Let's get to the big story.
Breakdown while US stock futures are lower ahead of the market open but managed to stage a comeback last week.
The S&P 500 recouped nearly all of its losses since the military strikes in Iran began began in late February, and the Nasdaq is actually sitting higher now than it was before the conflict started.
But at the same time.
Traders are not out of the woods yet.
Earnings season is here and corporate profits are expected to jump about 14%, but valuations may remain pricey compared to historical averages and add an elevated oil prices, as well as stubborn inflation, as well as a delayed Federal Reserve interest rate pivot.
The risks are still piling up.
Joining me this morning to weigh in.
Patrick Healey, founder and President of Caliber Financial Partners, good morning, Patrick.
Thank you so much for joining us this morning.
We are looking at oil back up and stock futures lower, but markets have been quite resilient despite all of this volatility.
So as we head into earnings season, what are you looking out for and what do you think the US economy currently stands?
Morning, it's great to be with you again.
Um, yeah, as you pointed out at the uh the beginning of the show, the earnings season's actually been very strong, and I think that's propping up equity evaluations.
We have a, a busy week of announcements this week with the major banks and, and Goldman had a strong number this morning.
Um, you know, we're in heightened volatility obviously because of the Iran conflict.
I think that will continue until there's an actual resolution, not just a temporary ceasefire.
I'm actually surprised that the futures are trading as well as they are this morning, just given the announcement of the blockade.
If that actually goes into effect and lasts more than a day or two, I think you're going to see oil prices spike quite a bit higher than where they're trading in the futures market this morning, and I think equity valuations will also take a hit.
So I think.
The market's signaling that they're getting a little bit used to the Trump administration's negotiation style, and they don't think that the conflict will continue for more than a couple of days, at least the blockade.
And one sector I do want to zoom in on, Patrick, is tech and in particular Mag 7.
So we know that the mag 7 carried this bull market from 2022 to the end of last year, but the recent sector rotation we're witnessing has been Brutal and some investors may be concerned that heavy AI spending is going to burden balance sheets with debt.
But now that big tech looks cheap again, do you think some of these concerns are completely overblown, or do you think there is a reason to be cautious here?
Uh, so I think you nailed it.
I, I think that the, the, uh, concerns are a bit overblown.
These are some of the best companies in the world with fortress balance sheets, and sure they're spending quite a bit of money for the AI buildout, but they also have the ability to out earn that and have enormous free cash flow, and so I, I just think it's a, it's a temporary phenomenon in the market.
They're getting spooked with AI threatening uh software companies, but.
A lot of these names are now on sale where they were trading at lofty multiples a year or two ago, and so we're taking advantage of it for our firm and for our clients.
And Patrick, over the weekend we're paying attention to updates regarding the trade truce talks between Iran as well as the US in regards to the conflict in the Middle East.
But we are trying to trade a 24 hour geopolitical news cycle in a traditional market.
In terms of equity markets that open at 9:30 a.m. and close at 4:00 p.m.
Eastern Time, so this is causing massive exaggerated swings.
So give us your take on tokenize stocks which have been getting a lot of attention as well as around the clock trading.
What are the implications here and what's your take?
So I think this is a really interesting technological advancement for the financial markets, and I think it's largely been uncovered in the in the media just because there are a number of dominant headlines sort of bullying that that environment, but as tokenizations start to become more mainstream.
And we're starting to see elements of that stocks being tokenized that will be on a 24 hour cycle and so it should mute some of the volatility at the open and close of the traditional, you know, market.
Um, and I think that will only continue to grow.
I think we'll force the, the, the, uh, the exchanges to move towards a 24 hour cycle, and we've seen some evidence of that as well.
So, you know, but in the meantime, that's why you're seeing these exaggerated moves in the, in the futures market, in the after hours, uh, and intraday even as the uh as the news cycle is rapidly evolving.
The president's made a number of announcements and remarks in the evening, and so, you know, traders are trying to position ahead of that and having to react when, you know, the news cycle does pivot and so tokenization, I think, is coming down the pike.
I think um you know, once the conflict is over and we can get some meaningful legislation on the crypto sector that will benefit those efforts, but um you know, it's it's largely been under the radar and and and there's a lot going on behind the scenes that's that's definitely encouraging.
And speaking of behind the scenes, we are hoping for more clarity regarding regulation and when it comes to clarity, the Clarity Act may be discussed in Congress next month.
At the same time, the administration does want it passed before the midterms, but the banking lobby is pushing back hard.
So if this legislation gets tabled because of the ongoing war, will we see a harsh selloff after six months of sideways trading in the major crypto market.
A really good question, and, and I do think there's concern that if that legislation doesn't get pushed through before we get into the middle or beyond uh summer and you know, the focus shifts to the midterm elections, that that legislative window closes, especially if there's a balance, a change in power in Congress.
Um, and I think that would be an adverse reaction for the crypto sector.
Uh, Bitcoin, Ethereum, a lot of the major names have been kind of range bound, uh, since the big sell-off late last year, um, and, uh, you know, no pun intended, but having some clarity, uh, for that sector and, uh, you know, knowing market structure would be.
Very constructive for the crypto sector and the opposite is also true, and if they don't get that pushed across the finish line before the midterm elections and there's a change in power, um, you know, it can really have a negative sell-off for the crypto sector.
I'm a bull.
I'm hoping they get it through, but right now I think legislation is taking a backseat to the conflict. and this week in the nation's capital, leaders from around the globe will be gathering for the IMF World Bank spring meeting.
So we'll be curious to see what comes out of that gathering this week.
But at the same time in the nation's capital we're watching the central banks.
So incoming fer Kevin still needs to be confirmed.
So what are you watching out for in the next several weeks and what do you think needs to happen here with the central bank, especially before the midterm elections.
Right, so I, I think the administration has a lot of incentive to end this, this conflict and get that out of the news cycle and, and, and sort of focus on, uh, you know, economic things, things that impact everyday Americans because as we get into the midterm election cycle, that's what voters care about.
Um, so I, I know they're eager to kind of, you know, put the conflict behind them and focus on.
You know, other initiatives, having to get the Fed chairman confirmed, that's a process that'll be a little bit of a fight as most things are in Washington, but he's well respected and once he does get into the seat, hopefully it's sooner rather than later.
I know he is sort of a, you know, an advocate of lower interest rates and how effective he is at convincing the other Fed presidents that vote. will make or break whether we see rate cuts sometime this year.
I think everything's on hold until the conflict is over, but once he gets into the seat and gets confirmed, hopefully he can have a meaningful impact on some of the impressions of the other Fed presidents, and we'll have more constructive data that will support that effort.
Well, Patrick, a lot to digest and a lot to look ahead to.
So thank you so much for joining us on this Monday morning, and as always, thank you so much for sharing your perspective.
My pleasure.
