- 2023-11-06
- Posted by: kimsite
- Categories: Commentary, Insights, News
Click here to listen to the full interview.
NEIL CAVUTO: You know, we repeat often enough because it’s worth emphasizing that even with the ongoing war in Israel, stocks are higher now than they were at the beginning of the conflict, and global markets seem to be holding their ground, with the exception of those in Israel. But with that said, Scott Martin, let’s discuss the significance of this day and all that’s happening. So, Dave, let’s start with you regarding the continuation of last week’s stock market gains, albeit at a less frenetic pace. What are your thoughts on how the markets have performed during this war?
DAVE MANEY: Well, Neil, I believe that, at the moment, this war doesn’t feel like a global conflict. I understand it’s a very serious situation, and we’re deeply involved, but it hasn’t escalated into an open superpower conflict. So it’s essential to keep that perspective. Additionally, there’s a convergence of factors coming into play during an extraordinarily challenging and unusual period following the Covid lockdowns. One of my longtime 30-year Wall Street veterans mentioned that this is the worst capital formation environment he’s seen in his entire career. As we’re moving away from that, multiple factors are starting to pave the way for the market to recover.
CAVUTO: All right, that’s it for you, Dave. We seem to be experiencing some audio issues today, but we’ll work on that. Scott, in the meantime, let’s talk about the resilience of our bond market. It’s pulled back from its highs, with the ten-year yield now hovering around 4.6%. This has somewhat alleviated concerns that things might get out of control. What’s your take on this relief in rates, especially considering we were at around 5% in late October?
SCOTT MARTIN: Indeed, Neil, as you mentioned, we’ve seen a decline of about 50 basis points over the last week or so, equivalent to half a percent. It appears that this reduction is effectively doing the Fed’s job, which may lead to the Fed staying on the sidelines and potentially cutting rates next year. The Fed is closely monitoring the bond market, and if rates continue to pull back, they may follow suit. This is supportive of stocks, particularly in the technology, healthcare, and industrial sectors, as they are highly sensitive to interest rates, and lower rates tend to boost stock prices.
CAVUTO: What’s remarkable, Scott, is that not only are stocks performing well, but Bitcoin has crossed the $35,000 mark per coin, and gold continues to fluctuate around $2,000 per ounce. Usually, one asset class outperforms the others, but right now, they’re all doing well. What do you make of this situation?
MARTIN: The market is searching for alternatives, Neil. As you mentioned a few weeks back, when stocks were under pressure, so were bonds. There weren’t many options besides holding cash, buying Bitcoin, or perhaps investing in gold. As Dave mentioned earlier, as global tensions rise, there tends to be a flight to safety, and this flight can even extend to Bitcoin. Lower rates may also erode the dollar’s value, leading to inflation in commodities like gold and Bitcoin, among other alternative assets.
CAVUTO: Today, we’re going to hear from the President of the United States outlining his significant rail initiative, expected to be north of $16 billion. It’s unclear if this funding has been budgeted for or accounted for. How does Wall Street react to this continuous government spending?
MARTIN: Wall Street is likely taking it in stride, considering the multitude of challenges faced during the Biden administration. While it doesn’t minimize the concerns, it suggests that some form of resolution will likely be reached. This resolution may not be the most favorable, but it should get worked out over time, especially as we approach the upcoming election cycle. As we get closer to the elections next year, the market may anticipate more positive economic scenarios, leading to better stock performance.
CAVUTO: Dave, we’re back to you. Between the President’s rail initiative and the reports of Saudi Arabia and Russia wanting to continue their oil production cuts, how do you see oil as a wild card in this scenario?
MANEY: Well, I believe that as markets look ahead and down the road, the unpopularity of the green policies of the Biden administration is affecting the situation. Market participants are considering whether US production is more likely to increase or decrease. It seems increasingly clear that production is likely to rise. Short-term oil prices may fluctuate, but we may have reached a peak in green initiatives. This could have positive implications for both inflation and oil prices.
CAVUTO: Thank you both, gentlemen. We have some breaking news coming in.
