest rates in order to keep going.

They have to borrow at lower costs.

Obviously, the consumer is maybe less affected in terms of going to the supermarket or buying things on their credit card, because those rates have been high forever.

But as you mentioned, real estate obviously is another factor to be careful about.

And, you know, basically the biggest thing here is that this is all why, if you're looking at the Fed and you're looking at the $39 trillion in debt that we have and paying off that debt, the higher interest rates makes that even more difficult.

So in all ways, it's screaming that the rates have to be lower.

And of course, trying to lower rates into this situation is tough.

But even the Fed themselves have said you cannot raise rates and lower oil prices if it's a geopolitical situation, which is clearly we have.

So this is a very, very fragile environment here.

This market being up so high, like I said, would I be a buyer, big buyer of equities at this point?

Probably not, but any substantial dip, as I said, the anticipation will be that the Fed will come in and that might at least help the market stay stable without some big crash.

Yeah, and Mish, I do want to build on what you just said.

We are hyper focused on the immediate conflict in the Middle East.

But looking at the FX markets, we are looking at the U.S. dollar index below the 99 level today.

But I think it's also helpful to take a look at not just the major currency pairs, but also the cross pairs as well.

So give us your take on the U.S. currency as well as the petrodollar and give us Given that we are seeing this geopolitical chess match between the U.S. and China, what the implications are here?

Well, I mean, I don't like to say this because it's scary.

But the truth of the matter is, is if you want to hurt the United States, the petrodollar and the elimination of the dollar as the world reserve currency is of the way.

And we certainly don't want to see that happen.

And right now, there has been more and more talk about either pricing oil in yuan, which of course would be a beneficial to China, or even cryptocurrencies, which is why I believe one of the reasons why we're seeing Bitcoin outperformed, say, some of the other markets at this point, marginally with this rally, but still holding up.

And so what would that do?

So right now, what you want to watch is really the dollar under this 98.50, which is where DXY is right as we're speaking, because that's a breakdown.

And I like to look at charts.

I like moving averages.

I find them to be extremely reliable.

And it's under both the 50 and the 200-day moving average.

So what does that mean?

Is it because of the fear of petrodollars going away?

Well, again, I don't like to say it, but it's certainly something we have to keep in mind.

Is it the fact that the dollar's purchasing power just keeps eroding, which is inflationary?

And again, what does this all mean, not just for the U.S., but globally, because we still are the place that people have been counting on for some kind of stability.

So this is, like I said, fragile.

It could go away.

We've seen this BRICS talk and all of this basically go back into the burner.

But I think you have to be aware of it.

That's why you have to watch the bonds, the dollar, and the consumer.

If I had to leave people with the best advice, it would be watch the consumer sector.

XRT is a great ETF.

It was the first to drag us down.

It actually sort of has triple bottomed here, but hasn't quite cleared the moving averages.

And if we see it roll over along with a falling dollar, we'll see those rates drop and we'll see those bonds go up.

Yeah, mish, finally, before I let you go, because you mentioned cryptocurrencies, I do want to get your take on the role of crypto, especially given this conflict in the Middle East and the price action that we have been seeing.

We all know that heading into the weekend, all eyes will be on Islamabad, Pakistan, especially as those negotiations between the U.S. and Iran take place and I'm sure all of us will be paying attention to the markets that do remain open 24-7 and that is crypto.

So give us your outlook for Bitcoin.

Well, right now at over 72,000, I mean, obviously, it held some major support this year.

And since the big decline that started in October 2025, we've actually managed to clear back over that 50-day moving average.

So we find that to be extremely important level, because essentially what it means is from October really up till March, the end of March, beginning of April, We were in a bear phase, and now we're back in what we call a recovery or recuperation phase.

So that kind of makes it sort of simple, because if it holds here, it's possible that we can see more buying coming in.

We get a weekly close over 74,000.

I think that's really the number that has to clear in order to see, say, a move to 94,000.

But if we can't hold up here, I don't think we're going to necessarily go to new lows, but it could mean we're going back into that chopped sideways consolidation while Bitcoin tries to figure out what its role is in all of this, in the U.S. economy, in the global economy, as far as an inflation hedge, the decentralization, fear of fiat currency and all of that.

It's still young, right?

I call it a tween.

And I think it hasn't quite figured it out yet, but I'm starting to see the signs. that is probably going to be a really good place to have some money parked.

Well, Mish, I like that analogy of crypto or Bitcoin being a tween.

So finally, before I let you go very quickly here, what does diversification in portfolios look like now for you?

Well, obviously semiconductors went to new all time highs yesterday, which was incredible.

I'm looking at SMH.

And I think, you know, we have the earnings coming up.

So another factor to keep an eye on, even though earnings expectations are great, it's always about the guidance.

And it's always about whether or not they meet the expectation.

So I think you should have a little bit money more in the semiconductor space than in the software space.

Obviously, if you're looking at things like in terms of memory with Micron was starting to look good, Google, obviously the kingpin.

So you can have some money there, but I'd be more cautious.

We have been very keen in biotechnology, particularly some of the companies that are really at the forefront in immunology and antibody medicine.

Also, if you look just like at something like IV, that looks like it has a lot of potential.

So some money in biotech commodities, absolutely.

I think you should be looking at those ags.

And finally, something I call the vanity trade, I've been sort of watching this for a couple of years, which is the domino effect of diet drugs.

People that have lost weight and their spending habits, how they've changed.

We've seen liquor prices go down, fast food prices go down, but we're starting to see certain things go up.

TJ Maxx, for example, just went to new all-time highs, but you gotta watch Eli Lilly, Novo Nordisk, and then look at things like Rent to Runway, Stitch Fix. companies that are benefiting from this new thin economy.