Host: But first, let's take a look at our chart of the week. Our chart of the week looks at the relationship between oil prices and Treasury yields over the past month. Now taking a look at this chart, we have both the 10 year Treasury yield and also the price of Brent crude. These are two markets that have been at the center of the current macroeconomic picture. Disruption to global energy supplies has sent oil prices higher, which is Concerns that more expensive energy could add another layer of inflation pressure. Now at the same time, Treasury yields have surged, with the 10-year recently crossing the psychologically important 5% level. But now we're seeing some of that pressure ease. Oil has fallen for four straight sessions while the 10-year has moved back below 5%. So the question now is whether that relief. Because another spike in oil could reignite inflation concerns, shift expectations for the Fed, and put renewed upward pressure on yields. So let's continue this entire macro conversation with Bilal, little global ETF strategist with direction. Bilal, good morning. Happy Tuesday. Good to see you. I know it's been, it's been a whole week. I can't believe it. You know, I hate when you're not here with me. So you have really described this week as a stress test of the entire, you know, macro chain as we were just talking, energy feeding inflation. Inflation obviously feeds what the Fed decides to do and the future path of rate cuts and the rate hikes, or rather I would say the higher for longer sort of interest rate environment that we've been in, we've seen a sort of reshuffling with asset classes. You and I have talked about this a little bit. But oil is now falling. So how does that sort of play into the picture? How does that change the picture right now?
Bilal Little: Yeah, look, 4 down days in oil doesn't rewrite the chain, right? If anything, you just see a slight cooling off. You see this is buying time for the Fed. At the same time you're seeing the market reprice obviously around rates. That's been the narrative. That's been the conversation over the last couple of weeks that we've we've discussed, right? So one of the things that we talked about, you talked about the psychological hurdle of a 5% handle on the 10-year Treasury. Right now again what I think you're seeing is a bit of a slowdown as far as the velocity of capital right now. It's a bit of a wait and see moment to see what inflation continues to look like. I would say as we get towards the back half of this month and then obviously we get into the next session for the Fed.
Host: All right, so speaking about the Fed's raised rates last week, but you know, does that reduce the likelihood that the Fed needs to hike again if we continue to see these moves that we're making? In oil, right, because again it's oil inflation, inflation to the Fed. So if we continue to see this movement, downward movement in oil, what are you picturing as a future path of rate cuts, hikes for the Fed going forward?
Bilal Little: Well, one, I don't necessarily know if you can continue to see the downward movement right now. I think you see a bit of, it's not complacency. I think it's uh the market's been very selective, especially given the fact that we have the UN General Assembly meeting you have a bunch of meetings around uh uh diplomacy right and discussions there everyone's calling for uh uh uh uh. More discussion around negotiations right to obviously open up the Strait of Hormuz and making sure that we obviously have oil flowing appropriately. The bigger issue and structurally for the Fed is going to be core CPI. That's their focus, right? So energy is a variable that moves up and down pretty exotically. I think what you're going to see for them is, do we have the structural persistence of inflation? That's what the test is. So right now it's a bit of a pause.
Host: OK, let's talk dispersion, dispersion because you deal with a lot of traders over a direction. Traders love dispersion. That's where the money is made 100%. Where are you seeing the biggest disconnect across the asset classes right now?
Bilal Little: So because volatility hasn't spiked, what you see is a hedge, I would say. Around indexes and I think there's a ton of dispersion in technology. There's a ton of dispersion in small caps. There's a ton of dispersion popping up in different parts of the market, obviously what you see with Bitcoin. So the conversation from traders right now is like, OK, they're looking for opportunity and headlines that are driving momentum. So that's one. The other component that I think right now is again you're seeing a trade decision being made around cost of capital. And we're calling it repricing of risk, if you will, and because there's not a lot of headlines right now, the market is in this wait and see period.
Host: So, OK, so you mentioned volatility. So let's talk about the VIX, right, because despite the fact that we have geopolitical tensions, we've got inflation pressures, right? The VIX has actually come down quite a bit actually, and I believe that we have a chart of the VIX. So what does that tell you about the risk appetite right now because it sounds like you're saying that investors right now are really they're keeping their money right now on the sidelines and they're not jumping into the market.
Bilal Little: Look with the Fed raising rates at the front end, I mean it's an enticing opportunity to actually park some capital, especially until the dust settles. The other component that I like right now is because investors are hedging with indices, they're actually looking underneath and they're identifying opportunities. No one's talking about these names, but they're still doing really well. Take SK Heinek for example. It's up 16% on the month. It's up over 9% on the week. No one's talking about it because it's not sexy right now because there are so many other headlines that are being disruptive right now. So what we continue to see right now is although the equity markets have said like risk isn't on the table. In the in theory it actually is they're just being very selective about where they actually decide to allocate.
Host: OK, we're gonna leave that as a little bit of a teaser because we're gonna hop over to break our con our conversation with Bilal Little from direction is gonna continue right after this quick break. We're gonna talk a little bit about where those traders and where those investors are putting their money. That's right after this.
