We are looking at US stocks rally and the oil futures as well as the US currency plunge as Iran as the Strait of Hormuz is open now.
Trump reacting on Truth Social a few moments ago saying quote the naval blockade will remain in full force and in effect as it pertains to Iran only until the time of our transaction with Iran is 100% complete.
Now Trump saying that this process should go very quickly because most of the. are already negotiated.
I do want to mention that Brent oil fell by as much as 10%.
And also there are reports incoming that US-Iran talks are expected to take place in Islamabad this weekend.
Now the Federal Reserve is officially in wait and see mode as the war in the Middle East sends global prices, energy prices that is in a volatile pattern.
Now inflation was already running hot due to the. and now we will continue to keep an eye on what happens in terms of geopolitics.
Well joining me without further ado is Eddie Ghabour, co-owner and Managing Partner at Key Advisors Group.
Well good morning happy Friday to you who would have thought that this would have been breaking news for us on this Friday.
So first and foremost, how long do you think this will hold and do you still remain dubious in terms of progress for this conflict.
You know, it's interesting we always say that markets are forward looking and predictors of what's going to happen in the future, and two Wednesdays ago we said that the technicals, which you have to respect.
We're starting to say that the market was getting ready to rally and that oil maybe has topped the VIX maybe has topped at a time when there was still a lot of indecisiveness and today is just kind of confirming what the market was signaling to us from a technical perspective.
So you know I think now this is a best case scenario for markets now.
When you're dealing with geopolitical issues, anything can happen and cause markets to scare, but I think when you look at what the market has done over the last 12 to 13 trading days, which is a historic rally that none of us has ever seen before, it's telling us a clear signal from a technical standpoint that markets are telling us that the worst is behind us and any chop that we're going to see in.
The next month or two more than likely is going to get aggressively bought.
So I think the playbook is right back to where it was pre-Iran attacks, which is bet on economically sensitive areas because the economy is going to accelerate from a growth perspective and probably surprise to the upside.
The Fed is going to cut rates at some point in time this year, and inflation has probably peaked.
With what's happening in oil, so this is a Goldilocks market now.
It's not been an easy one to navigate through, uh, but this is a real, real positive and huge catalyst today.
Yeah, absolutely, because we are looking at a rally here on Wall Street and we are looking at the Nasdaq and the S&P 500 at new record highs.
I do want to mention we are watching the S&P 500 inch closer to that 7100 mark.
So I understand that you do have top conviction that small caps, industrial semis and software will beat the S&P 500 by a wide margin here.
So why are you betting on these areas to lead the next leg of this rally?
Well, when you look at small caps, some of the most economically sensitive areas are small caps, and coming into the year we were bullish on small caps as one of our top conviction plays, uh, and now that we have a more of a risk on environment, uh, happening again, you're gonna see small caps that have a low bogey to hit in regards to earnings.
So we think they're in a really surprise to the upside on earnings, uh, and what you're seeing today is that outperformance.
So I would tell investors whatever you're seeing.
The tape today is probably going to be indicative of what's going to happen over the next several months.
So industrials and small caps are a real play on the economy accelerating.
And then the semis and the software.
Software is a contrarian play.
They have taken a real beating, still down, I believe, 20% in many areas year to date.
So I think there's lots of catchup trade that'll be a catchup trade.
And then the semis in a bull market generally are going to lead the way, you know, if the semis are strong, the markets are strong.
You look at names like Nvidia are probably going to break to new highs.
So this is going to be a really strong summer as we head into a lot of short covering.
You know, I think this war had a lot of people putting on a lot of shorts thinking things would get much worse.
I, for one, didn't think things would reverse as quickly as they did, but as we've always said, we're not going to fight the tape.
We're going to follow the trends and what the technos have done, and we're thankful that we bought aggressively on Monday at the open.
Yes, and short covering is something that all of us have been paying attention to, but when it comes to this foolishness that you're talking about, it does seem to stem from the idea that the US does face more lower downside risk compared to the rest of the world.
And not surprisingly, in New York morning trade on the heels of this news regarding the.
We are seeing the US dollar pull back further.
So you do call this the most resilient market in history for shrugging off a massive energy stock shock.
So when it comes to the leader and the S&P 500 right now in terms of sector, do you expect that to hold for the rest of this year or not?
Yeah, we do, and you know, I think this really speaks to how strong the economy actually was heading into this, and I say it's the most resilient market in history because normally when you get an energy shock like this and you have oil over 100, you know, you would expect a much deeper selloff that would last longer and a slowing down in the economic data, and we just didn't see it.
And now that it looks like the strait is going to be.
Open, you know, this is going to be a blip on the screen when we look back.
So you know this really could shape up to be another big double digit year if you're positioned correctly for investors.
And what's a little bit crazy is it looks very similar to last year when you look at the selloff last year where we bottomed last year and what ended up happening, it looks a very, very similar tape.
The only difference is this rally is much, much steeper than what we saw last year.
And finally, I do want to squeeze in a question about the S&P 500.
What is your price target for the index for 2026?
So you know, in regard to price targets obviously are very hard.
We are expecting a 12% return on the broad market on the S&P.
So I think that's a realistic expectation right now.
And again, a couple of weeks ago that probably didn't look as if it was going to happen, but with this.
War hopefully behind us.
Earnings growth should accelerate.
Economy should accelerate from a growth side, and you've got a Fed that's going to be accommodative.
So that is as good as it gets for the bulls.
And this is why I say I think dips are going to get aggressively bought because there's still a decent amount of cash on the sidelines.
We will have to leave it there, but hopefully we can discuss the Fed the next time you're on the show.
So thank you so much for joining us and have a great weekend.
Thanks for having me.
