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The Exchange
Private Credit Concerns, Crude's Climb, and Travel Chaos 3/17/26
00:43:50
Orlando Bravo talks uncertainty in private equity, private credit, and software. How will the Fed navigate oil's surging prices as their two-day meeting kicks off? Plus, American Airlines CEO Robert Isom says TSA workers deserved to be paid.
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- [00:00]
Narrator/Advertiser
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Kelly Evans
you're listening to the Exchange. Here's today's show. Thank you very much, Mike Santoli and we're seeing stocks drift higher as per usual in the afternoon before a Fed decision. Welcome to the Exchange. I'm Kelly Evans. The Dow's up 100 points at the moment. The Nasdaq we could call it up, leading the way of the major averages of 4 10. The small caps are up half a percent, though the S&P of 21 points is 6720. Now this does come ahead of tomorrow's Fed decision where they are expected to keep rates on hold, keeping things steady. We'll get the dots as they're called, their projections, but traders don't seem too concerned about a hawkish outcome, at least as of the moment. Software and memory names are leading again today as the IGV is now up more than 5% since the start of the Iran war and the memory names continuing their climb. Western Digital up 10% in two days, Seagate up seven as SK Group says the wafer shortage could last until 2030. Oil is also rising again after Iranian attacks on Gulf energy production infrastructure. Some saying that's a first for the war also hit a fuel tank at Dubai's main airport. All this has WTI up 2% to 95 a barrel and diesel is over $5 a gallon for the first time since 2022. So let's begin with the latest developments, including a surprise resignation today from the US Counterterrorism director opposing the administration's war, the President himself addressing that just a short while ago. Eamon Javors has the latest.
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Eamon Javors
Eamon Kelly.
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Eamon Kelly
That's right. The resignation came from Joe Kent, who is the top counterterrorism official at the Director of National Intelligence Office here in was he said he was opposing the Iran war and he said he believed that Israel had pushed the US Government into a war that it simply can't win or doesn't have a quick way to achieve victory. The president was asked about that in the Oval Office a short time ago. He said that Joe Kent was somebody he always saw as a nice guy, but he thought he was weak on security and he's glad that he is gone. The president, remember yesterday in the Oval Office, suggested that he had a number of countries who would send naval support to help open the the Persian Gulf and the Strait of Hormuz. Today, though, he said that the NATO countries have turned down his request for naval support. Here's what he said about that.
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President of the United States
All of the NATO allies agreed with
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Phil LeBeau
us and, but they don't want to,
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President of the United States
you know, despite the fact that we help them so much. We have thousands of soldiers in different countries all over the world and they don't want to help us, which is amazing. I mean, amazing. And I didn't do a full court press because I think if I did, they probably would be. But we don't, we don't need help.
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Eamon Kelly
KELLY so the president saying two things simultaneously there. One is that he's deeply disappointed with NATO countries for not helping the US Military, and secondly, that the US Military doesn't need any help. So we'll see ultimately where all this ends up. KELLY as we wait for the President to signal what his plans are to get the Strait of Hormuz open, as obviously oil markets and world financial markets are watching that situation very carefully.
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Kelly Evans
All right, for now, Eamon, thanks. We appreciate it. EAMON javers, the market continuing its rebound from the Iran conflict today, even with oil prices on the rise. But geopolitics isn't the only story that's been rattling the market. There are also concerns around private credit and its exposure to software, which led to an exodus of investor money from private credit funds. The biggest lenders going on media tours to downplay the risks. Although Apollo's Apollo Global's John Zito is calling out the industry as being arrogant in a recent Wall Street Journal article, he also called out one firm in particular, Thoma Bravo. And that brings us to our first guest today. Orlando Bravo is founder and managing partner of Thoma Bravo. He joins the program alongside our very own Leslie Picker.
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Orlando Bravo
LESLIE Kelly, thank you Very much in Orlando. Thank you for having us. We're here at your Investor Day in Miami, the largest investment firm exposed to software. So it's a critical time to be having these conversations. And I'm just curious to just address the elephant in the room. Here are your LPs freaking out about everything that's happening with private equity and software right now.
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President of the United States
First of all, it is so awesome, Leslie, to have you here at our annual meeting. Our LPs are relieved. You know, just in the hallway after our morning session, one of our biggest LPs comes up and says thank you for having this conference. Your annual meeting at this time two weeks ago. I'm just reading the news and reading about all these SaaS problems in the public market markets. This was a great day to walk our partners through the details of our 77 companies and those fundamentals. And what they see is for the most part, our companies are crushing it. Our companies are incredibly positioned to be winners in the agentic era, and our companies are well on their way toward becoming a centric companies. So I think relieved and back to fundamentals and back to the details of the companies has been very nice for them.
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Orlando Bravo
So do you think there's something different about the companies in your portfolio than the public markets? Because you look at just the S and P Software and Services index, it's lost a quarter of its value since October. I mean, is that, is this a sector issue or is there something idiosyncratic about what you're seeing in your own portfolio here?
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President of the United States
Well, first of all, we've been doing software investing over 500 acquisitions over the last 25 years. We have been living in the details of the space for a very, very long time. And not at a high level, not investing in stocks, investing in companies, customer contracts, knowing the details. So yes, as a sector specialist in private equity, our companies are very, very different than public companies. Now in the public markets, if you look at it, there are many, many software companies in the public markets that will be disrupted from a those companies were going to be disrupted anyway. I will create that disruption a lot faster. And some of the decreases in their valuations are very warranted and we would have no interest, for example, in buying those companies. Now there are other and many of them out there in the public markets where this is unjustified, where they're phenomenal businesses that are actually going to be big winners in the agentic era. And those companies have been severely punished when they shouldn't have been.
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Orlando Bravo
What does it mean for valuations in your own portfolio. I mentioned the S and P Software and Services index losing a quarter of its value. Do you feel that need to mark down your own portfolio by a similar magnitude or how are you thinking about the valuation changes? Given what we're seeing in the public markets right now?
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President of the United States
It's not close to the same magnitude. Of course we have to use public comparables to decide on the values along with our advisory committee on the value of our companies every quarter. But we have never marked our companies close to the public comps. I mean we are fundamental investors that market companies on ebitda, free cash flow and net income. Those multiples in the public markets have gone from 22 times forward EBITDA to about 17 today. In general, these are still very healthy levels and we can earn excellent returns on those exits or those levels.
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Orlando Bravo
The Wall Street Journal, of course publishing a piece yesterday, Kelly referenced it in the intro where they quoted comments made by Apollo co president John Zito in what was supposed to be a closed door meeting. But he said that quote, literally. He literally thinks all the marks are wrong. Private equity marks are wrong. Do you think there's some truth to that?
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President of the United States
I cannot comment on other people's marks. That is not my business. I don't know the details of those companies and I frankly don't know those marks. We have here with us literally 100% of the largest state pension plans in the US and literally all of the sovereign wealth funds of size in the world. Many of those have been our partners for 25 years. They have seen our marks, they have seen our exits, they have seen our progression. And everybody's extremely comfortable and we're extremely transparent as to what our companies in general are worth.
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Orlando Bravo
Let's talk about private credit as well because Zito also mentioned that the recovery rates on a private credit loan to a small or mid sized, he called it a Joe Software company will be between 20 and 40 cents on the dollar. And of course Thoma Bravo has about $25 billion through its credit. How are you thinking about your exposure there?
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President of the United States
Well, we don't have the Joe Software company. They don't have the middle market horizontal company that has very little franchise value. That is where our credit platform is very special. Like you said, we have close to $200 billion under management, 25 of that is in credit. But we integrate how we invest in credit as to how we invest in private equity. That sector expertise is more critical and more important now than it's ever been. And we are so comfortable with our private credit book given the choices We've made as a specialist in the space.
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Orlando Bravo
One specific example he pointed out was medallia $6.4 billion take private of Thoma Bravo. How many examples like that do you agree with that? First of all. And then how many other examples like that are there?
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President of the United States
Okay, I don't know exactly what he said about Medallion, but let me address that. Medallion is a fine company. The management of Medallion is doing a wonderful job. We're beginning to gain share again now from an equity standpoint as an investor in the company, in the equity, as the owner of the company, when we bought it, we way overestimated or extrapolated the very high rates of growth of that company into the future. We made a mistake and that cost us to pay too much. Now the equity from our standpoint has been impaired for a long time and our investors, this group that holds the capital in the world has known that for years. So there is no new news. So we at times make mistakes and we own them. And I put myself in I in terms of that as well because I'm part of these incredible deals with my partners. Now the other 77 companies that we have for the most part and it's so relevant for AI, I promise you that they're absolutely crushing it. Day Force 43% growth Jefferson accelerating growth the business that we bought from Boeing and a plan has become an AI centric company. Accelerating growth Coupe are right behind it in provider our entire cybersecurity portfolio. So we feel so excited now about how our companies are doing today and how well they're positioned for that agent tech future. That's just broaden their markets. You look at some of the public companies that are very large, the good ones out there. It is very difficult to grow in software at the high double digit rate at 10 billion, 20 billion, 30 billion of revenue. AI for those companies has opened up a whole new market that will give them Runway for many years. Investors and investors will be figuring out based on track record which ones are on the right side and which ones are not.
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Orlando Bravo
So then you know, there are many out there who say private credit, private equity, software exposure, all of that's going to be the next crisis. It's going to blow up. Those are, you know, the people who are maybe, you know, super, super concerned about this. What do you, what do you say to them and that notion, do you think there's any logic behind it or any truth behind it? Maybe not just at Thoma Bravo, but broadly speaking across the software and private credit ecosystem in general.
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President of the United States
Definitely not a Thoma Bravo. We once again, we're not perfect. We have made some mistakes, but that's why our investors are relieved for the most part. We buy the highest quality software company and we're known for running them really, really, really well and we're solid where we are now. Now there was a lot of excess in the business in general, private equity, private credit and software in general since 2020, 2021. Some of the issues now in those sectors that relate to software are due to those excesses and some of those issues are also due to the interest that generalists had in buying software companies. There are so many cases that we've seen where generalist investors that are good in general have entered the space and have bought software companies that really lack deep franchise value even though their gross retention and net retention metrics look good. And those companies now have a bit of a more uncertain future with a right, right upon us.
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Orlando Bravo
And you've also called out the risks of retail investors in the private markets in the past. We've seen, of course over the last few weeks several of these non traded BDC companies see higher than expected redemptions to gate those and so forth. What do you make of all of that and what do you think is going to be the overall impact of the situation we're seeing right now with private wealth?
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President of the United States
So you know that you have always known our approach about that. We have proceeded very, very cautiously towards that market. We want to see how others do. We want to see how retail investors react to the asset class. My concern about it has been that your investor really, really needs to understand what you're doing. Were you doing the deals that you have the core competency to do? Are you investing the capital just like you told them you were going to be investing it? That's what we like about these institutions. Every year we all come together for literally two days where you have every what other business in the world has that, where you have all your shareholders, all your investors in the details understanding it. Institutions have that with us and with other private equity firms. I think it's so important to have the retail investor really, really understand what they're investing in. And that to me has been unclear at times.
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Orlando Bravo
All right, Orlando, Bravo, thank you so much. A very important time to hear your perspective, of course, here at your investor meeting in Miami, Florida. Really appreciate your time today.
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President of the United States
Thank you.
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Orlando Bravo
Thank you, Kelly. I'll send it back to you.
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Kelly Evans
Leslie in Orlando, Bravo, thank you very much. Again, as you just heard him say, they're addressing the software issues with Medallion in Particular, he said, it's a fine company. They're doing a wonderful job. They're beginning to gain share again. We made a mistake way over extrapolated the growth into the future. And he said our investors have known that for years, adding that one of his largest LPs was relieved and thanked him for holding their conference today to shed more light on the 77 companies in their portfolio and their fundamentals. Now, in the meantime, in the public markets, investors are still bidding stocks higher and seemingly shaking off concerns about Iran for a second session. Our next guest agrees that fundamentals are intact, but says some windows of opportunity could be close, closing in certain trades. Ben Snyder is the chief US Equity strategist at Goldman Sachs. Ben, it's good to see you. Where's the window only open a crack? We got to still get in before it slams shut.
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Ben Snyder
Obviously, uncertainty today is very elevated, but if we look forward 612 months, the trajectory of earnings growth for the s and P500 and the broader US equity market still looks very healthy. I think the points you were alluding to is our recommendations coming into this year that there would be some real pockets of cyclical acceleration. We saw that from around October, November of last year through January in sectors like the consumer discretionary sector, in parts of industrials. And even though we still feel good about the economy going forward, we think we're coming to the later days of those cyclical trades in particular.
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Kelly Evans
Okay, before you circle back to that, do you have sort of a larger thought about what's going on between the public and private markets, Ben? I mean, look, you're the chief equity strategist. You cover publicly traded stocks. Stocks. It'd be nice if there were more of them. A lot of them are now. They're the venture capital. They're in private equity. That was a little bit of kind of undertone of Leslie's discussion there. The SEC now says maybe it's going to get rid of quarterly results. That's a seismic shift. And I'm reading analysts notes that say, yeah, they think this would come to bear in 2027.
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Ben Snyder
At the same time, of course, we are talking about some very large IPOs potentially on the calendar this year. So I don't think we should be writing off the public markets just yet. If you look at the size of the markets, of course, it's hard to match or compete with the liquidity and the depth still of the US Public equity market.
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Kelly Evans
All right, so if that is the case and we can then not worry about market structure so much as Just focus on these fundamentals. You were mentioning cyclicals and you're so you're on that leading into that side of the trade.
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Ben Snyder
We had been leading into that side of the trade because we saw a number of reasons to expect economic acceleration at the start of this year. That included lapping the tariff shock from this time last year. It included the tailwinds for monetary policy and the tax refunds that are being delivered now as a result of the one big beautiful bill act. That said, we always expected this acceleration to mostly be a story for the first half of 2026. Equities live in the future and so now as we near the end of the first quarter, especially given the headwinds of geopolitical uncertainty, we think it's time to move on from many of those cyclical trades.
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Kelly Evans
To move on from the cyclical trades into what exactly?
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Ben Snyder
Well, so one example is that we had been recommending small caps. They performed quite well at the start of the year. We now think investors should rotate towards larger stocks. Another example is for the last several months we've seen relatively low quality stocks outperform. That means stocks with lower profit margins, weaker balance sheets, etc. We now think investors should think about rotating into companies with stronger balance sheets, higher profit margins, these types of rotations in the equity.
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Kelly Evans
Is it true that the Mag 7 is down about 8% this year? I mean is that effectively what you're saying that get out of the cyclical trade? I don't know what that means for the economy. I want to bring Stephanie Lincoln to respond but is it because you're suggesting that large cap tech is the way to go here?
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Ben Snyder
I think large cap tech looks attractive. Clearly one of the highest conviction and most consistent trades this year for investors has been the CapEx story. We've seen an incredible upward revision to those CapEx spending forecasts and that's been a major tailwind for the companies that are receiving renfrews revenues from that CapEx. Including the memory stocks you were mentioning just a little bit earlier.
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Kelly Evans
Right. But as you're saying, if that's kind of overdone here, what would you do with the financials with amid some exposure concerns to. To private markets for sure, but also just larger questions of yield curves been flattening a little bit.
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Ben Snyder
I think you're right. Classically, if we don't know anything about the private markets financials tend to be very cyclical. And part of what's happened recently is the market has doubted the economic outlook given the geopolitical conflict. But One other dynamic we've seen consistently over the last several years is the market can be very quick to price systemic risk, but it takes a while to pull that risk out of the market. We need to see continued resilience, no new blow ups, etc. And so I think ultimately financials will be an opportunity, but I think it'll take a while to prove to the market that there isn't a major risk here.
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Kelly Evans
All right, Max, can I quote you on that Mag seven all the way, yes. Okay, Ben, thanks. Good to see you today. Get a very different tone than we had a couple of months ago and we kicked off the year. Ben Snyder from Goldman Sachs I appreciate. Not from him, by the way, from everyone in the market. Coming up, oil prices hovering around 95 a barrel, but they're still up 40% since the Iran war broke out. What impact will the spike have on tomorrow's Fed decision? How will Fed officials think about it? We'll talk about that next. But first, airline executives meeting with Wall street analysts in Washington where everyone's asking about rising jet fuel costs. Citi says the carriers focused on business travel should have no issue raising fares and passing that along with. We'll ask American Airlines CEO about that next.
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Narrator/Advertiser
This is the exchange on cnbc.
- [20:37]
Ben Snyder
This is the exclusive table with the view. This is your name on the list. This is three times points on dining with Chase Sapphire reserve and a $300 dining credit chase Sapphire Reserve now even more rewarding. Learn more@chase.com SapphireServe cards issued by JP Morgan Chase bank and a member FDIC subject to credit approval.
- [20:53]
Narrator/Advertiser
This episode is brought to you by Schwab Market Update, an original podcast from Char Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
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Steve Liesman
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Narrator/Advertiser
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Steve Liesman
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Narrator/Advertiser
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Steve Liesman
We are Marines. We were made for this.
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Kelly Evans
The airline stocks are higher today. Delta in particular were pretty much around session highs with a 7% gain. The company Delta talking about strong demand. We also saw that raise first quarter revenue guidance and they've been beaten up this month as jet fuel sits near 2022 highs and spending concerns crop up amid the Iran war. The carriers of course, are also dealing with hours long TSA security lines as this partial government shutdown persists. In fact, the CEO sent an open letter to Congress writing in part, once again, air travel is the political football amid another government shutdown. And that quote, it's past time for the government to make sure that TSA officers, U.S. custom clearance officers at airports and air traffic controllers are paid for the job they do. Joining us now to discuss all of that in a CNBC exclusive is Robert Isom, the CEO of American Airlines with our own Phil LeBeau. Welcome to both of you. Phil, go ahead.
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Eamon Javors
Thank you, Kelly. Robert, thanks for joining us here. We're in DC for the JP Morgan Industrials Conference Airlines where you gave a presentation earlier today. And much like Delta and other airlines, you're raising your guidance when it comes to Q1 revenue. Explain what you're seeing in terms of the market right now.
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Phil LeBeau
We really like what we see. Demand for our product has been strong. And so as we take a look at year over year, it's an extra $1.3 billion we expect now for revenue growth 10 over 10 percentage points higher year over year. And it's really broad based. It's every segment. It's premium, it's leisure, it's domestic, it's international. We like what we see.
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Eamon Javors
There's not a weakness in any of the major segments that you're talking about, whether it's transatlantic, whether it's domestic.
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Phil LeBeau
You know, Phil, we see broad, broad based demand and it really is proving nice. You know, fair environment is fairly healthy. And I like what I see going forward. So we don't see weakness throughout the
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Eamon Javors
system yet on the other side, on the quad side, you are being impacted by higher jet fuel costs. I mean, essentially you've got oil that, you know, since the beginning of the year, it's doubled in price. And when you add in the crack spread, you guys, the airlines are certainly paying the price there. Your guidance is on the lower end, but you're not cutting guidance, right? How confident are you that you can hold the line there?
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Phil LeBeau
Again, we're really pleased that the revenue has been such that it's offset a material increase in fuel costs. You know, it's only been seven, eight weeks ago that we talked about impact on first quarter, our fourth quarter earnings and we've seen a $400 million impact, the cost of fuel as we going forward. We really like what we see from a revenue perspective. And at American Airlines, we're ready for
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Eamon Javors
whatever comes our way Robert, Kelly's got a question for you.
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Kelly Evans
Kelly thank you both. Robert, I was just going to ask if there are any other longer term solutions the way that as you said, airlines are always a political football. How do you prevent that from happening going forward? Are there privatization options? I mean, I heard the administration might even have to shut down some airports because of what's going on right now. What are some of the bigger picture ways to try and solve this or do they exist?
- [24:47]
Phil LeBeau
Well, first thing is is our TSA workers, you know, they deserve to be paid. They come to work every day and they deserve like any of us that do our jobs to be paid. They're protecting us as travelers, they're helping the industry and I encourage our politicians to get back to work and then just get this done. There is no reason for it and we just don't need this distraction.
- [25:09]
Eamon Javors
Robert, are you noticing any impact in terms of operations? Because I see the reports everybody does long lines, whether it's Houston or New Orleans, Atlanta, not everywhere. But where it's happening, it's significant. Is it impacting operations?
- [25:21]
Phil LeBeau
So so far for us, Phil, our big hubs, the TSA workers, they're coming, they're coming in and we greatly appreciate that. That said, that's not going to be the case as we, as we go forward. We've got to get them paid and we serve everybody throughout the country. So it doesn't matter what airport. We don't need the inconvenience, especially in a backdrop where American is delivering, you know, in every respect from a network perspective, customer experience perspective, offering a product that people want to have and loyalty as well. You know, this is not the time for us to be dealing with this type of issue.
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Eamon Javors
I also want to ask you about the Wall Street Journal report that the SEC is preparing to move forward with a proposal where you don't have to do quarterly financial filings. You can do it twice a year, every six months. Would you like to see that happen?
- [26:05]
Phil LeBeau
I know our finance team would but you know, we're a long cycle business and I'd love to have a long term view of everything that we do. But at the same time, you know, we're dealing with a lot of noise in the system right now and our investors, they really want a lot of insight and you know what we're going to do what our investors investors want.
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Eamon Javors
So you know that there are investors who would like to hear from you more than every six months. They would like the mid quarter update like you give right now especially.
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Phil LeBeau
And as American really gets back and gets full into motion. This is a time where I love telling our story. I love talking to the marketplace, our investors about what we're doing to make sure that American really delivers for and
- [26:43]
Eamon Javors
you've had a number of investor meetings today. Had probably a few more today. Robert Ison, CEO of American Airlines joining us from here in Washington D.C. kelly
- [26:52]
Kelly Evans
will send Amazing to see the resilience with everything being thrown their way. Thank you both. Really appreciate it. Coming up, natural gas prices. They're well off their highs since the Iran war began, at least here in this country. But the market, especially internationally, is nowhere out of the woods yet. We'll talk about some longer term consequences to watch from all this when we come right back.
- [27:16]
Ben Snyder
This is the exclusive table with the view. This is your name on the list. This is three times points on dining with Chase Sapphire Reserve and a 300 dining credit Chase Sapphire Reserve now even more rewarding. Learn more@chase.com Sapphire Reserve cards issued by JP Morgan, Chase bank and a member FDIC subject to credit approval.
- [27:31]
Narrator/Advertiser
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projections, projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com Market Update podcast or find Schwab Market Update wherever you get your podcasts. Imagine relying on a dozen different software programs to run your business, none of which are connected, and each one more expensive and more complicated than the last. It can be pretty stressful. Now imagine Odoo. Odoo has all the programs you'll ever need and they're all connected on one platform. Doesn't Odoo sound amazing? Let Odoo harmonize your business with simple, efficient software that can handle everything for a fraction of the price. Sign up today@odoo.com that's o-o o.com
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Kelly Evans
the Iran War has caused one of the world's biggest producers, Qatar, to shut down their production of liquefied natural gas gas. But the US has plenty of domestic supplies as a result. Despite the conflict, the price of natural gas is actually down for six weeks out of the past seven and down 17% so far this year. But the LNG market could still be facing some long term consequences as a result of the war in Iran. Pippa Stevens has the details.
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Pippa Stevens
Pippa hey Kelly. About 20% of global LNG comes from the Persian Gulf. And virtually all of that comes from one facility. That's Ras Lafan over here in Qatar. Now, the Strait of Hormuz is the only exit route for that LNG. And raslafan has actually been offline since March 2nd following an Iranian drone attack. Alex Muntin from Rapidan Energy telling me Iran's first hit on the facility was a warning shot. If they wanted to do major damage, they could, since Raslafan is essentially a sitting deck. What's more, the gas comes from the North Field. That's an offshore gas site. And about two thirds of that is controlled by Qatar, but the other third is controlled by Iran. And so that means they are intimately familiar with the operation and could do serious damage if they wanted. And while select ships are now passing through the Strait, so far no LNG vessels have gone through. This chart from Goldman shows that shipments are now at zero. And nearly 90% of that LNG does go to Asia where prices are now rising. Unlike most other global commodities, what you pay for nat gas does depend on where you live. JKM in Asia at about $20. In Europe, we're seeing about 17. That means that some cargoes initially heading to Europe are now u turning and heading to Asia instead because of that price difference, Kelly.
- [30:13]
Kelly Evans
And we'll see, like you said, how long those patterns may last. Pippa, thanks very much, Pippa Stevens. Let's get to Mackenzie Sagalos now for the CNBC news update. Hi mackenzie. Hey, Cal. A judge has allowed a shareholder suit against Boeing to move forward as a class action. The lawsuit accuses Boeing of hiding safety failings in its 737 Max planes before crashes in 2018 and 2019. Shareholders of Boeing between November 7, 2018 and October 18, 2019 are eligible for the suit. Cuba's electrical system is coming back on after the country's Ministry of Energy and Mines reported an island wide blackout yesterday. The blackout was first reported around 2pm Eastern. Yesterday the ministry said on X that no faults were reported when the grid went down. The Ministry said today that service has been restored across most of the country. And the Metropolitan Transportation Authority in New York is suing the Trump administration for withholding almost $60 million from a new subway tunnel project. The MTA is claiming breach of contract. Last week a federal appeals court ruled the administration must keep making payments for the separate $16 billion Hudson River Tunnel project after New York and New Jersey sued. Kelly, sending it back to you. All right, Mackenzie, thanks. Coming up, Wells Fargo says that hundred dollar oil all year long would wipe out the gains from Trump's one big beautiful bill, at least for the bottom 80% of the population. Our next guest isn't so concerned though, and we'll talk about why. And as we head to break, take a look at gasoline prices across the country. The national national average hitting $3.79 today. We're back after this. Crude oil prices which have made the Federal Reserve's life a lot more complicated as their two day meeting kicks off today. Oil has soared more than 50% since the last decision, pushing out the market's rate cut timeline and leaving many wondering how Chair Powell will talk about that rise. Steve Liesman is here with what Wall street is expecting with the results of the latest CNBC Fed survey. Hi, Steve.
- [32:17]
Steve Liesman
Hey, Kelly. Three weeks into the US Attack on Iran, respondents to the CNBC Fed survey forecasting oil to remain high for several months, inflation to increase and growth to take a modest hit. But the Fed could still be cutting and maybe cutting twice. $88 is the average price of WTI seen six months from now. They're not oil experts, but they have to be now 0.5%. That would be the boost to CPI from oil from oil prices and a3.10 of a percent hit to GDP from the rise. Now 1.8 is still the number of rate cuts expected. That's one full cut and almost all of a second cut that's different from the Fed funds futures. We only see one cut and 31% is the likelihood of a US recession in the next 12 months, up 8 points from January but still relatively subdued, at least for now. Alan Sinai from Decision Economics writes in Big Oil price shocks lead to a recession if they last long enough. That is the big risk to the economy, a prolonged Mideast conflict, oil price and inflation shock, uncertainty from this and then recession. Well, that's not what's quite in the cards yet. The current rate was or 2025 was 2.1%. You can see they took off a bit from their outlook for GDP this year, but still a round trend and then bouncing back a bit in 2027 when it comes to GDP. Looking at the inflation outlook, we did 2.4 in 2025 and you can see that's seen going higher and higher compared to how they forecast it in January as well. So another three, 10 there or two. 10 there and another two. 10 on 2027. Bottom line, not coming back to the Fed's 2% target. Big question here. Will oil prices bleed into the core? And 38% say it's very likely. 44% saying it's only somewhat likely. And 16% say somewhat un likely. As for the Fed's funds market, you can see there they're a little bit more optimistic than the market. The average Forecast has about 1 1/2 to 2 rate cuts built in. More dovish than the futures market. Likely because many respondents, as Alan Sinai said, focus on the negative effects of oil prices on growth rather than the inflationary effects. So 363 goes to 325, but not much seen in 2027. And about Fed Chair Powell, while his last two meetings are expected. Market to see no change in the funds rate, likely because inflation remains above target. Kelly and looks set over the next several months at least to head higher.
- [34:39]
Kelly Evans
Still more dovish than the markets. They said I can't talk to you because you have to catch a train, Steve, but that is my big takeaway.
- [34:45]
Steve Liesman
I got time. You got a. That's all right.
- [34:48]
Kelly Evans
That's more dovish than the market.
- [34:50]
Steve Liesman
The train. The train is late, just so you know, as always with Amtrak. But here's the story. The story is that they're focusing on the negative effects and what you'll need to see are strongly negative or decisively negative jobs reports. And that's going to move the Fed. And as one of the respondents did point out, the market had these cuts built in, took them away quickly. They can put them back pretty quickly.
- [35:16]
Kelly Evans
All right, Steve, really appreciate it. Steve Liesman, I think that train us to Washington where there's a Fed decision tomorrow. Our next guest says oil will not have a meaningful impact on the economy. And with tax refunds supporting growth, she's expecting zero rate cuts this year. Nancy Lazar is chief global economist at Piper Sandler. Nancy, I hang on your every word over the weekend and with all of your notes. I love them. I wish we had more time, but let's just cut right to the chase here. So you, you feel differently, I think, than the consensus in that survey Steve just talked about. You're much more constructive on the economy, is that right?
- [35:48]
Nancy Lazar
I AM. In part one, the Fed has already cut rates 175 basis points. Level of interest rates at roughly 360 is well below nominal GDP growth. Think of corporate revenue growth. And so the level of rates is one net stimulative. You see that in banks. Their willingness to make loans, bank loans have, have indeed picked up, as has money supply. Second, as you've alluded to a couple of different times, there is significant fiscal stimulus and not just from tax refunds, but also from Capital from, for capital spending. Net debt stimulus in and of itself boosts GDP growth this year by 2 points. If you add in the fiscal roughly another 1 1/2 percentage points. I don't want to sound too nonchal when it comes to the increase in the price of oil. And, and as you've emphasized, if it stays at $100 for a sustained period of time, then we might have to clip our forecast in the back half of the year from currently we're using three, maybe something a little closer to two. But this is not the same economy that we've had over previous oil shocks. That is in the 1990 period we were still a net energy importer, net oil importer. It really is over the past 15 years that we've become a net energy exporter. As your table highlighted, natural gas prices here in the United States are low because we produce obviously plenty of natural gas here and we are indeed an exporter. The low end consumer will get hit from these higher energy prices to be sure. But again, I don't, I'm not comfortable saying this. They're just not the driver of growth. It is that middle income consumer who will see a benefit from these tax refunds. The labor market has incrementally improved. TOMMY Y Unemployment claims have come down. If the labor market is, is, is deteriorating, why so many anecdotes of employment from the ISM surveys to, to, to regional Fed surveys show that the employment backdrop is incrementally improving. And so there are a lot of green shoots as we moved into 2026 reflecting what I've just talked about. And it depends upon how long oil prices stay high before we can really get a good handle on how soft the economy might get as you move into the back half of the year. But net right now we've got a pretty strong backbone.
- [38:00]
Kelly Evans
Yeah, you've been really emphasizing this Capex boom. I mean look at the ISM surveys. A lot of people in the, in the market are talking about this as well, the areas of the market that are doing well, those cyclical names and so forth, you know. But I think the labor market point you're making is really important because if I'm on the Fed, if I'm more sure, if I'm whomever, and I'm making the point that we need lower rates. There's probably two reasons. One is the labor market, we want more hiring. The second would be kind of the Berry Knapp argument that, you know, they use the balance sheet to ease, but then they hiked with the rate and that has resulted in a K shaped economy. Does that rate need to come down so that there's, you know, better borrowing costs for smaller businesses? And look, those are the ones that do a lot of the hiring.
- [38:40]
Nancy Lazar
So small business confidence did come down in the latest survey in February and it's not, it didn't reflect the, obviously the Iran turmoil yet anyway, but their profit backdrop did improve quite significantly in February. And so that actually is what leads employment. So even for small businesses, again, I think there's way too much looking in the rearview mirror and not looking at the lagged effects of all the stimulus that's already been put into the economy. And quite frankly, if you cut rates too sharply, all you do is make housing unaffordable again as the Fed has done over the past 15, 20 years by sharply lowering interest rates, interest rates causing short term housing booms and then short term economic booms. And then again what you end up with are higher prices, particularly on the housing side and you, and you really squeeze people out of the home market. So the Fed has already cut rates, rates are historically low. You are getting green shoots for the economy. Signs that economic activity was broadly improving from capital spending to the, to the labor market, even housing. The NIHB index yesterday obviously coming in a little bit on the brighter side, nothing is booming but a gradual improvement in growth makes it more sustainable because you don't then get these price, these, these price shocks.
- [39:53]
Kelly Evans
I want you on the Fed, I want Warsh is in the chair. You're going to be over there. Nancy, how you guys can come to a mind on this, you know, we'll see. But he's got some time I think before we have to worry about that. Nancy, we'll leave it there for now. Thanks so much.
- [40:06]
Nancy Lazar
Thank you.
- [40:06]
Kelly Evans
Nancy Lazar with Piper Sandler. Coming up, the AI giants like Anthropic and OpenAI are promising their applications increased productivity. But what happens when these companies themselves are struggling with efficiency? We'll take an inside look at how they're trying to streamline business ahead of an IPO when we come back. Getting new details today from an OpenAI all hands meeting where leadership doubled down on the push toward their enterprise business. Business and an ipo. What does it mean? Kate Rooney has more in today's tech check. Kate.
- [40:39]
Kate Rooney
Hi Kelly. So that was the message from Fiji CMOS. She's OpenAI's CEO of Applications. I spoke to somebody who was in the room at her employee All Hands last week. The source says that she really emphasized why their enterprise business is so important this was to employees. She really tried to rally employees around that message. According to this person, Simo said that the opportunity is to now take ChatGPT 900 million users, turn them into high compute users, and transform ChatGPT into a productivity tool. As part of that, OpenAI has been shifting its focus from some of the less profitable projects within the business. The Journal was first to report some of these details. Someone close to Sam Altman also tells me it does fit within his broader strategy for OpenAI. Enterprise and ChatGPT have had the most material impact on revenue ahead of an IPO. And OpenAI is going to need to prove more discipline, not just talk about it. And that is where CFO Sarah Fryer is coming in. I'm told by sources she's been getting OpenAI ready to list as early as the fourth quarter of this year, discussing which gap metrics to use. We have reported she has been putting out a more defined infrastructure, spend 600 billion versus more than $1 trillion to investors. And then Fryer also, I'm told, is beefing up the IR team. She hired Cynthia Gaylor, that's Morgan Stanley's former banker. She was the CFO of Dropbox to really help, help get that message out to Wall Street.
- [41:57]
Kelly Evans
Kelly all right, Kate, for now, thanks. Want them to go public? Kate rooney, Coming up, US Markets are under pressure this month. The S and P lower by about 2% while the Dow is down about 4. But international investors, boy, are they having a tougher time. Europe faring a little better than Asia. The euro stocks down 4% while the Cosby is down 10. But do those dips represent buying opportunities? That's next on the exchange. Stocks are drifting higher, building on yesterday's gains. But the S and p is still down 2% this month amid the Iran war. And the damage is worse overseas. France and Switzerland's markets are down more than 7%. In Asia, the Hang Seng has fallen 3. The Nikkei is down 9% and the Cosby nearly 10. So does this weakness abroad represent a opportunity for investors who have missed the international trade? Let's ask Tim Seymour, the CIO of Seymour Asset Management and a CNBC contributor. Hi to you, Tim.
- [42:52]
Tim Seymour
Kelly.
- [42:52]
Kelly Evans
And I think the larger question is, is this just a moment to get into a secular kind of, you know, alpha generation story, or did the Iran war fundamentally change things because of energy prices?
- [43:06]
Tim Seymour
First of all, Happy St. Patrick's Day. Second of all, I think if we extend oil past $110 well into the summer, I think you have Issues for Europe. I would just note that in terms of the opportunity, there's no question sentiment. Bank of America's fund manager survey notes this. I've noticed the prices noted. You've gone from basically three quarters of the market saying Europe was going to have growth, relative growth that was going to be significant and something that was at least quickly dialed down. There's no question that we see back to Ukraine and what that meant for European pricing on energy and what that meant for the European economy. I just think it's overdone done. I do think that this was a view that a multi year trade after multi years of underperformance hasn't really changed. I actually think in fact if you look at the Euro's underperformance to the dollar since kind of late January, the MSCI all world is actually held in there. If you look at valuations, they still make a ton of sense here for Europe. And I don't think the growth story has been derailed.
- [44:07]
Kelly Evans
You know I'm struck by most of the analysts whose, you know, stuff I see seem to agree with you. I mean I think it was even this morning maybe Goldman reiterated that it's you know, kind of secularly bullish on Korea and that's one of, I hate to use the word frothy. The memory cycle is real. I mean this stuff, the announcements every day are about how in short supply it is and the price increases and so forth. So you know, it's highly leveraged to those two companies. But as long as that's a story, I don't see why it can't continue to outperform, you know, even with an energy headwind. But it's more that it seems like everybody agrees that these are still valid longer term growth stories.
- [44:45]
Phil LeBeau
Yeah.
- [44:45]
Tim Seymour
And if anything so banks which have a higher beta sold off more. But tech is the overweight. And so Taiwan, Korea and even Japan are places where global investors, US investors feel very comfortable. And I do think they're part of the tech trade that's less in question. They tend to be more on picks and shovels, on hardware and even names in Europe like ASML and XPI arm. I mean these are places where I think you're not as exposed into the AI wreckage and some of the concerns about Capex spend, they're on the other side of that. So I think it just gets back to where there is an opportunity. A lot of investors felt like they had missed this and I do think if you look at the places that are the highest beta to the Downside, those are the places that look the most interesting here.
- [45:28]
Kelly Evans
Yeah, Hang Seng, I mean, the Chinese names have actually kind of outperformed, you know, I know Peter Bocva has been a fan of some of the Hang Seng listed stocks and you don't have to comment on that per se, but it's India where I wonder, do they face face kind of a double challenge here with energy prices. And also I don't know to what extent I really presents any kind of existential threat for their economy, but that stock market's down more like 6%.
- [45:49]
Tim Seymour
Well, I think India came into this being a more expensive market, a universally known to be energy reliant. By the way, I believe I'm in agreement with Peter. We tend to see the world similar in a lot of things. India is not cheap in an m overweight that is maintained even through this week. And some of the sell offs, I think the parts of the space you talked about them, I think China tech looks a lot more interesting. Even Latam, which gets the benefit on the macro and I think in terms of materials looks really interesting.
- [46:20]
Kelly Evans
And finally then, are you kind of sticking with the bullish Europe thesis?
- [46:26]
Tim Seymour
And again, the banks don't have to be where you go if you want that inverse correlation to a slowdown in manufacturing. You want EU Pharma, we're long Novartis and Ibo, we're long Sanofi. I think these are great plays. Oncology at AstraZeneca means this will be a premium growth story well into 2030. Trades at a premium to the market, but very defensive. And health care is underweight. So European health care, really attractive here.
- [46:51]
Kelly Evans
All right, Tim, thanks as always. Appreciate it. Tim Seymour. And that's it for us. This Irish flag behind him there. Thanks for watching the Exchange and I'll see you for power lunch with a special guest after this quick break.
- [47:05]
President of the United States
Foreign.
- [47:11]
Kelly Evans
You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [47:19]
Ben Snyder
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