Iran War Upends Risk Markets and Safe Havens

Thomas Shipp (00:00):

Welcome everybody to the LPL Market Signals Podcast. It is March 9th. I am Tom Ship. I am the Head of Equity Research here at LPL Financial, and today I am joined by Kristian Kerr, our Head of Macro Strategy, welcome Kristian. I'm sitting in for Jeff Buchbinder for this week's podcast. And couldn't be a better time actually to have you on to talk about macro and everything that's going on with the Iran war, geopolitics, et cetera. And that is, you know, what we'll talk about here's my agenda and you know, we're going to cover market recap, then dive into energy markets and the war. Look at, you know some of the typical geopolitical playbook you know, safe havens, if you will, kind of acting a bit different. We'll touch quickly on a headline that came out Friday on, on AI CapEx, and then look at the week ahead. Sound good to you, Kristian?

Kristian Kerr (01:07):

Yeah. Plenty to talk about. Not a boring Monday. So happy to get into it with you.

Thomas Shipp (01:17):

Absolutely. Well, kicking off, just looking at the markets last week, you know, we say the war has upended not only risk markets, but traditional safe havens starting with equities, you know, S&P 500 down 2% last week. International markets down more. Look at the EAFE down over 6%, emerging markets down almost 7%. Not, many places to hide on a U.S. sector basis. Just, you know, energy was the only positive sector on the week. Technology did its best to hold up, down just about four 40 basis points. And across the board equities though, outside of energy, down. Small caps taken on the chin as well down 4%. And, you know, when we get over to our fixed income and commodities, this is where I think we're going to spend some time today, but just looking at the U.S. AG down a percent you know, the yields on the 10 year and 30 year up, you know, 15 to 20 bps.

Thomas Shipp (02:23):

But, you know, down in the commodity section, we do see, obviously crude. This was updated early this morning when crude was trading with a hundred, but we're down to about 95 now. So it's traded off a little bit on, on some news flow on potentially releasing strategic reserves across the G7. Another area within commodities we're looking at is grains and agriculture of a potential place of strength in this? And then finally, the U.S. dollar has continued to be bid breaking above the 200 day moving average. So we're going to take a look at that. But before we get going, we'll just take a quick look at the S&P 500. This chart was updated around 10 o'clock this morning when we traded down pretty low off the morning, but got almost back to flat. But, you know, just we're still above that 200 day moving average at 6586. But you know, as of this screen print here, we were below the 50, below the 100 days. So, you know, on a realtime basis, I'd say we're still range bound, but on this chart here, we're not Kristian. Any thoughts here on the S&P as before we get into some of the geopolitcal.

Kristian Kerr (03:37):

Things? Yeah, I mean the futures did trade actually below it in the overnight session. So very big technical tests for the market, and we got kind of almost the reflexive balance that you'd expect after a first-time test of such a big widely followed support. You know, we'll see kind of if we can get momentum from here, you know, obviously I think the news flow needs to get a little bit better. I think the volatility in the energy market needs to start to come off more meaningfully. But for a first time test a major support just given the somewhat negative news environment, you know, it's a welcome positive to see that we've so far held that. You know, I think bigger picture, we've really been talking about this all year, is the fact that, you know, we're looking at kind of the, what was one of the tightest opening ranges of the, you know, tightest ranges ever in the S&P markets.

Kristian Kerr (04:39):

Gotten a lot thrown at it in terms of what's been going on in terms of, you know, in the factor space, in the quantitative space where you've had a kind of, a lot of volatility internally. You know, the average stock is trading a lot more volatile than the index is. And, you know, the indexes have held up well with kind of that volatility going on under the surface. So, you know, kind of what you'd expect to see after kind of testing a big level of support like this. But again, I think we're going to need to see kind of the energy markets calm down, see the news flow, short term positive for us to get a momentum to the upside here.

Thomas Shipp (05:14):

It's really been the story of the year that, you know, taking a look at, at the index level is not telling you the whole story, but if you know you're a passive investor, do you really care <laugh>? So that's really been the story we've been looking at in my work. Obviously all the volatility underneath the hood, you know, presents opportunities, but it's definitely been a trickier market than the index suggests.

Kristian Kerr (05:38):

A hundred percent.

Thomas Shipp (05:39):

Let's dive into it here. I was thrilled to be, you know, sitting in for Jeff Bookbinder, our chief equity strategist this week to have you on and talk about, you know, just a bunch of the different geopolitical events going on with the Iran war and kind of took this in a direction where, you know, you'll send us all charts of the week. So we really just kind of pulled together a bunch of charts that can maybe frame the conversation for us and starting with, I think even more so than the oil price itself, but the volatility we're seeing in the oil market, you know, we've got the CBOE crude oil VIX basically this is a volatility of the oil ETF and this is one that you suggested. And when I looked at it, I said, wow, you know, we've had a few different volatility shocks in oil in the past five years here particularly looking at that, you know, the period with Russia and al also, you know, towards the middle of last year with Liberation day.

Thomas Shipp (06:46):

And we've shot well above that. So, you know, what is this chart telling you? And how are we thinking about oil broadly? I know we, the straight has gotten essentially to a standstill. Now we're starting to see production shut-ins in the Middle East. What do we think here on oil broadly? It's a global market, right? So, yeah.

Kristian Kerr (07:07):

Yeah. I mean, quite simply, I would say I would argue this is probably the most important chart to be watching at the moment. Now we can make a case that, you know, the way it's constructed is not maybe the best. But, you know, the idea here is that it's telling us the volatility within the energy market, and until this calms down you know, until we get some sort of blow off top or whatever it is, and can kind of be convinced that the volatility within the energy markets is subsiding it's, it's difficult to get, you know, two positive I'd argue there's probably a lot of complacency in the market with what we're seeing, you know, I mean, oil trade up to almost $120 a barrel just in the overnight session, right? And we're already, as you mentioned, back under a hundred, so tremendous amount of volatility right now in, in the energy market.

Kristian Kerr (07:54):

And it's basically, you know, it's an energy shock that we're seeing. And what are the implications of that globally? You know, a lot of ink has been spilled on kind of what the, this quasi closure of the of the strain of moves means you know, a lot of it, it's talks about, you know, about a fifth of oil supply is ceasing probably a little bit less given that there is some pipeline flow. But I think it's bigger than that. Because You've got, you know, a third of the world's fertilizer goes through that choke point as well. So it's got to, it's got a lot of implications. We're kind of working through that. I think what the market needs to see is, is this chart starting to come off? We need to see kind of ships moving through that area to kind of quell some of the angst of what's going on. So I think it's kind of, it's really that simple, Tom.

Thomas Shipp (08:46):

So you mentioned ships and the, this chart right here really, you know, as I was pulling these together, it blew my mind. It's one of those that you're most of us are not looking at frequently. And you know, one that is really telling the story, and this is really the day rates of very large crude container ships. So these are the primary ways that crude oil goes. And this is, you know, what you would call dirty vccs, and that's, that's unrefined prude, right? So from the, you know, oil derricks, you know, taking them to move to refineries more locally. And the, the four data series we have here are all, you know, originating in the Middle East Gulf and going to different places, us Mediterranean, Singapore, and Japan. And I mean, you can just see that's the definition of a parabolic rise here on shipping rates.

Thomas Shipp (09:45):

And this is, this is world scale down on price. So it's not in any dollar currency, but it, it really just, you're getting the impact of looking at this. And, you know, I think the big difference what I've, you know, been seeing is this isn't like when with Ukraine and Russia in the sense of the breakdown of moving crude, right? There was, there's always the, the secret barrels getting around sanctions and whatnot. But this is just straight up standstill of getting through the straight up four moves and getting to where it needs to go. So like you mentioned shipping rates, it, this is, I think this is another one to watch, just to think about, you know, when these shipping rates can maybe clear up and more so when the passage opens up. Am I reading that right?

Kristian Kerr (10:32):

Spot on? I think, you know, I would use the word to describe this chart as unprecedented. I think it tells you the, the scale that we're talking about from the economic impacts and, and listen, you know, I wrote a piece the other day just talking about, you know, there's two ways to think about this or kind of how the market's thinking about it, is that you know, the range of outcomes, and this is why I'd argue there's been a fair amount of complacency about it. The range of outcomes here is quite huge, right? Quite wide. So I think the markets are trying to, you know, how do you price that in? That's why I'd argue kind of where energy was priced when we kind of ended last week was still not factoring in that full range of outcomes, but kind of the positive or turning, you know, almost two negative equals a positive.

Kristian Kerr (11:20):

That there's a lot of people out there that think that the scale of this is so big that the powers that be are going to have to figure out a solution, right? So it's almost as bad as it gets creates kind of the situation where people come to the table and, and sort this out. And you even make the case that, you know, with some of the news flow we've been seeing this morning with respect to G seven you know, releasing some barrels into the market or, or, you know, talking about that. I think that's kinda what you start to expect. And that's kind of what these talks are telling us is that these are fairly unprecedented moves you know, wide ranging impacts from an economic perspective. And ultimately, you know, the half glass, half full kind of perspective would be that it's so big that we'll probably see people come to the table to try to sort out and figure out a solution here, because we can't, you know, we can't go an extended period of time without things moving through that, that choke point

Thomas Shipp (12:17):

I just switched the chart here because you mentioned what's going to bring people to the table, like, well, so everyone's going to be mad about shipping rates. No, folks are going to be upset about the impact to them. And so we've got, you know, WTI price, like, again, this was 10 30 this morning. I've got gasoline, you know, futures and jet fuel, right? So a few other things that, you know, when you think about gas and jet fuel, these are things that impact the economy full stop. And this kind of plays into what we'll talk about when we get to safe havens, but, you know, this is just wanted to kind of highlight, you know, this is the real impact, right? When you, we start to see these things is that the flow throughs to the rest of the economy really start to spike here. And that this spike is, while not as dramatic as what we saw in the shipping rates, it is enough to get folks to the table and I mean potentially trigger, I don't want to, you know, belittle the situation, right? That we're, there's people going on, but does this trigger a trump taco trade, if you will, right? It gets so bad that, you know, we, we have to do something to reverse that is, that's where I'm thinking here.

Kristian Kerr (13:30):

Yeah, I mean, a couple things. I mean, this, there's a regional aspect to this as well, right? What you're showing is U.S. prices very different story in Europe, right? Europe is much more heavily dependent on what's coming out of the Middle East in terms of energy and kind of driving the economy there. So I think it kind of depends where you are in the world. I think the U.S. is somewhat insulated here as kind of a large, you know, net energy exporter to the world. So I think, you know, as crazy as some of these moves have been in, in kind of product that comes from energy, it's nowhere near kind of as crazy as it's been. You know, you look at jet fuel prices in Europe, the spikes there, the, you know, the moves in LNG as well.

Kristian Kerr (14:16):

So it kind of depends where you're located and kind of who you're dependent on. Japan is another clear example, right? You know, 90 plus percent of their energy comes from the Middle East. So, you know, I think that's another one where people were expecting the yen to be strengthening an environment like this, and it hasn't because they're vulnerable on the energy side. So I think that aspect matters. So is it, you know, the rest of the world, because they're kind of feel vulnerable here, do they kind of put more pressure? I think that's an aspect that we should be thinking about. You know, in terms of the us I don't think it, if things were to get, you know, a little bit crazier here, there's always the option of, you know, stopping exports, right?

Kristian Kerr (15:02):

You know, I think people forget that the U.S. was, you know, under the Obama administration, we started to become an exporter again. So how wasn't that long ago that we didn't export energy? So kind of rolling that back, I could see as being a potential solution if things were to get worse. So the U.S. has certain levers they can pull that maybe other countries don't. So it's kind of that geopolitical interplay I think is really what matters in terms of putting pressure to come to some sort of solution. But, you know, ultimately what this crisis, if we want to call it that, or shock or whatever it is, is about it's the length of time this lasts is where it gets worse. And you know, so I think you're going to want to see parties come to the table to make sure this doesn't last you know, multiple months you know, or quarters or whatever it is, because you know that that is a much more dire solution than if we can figure something out over the next few weeks.

Thomas Shipp (15:53):

Yeah. I think the, one of the things to think about too is while the markets will ultimately, if a solution does, you know present itself nearer term rather than longer term when just thinking about energy markets globally, like some of these shut-ins have happened, they don't just turn right back on too. So yeah, there's definitely that to think about when thinking about energy prices broadly, right? So yes, the sentiment will turn when the news happens. But, you know, if we're shutting in production across places in the Middle East, that could take a while. And so we could, yeah, we start to maybe get some delivery of this, you know, crude that's in storage, but getting it back to refilling those tankers again could be a longer drawn out thing already. Like the damage may already be done on that front.

Thomas Shipp (16:41):

But you know, when you mentioned the U.S. and EM, that's definitely been something to call out is just thinking about, well, what are, what are the playbooks, right? So I think I have this chart here of both equity and traditional havens. It seems that, you know, in the past week, investors have more or less fled for the exits, right? We've got the S&P, the Euro stocks, and the, the k, you know, futures on the left as well as the long bond and gold on the right, ev everything's down and, you know, so what are some of the, the reasons that you think, we've seen some of the, obviously the equity side, we've got the reasons there and we've seen the, the bigger declines in international markets to your point earlier than, than maybe in U.S. markets, but just in, in terms of some of the traditional havens, we can talk about both bonds and gold. Just quickly, what you're seeing and why maybe those traditional havens haven't really held up?

Kristian Kerr (17:43):

I think in a post GFC world you know, there've been three things kind of the textbook say should happen in a risk offer, geopolitical shock one, you know, you would expect gold to do well. The other would be you expect bonds to do well. And third would be the dollar going up, right? We only got really one of those three in this episode. I'd say gold. The reason that happened is there's a context element, you know, everyone wants to say, well, gold should just go up. This seems like the perfect environment for it, but gold is up 20 plus percent on the year going into this. Had, you know, what I would consider a pretty interesting blow off top at, you know, the start of the year.

Kristian Kerr (18:28):

So a lot of speculation in the gold market. I also think there's an element that when you have a market that's running ahead of a geopolitical event and it comes what happens, right? You get a var shock and that tends to make you cut risk, reduce risk, degrowth, whatever you want to call it. And I think we got that in the gold market where because it was so strong, you get this shock element that hits the market, and what are you going to do? You're going to trim your winners, right? So I think the combination of kind of this forced de grossing combined with the fact that you have a lot of speculative interest to where, you know, the golden silver TFS were in the top five on Wall Street bets, right? So I think you got a lot of stale positioning from that from earlier in the year.

Kristian Kerr (19:07):

So that combination led to gold not being a great you know, risk off hedge in this environment. And I, but I think it's about the context in terms of the bonds, you know, I would say, listen, we in the post 2020 world that we've been in, so post pandemic bonds and stocks are a lot more correlated to each other than they used to be. I think in the period from 2000, 2020, you know, you could sit in a 60 40 portfolio and be just fine because bonds acted as a natural hedge. You know, a lot of that was because we were in a secular decline in rates. And that, and that I would argue ended with the, with the pandemic. So you have rates going up you know, in a, in a secular sense.

Kristian Kerr (19:48):

And what does that mean? It means like the bonds aren't the exact same, you know, natural hedge they used to be. And the fact of the matter is, you know, when you've got inflation, you know, higher than, than target for going on five years you know, you, you get inflation kind of spikes or potential risk related to inflation, like this move in oil suggest, or is that makes, you know, bonds a little bit less of a safe haven instrument than they would be in prior time. So I think that kind of explains the bonai and I would think dollar's done kind of what you thought it would. You know, I think last year, especially during liberation day and also kind of in that tactical strike you know, against Iran, you didn't really see the dollar do very well.

Kristian Kerr (20:39):

And I think people started to give up on the dollar being a safe haven. But a lot depends on the, on the type of event that causes market turmoil, right? I think in this case, there's very much a terms of trade element, which is a fancy way of saying, you know, we've seen over the last week, if you're an energy exporter, your currency has done pretty well. If you're a net energy importer, you've seen weakness, and that just comes down to the fact that you know, if you're a Japan then, then you have to sell a lot more of your goods to buy the same amount of oil you did a week ago, right? So that terms of trade element creates a flow effect that we're seeing kinda really driving the FX market right now.

Kristian Kerr (21:18):

But I think, you know, understanding you know, like how gold was set up going into this, you know, you could have made a fairly reasonable assumption that it might not be the greatest you know, risk off hedge in this environment because it was so strong going into it because of these other dynamics I talked about. So you know, that's another reason why you diversify, right? You know, if you want to have these types of things built a portfolio you know, having a few things in there. So you can be insulated is what makes a lot of sense. You know, because it can change. And we've seen that, you know, over the last to five, 10 years, there isn't one textbook answer to these things. And I think that's really what I would drive home is that, you know, that understanding that you probably need to be diversified across if few safe havens, if you want to kind of dampen fall dam in your portfolio probably makes the most sense.

Kristian Kerr (21:55):

But I think, you know, understanding you know, like how gold was set up going into this, you know, you could have made a fairly reasonable assumption that it might not be the greatest you know, risk off hedge in this environment because it was so strong going into it because of these other dynamics I talked about. So you know, that's another reason why you diversify, right? You know, if you want to have these types of things built a portfolio you know, having a few things in there. So you can be insulated is what makes a lot of sense. You know, because it can, it can change. And we've seen that, you know, over the last to five, 10 years, there isn't, there isn't one textbook answer to these things. And I think that's, that's really what I would drive home is that, you know, that understanding that you probably need to be diversified across if few safe havens, if you want to kind of dampen fall dam in your portfolio probably makes the most sense.

Thomas Shipp (22:41):

Yeah, I think that that makes total sense. And I think even despite this, you've seen a lot of commentary on, on Twitter, you know, asking about, oh, how's that international reallocation looking for you now? I think long term, you know, we've talked about this a lot. We've, you know, looked at Ems and, and developed market XU.S., but particularly EMs and, you know, I think there's still that long-term cases there, but you know, of course when there's shocks like this, there's going to be volatility. And so to your point, you know, having some cash and for these type of events and having, you know, what I would say vehicles or managers or what have you that can capture some of these other trends that are playing out. And so we've talked about cash, another area where we're looking at, you know, potential safe havens.

Thomas Shipp (23:34):

There's been, you know, on, on the agricultural side, we're looking at agriculture grains and wheat in particular, as well as urea, which is a, you know, the largest input into fertilizers across the world. So this is one where, you know, these have all seen some pretty notable spikes here now that the data series are admittedly volatile just even in this last year. But the one thing is clear that, you know, since this broke out, they've gone straight up. So it's another kind of area where we thought maybe not in your traditional playbook of safe havens, but definitely something that's been working.

Kristian Kerr (24:13):

Mm-Hmm <affirmative>. I'd actually argue it is right. The, the, you know, if you look throughout history whenever you've had wars, you know, food tends to do pretty well in that because food tends to get destroyed during wartime, especially if it's, if it's you know a bigger type of conflict like that is, that is a risk here. You know, I mentioned earlier that, you know, a third of these fertilizer moving through the straight of war moves. So that's, that's part of the story. But you know, historically you know, things like agriculture do well. So, you know, you could say it is kind of a textbook hedge against this type of particular event. I think in this particular case, what's interesting is that you're getting this potential shock right at the start of growing season for a lot of the, the major agricultural products.

Kristian Kerr (25:00):

So you know how that plays out, you know, might not be an immediate story. You know, that's another thing I would argue here when we talk about geopolitical impacts on the markets, is that the markets have become very short term focused here over the last few years. So people like to say, you know, geopolitics doesn't really matter. You know, the market always comes back and that to an extent is true, but I would argue a lot of times it's, there's a lot of butterfly or knock on effects that happen because of geopolitical event. You know, the one I always talk about is what we saw in the gold market. You know, it's very popular to say that the Russian invasion Ukraine didn't really have lasting impacts. I would completely push back against that. Who we ended up seeing was, you know, prior to the invasion of the Ukraine by Russia, you know, gold pretty much traded lockstep with real rates.

Kristian Kerr (25:47):

And that dynamic completely flipped because what ended up happening was the knock on effects of that geopolitical event ended up making central banks in the eastern hemisphere start to say, you know, I have to diversify my reserves out of the dollar because there's a good chance if I don't fall in line with the west in terms of politics and I could get my assets seized. And we ended up seeing kind of a structural shift in the gold market. So there was a very huge impact from that geopolitical event. And just a lot of it comes down the timeframe. And I think one of these things that we could see is, is, you know, going into growing season, kind of seeing this bit of shock going on in the fertilizer market you know, could have impacts on agriculture in the next growing season. So it's things like that you have to be thinking about in this type of environment and kind of step away from the short-termism because these things will have impacts and there will be opportunities as well from it. So, you know, that's the way I try to think about the markets when these type of events occur.

Thomas Shipp (26:42):

It makes me think, you know, the market is either so short term or you've got the other crowd that, oh, well, you know, nothing ever happens long term. We're just you know, stocks for the long run or <laugh>, what have you. And I always think about this maybe morose, but it's like, yeah, sure, but you know, we all know what in the long term, right? <Laugh>. So you can put anything on that long term chart and it doesn't really matter, but, okay, so thank you, that was a great run through on, you know, all the geopolitical stuff. We did have one last topic here. I called it a canary in the data center. We had a headline on Friday, nicely buried by the way, I'd say, but the, you know, open AI and Oracle made big news last year talking about this Stargate expansion this huge, these huge data centers building out and they are still building it, but there were plans to make it, you know, even bigger a, you know, thousand acre data center.

Thomas Shipp (27:45):

Well, they, they've kind of come out and said, eh, you know, open AI's plans have changed a little bit and they're not necessarily going to build that data center news followed up that NVIDIA's working with their data center builder, Caruso and, and meta to potentially take on that, that lease and build that out. But this is really kind of the first big negative news I feel like we've had in a, you know, trend here that's just been nothing but more deals, more building. We're going to build data centers that's going to save the economy. Obviously haven't seen anything in the numbers yet here, but I just, we threw together, you know, the 2026 calendar year CapEx estimates for five big hyperscalers you know, Amazon, Google, Microsoft Meta and Oracle since they joined the party and, you know, the, these numbers have grown to north of $700 billion just for calendar 2026.

Thomas Shipp (28:49):

No rolling over, we've seen in any of the data yet. But, you know, just thinking back on history, there's always some event, right? Whether it's a cancellation or whatever, something that starts to maybe pull the shine off some of this nothing but growth stories. So we want wanted to call this one out. And we also included a chart from last week, because it's still relevant, but, you know, any thoughts on this? I know that, you know, digging into the individual names is generally more my lane, but this definitely has big macro impacts too with the growth story that we'd see in the U.S.

Kristian Kerr (29:25):

Yeah, we'll see. And I'll be curious to see if somebody else steps in, right? Because that would tell you maybe it's more, you know, micro than macro. If you were to see kind of one of the other hyperscaler shops kind of come in and say, you know what, I'll take over that project or, you know, it makes sense for me or whatever it is, then I can see the market kind of say, you know, no big deal. So that's kind of what I'm looking at. But you know, I don't disagree with you know, in terms of these things. There usually is kind of, you know, one point in the cycle where something happens and kind of that changes the narrative. So we'll see if that's what's happening here. You know, I think it's a little bit early here. We'll see how kind of, you know, the chips fall, but clearly something to be monitoring because it does have potential narrative change impacts, right? Or implications.

Thomas Shipp (30:11):

Yeah. Yeah, definitely. And like I said, you know, shout out to Lawrence Gillum from last week's episode. I was working off that deck. I was like, well this definitely fits right in. And you can just see that the amount of debt kind of coming out of investment grade technology is kind of at all time records as of last year. And I believe that the numbers will continue to grow. Well, yeah.

Kristian Kerr (30:35):

I mean, there's kind of two schools of thought there, right? That I've kind of been running up against one, you know, if you want to compare this to like the 1990s you know, the debt is what really kind of drove that overspend. So kind of, you know, what I mean by the two views is there's some that, that are out there saying, you know, it's been cash funded for the most part up until now and we're just starting to get in the phase where, where debt's being used, so this could have a lot more to run. And you know, the other side is that, you know, well, you know, maybe it doesn't have to, because so much was already spent leading up to this. Maybe just getting you know, moving into the debt phase is signal enough. So, you know, I'm not smart enough to know whether, you know, if, if that's the right way to look at it or not. But something I think to think about in terms of the, you know, maybe we do need kind of an uber debt cycle first before the overspend kind of question becomes a real thing. You know, that's something I'm thinking about, but, you know, take my cues from the price action over anything else.

Thomas Shipp (31:40):

Yeah. Well we've come to the end and we're thinking about the rest of this week. We've got some big economic news on the calendar. I've highlighted what I think are the obvious big ones. We've got CPI on Wednesday jobless claims on Thursday and then on Friday, PCE and some sentiment as well as Jolts you know, is another one I didn't highlight. But the quits level can kind of give us some reads on maybe what's going on in the job market. Anything that you're specifically watching, either, you know, those I highlighted or otherwise.

Kristian Kerr (32:19):

The inflation number will be important. Although I wonder, you know, how much will it really matter given what's going on in the energy market and will it be look through because, you know, you could say it's stale. You know, I think Friday's number was somewhat kind of looked through because of the changes to the birth death model and also just the weather impacts. You might have a similar kind of effect here, but honestly, I think from a, you know, what's going to drive the market, it's going to be any news out of the Middle East one way or another. That's really what's going to drive things here and I think, you know, the data for the most part becomes secondary in this environment. It's very fluid. So I think, you know, the Middle East right now is going to be trumping most other kind of known event risks here.

Thomas Shipp (33:07):

Yeah, I agree. I think that the number on Friday was, it was interesting because it was kind of looked through because of some of that noise in there, but it's still, you know, to a non-economist, I'm like, well didn't the consensus and the survey participants also know that? And yet they were still wildly wrong. So interesting stuff. Well, thank you so much Kristian for joining and you know, lot going on. We'll continue to watch you know, news out of the Middle East and you know, be back next week.

Kristian Kerr (33:43):

My pleasure.