While we are looking at the Dow industrial set to extend record highs and oil prices pulling back to their lowest level since March with global investors turn an interim US and Iran deal that promises to reopen the Strait of Hormuz and SpaceX showing no signs of slowing down after its historic IPO with shares surging nearly another 20% on Monday and topping $2.5 trillion in terms of market cap.
Well joining me as we head into a holiday shortened week is my.
Rankins, senior market strategist here at the NYSC.
Michael, good morning.
Thank you so much for joining me.
Good morning, Remy.
Thanks for having me back.
Well, we have a lot of headlines that are competing for attention, but of course I do want to start out with geopolitics as well as the AI trade.
So what do you make of what we're seeing in terms of oil prices and the equity markets?
Yes, so look, I mean, equity markets rallied yesterday.
I don't think it was so much on the geopolitics, but more so on just the optimism coming out of the Knicks, kind of taking the, you know, bringing the NBA.
Championship back to back to New York City and there's been a lot of buzz here in New York and we're all looking forward to the parade later this week, but you know, in all seriousness, right, we did see President Trump on his own birthday give kind of Fed Chair Warsh a present of his own as he kind of, we had this agreement with Iran.
You saw oil prices move pretty sharply lower that helped yields move lower as well as markets are starting to Kind of price in or kind of price out some of the rate hike expectations that have moved into the market, right?
So some of that hawkishness, you know what we saw yesterday is kind of oil prices we've talked about, you know, for the last couple of weeks we're holding above kind of the mid-May.
We were looking kind of targeting a mid move to the mid-May levels around the mid 80s.
That was where the 100 day moving averages.
We broke below that yesterday and we're now kind of testing the April, lows kind of in the.
80s that 200 day moving average is sitting around 75.
So you know that is kind of a domino, right?
And and a domino in you know kind of helping the Federal Reserve right as you know you you you expect kind of the inflation prospects to get a little bit better, you know, assuming oil prices kind of, you know, that the ceasefire holds, right, that we have an agreement and that oil prices continue to kind of move lower, right?
So that that that kind of takes some of the pressure off on the inflation side of things.
Yeah, absolutely.
Because when we think about the Federal Reserve, Wednesday afternoon will be Kevin Warsh's first presser, and everybody will be hanging on every word.
But what are your expectations and what will you be listening out for?
Yes, so you know it's really interesting, right?
Markets widely expect the Federal Reserve to leave rates unchanged, but it's really trying to understand and get inside the head of the new Fed chair, right?
So I think the first thing he needs to do is just kind of kind of set credibility, right, and And you know there's a lot of question around kind of Fed independence after his nomination, you know, I think.
Given the current environment, right, he's got to acknowledge kind of where inflation sits, you know, and the fact that that's being driven by kind of energy prices will be something he can kind of fall back on, but he can't be overly dovish kind of out of the gate right now.
He's talked about a couple of things that he wants to accomplish in his term, right?
He's talked about the communication style.
He wants less talk from the Federal Reserve as you suggested earlier. of the dot plot is something interesting to see whether or not he actually submits, you know, his own projections, right?
That's one way that people have suggested that he could push back on you know how important that is as a tool for the Federal Reserve, right?
And then, you know, just, you know, hearing how he couches where he would like to see communication going forward, you know, the balance sheet. been another issue that he's, you know, kind of talked about wanting to start to shrink that balance sheet, but I think what has to happen is all of these things are going to happen gradually, right?
They can't happen, you know, in his first meeting, right?
So I think like, you know, the key part, you know, for day one is establish credibility, right, and then, you know, start working with that committee that he's working with to kind of start to move, you know, kind of the ball in the direction that he wants to.
The fact that we have oil prices moving lower, that is going to be helpful right in terms of, you know, the inflation expectations, you know, and kind of on a go forward basis, right, so that does take like you kind of take, you know, makes his job a little bit easier, right, you know, if things start to move in the right direction.
Yes, and as you mentioned, Michael, there's a lot of pressure on Kevin Warsh as we count down to that presser tomorrow afternoon.
But I do want to get your take on the historic IPO we saw with SpaceX, especially as the company announced its acquisition of Cursor for $60 billion.
And given the market cap of SpaceX right now, sometimes I have to do a double take when I'm reading billions or even trillions, but that does speak to the magnitude of what we're talking about with this IPO.
And there are Other listings that are coming down the pike in 2026.
So what do you make of the trade?
Yes, look, you know, it was, we're seeing kind of strength in kind of that IPO market, right?
It's a very big, this is a very big transaction, I think with the move that we're seeing this morning.
SpaceX is kind of rivaling Amazon's market capitalization to put things in perspective, right?
So.
Um, you know, look, I mean, it, it there was plenty of demand for that.
It traded well in the, you know, it's traded very well in the secondary market, um, right, which, which just points to kind of the strength of, you know, of the IPO pipeline, as you, as you've highlighted, right, there are you know kind of a couple of, you know, kind of big, big IPOs that are still kind of in that pipeline, you know, that we're expecting to see over the next year or two, You know, uh, today we do see options listed on SpaceX, so that's going to be very interesting to see how that trades and how the options markets are impacting, um, you know, kind of impact the trading in the, in the single stock here, um, you know, and then, you know, just, just from, uh, you know, kind of a risk tolerance perspective, right?
I mean we're seeing kind of markets are, you know, kind of, uh, we're seeing kind of speculative juices come back into, into market.
Markets are trading really well, but I think kind of with some of the shift that we're seeing kind of on the macro from a macro perspective with kind of the theoretical resolution of Iran, right, we could start to see the breadth in the market start to improve again if you kind of think of the domino effects of once again oil prices moving lower, helping interest rates starting to.
Help the consumer that can help maybe continue the economic strength that we've seen in the first half of this year and help that continue through the back half.
Michael, you bring up a lot of important points because not only is the G7 taking place this week in France, but there are several central bank rate announcements expected this week.
So finally, I do want to leave with the Your take on what we're seeing across global bonds as well as the yield curve.
So what is the yield curve telling you?
Yes, look, so I mean it was sort of interesting in that yesterday while we've had this pretty significant move lower in oil prices, which have been pretty correlated to rates recently, rates moved down but not quite as much, right?
So I'm really kind of there's a couple of key levels I'm kind of watching.
Uh, you know, for the 10 years specifically, right, we've broken back below 4.5.
Like if we can kind of get below 4.4, right, that kind of opens the door for, you know, kind of a 15-20 basis point move, you know, to the downside, you know, which is kind of like taking out this kind of rate hike expectations, you know, you know, you have kind of the two years trading kind of above, uh, kind of the current Fed funds.
Target, right, so we can kind of get back into that range, kind of back below 4%, right, that would also be pretty supportive.
Last night we had the Bank of Japan kind of hike rates as was pretty widely expected.
We've seen kind of global central banks have been a little more hawkish than the Federal Reserve.
You know, you're starting to, you know, we'll see.
I guess some of the commentary coming out of that after kind of the Iran announcement has suggested like you know we can potentially be on hold here you know as rates, I mean as oil prices have backed off, right, so we kind of heard a suggestion of that from the ECB last week, we heard a suggestion of that from the bank.
Japan, you know, last night, right, where they're going to be able to kind of hopefully, you know, taking oil off the boil helps the inflationary backdrop around the world and they don't necessarily need to be as aggressive as they once thought.
Yes, a lot of moving parts here, Michael, so I appreciate your time and thank you so much for sharing your perspective and your insight.
Thanks for having me.
Thank you so much.
