Scott Wren now joins us live via Zoom.
Thank you for your patience, Scott.
He is the senior global market strategist at Wells Fargo.
Scott, thank you for joining the broadcast and taking stock on this Thursday.
Let me get your perspective, and I am wondering to what degree you are surprised, if at all, given the chop and volatility that we have seen over the markets, even over just the last few days, Scott. the thing is you wake up in the middle of the night or you wake up in the morning and check the market.
I mean you don't know if it's going to be up a lot or down a lot, and I don't think that really surprises me.
What surprises me is we're just not that far from the record high in the S&P 500, even with all the things that are going on out there, and there's a lot of churn obviously.
Underneath the surface, but I think the market is hanging in here very well.
We think this situation with the Strait the Strait of Hormuz is likely to resolve itself over the course of the next couple of weeks, and we'll see some oil flowing through there.
And I would argue that really this volatility is all about the price of oil.
So let me get your take on the price of oil.
I'm looking around the floor of the trade floor, seeing if I could see it, but last time I checked, West Texas north of 80, Brent crude north of 80.
Scott, do you have a base case for how high it could go?
We're talking a lot more about $100 barrel oil the last few days.
Well, I tell you, if if the strait stays closed and we see production facilities within the Persian Gulf shut down or damaged.
By Iranian attacks or something like that, oil can go higher, but we don't think that's not our base case.
We don't think that's what's going to happen.
The top end of our range for oil for WTI at the end of this year is $70 so we're pretty far above that right now.
But I think if we saw some resolution here in terms of oil transportation, I think you could see oil come off 58 $10 pretty quick.
Scott, pretty quietly since the attacks on Iran started over the weekend, we have seen the odds of a short-term interest rate cut be pushed out further and further.
Earlier this afternoon, the last time I checked the CME Group FedWatch tool, we're now not expecting a 25 basis point cut until the month of September.
What happened and what is your sense on how that timeline will actually play out given the uncertainty of the last 5 days?
I think that certainly these inflation readings are going to be affected in the short term by the price of oil.
Now I would also argue that higher oil, higher gasoline prices means consumers have less to spend on other discretionary items, and that could slow the economy a bit right there.
But we've had two cuts penciled in for this year.
We had previously thought probably June or September for the cuts, but it makes sense that they are pushed out a little bit further.
But like I said, I think, I think this is a fairly temporary situation because it's all about the price of oil and the Federal Reserve though is going to be careful here.
They can be careful.
We're going to have a good economy this year.
We're going to have low unemployment, so you can make a pretty good argument that the Federal Reserve doesn't really have to do much of anything.
I'm glad you made that point about potentially pulling back on other discretionary spending.
I've been thinking that since the weekend events.
You're the only other person I've heard say it out loud.
The theory there being if you are forced to spend more money to fill up your gas tank, that in theory leaves less discretionary spending for restaurants, for other goods and services that could work to the benefit.
Of central bank policymakers.
Let me get your take because we are having this conversation on Thursday afternoon, which means tomorrow 8:30 a.m. the Bureau of Labor Statistics, the February jobs report.
What are you going to be looking for, especially after that higher than expected PPI inflation print we had last Friday, Scott?
I think the no hire, no fire environment is still alive.
I don't think it's going to change any time soon.
I felt like we were going we were going to see some additional hiring here pick up.
That's been slow to respond, but I think it's going to be more of the same at least over the course of the next couple of months.
This initial claims, I think yesterday was a perfect example where continuing claims rose and then initial.
Claims stayed really low, so I think we're going to see kind of a confirmation of that in this particular report.
I don't think we're going to see that big upside surprise in non-farm payrolls like we did last time.
If you get something in the 50 to 80% range on non-farm payrolls, I think that makes a lot of sense in this environment.
Unemployment rate 4.3%, somewhere around there.
I think that makes sense too.
So I don't think we're going to see a lot of surprises tomorrow.
Scott Wren, senior global market strategist at Wells Fargo, thank you for dealing with us through the tech issues, Scott.
Come back on the broadcast anytime.
