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“No Need to Worry,” Consumer Hide & Seek, “Taming, Not Toppling” 3/13/26
00:42:55
There’s “no need to worry” about the situation in the Strait of Hormuz according to Defense Secretary Pete Hegseth. Why RBC Capital Markets is playing hide and seek with consumer staples stocks. And one professor’s case for why the Trump Administration needs to tame, not topple, the Islamic Republic.
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Trading at Schwab is powered by Ameritrade, giving you even more specialized support than ever before, like access to the trade Desk. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy. Gut check. Need assistance? No problem. Get 24. 7 professional answers and live help and access support by phone, email and in platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn more@schwab.com trading what do the steam
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engine, electricity and AI have in common? These technologies, technologies not only change how we work, they can transform entire economies. I'm Stephanie Wong, host of where the Internet Lives, a podcast from Google and Latitude Studios about the unseen world of data centers. Explore how data centers are unlocking growth in every sector of the economy. From agriculture to medicine to manufacturing. Data centers are powering a new era of AI innovation. Listen to where the Internet lives wherever you get your podcasts and thank you very much, Scott. We're keeping a close eye on oil again today while the broader markets look to be on hold into the weekend. Welcome to the Exchange. I'm Kelly Evans and we have WTI crude nearing $97 a barrel as the US is reportedly moving more warships to the Middle East. 100, you could call it, back in sight again as we head into the weekend. The level of Brent is around 102 stocks are responding in kind, unable to hold on to their earlier gains. All three major averages are now on track to end the week lower by 1 or more. Nearly a 2% drop since Monday for the Dow financials and industrials, down 3%. Those are your worst performing sectors and 4.28%. And the 10 year treasury yield again, we were below 4% just a few weeks ago. It's going to have an impact on mortgage prices and the rest. But let's begin with the latest developments over in the Gulf. Secretary of Defense Pete Hegseth saying there's no need to worry about the Strait of Hormuz. And a morning briefing two hours ago we got reports that the Pentagon plans to send additional warships and Marines to the region. Let's get over to Eamon Jabers for the latest.
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Eamon Kelly, that's right. The Wall Street Journal reports that the Pentagon is moving a Marine Expeditionary Unit to the Middle east as the Strait of Hormuz remains closed to international traffic by the threat of Iranian missiles. Now the Journal is citing two US Officials for that report. These units generally consist of about 2,500 marines. Defense Secretary Pete Hegseth did not mention that at the Pentagon brief this morning, but he said today that the administration has been dealing with the Strait of Hormuz and there's, quote, no need to worry about it. At the Pentagon press briefing this morning, he also suggested, but didn't provide any details that the US Military has options to get traffic flowing through the strait again. So we have a plan for every option here. We're working with our interagency partners, and that's not a strait we're going to allow to remain contested or with a lack of flow of commercial goods. Hegseth also said that the quantity of Iranian missile fire has been drastically reduced in recent days. And he called into question the physical status of Iran's new supreme leader. We know the new so called, not so supreme leader is wounded and likely disfigured. He put out a statement yesterday, a weak one actually, but there was no voice and there was no video. Hegseth also responded to leaks that appeared in Politico this morning suggesting that Vice President Vance privately opposes the US War in Iran and is skeptical of the chances for military success. Hegseth called Vance an indispensable voice in the administration. Separately now, U.S. central Command has sadly said this morning that all six crew members aboard a U.S. kC 135 refueling aircraft that went down in western Iraq are now confirmed deceased.
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Kelly, back over to you and Eamonn. As we head into the weekend, are you getting any more sense from the administration? You know, I've heard reports that say things like, you know, Trump's patience is wearing thin, but every time he posts publicly or talks about the topic, he seems to be digging in his heels.
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Yeah, I mean, the president has been saying two different things simultaneously throughout the week. Right. I mean, one is that we are there indefinitely. We have plenty of ammunition, plenty of time. He has suggested on social media to do this, but in other commentary he has said, you know, this is a short term operation all but complete. We've basically won the war. So, you know, two entirely separate messages coming from the president at the same time, clearly trying to win over two audiences. One is those who are concerned that we'll get out of this too quickly without any tangible complete results. And the other is that we won't end it quickly enough and we'll do damage to the global economy.
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B
Now, it was an interesting piece in the Journal yesterday, the day before, and I think it was Barton Swain, but his point was no one can quite understand kind of the strategy for the president here, other than the fact that perhaps he's frustrated that the US Quote unquote, doesn't win wars anymore. And he's talked about that. And so as people try to game out what the pressure point is on him, is it the stock market? Is it the midterms? Is it, you know, people in his own party? Is it a legacy thing now? Is it a longstanding sense that he just isn't pleased with the way that we've handled conflicts? And now the stakes for him, obviously, to find some resolution to this one are really high in his own judgment.
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A
Yeah. I mean, the stakes for him and for all of us, Kelly, are really high. And look, I mean, you talk about frustration, and we saw some of that boiling over in the Pentagon briefing this morning when Defense Secretary Pete Hegseth really attacked the media. He was very concerned about reports that the US had no plan to keep the Strait of Hormuz open before the President launched this war. He said, of course, we anticipated that. Of course we had a plan, you know, but here we are, you know, with the straight not open. Right. And so they're dealing with a situation that is very much not of their making but was relatively easily anticipated according to all the defense experts that, you know, we've heard commenting on it this week. So the question is, what are they going to be able to do now with the US Military? And does that involve boots on the ground in Iran to secure the the Iranian coastline of the Strait of Hormuz? That, you know, could be a very complicated operation by the U.S. military and
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not necessarily a quick one, I think either.
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That's right.
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Amen. Thanks, Amy Jabbers. We appreciate it. With all the focus on what this means for the oil price, let's bring in Pippa Stevens with a closer look at the moves we've seen PIPA and what may be coming now. Hey, Kelly. So oil's up about 1% today. Brent is holding around 10135 with WTI just shy of 97 as the US treasury temporarily authorizes the purchase of Russian oil. But a lot of caveats there. It's oil that's already at sea, loaded before March 12 and the waiver expires on April 11. Now, JP Morgan, noting that oil loaded before the war is still arriving at final destinations that will be exhausted by the end of this week for Asia bound shipments and the end of next week for Europe. Now, they estimate that in total, 6.5 million barrels per day of production is now shut in, and they say that that will rise to about 12 million barrels per day by the end of next week. Now this is very much becoming a refined product story. We talked about the gasoline crack, but take a look at the diesel crack, which as a reminder is a measure of the difference in the oil price versus the refined product. It's now at about $70, more than doubling since the start of the year. Meantime at the pump, diesel is quickly approaching $5 now at $4.89 per gallon. That's up $1.22 since the start of the month. And finally, keep an eye on European natural gas. It's at €50, €50 I should say, per megawatt hour. That is within a range where we could start to see Kelly, some fuel substitution. Pip, appreciate and explain one more time. This is my favorite current triple A fuel price gauge. Okay, I know you just said it, but we are at 363 call today's oil move unchanged. So people this week, I think as we go into the weekend again are going to be looking at this and having it sink in this reality that that price did not reverse lower despite everything going on with the spr. That's right. And we've been talking a lot about how total share of energy and gas spending is now lower compared to what it was during prior oil shocks. But you can't get away from the sentiment of what higher gas prices mean. It's probably the most visible consumer touch point around, even more so than grocery prices. You see gas prices absolutely everywhere. And so even if it is, you know, not at an all time high or close to an all time high, even adjusted for inflation, it still starts to weigh on consumers. And of course there is a lag between when we see our bob rising and then when we see it at the pump and wholesalers are buying it. If they buy it at a higher price, they have to work through that entire tank before they lower it. So higher prices here, if they're looking, they should just say there's a ban on advertising gasoline prices. You don't want you to see it how what is the lag? Typically a few people have been asking me about this. If you run a gas station, for instance, the price we're going to pay today, tomorrow, it seems to move almost in line with the headline oil price, even though I don't think it works that quickly in practice. Yeah, there's a little bit of a lag, probably about five to ten or so days. But again, it does depend on, on when the distributor is buying that when they are filling their tank. And also there is the phenomenon, phenomenon as you know of how prices go up for like a rocket and then come down like a feather. And that is because they are reluctant, of course, to lower the prices and particularly since you do have to work your way through. But I think the, the extent to which we've seen them rise this time has been surprising. Some of that was because there was a lag. There was about 20 cents. Tom Closer was telling me between before the war that distributors still had to raise their prices by really. And so that started to catch up very quickly. And you know, sometimes they don't raise them. You want to have competition but then when the prices start rising around you, then everyone is lifting them at the same time. That's interesting. There's some buildup in the pipeline already, some price pressure. All right, Pippa, for now, thanks. Appreciate it. Pippa Stevens, let's turn now to how all of this will play out in the economy as we got some GDP downgrades along with some sticky inflation data this morning. Let's bring in bank of America's head of US Economics, Aditya Bobby, along with Matrix Asset Advisor CIO David Katz. Welcome to both of you. Aditya, first to you. The lower GDP read, we're told that's a passing phenomenon because of the shutdowns, is that right?
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Yes. Good afternoon, Kelly. Thanks for having me on. So the way I would think about the fourth quarter GDP number is X of the impact of the government shutdown. The government shutdown took about 1.2 percentage points off of GDP. So you add that back on to 0.7, you land at 1.9% annualized, which is kind of tepid. It's not a super strong quarter. But off after two very strong quarters, particularly the third quarter was quite impressive. I think the economy was in good shape going into the end of last year.
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Yeah, we're looking at that chart there. A couple of 4% prints and then I guess maybe call this A2. Although the shutdown was real and now we're in it again and you know, partially anyway. So let's turn to the inflation number which what was the core? 3.1.
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Core was 3.1.
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Yeah. So if I'm. And this is the Fed's preferred gauge, 3.1, I mean no matter how you slice and dice it, it's not two. You know, when you hear Fed officials like Steve Myron saying a lot of this is portfolio management fees and things like that, does he have a point? And what do you make of the fact that in recent months the trend has been back upwards?
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There are Special factors. So portfolio management fees might be adding about 10, up to 20 basis points to corp inflation year over year, the tariffs have probably added about 60, 70 basis points. But even as you said, once you take all of that out, you're still a few ten above. It's not a huge overshoot, it's about a 20 to 50 basis point overshoot. And that's not great from the Fed's perspective because if you look at the policy stance going forward, fiscal's gotten easier, monetary policy has gotten easier, and yes, the oil price shock has to play out. That's a separate story. But setting that aside, tariffs are also coming down. So what's the impulse to get you back to 2%? I don't see it that clearly.
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So you're telling me that if it weren't for the tariffs, you think core PCE would actually mathematically be at a level of about 2.4 or 2.5% instead of 3.1?
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That's about right. Yep.
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That's a big difference, don't you think?
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It is. It is. And this was expected, the tariffs were expected to add, you know, 60, 70, 80. We basically said about seven basis points on core PC for every percentage point increase in the average tariff rate, the average tariff rate has gone up about 8 percentage points. So it's kind of landing in the ballpark that we expected there might be a little bit more pass through in coming months and then over time that will roll off the year over year rate. Which is why I think it's entirely reasonable to take that out of your year over year rate. Underlying inflation isn't 3%, but it isn't 2% either. It's in the low to mid twos.
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Yeah, because it's interesting, if you take that out, if you take out the portfolio issue you mentioned, all of a sudden you're at 2% and so instead of three. So last one quickly, what should the Fed do? You know, I listen to what you're saying and I'm like, well, so is 3.1 a problem and we need to be careful not to lower rates here, or is it all kind of a passing phenomenon that even could act as a tax on the economy and we should lower rates here.
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I think the Fed should stay on hold because it's not 3.1, but it's probably underlying about 2.4, which is still uncomfortably high. The unemployment rate is still relatively low by historically historical standards. They're going to stay on hold next week. They're probably going to stay on hold in April as well. I think the question becomes a lot more interesting in June because then you aren't just thinking about fundamentals, you're also thinking about how the nature of the Fed's reaction function changes as the new chair comes in.
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Yeah, exactly. That'll be a big question after the next few months. Thanks, appreciate it. Above David Catholic, turn to you. You're always kind of looking for those contrarian positions or value plays in the market. Very curious what you're doing amidst the sell off. We've seen.
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Well, the news flow has been absolutely miserable. If you read the paper today, nothing good. Last guess, nothing particularly good about the economy. We think that the vast majority of the negatives are starting to take hold in the market. We think if you look at past wars, typically the market bottoms about three to four weeks into the conflict and then recovers very quickly, typically about two months later. So we would be buying individual stocks into the sell off. We think that if the market were to pull back another 4 or 5%, you could get more aggressive in the market in aggregate. But it's very important to know the market's down about 4 or 5%. There are many stocks, they're down 10 to 25%. Focus on good quality companies that are going to get through this. We're very confident the US Is going to get through this. The economy is going to get through this. The problems with oil prices are going to be transitory. Inflation is going to clip up, but then it's going to come down as quickly and markets are going to recover.
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But you would almost kind of acknowledge it in that, even while people might be surprised to hear it. And it is surprising that we bottom three to four weeks into a war and we've had so many different kinds of conflicts and yet it sounds like that's a fairly consistent pattern. We're only about a week into this one. So not to be too short term, but it's not like you're saying, you know, look, we might still face some pressure here.
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Absolutely. The market could go down for anywhere from another week to five weeks until we have some clarity or de escalation. However, you shouldn't be thinking about getting out of this market. You should think about adding into the market if there is any significant sell off from here. And very importantly, as I just said, there are lots of stocks that are down a lot already that you can already start to buy.
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Let's get to that list. I see a bunch on here and Lowe's, Metta, which, you know, there's so much talk About Meta these days, pnc, Qualcomm, obviously Qualcomm faces some, some secular challenges there. Why these four? How many more are. I mean, I'd love for you to just rattle off all kinds of moves that you're making. Are there software names on this list or are you interested in that move or.
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No, we're looking at the software companies very closely right now, but we haven't pulled the trigger on many yet. We are looking and buying ADP and we've started a small position also in Accenture. In terms of matter, the news today was disappointing. It's a black eye that they're late in the next upgrade for their product, but it's not going to affect their financials. You're getting better at a great price. It's at 16 and a half times next year's earnings. Rarely are you able to get a great technology company at that type of price. Same thing. Lowe's has sold off very significantly. We think the economy is going to do better at the back half of the year you want to be adding there. And the financials in aggregate have sold off. Focus on the best financials. But companies like PNC or Qualcomm or U.S. bank corporal, Goldman Sachs, all should be a lot higher six to 12 months from now.
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And I should note you also advise perhaps taking profits in energy stocks if you have them, as opposed to, to getting in here despite everything that's going on on the financials. David, you know, yes, there are going to be firms, it sounds like, that face some losses if they made those loans to BDC or what have you. Do you think that's priced in now or could there be more to come
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in terms of those type of companies? We don't think it's fully priced in. We would not be buying into that weakness. Generally. We think the problems could be deeper. And if investors want their money out, you're going to have more bad news like you had in the last day or two. In terms of people trying to pull money out of private credit bonds. We don't think it's going to fully flow through to the big banks. We don't think this is a 2007, 2008 where everybody's got the same type of exposure. We think it's going to be limited to those type of private credit firms. We think it's going to hurt financials overall. But right now that has been priced into the PNC of the world.
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And finally, I'm curious if you think that there might be a little bit of a Sea shift here where investors, big, you know, asset managers at institutions who have put a lot of money in the private space over the past 10 or 15 years. Could they reallocate into the public markets?
- [17:52]
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We think that's a very slow process. The thing that we've not been a fan of, of the private credit markets, private credit markets is you can't get your money out too quickly. So we don't think it's going to move quickly, but we do think there should be some allocation or reallocation into public markets, like you said, but very slowly, individuals will move much quicker.
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B
All right, again, financials technology, Lowe's, Meta, pnc, Qualcomm. Those are some names you're looking at. David, thanks very much. Appreciate it today.
- [18:18]
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Thanks a lot. Have a great day.
- [18:19]
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You too. David Katz with Matrix Asset Advisors. Coming up, a new CEO. They're searching for one for Adobe with shares on track for a five day losing streak. Now they're down 11% since Monday. All of that overshadowing their results from pretty decent last night. We'll have the details ahead, but first, when will food prices start to feel more pain? RBC rolling out a hide and seek strategy to ride out the rotation. It includes finding safety in this name over the next three to six months. We'll reveal it when we come back on the exchange.
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Welcome back. Take a look at some of these fertilizer names which are lower today despite those increased attacks on tankers in the Strait of Hormuz. Intrepid potash down about 8%. But they've been soaring since the start of the Iran war. CF Industries by more than 30%. The price of key fertilizer ingredient urea, the majority of the world's supply of which comes from the Middle East. That is up nearly 30% over the past month, which would mean higher input costs for farmers. My next guest says the uncertainty, combined with inflationary effects of high oil prices has been playing a little hide and seek when it comes to consumer staples. Let's bring in Nick Modi. He's RBC co head of Global Consumer and Retail. Nick, it's good to see you. I mean, you know, the question for the public is, are food prices going up? And from that very simple point of view, what would you say?
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Yeah, I would, I would say if this sustains, they're going to go up.
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The reality is a lot of these companies have contracts that hedge them effectively six to nine months. So, you know, if this thing continues to persist and fertilizer costs remain high,
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and again, like you said, the Middle
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east is, you know, 35, 40% of
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fertilizer exports, you know, it's going to,
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it's going to cause a problem. Now the reality is, Kelly, in the near term, the real consumer impact in
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the US Is going to be more
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about, you know, energy costs going up.
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Right? Because that's more immediate. The consumer feels that right away, you
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know, home energy bills and gas prices,
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that is the more immediate issue. Now, if this sustains itself and the
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costs go up, there's going to be a lot less latitude to take pricing than what we've seen in prior cycles where this has happened. And so I think this is important, which is, you know, there might be some comfort taken in the fact that we spoke with an analyst about this the other day who said, look, you're not seeing crop prices go up yet. So right now, unfortunately, the squeeze is on the farmers, for instance, it's could end up being on consumer staples companies where. And you see those with them down 5% since the war broke out. If consumers are under pressure, they're buying Less they can't pass along price hikes even if they do experience them. That seems to be directionally what you're talking about. Who do you think is most vulnerable? Yeah, I mean, I think when you think about the packaged food stocks, they
- [22:35]
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are certainly in the, in the crosshairs
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here, mainly because they're feeling the volume pressure already. There is less pricing latitude for them. And so I think that they're probably going to be most at risk. Names that we think are kind of
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more protected, Primo brands, they're US centric only.
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In fact, they compete against a lot of imports.
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Right. That are completely domestic produced. So any issues with products getting here
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from overseas I think benefits them.
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It's also a very cheap stock and
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they're kind of in the, the midst
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of a turnaround which seems to be going well.
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And then Church and Dwight is another name that we like.
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You know, they have a big value
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end of their portfolio there.
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They've gotten rid of some businesses that have really been a drag on their top line.
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And they have a lot of dry
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powder for M and A, which could
- [23:23]
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create some upside in a pretty tough environment. What is Primo? Is that the protein bar or am I thinking of the wrong company?
- [23:29]
A
Yeah, no, Primo Brands is the biggest
- [23:32]
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home and office water delivery business.
- [23:34]
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They purchased the Nestle water assets. So they also have a big retail business with Poland Spring, Saratoga, Mountain Valley on the premium end.
- [23:42]
B
Oh, I see. Okay, that's fascinating. So you mentioned from a supply chain perspective, companies that would have exposure to a pressured consumer, you know, could include Spectrum, Newell Brands, Traeger, Ken View, Smucker. I mean, I just want you to get a little bit more color on this. Risk of margin pressure from logistics costs. That's another thing to think about. Could be Reynolds again, Traeger, Newell, Spectrum. So you know, there are a few names here, including ones with exposure to the Middle east like Pepsi, Mondelez, Coke and Procter and Gamble. So it does sound like if you're in the consumer staples sector, which had been the third best performer in the entire market, more or less until this broke out, does it suddenly go to the bottom of the pack? Yeah, I mean, look, let's put put some context around it. Staples have been a pretty poor performer before coming into this year. They over, they took more. Too much pricing volumes really started to lag and the space has not been
- [24:35]
A
a very good place to be investing on the year. When we began the year, this whole
- [24:40]
B
concern over the trade really had people
- [24:43]
A
just flooding and going into defensive spaces.
- [24:46]
B
So the reality is the sell off that we've seen in the last week or two has really been kind of the starting point was, I would say artificially high because the fundamentals have not improved yet. The stocks had an incredible start to the year.
- [24:59]
A
So the reality for us is, you know, every one of my stocks is
- [25:04]
B
going to get impacted.
- [25:05]
A
There's no question some will be impacted less than others.
- [25:08]
B
That's what I highlighted to you earlier. And so it's really going to be
- [25:12]
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kind of a stock picker's game in
- [25:14]
B
this sector for this year. And there are the stocks that you mentioned that you like, you know, bottled water, you know, Safe One, Church and Dwight Primo Brands. Nick, thanks very much for bringing that to us today. You bet, nick. Modi from RBC. Coming up, Nvidia is the best performing MAG7 stock this month. It's up 2% and the only name in the green besides Microsoft. Investors looking ahead to Jensen Huang's keynote address at their big GTC conference on Monday. We'll look at what to expect next. And as we head to break here, some names in the energy and utility spaces which are actually hitting new all time highs today. We're Talking Alliance, Duke, CenterPoint at most and EQT. We'll have more when we come back.
- [25:57]
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When all is said and done as of right now, here are the leaders and laggards in the market since Monday. The Memory and Chemical names, those are seeing solid gains. Sandisk, Mosaic, Micron, cf. We already mentioned Dow Inc. Those are leading the way. Mosaic is having its best week in nearly four years as the fertile names, fertilizer names even give some of that backdrop today. On the flip side, Fair Isaac Centene, Paramount, Skydance, Campbell's and Ulta Beauty are your worst performers since Monday. Ulta's down 10% today after weaker than expected results and disappointing guidance. And Campbell's is hovering near 23 year lows. Let's look ahead now to next week's in video big AI conference. It kicks off Monday and it's the only mag7 stock in the green over the past three months. Over the past three months, it's the only mag7 stock in the green. Think about that. It's the 6%. So how crucial is this GTC conference? Rothschild Redburn writing that unless oil hits $150 and sucks the air out of the room, Nvidia will likely be the market's primary focus next week. Does Christina Parts and Evolis agree? And it stands for GPU Tech Conference, is that right for. For the audience? I texted Kelly last week when you had that discussion. Yes, and it started out as, you know, focus around gaming. And now the event is so massive, tens of thousands of people, you can't get anywhere. I'm always stuck in traffic. And it's no longer just about the individual chips that are used in gaming units. We know that Nvidia has Expanded. They want to be known as an AI infrastructure company. And that's going to be a central theme around this event. The reason why we're so focused on it is because the anxiety in the market, the stock has been sideways for so long. Despite having two stellar earnings reports, a $500 billion backlog, at least four hyperscalers in 2026 that are going to spend over $600 billion. And that would mean money in Nvidia's pockets. So in regards to GTC, we're going to be just expecting, you know, more commentary about that demand sustainability, you know, how the growth rate is going to continue if that backlog is going to increase, and of course, all of the product announcements which can get into. And so I think that the way the analyst put this context is important and the market is, is casting a vote here as well. And it's saying that while everyone else is duking it out over the investment and kind of the adoption of AI, Nvidia for now still is benefiting from the general kind of arms race here. And maybe that's, maybe that and any commentary around memories, you know, I don't know if this would quite be the forum for that. Maybe it's more about kind of the next generation of unveils, that sort of thing. Well, recall that Nvidia, I should say acquired, acquired the IP of a company called Grok for $20 billion just a few months ago. And you bring up memory is because Grok built this technology where the memory is actually on the chip. So we're expecting Nvidia to actually speak specifically to memory and maybe offer a new variant incorporating the GROK technology that would not require them to rely on external high bandwidth memory, which would help with that whole supply issue that we're seeing right now and is affecting so many companies. So that could help with margins per se. So that is one major thing with Nvidia. And you talked about, you know, the focus for Nvidia, it's not only just these chips, they're in the entire stack. They just. Last earnings call, Jensen Huang, the CEO, said that they're the largest networking company in the world. That's how chips talk to each other. So we should hear comments about them using light instead of copper. And that's going to have an effect on many other companies like Coherent, Credo, Lumentum, etc. And then possibly moving up the stack towards software, OpenAI software, I should say Open Source Software offering. There's been some rumors around that. And it just shows that Nvidia is thinking about how they could just be part of that entire ecosystem and benefit from all that capex spending as opposed to just the hardware. Yeah, no. Great. And the only thing to me that feels a little bit like an elephant in the room, it's something that's called a GPU tech conference, is the fact that Google seems to have a better Mousetrap using TPU's and I still am I is my conclusion an oversimplified one. And it's interesting to see that even with this fact in the market that in video and the GPU emphasis can still remain so strong. The argument that all of these CEOs or I should say in video CEO really takes is that the pie keeps growing. So even if you have the likes of Google with their own TPUs, operations offerings, tensor processing units, or if you have Metta, you know, launching their different versions of inference chips, was it two days ago they just announced that? Or Amazon working with Cerebras just on an inference chip? That was news just within the last 24 hours. All of these individual companies are trying to make a more tailored approach for their own infrastructure and not necessarily rely on one giant like in video. So yes, that does mean competition. Nvidia is going to already argue that. Look at their backlog. $500 billion. They see a $3 to $4 trillion opportunity by 2030. Don't worry about us. We're still gaining so much market share. But at the same time, you see the trends. We see many companies offering their own versions of these chips and that does pose competition in the near term. Well said, Christina. Thanks for now. Appreciate it, Christina. Parts in evil s let's get to Frank Holland for the CNBC news update. Hi, Frank.
- [33:01]
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Hi there, Kelly. The FBI says it's investigating the fatal shooting at Old Dominion University in Virginia yesterday. Terrorism? That's because the alleged gunman served several years in prison for trying to support ISIS. Authorities identified a 36 year old former Virginia National Guardsman as the shooter who killed a retired army officer and injured two others. The FBI says the shooter died in a struggle with students in a classroom. Workers of the Department of Homeland Security are missing their first full paycheck today as the partial government shutdown is entering its second month. A bill to fund DHS failed in the Senate yesterday as Senate As Democrats push for new restrictions on federal immigration officers. TSA absences, they've doubled during the shutdown, leading the long lines across airports all across the country. With US Grain prices surging since the war in Iran began, farmers are rushing to sell their crops. Farmers are capitalizing by selling corn, soy and wheat from their storage bins to producers of ethanol and major commodity traders such as Archer Daniels Midland. Soybean and wheat futures hit a nearly two year high this week, while corn is at its highest level in a year. Kelly.
- [34:03]
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Interesting. So those prices are on the move. All right. Got to modify our chat there with Nick a little bit. Frank, thanks very much. Frank holland. Coming up, Defense Secretary Pete Hegseth says we don't need to worry about the Strait of Hormuz. At the same time, the Pentagon is reportedly sending Marines to the Middle East. We'll look at the road ahead for the region next. And as we head to break, here's a look at where gasoline prices stand across the country. 363 is the national average average. We're up about 35 cents this week. More after this. Oil prices are higher as the US Is reportedly now moving additional Marines and warships into the Middle East. As Pete Hegseth says, Iran's new leader has been wounded by the US Our next guest says the Trump administration needs to, quote, set a steady course aimed at taming, not toppling the Islamic Republic. Joining us is Charles Kupchen. He's senior fellow at the Council on Foreign Relations. You know, we delve into here, Charles, because investors are trying to figure out how to think about a conflict that seems almost bigger than we can really do it justice. You know. Welcome. And what are your thoughts? As we are, I guess, what is this the conclusion of the first week of something that could go on now for? I don't know. Do you think they're going to look for an off ramp pretty quickly here or try to come away with some kind of more clear when, you know,
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I do think that President Trump probably bit off more than he could chew here. His previous uses of force were immaculate, if you will, kind of surgical strikes, no loss of American life. They went quickly. And I think President Trump jumped into the deep end of the pool thinking that the Iranian regime was very weak and that if he gave it a shove, it was going to topple. And yes, I think the Iranian regime is weak. It's lost the support of a large majority of Iranians. But institutionally it's very strong. The military, the revolutionary guard, the police, the besieged, this militia that goes out and enforces order. And so I don't think that we're going to see a toppling of the regime anytime soon, nor do I think we should push for that because we don't know what we will get I do think that Donald Trump will be looking for an off ramp sooner rather than later, mainly because of the impact of this conflict on oil prices in the global economy.
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If that leaves the current leader in place, what does that mean for. Ok, so, so what are the facts of what's been achieved, which is a clear degradation of their weapons capacity? As of right now, I don't know how quickly they might rebuild that. I don't know if they're more or less upset about the US or allies in the region now. I don't know if allies in the region are hardened in their attitude towards Iran. I mean, what would you say are, are the facts as a result of what has happened so far?
- [36:50]
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Yeah, I mean, I think that the war, it's been only running now for under two weeks. Two weeks this weekend. And over time, the military balance is going to shift in the direction of the United States and Israel because Israel and US have control of the airspace. They can loiter over Iran. They can hit the missile factories, the launch sites, the drone factories, the places they're launching the drones from. And so Iran's ability to retaliate will decrease over time, but it's not going to go to zero. And so I think in some ways, what the Trump administration needs to decide is how much degradation is enough, how much damage is enough. When can we credibly make the claim that the threat that Iran poses to Israel, to its neighbors, to the region, has been substantially neutralized, at least for now? That's not going to be easy unless the Strait of Hormuz opens. And that is going to be a difficult aim for the administration because the Iranians are mining it, because they can use speedboats, because they can make new drones and use drones. So I think in some ways, that's the key issue that everybody needs to focus on.
- [38:08]
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If there were, if somehow there, you know, and again, we're talking about a country where the regime has been in charge for decades. Prior to that, it was basically a monarchy. So if, if somehow that were replaced with something, I don't know, different, it'd be one thing because it remains intact. Can't they just pick up where they left off in terms of the kinds of arsenal? Maybe it's not nuclear. Maybe. Maybe it is. I don't know. So can they just pick up where they left off?
- [38:38]
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Well, you know, Kelly, it's possible that this war will end well, right. It's possible that you could get a spontaneous uprising and that we are in the waning days of the Islamic Republic. And I don't think there are a lot of people, whether outside Iran or inside Iran, they're going to shed a lot of tears about that. But I think you can't count on that, nor should you plan on that simply because it's too risky. You could get a civil war. That civil war would likely spread across the borders because there are a lot of minorities in Iran. There are Kurds, there are Belluchies, there are Azeris that could spread across the border. So I think the Trump administration needs to be careful what it wishes for. But even if you still have a hardline regime, even if Mojtaba Khamenei, the new supreme leader, stays in place, I think the key test will be can they continue to cause trouble and will we be able to monitor what they do closely enough that if necessary, we can do this again if they try to rearm, if they try to rebuild their nuclear enrichment facilities. So it's possible this will end well, it's possible. We're just going to need to mow the lawn, as the saying goes, for quite some time.
- [39:57]
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Yeah, I guess. Charles, thank you so much for joining us. And we'll check back in maybe, you know, hope hopefully not. We'll see what happens in the next weeks.
- [40:07]
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Let's hope it ends soon.
- [40:08]
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Yeah. Charles Kupjen, really appreciate your time this afternoon. Thanks.
- [40:11]
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Bye.
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Bye. Coming up, Adobe shares are on pace for their worst day in more than a month, after CEO Shantanu Narayan said he plans to step down. They're just the latest software company to shake up leadership, joining the likes of Workday, asana, Zscaler and MongoDB. We'll dig into what's driving all these changes at the top when the exchange comes right back. Adobe is now the latest software company to reshuffle their leadership as fears of AI disruption hammer the space. Seema Modi has more in today's Tech check. SEMA KELLY After 18 years at the helm of Adobe's CEO, Shantanu Narayan, who grew the company from 6,500 employees to about 30,000, said last night he is transitioning out of his role. Once a successor is found, he will remain remain chairman of the board. The software giant has struggled to articulate how its suite of Gen AI products will stand up against OpenAI's enterprise offering. With Adobe's annual recurring revenue growth decelerating in the latest quarter, it does follow a flurry of leadership changes that we are seeing across offers because of these displacement fears. Workday surprising shareholders by bringing back its founder Anil Boosri last month call center software player 59 bringing in a former PayPal executive to lead its company through the era. It is top of mind right now. The World Economic Forum conducting a survey of 650 CEOs and found that half of them believe their job stability depends on getting AI right. We're told a lot of this is due to what boards are doing right now. They're becoming becoming more impatient as stock prices across software remain challenged. Boards are conducting these real time reviews and assessments about whether management teams have the deep technological skill set to lead a company through this transitional period. And most importantly, Kelly, they're looking for companies or executives rather who have that experience with mergers and acquisitions given the type of deal flow that we're expecting to pick up in the second half of this year. Yeah, I'll be very curious whether they pick internal candidates or people from the outside. You know what that all signals of so many of those seats open right now. Seema, thanks very much. Appreciate it. Sima Modi Coming up, according to bank of America, we saw $6 billion of single stock inflows last week and that was the 16th largest ever as a percentage of the S and P market cap. This after the start of the Iran war. But as the conflict continues, should investors look for safer havens than equities? We'll talk about that next. Welcome back. A big move in the 10 year treasury yield. It's up nearly 30 basis points, nearly 4.3% today as the Iran war spurs some inflation concerns with high oil prices. Muni yields have been climbing as well. But my next guest says they remain one of the safest havens the in in times of geopolitical stress. Joining me is Nick Van Did. He's head of the municipal fixed income team at Al Spring. Nick, welcome to you. I mean this does present a challenge which I think muni investors have experienced the past couple of years. They want to be out of kind of the, the whipsaw of the market, but they're getting whipsawed by rates.
- [43:13]
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Yeah, look, the macro realities are whipsawing every asset class unfortunately, including obviously fixed income. But I think one of the cool things about munis is that fundamentally they are less correlated with some of the geopolitical risk. One of the kind of common stories I tell people all the time is that I live in Milwaukee, Wisconsin and it turns out the water sewer system of Milwaukee, Wisconsin has nothing at all to do with Iran. And that level of diversification I think is going to be valuable in a very volatile world.
- [43:47]
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Right. Although look I know a lot of investors love this asset class. They just can step a little bit outside of the, you know, especially the life of it, you're nearing retirement or, you know, a little bit different profile where this is something more appropriate. All of that said, you know, I pick up the paper and I read, you know, New Jersey austerity. I go, what happened? Where'd the money go the past couple of years? I thought the economy was fine. And you know, you read about soaring health costs and schools having to make budget cuts and all sorts of things like that. And so what would you say the health is of the asset class in the places where you feel again, sheltered from even some of those kinds of storms?
- [44:22]
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Yeah, the health is still relatively strong. Right. Obviously there are those headline news things that will pop up from time to time, and munis aren't quite as strong as they were when they were benefiting from all of the stimulus cash surrounding Covid. But the reality is, is that municipal issuers have to balance budgets. There are a whole bunch of municipal bonds that are rated higher than the US government. So when you think flight to quality munis might actually be a better option for a lot of investors.
- [44:50]
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Okay, you said if people go, well, okay, I could think about the trade off with equities. We said think about this almost as a trade off for cash. Now that rates are down a little bit, that cash isn't yielding what it was. You said for a cash alternative, consider short term munis. I'd love to know what's a short term muni, which you say for an investor in the upper tax bracket. We heard Robert Frank's reports on this. Today is the closest thing to, on Wall street to a free lunch. What do you mean by that?
- [45:14]
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This is the easiest trade in all of finance right now in my mind. Right. You have money market yields that have evaporated over the last six to 12 months, obviously as rates came down on the short end. Muni, short term munis on an after tax basis are out yielding your money market by anywhere from 50 to 75 basis points for incrementally more risk. It's essentially free money. Anyone in the upper echelons of the tax bracket should make that trade today.
- [45:46]
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So how short term are they?
- [45:48]
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Oh, they're like inside of three years. Right. So duration inside of one, very, very short, but liquid.
- [45:54]
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So what happens if I put. But I can't pull my money out, you know, in like a couple of months time or something?
- [45:59]
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You can pull your money out. That's the, that's One of the beauties of munis is that they are highly liquid. The money is available to you every single day.
- [46:07]
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You just have to pay tax. You know, there's tax implications. There's still the implications, sure.
- [46:13]
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But on ultra short munis, the navs of the portfolios don't move. Right. The value to you is the income, not the appreciation of the assets. And the income is the part that's tax exempt.
- [46:25]
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All right. I'm going to think about this. I think a lot of people are actually. I think my audience is going, no, we already know, but now more people know. Nick, thanks for joining me today. Really appreciate it.
- [46:35]
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Absolutely. Thank you.
- [46:36]
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Nick van Den of all spring global investments. And that's it for us here on the Exchange. I'll join Steve Liesman. He's in for Brian next hour for power lunch. Stay with us. That's right after this quick break.
- [46:49]
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