Closing Bell - Closing Bell: Navigating the Geopolitical Uncertainty 3/12/26

Episode Date: March 12, 2026

Solus’ Dan Greenhaus and CIBC’s Chris Harvey tell us what the recent developments out of Iran and the big moves in oil could mean for the market in the days and weeks ahead. Plus, Wilfred Frost caught up with U.S. Treasury Secretary Scott Bessent on the strait of Hormuz, the war in Iran and much more. He brings us some of the highlights. And, Morgan Stanley’s Chris Toomey is one of the country’s top financial advisors tells us how he is advising his clients right now. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, guys, thanks so much. Welcome to closing bell. Scott Wobner, live from Post 9 here at the New York Stock Exchange. This maker breakout begins with yet another dicey day on Wall Street. Oil prices rising, stocks falling once again. There's a scorecard with 60 to go. Crude, most important. Look at Brent. It has settled above $100 a barrel for the very first time since August of 2022.

Not surprisingly, as crude has moved up, stocks have moved down. Let's show the majors once again, just that we can underscore. what's happening here. We're down almost 700 on the Dow, almost one and a half percent. NASDAQ down about one and two thirds. Banks, the private equity and credit names have been weaker. If oil's up, the airlines, the cruise ships, they're all lower. That's been the story really since this whole conflict started in the Middle East. We can cycle through some of those. You get a look at what the airlines are doing. Jet fuel prices are up. Maybe demand is down over the big picture, certainly in certain parts of the world, flights aren't going, and the stocks are falling.

Carnival's down 7%. Tech, we showed you the NASDAQ, mostly lower. Mega caps have been mostly in the red today, too. I did notice at least earlier that Microsoft was green. It is no longer. But we'll watch all of that, obviously, over this final stretch. Let's get the latest on the war and on oil. We do begin in Washington with our very own Aymn Javers.

Hi, Aiman. Hey there, Scott. We got this new statement from the Supreme Leader of Iran Kameney today. It's a lengthy statement, but in one portion of it, he speaks directly about and to the Iranian military. And here's what he says. He says, they have been responding to the enemy and they have blocked their way to take control of our country. My dear brothers, the nation wants you to defeat the enemy and use the leverage of Hormuz Strait to block the enemy. So that is the new Supreme Leader of Iran, doubling down on this strategy that we've seen playing out in the oil markets all week, of keeping the strait of Hormuz closed.

leveraging the economic impact of that against the United States and Israel and global oil markets. And we'll see where that strategy goes. If the U.S. has the capacity at some point to do something about that. In the short term, though, we heard from the Secretary of Energy today who said that at least for now, the United States military is not going to be able to do anything to clear the Strait of Hormuz. Here's what he said. It'll happen relatively soon, but it can't happen now. ready, all of our military assets right now are focused on destroying Iran's offensive capabilities

and the manufacturing industry that supplies their offensive capabilities. You know, we don't want this to be a brush off for a year or two. We want to permanently destroy their ability to build missiles, to build drones, to have a nuclear program. Scott, so a couple things to think about here. One is we don't know exactly who issued this statement on behalf of the Supreme Leader of Iran. and what his physical condition is, what the apparatus of leadership around him might be.

So there's a lot of unknowns here. And we don't know really what the capacity is of the Iranian military to continue the fight here. But if they can continue it in the short term, that presents the Trump administration with a real conundrum. Do they have to go in with ground forces to secure the Strait of Hormuz in order to get the global oil markets going again? Or is there some way using drones and air power

or some combination thereof to bring this threat to an end. It's not clear, as we sit here right now, Scott, how this is going to resolve itself. Reflected quite obviously and quite dramatically in the price of oil as we were just looking at. Amon, thanks for the update very much. It's Aymond Jabbers. Come back if needed, obviously, again, reporting for us from Washington.

For more on what's happening in oil, let's bring in Pippa Stevens. I said Pippa, Brent, settling above 100 for the first time since August of 22. We just were looking at WTI and Brent, and they continue to march higher. That's right, Scott. So the oil market is certainly not reassured by those comments from Secretary Wright or by the 172 million barrel release from the Strategic Petroleum Reserve as part of the IEA's 400 million barrel release. We still don't have any indication of the flow rate or how fast the oil can get out of storage.

And while the DOE said in a statement, the oil will start being released next week, it will take about 120 days for all of the bearer. barrels to be delivered. So the bottom line is that this does not fill the gap from lost barrels from the Gulf. And with each passing day, more production is being shut in. Duration does remain the most important factor. And if demand destruction is what is going to help ultimately balance the market, analysts say that number is north of 120. Scott? Pippet, thank you. That's Pippa Stevens. Here with me at Post 9 is Solace's Dan Greenhouse and CIBCs, Chris Harb. It's good to have you both with us seems kind of obvious.

Oil is what matters most for the foreseeable future? Is that correct? Yeah, for sure. And I think Pippa just hit a lot of the nails on the head, so to speak. Chris and I were talking before we came on air. There's nothing else that matters right now. And the problem is that none of us have any idea what's going to happen. So there's a lot of assumptions about what's going to happen.

But the truth of the matter is by next Friday, oil could be $125. It could be $150. I don't know. And so in a sense, the release of the barrels from the SPR and the global release is helpful. Saudi has an east-west pipeline that's going to move a couple of million barrels across the country, perhaps to Yambu, and we'll get some barrels that way. But nothing short of a freeing up of the strait, so to speak, is going to solve this problem. Which is why, Chris, you have people like J.P. Morgan's trading desks today laying out a tactical, bearish call.

long energy and energy stocks and short equities. Is it that simple? I don't know if it's that simple. Actually, it's not simple at all. Because the things that you're used to just aren't working. Rates are going higher. Your risk aversion assets, your long-duration risk assets, such as low-val, not acting the way they should.

Your opportunity set or your defensive sector has shrunk. And so what you're looking at at this point in time is, how do I make money in this situation, especially when the market sentiment is not broken, stocks are not oversold, and at the end of the day, we have too much uncertainty. And so I don't think there's anything that's simple. I think what you have to go back to is some good risk awards.

What we did is we came into this year a lot more defensive. We're beginning to unwind that slowly, right? And what we're looking for is some growthier names, some growthier, beaten-up tech names, that we think can work. work longer term. And that's the best we can do right now. So you're actually trying to play a little bit of offense in some of the, a little bit of offense in the beaten up names. That's right. Right. So what we're doing is we're going out and we're finding stocks where they have good balance sheets,

good stewards of capital, higher profit margins. But the market is also saying these are not broken stories. They have positive price momentum. Right. They may have bent, but they did not break. And some of those are the stocks that were quote unquote AI'd, right? Some in software. Some, some across tech, some in financials, some in industrials, right across the board. And I think you slowly want to start taking this opportunity, because it's almost impossible to handicap the geopolitical, but we can handicap what's mispriced. I'm going to somewhat disagree, as I'm known to do.

I don't think you're, sometimes the best thing to do is nothing. And I would argue that right now, if you're not already exposed to energy and therefore benefiting from the upward move. I would argue it's probably a good time to do little to nothing right now. For some of the reasons I articulated earlier, which is we don't know who the Supreme Leader of Iran is right now. Obviously, the statement was not made in public. We don't know the degree to which the various IRGC personnel are willing to die, so to speak, and take this as far as possible. We've seen ships in the strait get torched. And the longer this goes on, as Pippa noted in

reporting, the more production is going to get shut in. And to be clear for the viewer who may not be aware, this dislocation in the oil market is orders of magnitude larger than anything we've seen since, let's say, the 1950s when the Suez Canal was shut down. It dwarfs what happened with Russia, Ukraine, the 73 war, et cetera, et cetera, in which case, by the way, the oil embargo went on for five months in the early 70s. So I would argue there's too much uncertainty right now to feel as valid as that view is about the fundamentals and stepping in when there's blood in the streets. I just, I don't know that you can do it yet. There is a view out there, too, because I've heard it from people, some of whom have articulated this view on the air of the

so-called Trump put. And the lack of a tolerance at 1600 Pennsylvania Avenue for the stock market to get a lot uglier than it looks now. Well, the stock market's only down 4%. From its highs. From its highs, right? And I am hearing that from clients. And I think clients are a little bit too optimistic. Some people are saying, hey, we need upside protection because we think this is done by the weekend. I don't see how that occurs, but you do have a section of the market getting a lot more bullish and saying there is a taco trade out there, there's a Trump put out there, and we're going to get more aggressive or we're going to position for that. Well, because it's worked. It has worked. It worked almost every time because people still have

their eye on the proverbial prize of an economy that's still doing well. And you've got all the other reasons. Earnings have been good. I mean, I say the same things all the time in terms of the bullish checklist because people are still believing in that. I think that's all fair. And where we fall out on this is, okay, at the beginning of the year, risk was mispriced. Now we've repriced it as the macro has come to the fore.

That opportunity is beginning to shrink. And we're shifting to where the opportunity is. To Dan's point, we're not doing it aggressively, but the market is telling us to go. go back to some of these gross stories, to go back to these broken stories, not broken stories, these dented stories, because longer term there's good secular opportunity there. And that's what we want to do. I mean, there's been a lot of stories underneath the surface, certainly of stocks that have gotten hit pretty hard.

The financials are among them in which BTIG's Jonathan Krenzky today says, losing patience, breath erosion, and financial weakness too much to ignore. Another day as well, another batch of concern about private credit. We all keep hearing the stories, Leslie Pickers. following the money there and joins us once again with the latest. Les? Hey, Scott, yeah, you can see it in the stock prices of alternative managers and big banks, especially those with private credit exposure. Well, they are slumping today. And of course, the concern to Jure involves redemptions. Cliffwater and Morgan Stanley reporting redemption rates

of 14% and 11% respectively yesterday. But the managers only fulfilled about half of those requests. The rest were gated per the fund agreements. And these numbers come after last week's disclosures from BlackRock and Blackstone, the latter of which was able to satisfy the redemption requests through employees and the firm's own capital. The gates are a feature of these semi-liquid structures, and they exist to prevent forced asset sales and losses on liquid assets. However, the fact that we are seeing investors get cut back on their requests means it is very likely that they try again in the second quarter, perhaps by an even greater magnitude, especially if they expect to be capped again, Scott. Yeah, the temperature continues to rise. There's no question about that. Leslie, thank you very much. That's Leslie Picker. Let's now bring in Ed Yardini. He's the president of Yardini research downgrading the financials today and is here to tell us why it's good to see you. And one of the key reasons why you say in your note today, and I quote, until the fog of war and Jamie Diamond's cockroaches disappear, we will underweight that sector. So the disruption within private credit and the narrative around it has been enough for you to downgrade this space broadly.

I think it's the combination. I think it's the combination of stress cracks in the private credit market combined with the possibility that this war lasts longer and starts to really weaken the economy. That would come back to create more stress cracks in the private credit market. I mean, there's basically a run on the private credit banks. They're not banks, but their funds. So the run on these things is unnerving. And of course, the media is covering it and just creates more uncertainty about whether people want to invest in that area.

So that clearly is already creating some sort of credit crunch in the private credit market. And some of the banks see an opportunity and may kind of fill in the missing funds. But you add the two together, the war and the private credit. And I think the risks of things going badly continues. You know, I've been talking about a 10 to 15 percent correction in the market. this market four days after the war started. My initial reaction was this will be short, but then on thinking about it some more and recognizing that the fog of war, nobody really knows, but I'm becoming more pessimistic about how long this thing lasts, because at the end of the day,

Iran is a country of, it's sponsored terrorism. These are professional terrorists that are running the government and running the army, and it's pretty hard to get rid of terrorists, just with bombs. Well, see, I was going to ask you about this because I was going to say, how could you downgrade the financials, for example, and at the same time not grow more pessimistic about the market as a whole? One goes with the other, and you've just laid out that exact thesis. Exactly. And I started out with a macro, and I'm reverse engineering that into the sectors. Yeah, I think if you're lucky enough to have enough exposure to energy, I would stick with that. I think the Iranians, look, I mean, Trump may declare victory here, and he just, I think today said that he's going to define what unconditional surrender is.

He says when he says that it's unconditional surrender, then they've done it. Well, the Iranian regime may not agree with that, and the Israelis may not agree. with that and the streets of our moose could remain closed because of ongoing fighting. But then today he said that, you know, we're not going to leave until the job is completely done. So the markets are kind of hoping that the administration knows what they're doing, but the price of oils certainly signaling that this could last longer. Yeah. I mean, there's been mixed messaging, no question, which has made it a little more difficult for investors.

Thank you. I'm going to get some breaking news here. I'm going to let you go. I'm going to talk to you soon. That's Ed Yardinney. We do have breaking news. As I said, out of Washington, Sky News anchor and our colleague, Wilfred Frost, just spoke with Treasury Secretary Scott Besant. He joins us now with the headlines that he undoubtedly made it a critical time to do so, Wilfred. Absolutely, Scott. Very good afternoon to you. I sat down with Scott Besant for a 50-minute conversation. We began about five hours ago, but only finished about two hours ago. Because in unprecedented fashion, the interview was interrupted when the president called on the Treasury Secretary to make that short trip across from the Treasury building into the White House to join him in the situation room. The conversation picked up a few hours later when he was done in the situation room. His little taste of what we discussed about Iran and specifically what they'd been discussing in the situation room. Are you starting to think, if this does keep persisting as it is, that the Navy has to go into the Strait of Hormuz to, to help ships get through, which would have a big effect. Look, that was always in our planning that there's the chance that U.S. Navy or perhaps an

international coalition will be escorting oil tankers through. There are, in fact, tankers coming through now. Iranian tankers, I believe some Chinese flag tankers, have come through. So we know that they have not mined the straits. And was that where you were just discussing in the situation room? We were discussing a plethora of things. And is it your belief that the volume of ships going through the Strait of Hormuz will be improving immediately from now? My belief that as soon as it is militarily possible, the U.S. Navy, and perhaps with an international coalition, will be escorting vessels through.

I thought what stood out to me there is that the Iranians haven't mined the straits, that ships are passing through, even if sporadically. And the very clear implication there, Scott, that the US Navy, possibly with international support, might be going in to aid the passage of ships going forward into the straits of Hormuz. He also revealed to me that the cost of the war for the United States so far is $11 billion, when asked if there was a number that would lead him. to knock on the door of the president, say, Mr. President, we can't afford this anymore.

He said, absolutely not. It was a wide-ranging 50-minute conversation on the Master Investor podcast. It should be live in the next couple of hours with many topics covered from the background of his investment career, his outlook for the Federal Reserve, inflation and interest rates, and very much more. As it relates to the current war, Wilford, a couple things. As soon as militarily possible is what the Treasury Secretary. told you, which underscores that they don't really know or have a timeline as to when that

could occur to sort of calm what's happening within the energy markets. I also thought notable that he underscored twice to you that it won't be just the United States Navy, but a coalition as well. So this will not be in his thoughts apparently right now, the U.S. going at this part of this conflict alone. I agree with all of that, Scott. And I think, you know, what also jumped out to me is this interview was interrupted for him to go and discuss all of those things. The day after the US and its allies made quite a few big announcements to try and ease the oil price without the need of sending the Navy into the Straits of All Moose. Of course, this comes the day after huge announcements for the IEA and the US about releasing oil reserves. And yet, oil prices, of course, still remain significantly elevated.

And I think it's interesting that therefore the conversation is the following day about what could happen next. I do think if you step back from all of this, that what could happen next isn't should the US back down. It's what can the US do in a more offensive way to allow them to pursue their aims and ease passage of ships through the straits of all moves from here. So I didn't get a sense across the broad conversation that the US president is in a sort of, calming down mood in any way. Yeah. Well, he said as much himself through social media today. We'll stay as long as it takes. So we shall see. Wilford, thanks so much. Appreciate that. That's our colleague again and the Sky News anchor Wilford Frost, joining us with the highlights from his just-finished interview with the Treasury Secretary.

You guys want to, Chris, first, comment on what you hear from Wilford? Not so much Wilford, but I just want to comment on credit, right? There's lots of talk about prior credit, lots of issues with credit. If you look at the IG market, IG markets holding up much better. There's a bit of nervousness about it because if you're hedging credit with treasuries, treasuries are not acting the way they are. And so that's causing some volatility. But the overall IG credit market functioning and functioning quite well.

But what about the implication of what the Treasury Secretary told him as soon as militarily possible? That suggests to a market participant that maybe you're not going to wake up in the morning or the following morning and have a resolution to this issue in Hormuz. Those are great words. And I hope that happens. And I hope we get resolution. I hope diplomatic resolution comes in.

But you can say a lot of things. Now we have to prove it. Now we have to go forward. There's still a ton of uncertainty. There's still a lot of unconventional warfare out there. And there's a lot of wild cards. So I'll see it when I believe it. It's great that they're making this progress.

These are great words. And again, I want to see some diplomatic solution as well. And the coalition is fantastic. but there's still a lot of uncertainty. And when you're dealing with the military action, there's few things that you can guarantee. The Energy Secretary already said this is going to happen at the end of the month. So we sort of knew going into this interview,

which I'm sure is fantastic, nonetheless, that it's going to take a little bit of time to get assets in the region, in the strait, in order to start escorting the ships through. I think the bigger question that I have is, why are Iranian ships getting through the strait? This is a separate conversation, but we can track the data. Everybody knows what's getting through and how. How are we letting Iranian ships getting through the straight?

I haven't been able to get a straight answer on that. But that's a conversation for another day since I don't have the answer to today. But like, Chris, I want to turn back to private credit, which was the genesis of this conversation. Right. Before we went to Wilford, we were discussing as Leslie Picker was. That's right. As she has been, frankly, every day about the issues that exist, which more people are talking about. maybe more gates are going up to prevent people from being able to get out immediately.

I just want to make an important point that Leslie touched on, but I want to drive home, because we hear the word gating, just to be crystal clear for the viewer who may not be familiar with the way that some of these private credit funds, the BDCs work, it is in the agreement you make by investing in some of these vehicles that you know in any given quarterly period redemptions will be capped at 5%. This is not something that was done, surreptitiously or illegally or on the side. Like, this was well known. It is a contract that you effectively sign saying redemptions will be capped at 5%. So when you hear redemptions put in were 14%, they're only meeting 5% because they're gating. You continue to downplay this entire issue.

I do. You do. But to be clear, too, so that the viewer fully understands that. Sure. I have unquestionably one of the more positive takes on what's going on with private credit. But I sort of caveat last time I was on, and I will do it again. I'm not apologizing, so to speak, for the fact that 15 to 25% of loans were done to software companies. Among the private credit companies, they're going to be disproportionately more highly rated than the public equivalence. I'm not saying there wasn't malinvestment or bad loans or any of that. I'm not saying that. What I've been arguing is some of the narratives around the systemic nature of private credit and BDCs,

some of the narratives around some of the activities that they've been engaged in, have been framed in the most nefarious and negative ways. I'm, as someone who is sort of involved in the credit space by virtue of what we do at Solis, I'm trying, and I know Anastasia and Chenali also being tangentially or directly exposed in private credit are doing the same, just trying to provide an alternative viewpoint here that is not all doom and gloom with respect to the private credit companies.

You could have significant issues within part of the private credit business that are still not systemic, but are worth keeping your eye on and could have a dramatic impact on certain parts and various, you know, asset classes. That's a fact. No one is ignoring that fact. I guess to summarize it, what I would argue is that the issues going on in software now are akin to the sectoral issues that we've seen over the last 20 years, whether it's retail or energy or, let's say, telecom in the 2000s, and it's much more likely to be a sectoral dislocation than something broader, systemic or economic.

All right. You have a quick, very quick. You have a point on that? I agree. What you want to watch out for with leverage is the economy. As long as the economy is okay, it's not a systemic issue. It's here. It's here to use and crowd. All right. Guys, it's good to have you here. Thank you. Chris and Dan, we'll see you soon. We're just getting started here on closing bailout. Next, new developments in the ongoing battle between Anthropic and the United States government. What will it mean for that company's plans to go public? We'll ask, first marks, Rick Heitzman next. Welcome back to Trump administration defending its designation of Anthropic as a supply chain risk. A move the company is now suing. over. Here is the Undersecretary of Defense on Squackbox this morning. The truth of it is we can't have a company that has a different policy preference that is baked into the model through its constitution, its soul, its policy preferences, pollute the supply chain, so our warfighters are getting ineffective weapons, ineffective body armor,

ineffective protection, and that's really where the supply chain risk designation came from. Our Kay Rooney has been following the fallout here, as you know, as Anthropic does hope to go public we think later this year, Kate. Yeah, Scott. That is what we're hearing, but Emil Michael has been sort of the spokesperson, point person for the government on this topic, defended that unprecedented move to label Anthropic, a supply chain risk.

He argued that, as you heard, subjective moral guidelines that the AI company, he says, built into their technology is why the government does think it's a risk. There had been this debate around that he does also argue. that Open AI, who they did partner with, is not designed that way. Calls Anthropics claims about autonomous weapons and mass surveillance. Those red lines we've heard about a marketing ploy and a red herring. Michael also said, this isn't meant to be punitive. He dismissed Anthropics claim that the government has proactively reached out to other companies

telling them not to use the technology. Anthropic, though, on the other hand, suing the administration, calling the move unlawful. Anthropic says in a filainer did this week that it is being harmed irreparably and that hundreds of millions of dollars worth of contracts outside of the government are now at risk. At the same time, Anthropic, though, sort of business as usual announcing earlier that they're going to be spending $100 million on a new partner network to help get other companies building on Claude. That's their AI model, Scott. All right, Kate, thank you for that update. That's Kate Rooney. Rick Heitzman is the first Mark founder and partner joins us now back at Post-Nines. Good to have you back.

Thank you. Especially as we see the fallout from this ongoing drama. Do you think the fight with the, government will hurt Anthropics plans to go public? I don't. I don't. Their metrics are amazing, so they're adding almost $5 billion a quarter in revenue, and the fundamentals of their business will be sound. And my guess is they'll resolve this before any time they go public. And given the flip-flops we've seen in the administration, it wouldn't be surprising to put them back on the right side of history by the time of public financing would happen. Even if you wipe out whatever prospective revenues you were going to get from the government, we're not insignificant. It's not going to have a material impact?

It won't have a material impact. And also you're hopefully continuing to grow with your direct-to-consumer-clawed product that I think there's so much fundamental groundswell belief in AI, the models, and consumer demand, that it shouldn't be a big issue. I mean, the things have changed so much, it feels like, and at least its sentiment, given what's happening in the world. You were on in January, you told us the IPO and the M&A pipelines were going to be strong. this year. Does this upset that? It clearly does. It clearly does. I've changed my perspective. You know, M&A is still pretty strong, not for mega M&A, and IPOs between, you know, everything that's going on in the current war, uncertainty what AI does is traditional

software companies, and basically there's a coming huge pipeline of mega IPOs. You're going to see two of the four data bricks, anthropic and open, open AI. SpaceX, probably not Stripe this year, but two of the four will go and they're going to need to raise $50, $75 billion and that's such a gravity that everyone from the bankers to the buy side to the sell side are waiting for those numbers and care less amazingly about $10 billion value companies. Okay, so you think that the upset in software and the destructive narrative, I guess you could call it, around that has had a profound and material impact and effect on how we should think about and how these companies themselves

and others and investors and venture is thinking about these businesses moving forward. It's completely true. And there's also, especially given the amount of news cycle around the war and oil and everything else there, I don't think investors have taken a time to sift the babies through the bathwater. So they're not being really specific on the companies that are going to continue to thrive, who have proprietary data, systems of record, have very strong vertical presence versus workflow software, which are going to be hurt. And they basically said, hey, all legacy software is going to be disrupted by, you know, largely anthropic in the coming models. And therefore, we don't really want a part of them in the

public markets for now. If this war persists, let's just say for for the sake of this conversation for many months. Yes. You think we have the potential of seeing any of the hyperscalers cut their spending? They get a little more defensive? Or is that full speed? ahead no matter what? I think it's full speed head. Everyone, it's a game of chicken currently. No one I think is going to want to be the first person to say, I'm scared, my model's not working. This AI strategy, which I've put hundreds of billions of dollars behind over the last four years, might not be working because that's a way to cut your stock price 20% a day. All right. Rick, thanks for being here. I appreciate it very much around a lot of breaking news.

And we do have more now. It's Rick Heitzman of First Mark. Let's bring Steve Leasman in for that, because, Steve, we asked you to come on to react to a social media post from the president in which he says a few moments ago, where is the Federal Reserve Chairman Jerome Too Late Powell today? He should be dropping interest rates immediately, not waiting for the next meeting. It's interesting, the timing, it's not new, of course, the thought and the idea from the president that the Fed chair should cut rates. We are now talking about $100 oil, though. it's a different conversation today than maybe it was months ago.

Yeah, and it's a curious conversation. I'm assuming the president knows that the Fed is meeting next week. And it's curious on two counts. The first count is the theoretical one, Scott, where most people who are looking at the Fed think this is a really important time for the Fed to pause and not do anything and gauge the impact on inflation, gauge the impact on growth, wait to see how long this lasts. the second and maybe more interesting thing is the president is alone on this in terms of where the

market stand. If you look at what's happened today, Scott, with Fed Fund Futures, they have dramatically backed off their outlook for rate cuts this year. Here's the latest data. And what we're looking at here is the probability of a single cut. Remember we had had two cuts priced in. I'll get to that in a second. But the probability of September cuts got going down, to 41% and again by way of background that first cut had been built into June and now that's gone of course

and I look at that we're teetering with the idea of a December cut a single cut this year being right around the flip of a coin so not only is the theory against the Fed cutting here and a lot of the thinking of Fed observers but also Scott the market is not banking on this and they are backing off calls for cuts here

well before I let you go I want to lean on your expertise for a moment help us understand how in times of either war or periods of oil spikes, how does the Fed typically judge all of that and how it thinks about its monetary policy? So, Scott, I've been studying the history of this, and what we did this week is we looked at all 10 instances where oil prices year over year were 25% or higher for six months or more. And what there was, Scott, is before 1980 or so, there's a pretty automatic reaction of tightening rates. Since then, there's been a much more nuanced reaction, depending upon what's

going on in the economy. And I'll give you some examples. For example, in 2008, well, oil prices spike. But what else was going on? The great financial crisis. So the Fed ended up easing. There's no automatic response. What should have happened in 2022, you had an oil price spike? Well, the Fed stayed easy, probably should have tightened made a mistake there. So there's a lot of reason, Scott, why the Fed is going to take a step back and try to not react according to any particular playbook here. It's chasing by the reaction from 2022 in the pandemic, and it's going to, it's going to try to not make that mistake again. The other reason, Scott, remember, we're coming off of tariffs. Inflation is above target. And there are people who believe that if the Fed were to

so cavalierly look through this oil price spike, well, then the commitment to the 2% target, will be called much more seriously into question than it has been already. It's got to keep its eye, too, on financial conditions, whether they become tighter or not credit, as many are talking about now as well. Steve, thanks so much, Steve Leasman, our senior economics correspondent. Yeah, we'll have this chat again, I'm sure of that, Steve. Thank you. Up next, one of this country's top wealth managers, Chris Toomey, Morgan Stanley, tells us how

he is advising his clients right now. Welcome back. Stocks are weaker yet again, as crude oil remains the most. important thing investors continue to watch. Chris Toomey with us of Borgon-Stanley Private Wealth. He's here at Post-Nineast. Good to see you. So obviously this is the focal point of everybody. Now, you suggest to stay risk on unless Hormuz effectively closes. Hasn't it effectively closed? I think it's for a longer duration. So I think if we see an issue for two to three weeks, I think you go back to that geopolitical situation where 12 months from now, typically, the markets are up 10, 12 percent. We're probably in a better place, just given kind of the tailwinds that we had going

into this. Oh, so you're still trying to look through this current conflict and focus on the tailwinds, which we talked about at the top of the program. Yeah. It allows you to sort of do that. I think, I think, look, the big tailwinds that we saw that everyone saw was kind of those three pillars of prosperity, monetary, fiscal, and deregulation. I think we're right now in a period where you've got kind of three pillars of pain, right? You've got the AI bill. out you've got private credit, which you spend plenty of time talking about in this energy situation. I think the energy situation is the thing that we're most concerned about. To put it in perspective, if you think about it, 20 million barrels go through the straight of your moves every day.

COVID, we lost 10 million barrels. So this is twice as bad as COVID, right? I think if we can manage this process over two to three weeks, I think we get back into our base case. If this goes two or three months, that becomes a real problem. You think about just the basic math. You look at the reserves that the U.S. has, it's 460 million. So there's not a lot of wiggle room given these size that we're seeing. And here's the thing that's the most concerning. This is a supply side inflation issue. It's not a demand side. Demand side would be we've got too much growth. We're in a situation where we need to raise rates, growth is too much, and we need to take it back. If this is a demand, a supply side situation, we're in a situation where prices go higher.

And then a lot of these things that we have for the pillars of prosperity start going away, right? You can't cut rates. Fiscal spending has to become a problem. And then you probably go into the midterms where there's a situation where you could have a regime change in Washington, which could affect regulation. So you're getting clients that call you up and they say, Chris, you know, this looks like he could get pretty bad. Like I see oil at 100. What should we do? You're predisposed at this point to tell them, you know what?

I think we should actually buy some stocks? So I think right now it's too early to say buy stocks. I think we kind of stay the course. Right now, look, we've been in a fairly defensive posture. Last time we were here, we talked about the fact that everybody was expecting the market to go higher, which is a concern for us because usually that means the market's going to go the other way. And so one of the benefits of having kind of a diversified portfolio focusing in alternatives, focusing in on ways to diversify that risk, is we're in a position where the market does get weaker,

we can take advantage of it and buy some of the companies. that we thought might be a little bit too expensive to take advantage of when they were there. Let's talk about alternatives then, since you say that, of private credit. How concerned are you? So I'm concerned structurally with what's going on, not fundamentally. So I think if you look at it, there's a reason why these things are called private credit, right? These are instruments that aren't typically very liquid. You're putting them in semi-liquids type of structures. There's a concern that people aren't going to get their money. They're going to run for the door, and that's obviously going to put pressure on the sector. But I mean, if you go back to what we historically said, as rates were coming down, as competition was coming into the market, it wasn't a very attractive market to begin with.

And we were actually rotating money out of private credit in the things like ABS and infrastructure. Now, though, if you look at the fundamentals and you're looking at what's going on, we're not necessarily seeing a tremendous tick up. We don't think it's a systematic issue with the overall sector. We think it's an issue with regards to asset liability mismatch with regards to people that are buying into the sector. So we think companies are okay. We think they're in a situation where they've got plenty of liquidity to make some of this. But I think the concern is that there's a lot of headway and noise in this, which potentially makes this become a detractive investment in the future.

What about financials, which you say you're overweight? I mean, that group obviously is not done well at all, in part because of private credit. No, I think that goes back to our original base case, which is the economy is going to do well. Earnings are going to be at 17%. You're going to have a better issue with regards to leverage with the in the system and the financial should benefit. If we do have a situation with trade of removes, if we do have some inflation,

we don't have rates coming down, that could totally change this. We already have a situation. It just depends on how bad it actually gets in for how long. That's right. And so look, I think if you're thinking and you're concerned about what's going on in the market, you look within fixed income.

Fixed income, you want to be short duration. With regards to equities, you still, I think, want to look for secular growers. So some of these trades, whether they're in software, whether they're in AI that get cheaper, that becomes a good entry point. And they shouldn't necessarily be as sensitive with regards to energy prices. All right. Good stuff. Chris, thank you for being here. That's Chris Toomey. Back at Post 9. We'll be right back.

We're now in the closing bell market zone. Mike Santoli in Renaissance macros. Jeff DeGraff break down these final moments of the trading day. Plus, Christina Parts in Nevelas watching Adobe. That company reporting in overtime. Michael, begin with you. Your first words, what? Well, I mean, the declines are kind of gross. and orderly. I'm not sure if that's necessarily a good thing at this point. We are going to make likely a new closing low in the S&P for the year. You can, you know, look elsewhere and look at ways the market maybe is making it harder to give it the benefit of the doubt. You keep highlighting the

action in the financials. The consumer levered companies also continue to leak lower down like 2%. Credit is starting to notice this stuff. So it's not so much that there's something new the market is building in. I think you also maybe can say, hey, is making these new highs or near new highs, and the stock market isn't going down kind of commensurately tick for tick for it. I don't know if we can really take heart in that or not, but that is where we leave us. I wonder if you just have to wait for the market to get a little more oversold and then have some headline excuse to test the upside. Well, that's what some think you need to see a VIX spike even higher than it is now. What do you got in overtime for us?

Well, among all the other top-of-mind issues, we are going to delve pretty deep into Adobe after its results. We also do have an investor that has been nibbling there. Oh, interesting. All right. We'll see you in Mel. Top of the hour. Thank you, Michael. Christina, tell us more actually about Adobe. His stock has just done horribly. So there's a lot to try and prove tonight in OT. Yeah, horribly. Down roughly 22% this year underperforming the S&P 500, even underperforming the software IGV ETF as well. As Wall Street just really worries about AI tools from the likes of Canva, Google, and Open AI, just eating into Adobe's creative software dominance. There's three things to watch, though.

Total annual reoccurring revenue, ARR, Adobe's key subscription metric. And that's where the street is going to be looking for roughly 11% growth. Investors will also be zeroing in on AI-influenced ARR. Last quarter, more than a third of Adobe's subscription revenue was tied to AI adoption. And then the second part is the key question is whether Firefly, it's an AI, Creative Street is actually driving enough paid upgrades to keep that number moving higher. And finally, any changes to full your guidance currently calling for up to $26 billion in revenue. But the really big question hanging over this name right now is whether Adobe can actually

prove it's monetizing AI rather than being disrupted by it and whether that's enough to turn sentiment around, Scott. All right. Christina, thank you. We'll see what happens, obviously, in overtime. Jeff DeGraff will bring you in. Dow's down about 727. 731, 735. So we're going to close around the lows.

It is clear, and you suggest we're not oversold enough. Yeah, look, 20-day lows today. I mean, this is a couple hours ago, but it was only at 24%. That was actually a number lower than where we were back on Monday. You want to see 20-day lows expand. You want to see them really suggest that it's indiscriminate selling and that risk is being taken down. The other thing I would just say, Scott, is most of the sentiment measures that we go through aren't bearish enough yet.

You can see skew is rising, so that's the difference in the pricing of volatility front month versus three months. And I think people's expectations around what's happening in the Gulf is going to be a short-term war. Therefore, that premium makes sense. But we'll get back to normalcy in three months. Maybe, maybe not. And I think the put-call data just shows that complacency, that there's just not enough there. So I think we've got a little bit more ringing to do. I think we'll probably have some more bad news.

The good news is we're still in kind of this neutral trend, so oversawed conditions should hold, but we're not there yet. What levels are critical on the S&P to keep our eyes on? 6,500 is a big one. That'll be important. But for us, it's going to be more of the internals than anything else. So even if we, in fact, I wouldn't even mind seeing us break an important level because that might force some selling, get those internals where we want them,

get the sentiment where we want it, and then we'll start going after it there. Hard to feel better about this market as long as financials. We're looking at the screen here. We just cycled through some names, but Goldman was one on the list, down almost 5%. The group just hasn't traded well at all. It's making people uncomfortable. Yeah, it is. I think it should.

It started in the private asset managers, right? The private credit guy or the private equity guys that basically morphed into private credit. And then it's just kind of snowballed. We lost consumer finance this week. The regional banks actually act better than the business. big banks. So that's a little noteworthy because, you know, they tend to be more broadly, economically sensitive, less financially engineered sensitive. So I like that. I think one of the more interesting things, though, Scott, is gold, right? Gold has not responded well. We called

gold a bubble back in the fourth quarter of last year. You know, I think you can have a big correction. And you kind of have to ask yourself, what in the world would have to happen for gold to make a new high if this isn't enough, right? And so I think there's going to be more pain in the gold market before this is all said and done. Why are you trimming energy and adding to materials now? I've lost my mind, right? It has to be the case. Look, the sentiment in energy, if we look at where the retail is,

if we look at where the option activity is, if we're looking at where the ETF inflows are, they're just excessive. They're pricing in a lot of upside for energy. That by itself doesn't make it a sell. I think you want to just trim some of those. At the same time, if you kind of compare the economic cycle with energy and materials,

they tend to be birds of a similar feather. And so if you have one that's oversawed, one that's overbought, one that's got a lot of hype in it, and one that people are concerned about, we just think it makes sense to take a portion of the energy gains here, book them, move them into the oversold conditions and materials. Yeah, I mean, you just think that space is oversold and maybe deserves a look.

I'm going to let you go. I appreciate you joining us here, Jeff, as we count down to the finish. The bells are going to ring in just a moment. It's going to ring us out, as we said, just about at the lows of the session. Equity is obviously only one part of the story. And, you know, the Dow's down one and a half percent. SEP is as well.

NASDAQ is taking a little harder today, too, as technology sells off. Let's show crude, though, as we go out here because we had said that Brent had settled above 100 for the first time since August of 2022. Being close to watch, WPI is on the move as well. As long as that remains the dynamic, you're going to have a problem with equities. I'll see you tomorrow.