From Tech to Energy: Understanding the Shifts in Today’s Investment Landscape

Wall Street is rallying on this Monday morning as President Trump halts attacks on Iranian energy infrastructure for 5 days.

At the same time, Iran's Foreign Ministry is denying that talks with the US are ongoing.

Beneath the headlines at the same time is a massive sector rotation happening in the markets.

The 3.5 year bull market driven by tech is running out of steam.

The energy sector is the S&P 500's leading sector in Q1, while materials and industrials are also outpacing the MX 7.

Well joining me to weigh in is Eddie Ghabour, co-founder and CEO of Key Advisors Wealth Management.

Good morning, Eddie.

Thank you so much for joining me.

So a lot going on this morning, but first we're seeing a pullback in oil and we're seeing a rally in US stocks.

So what do you make of what we're seeing this morning?

Well, obviously we came into this week being very oversold, and then of course President Trump's tweet about having negotiations with Iran has caused the market to rally.

We don't trust this rally.

We've been raising cash.

We just think there's a lot of damage done in the oil markets due to this conflict that's going to cause inflation to accelerate in the coming months.

And what that means is the Fed is Off the table now of coming to the rescue and cutting rates and being accommodative.

So for investors that were uncomfortable last week, you may get a second chance this week if you get a bounce this week to reposition and be a little bit more defensive if that's right for their families.

But for us, we are playing a lot of defense.

We've raised more this morning on this bounce because we'll think we'll have better opportunities to buy the market lower in the coming months.

And Eddie, I do want to get your take on the implications here for central banks here, not just in the US but also globally.

So last week the Fed concluded the March meeting with no change in rates, but Chair Powell striking a decidedly hawkish tone.

So we are going to be hearing from Fed officials this week and Goolsby this morning has indicated that the door is not closed to rate hikes.

So what is your take on where we go with rates?

So right now the bond market, which is just a massive pivot in the data and the sentiment, the bond market is pricing in rate hikes.

I don't think they'll actually do hikes, but it doesn't matter what I think.

What matters is what the market is pricing in and what we think is going to come from all of this is stagflationary data.

And the reason why stagflation is so bad for risk assets is because the Fed is stuck.

You've got growth slowing.

But you also have inflation accelerating and it can be painful at times.

Now we just hope this isn't extended for 12 months, but I think it's common sense when you take a look at things that the next 3 months' data should be stagflationary, and I think the market is getting it right with its reaction.

And while we're on this topic, I want to get your take on energy.

So energy is up an astounding plus 30% this year and it isn't just the Strait of Hormuz blockade.

Ever since the US captured Maduro in January, investors have been betting big that majors such as Exxon or Chevron will tap into Venezuela's massive oil reserves.

But do you think energy could be due for a pullback or do you think we keep charging ahead?

I do think we're going to have new leaders this year.

We've talked about being in the economically sensitive areas pre the attacks in Iran, and oil was actually benefiting from that, but it also benefits from the overseas attacks.

So I think it's very, it's overdue for a pullback, but I think the trend in oil and energy should continue to be.

Bullish for the next 3 to 6 months.

So, but again, when you're up as much as it is in a short period of time, I think one should expect pullbacks.

But it's probably safe out of all assets to look at is to buy dips in the energy sector for investors that have that risk tolerance because the momentum should continue to be pretty bullish in that area.

Yes, and I do want to get your take on other sectors as well while I have you here, Eddie.

So the tech trade, the Mag 7, are down almost 9% this year, and this does come even after Nvidia's GTC gathering last week.

So we are seeing capital pour into industrials such as Caterpillar and Deer.

So do you think the tech gold rush is officially over, or do you think this is just a temporary shift toward the so-called pick and shovel ins?

I think for this year, the tech being the leader trade is over.

We've talked about this a lot with our clients coming into this year.

We were underweight tech.

The problem that tech had coming into this year is the bar was set too high on earnings and earnings growth.

Now it's actually healthy to have a big reset in tech.

I think you'll have a great buying opportunity in tech towards the end of this year and maybe set yourself up for 2027, but I think there's a lot more downside in technology here for this year.

And what about the material sector?

So we're again bullish on the economically sensitive areas, but right now because of the stagflationary data, we would just kind of sit back and see how things materialize.

So we were in industrials and other names like that, and we actually just recently over the last few weeks.

Out of those positions to get more into the money markets for clients because we think we'll have a better buying opportunity across the board in all areas except maybe energy.

That is the one area that is winning in both economic scenarios that we have witnessed already in the short period of time this year.

Well, Eddie, we will have to leave it there for today, but always great talking to you.

Thank you so much for joining us on this Monday morning and thank you so much for sharing all of your insights.

Thanks for having me.