Crude is at 98 bucks. Gas is over 6 dollars in half the country. The strait of hormuz is still disrupted. Trump rejected Iran's latest peace proposal today. And the S&P 500 closed at an all time high on friday for the sixth week in a row.
Amrita Sen from Energy Aspects went on CNBC last week and called this "extremely misplaced euphoria" and said we're sleepwalking into a recession. Morgan Stanley's chief europe economist said we're "nearing a day of reckoning." These are not perma-bears, these are energy market specialists who watch supply flows for a living.
The bull case is all earnings. 29% Q1 growth, 78% beat rate, great. But that was last quarter. Oil was at $85 for most of Q1. It's been $95-100 for the last 3 weeks. That feeds into transport, logistics, manufacturing, food production. None of that shows up until Q2 and Q3 numbers.
CPI comes out tomorrow. Core was 2.6% last month. Polymarket has traders watching for a possible reacceleration toward 3.7% when the oil passthrough hits. The Fed is at 3.50-3.75 with a 96% chance of holding in June. If CPI comes in hot, the one remaining cut everyone's hoping for in September evaporates.
I'm not selling everything. But I moved about 15% of my equity allocation into short duration treasuries last week. If oil cools and Iran resolves, I'll rotate back and miss a couple percent upside. If it doesn't, I'll be glad I have the dry powder. The risk reward just feels off when crude is doing what it's doing and the index is pretending it isn't happening.
Oil is up 50% since february and the market just doesn't care
byu/Hungry-Command-8454 ininvesting
Posted by Hungry-Command-8454
8 Comments
Stayed in the market chads stay winning
Yea…. whatever. We will see who is and is not right. I am well diversified enough and with enough cash on had that we’ll get through whatever storm. And like ALL other storms come out better on the end. No worried one bit and I do anticipate a good correction ahead.
I agree the market may be underestimating how quickly higher oil feeds into inflation and corporate margins. Q1 earnings were strong, but they reflect a very different energy backdrop. If crude stays near $100 and CPI reaccelerates, the “rate cuts plus earnings” narrative could get tested pretty hard. Holding some short-duration Treasuries here seems like a very reasonable way to keep dry powder without going fully risk-off.
The stock market measures the expected future cash flow of large American corporations.
Until demand destruction starts high energy costs aren’t gonna hurt them too much.
There was also a big oil glut when the war started, and that’s just now starting to become an actual shortage.
Yea, and? Did you see the massive numbers the market leaders put up this quarter? The YoY growth is absolutely insane.
In theory the market is future looking, in practice trends and momentum are sticky.
The higher the inflation and the less chance of a cut means that everybody has to rotate back into something that goes up and matches inflation. The stock market is the only investment that front runs inflation. That’s why the stock market hasn’t ever gone down since it was first introduced.
Agree. I’m up 18% ytd and I’m not giving that back. In addition to the oil shock both the spy and nasdaq just broke above the upper bollinger band which historically won’t stay there for long.