Brian Sozzi asked me back on Monday after retuning from a restful spring break - and markets just can't seem to face the reality that higher oil prices will impact earnings this year. There is no way around it. But, I also suggest that the big banks that wrote "oil at 200" this weekend is unlikely. Why? Because high prices destroy demand.
It's Friday and Opening Bid on Yahoo! Finance brought out the big guns. Brian Sozzi is basically a genius. He hand picks all his guests. And for a Friday blowout he paired me with Tom Sosnoff - one of the great tactical traders of our time. Tom is a futures trader that plays every pitch, while I wait for the fat pitch. Tom trades volatility, I allocate around. While Tom sees the world in volatility and probabilities, I work on the macro and earnings.
But here is the thing - our view of markets are very similar right now and that speaks volumes. We both agreed that the juice isn't worth the squeeze with current market levels - the upside of being long isn't worth it. We both think the market grinds down from here, and my thoughts are having to wait for earnings season to pick up in order to see the reduction in forward guidance - meaning, investors won't get nervous until CEOs start to talk about the impact of oil going forward.
Right now? My bust guess is that investors and trades think Trump will just end the war tomorrow and peace will break out - but those people don't do their homework - infrastructure to LNG and oil fields take years to repair - or as I said "this ain't fixing a pothole in Boston."
Brian Sozzi asked me to give his viewers my take on markets after the second week of conflict with Iran. We agreed on one thing - Wall Street has been slow to the reality that this is a real oil shock, with real repercussions for 2026. That includes saying goodbye to Fed cuts this year, further compression in software stocks, and overall being patience and not reacting to headlines.
If you really want to take advantage of lower prices for stocks and bonds - then wait for actual lower prices. Because we aren't even down 5% from all time highs for the broad market. That isn't a correction, yet.
What a treat! My long time friend and Yahoo! Finance host invited me to hang out on the NYSE and see the closing bell ring - because who wouldn’t want to visit the cathedral of capitalism. While we were waiting, why not do a quick interview?
We cover oil, how markets had not yet started to get volatile, and most important, how software and tech in general needs to come down in valuation - or as I like to say MAKE TECH VALUE AGAIN. Enjoy!
Why not have a tag line? MAKE TECH VALUE AGAIN
What I mean by all of this is if we simply have mega tech go sideways for nine months the forward earnings are so strong, so huge, that multiples will go down naturally. Or in other words, the earnings catch up with the price. And really, people think this war with Iran will go away soon. I'm not so sure.
I lay out my strategy for the year - because sometimes cheap becomes dear and dear grows into the multiple.
Charles producer reached out to see if I would be willing to discuss value stocks - and of course the answer was yes!
Here is the bottom line: Value isn’t a sector. It’s a discipline. It’s paying less for a stream of cash flows than that business is worth. Sometimes that’s energy. Sometimes it’s financials. And sometimes it’s mispriced tech like Amazon - or Google a year ago. It’s about valuation relative to growth and durability — not about whether a company makes steel or software.
Right now, some areas we traditionally associate with value are very pricy, and the hot glamor stocks (just call that the Nasdaq 100!) have seen their inflated multiple come down, just not enough to get me excited - yet.
Remember that CEOs don't grow up wanting to be a value stock - it's something that happens due to poor performance, investor sentiment, and economic trends. So don't go looking for the Loch Ness monster - which is a permanent value stock - we call that a value TRAP.
We are about to see the largest IPO in history. We have companies engaging in circular financing similar to the year 2000. We have no clear revenue plan for most of the massive investments in data centers. What could go wrong? If you go looking, the mind will see what it wants to see. Let's break it down and understand what markets are asking and the potential responses by firms.
The big issue going into next year is a clear path of profits for the trillions of dollars we are going to spend on AI infrustructure. We don't have that yet, and when places like Microsoft report slower than expected uptake on AI revenues (i.e. people aren't signing up for AI services as fast as expected), markets pause. When cash machines like Facebook suddenly start borrowing billions to build out AI, not to mention debt hog Oracle, markets get the jitters. But if the revenues follow, and the money flows, it's hard to knock down higher valuations. While we may not be there yet, if earnings don't start catching up with earnings (they have over the last few months!), the day of reconing will come sooner and be more painful.
The good news is that the hot AI names have paused over the past 4 months and let earnings catch up. You can also see value stocks killing it during that same time period. Thus, diversification isn't dead, it's doing what it's supposed to do, and overall markets are healthy. Let's keep an eye on it.
As I wrap up 2025, my last interview had a few themes: tech earnings and who will lead the Fed. Is there anything else people care about? Not really.
The earnings for tech is there, as it is for the rest of the market. For some reason, most investors are focused on the problems of the world and what politicians say all day rather than tune out the noise and observe earnings. We have seen market valuations decline of the last quarter, as earnings increase and are revised up in aggregate. So, if volatility picks up, I'm looking to add to my equity exposure next year.
As for the Fed, I'm unconcerned about how fast or slow they cut. The Fed wants to cut, but they will do it on their timeline. That gives investors a great backdrop for equity performance, as well as enough uncertainty to allow for volatility when impatient traders don't get cuts on their timeline.
It was a fast morning of hitting the big news that has long term repercussions.
First, we discuss the decision by POTUS to allow H200 Nvidia chips to be exported to China. Time has passed and these are like last weeks newspaper. Here is the big idea - we continue to normalize trade with China, so hopefully we can keep getting exprot certificates for rare earths!
Next, the hostile takeover of Warner Brothers by Paramount is more than simply an exciting news story - it's about the future of the movie industry as we know it. I like Paramount because they are bringing UFC over in January. Time will tell if the minnow swallowing the whale will actually happen.
As for markets, earnings are strong. All we have to fear is AI stock disappointments and the Fed not slashing rates fast enough - so, plenty of risk!
Brian Sozzi, who I have known for more years than we want to admit, asked me to hang out on his show, Opening Bid. We covered all the good stuff - my views on the current selloff (I can’t wait for a correction!), AI spending (some rational, some irrational), and even hit some topics like the soft consumer. Sozzi hit Home Depot as a sign of consumer weakness, and I took Target to the woodshed - declining sales and lost mojo. We had a crypto expert on as well, and she pressed a point I’m in agreement with - Bitcoin is now just a reflection of a risk on trade, and when that trade is in a bear market, the broader markets tend to follow. From my research, there is about a 2-6 week lag. So, if Bitcoin is any indication, we may have a larger correction before year end. Time will tell. And, it’s better to have a plan and not need to use it than no plan at all!
