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Bitcoin’s Resilience Stands Out as Stocks Face Geopolitical Pressure | Markets Outlook
00:06:45
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- [00:00]
A
I'm struggling a little bit with today's price action. Right. Where is, you know, I'm trying to understand is that, you know, kind of the reduction, you know, or kind of that, that rotation into some of the, and the outperformance of some of the software or is there something bigger kind of happening here?
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B
Welcome back to Markets Outlook from the New York Stock Exchange. As we get this week started, New York stock exchanges stock senior market analyst Michael Rankine joins it now to weigh in on what you should be watching. Hey, Michael.
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A
Morning. Thanks for having me. And, and welcome to the New York Stock Exchange.
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B
Thank you so much for having me here. I know you, you are a veteran here, so maybe I'll get you to show me around the floor one of these days. Let's talk about what investors should be watching this week. I know there are two big narratives we're dealing with right now. We have disruption fears and rising geopolitical risk in the Middle East. The talk to me about what's driving investor positioning.
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A
Yeah, I mean, you know, right now we've kind of moved to, we put some of those anxiety fears to the back burner for the moment, you know, with what's going on in Iran. Right. And we, you know, markets are really just solely functioned on kind of what oil prices are doing kind of at this point. So overnight we had a massive move higher, you know, kind of in oil prices as we saw an escalation in Iran over the weekend. Right. You know, the narrative originally was that kind of this was going to be kind of something that was going to, the conflict would be over reasonably quickly. We're starting to get kind of signs that that may be a little more prolonged. You started to see some Middle east countries, you kind of start to reduce production and the strait is complete, is completely closed. So, you know, we saw prices move up to the high right around 120 for ice. Brent, we've backed off overnight as there's been some reports that the G7 might start to tap some strategic reserves. And we've seen kind of, you know, kind of the oil markets back off a little bit, but equity markets have been kind of under pressure and we finally started to kind of break to the downside for the first time this year.
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B
I saw some chatter on social this morning that markets haven't fully priced in a longer term war. Should this, should this continue for longer than most expect? What are your thoughts there?
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A
Yeah, I think that's, that's fair. Right. You know, the one thing, there's a couple of things to think about from a US investor perspective. Right. The rest of the world, particularly Asia, is much more impacted by the rise in energy prices. Right. As we've seen kind of the US become more energy independent, you know, so, you know, kind of about 80% of Middle Eastern oil that goes through the Strait goes to Asia. Right. So there is, the impact is greater elsewhere in the world. And what's that, what that's done, right, is it's reversing some of the trades that we've seen throughout much of this year. So if you think about what has been ongoing, you've seen global markets outperforming US Markets throughout much of this year. Last week you started to see US Markets outperform a little bit more. Right. We've also seen like when you get into these periods of volatility, you start to see de risking happening kind of across asset classes and across kind of just investment portfolios. Right. And so as volatility moves higher, you start to see positioning come down that happens on both sides of the portfolio. So you see kind of long positions get cut, but also short positions. Right. So last week you started to see some of those software stocks that have really been under pressure given that anxiety, like those stocks outperformed and started to move higher. And we also, you know, the US markets are very concentrated in kind of that mega cap tech area. Right. And you've started to see some signs of, you know, kind of some, the defensive nature in some of those stocks that we've seen in prior drawdowns. And you started to see kind of, you know, a little bit of bounce there. The NYSE Fang Plus Index was actually up 2% last week, you know, when the S and P was down two and you saw small and mid cap indices down about twice that amount.
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B
Bring that back to crypto markets for me. Now if we're looking at crypto in the public markets, we're looking at etf, some of the crypto equities. How's what we've talked about so far going to affect folks who are watching this?
- [04:08]
A
Yeah, I mean it's, it's the price action today is particularly interesting. You kind of, we've seen kind of crypto markets actually lead kind of equity markets, you know, kind of over the last couple of years. And you know, crypto clearly turned down much earlier than kind of equity markets. And we've seen this high correlation to kind of crypto and software. Right. And so as you kind of crypto move lower as software also move lower, you look at those correlations they were pretty high. And now, as you know, kind of. So I'm struggling a little bit with today's price action. Right. Where is, you know, I'm trying to understand is that, you know, kind of the reduction or kind of that, that rotation into some of the. And the outperformance of some of the software, or is there something bigger kind of happening here? Right. The price action is very positive. You know, if you kind of just from a technical perspective, right. Where crypto has been trying to consolidate here, you know, we'll just take it to Bitcoin, you know, in about a 10,000 kind of dollar range, you know, low 60s to high, low 70s. Right. And we've been consolidating while you have equity markets that are clearly breaking. Right. Another and other asset classes that are clearly breaking to fresh lows. Right. You know, you saw bitcoin kind of hold up in the mid-60s yesterday, and we've now kind of started to bounce. Right. So, you know, it's very interesting. We're watching the clarity act, right. There is no clarity on clarity, right. Right now. But, you know, you know, you saw some commentary from President Trump last week kind of pushing the banks to kind of get that process moving forward. So I guess, you know, there may be some optimism on that front as well.
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B
Quickly, before we go, if there's one thing we should be watching this week, what should it be?
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A
Yeah, I mean, unfortunately, it's all the geopolitics, unfortunately. I think, you know, at this point, you know, we do have a couple of kind of important earnings that I think people are going to pay attention to. Oracle earnings, right? They're kind of very much in the, you know, kind of in that kind of infrastructure spending paradigm right now. And so they have earnings tomorrow night. And then, you know, we have a couple of pieces of economic data, PC, the inflation side of things, kind of at the end of this week, you know, the move higher in oil, like, kind of changes a lot of different backdrops, right. In terms of, you know, just the consumer, but the interest rate, you know, kind of interest rate environment and interest rate policy going forward. So unfortunately, all things seem to come back to oil at the moment.
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B
Michael, thanks so much for joining the show and we'll see you around.
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A
Sounds good. Thanks for having me.
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B
That was senior market strategist and ahead of Mac desk at the New York Stock Exchange. Michael, ranking.