Boing! Springtime for the markets

Katie Martin (0:06)

Pushkin.

It looks like investors are really popping those happy pills. The Iran situation is the Iran situation. It's still bad. There's not a lot of ships moving around over there. Oil is still 50% more expensive than it was at the start of the year. So in general, it's not great. But, like whatever, stocks have not just recovered. In the US, they've zoomed up to new record highs. And there's some classic over-excited, silly stuff going on too. Today on the show, euphoria and joy across the land.

This is Unhedged, the markets and finance podcast from the Financial Times. And Pushkin and Katie Martin, a markets columnist here at FT Towers in London, where spring is in full swing. Lovely stuff. And I'm joined down the line by the big man, Mr. Robert Armstrong, off of the Unhedged newsletter in New York City, where he's been thinking big thoughts about big tech. Rob, are you feeling the vibes? The vibes are good. Are you feeling good?

Robert Armstrong (1:14)

I feel good. I feel exuberant.

I am irrationally exuberant right now.

Katie Martin (1:21)

Record highs in stocks, baby.

Robert Armstrong (1:23)

Yeah, it's true. And it happened so quickly. I mean, the way I was thinking about this is like a week or two ago, you could say grouchily, the S&P 500 hasn't gone anywhere since October, and you'd be right.

And then the S&P was like, watch this.

Katie Martin (1:42)

Hold my beer. Yeah.

Robert Armstrong (1:44)

And now we have an S&P 500 that starts with a seven, which is something of a moment. We've never had it starting with a seven before.

Katie Martin (1:54)

Seven thousand and something on the S&P boys and girls.

Robert Armstrong (1:57)

And I don't really know, to be honest. You know, the market hit a low at, you know, 6300 on the 27th of March. So what was that? That was, you know, two, three weeks ago, two weeks ago. What changed between now and then that took you from 6300 to 7000?

I don't rightly know.

Katie Martin (2:20)

Well, I think the thing that does make sense is, as you and I and regular listeners to this show will know, markets are forward looking things, right? So they dropped in anticipation of an energy crunch. So before the oil actually started drying up, markets like dumped. And now they're jumping in anticipation of a resolution. So yes, I know there is no lasting resolution to this conflict in Iran yet.

But if you're feeling pretty bullish about the world, feeling pretty positive in general, then the direction of travel is towards things getting better rather than things getting worse. And that's enough. That's like fine.

Robert Armstrong (2:59)

Let me add to that. We've had a sustained period of oil at $100 or more than $100.

And it hasn't been a disaster. So it's like, okay, we can live like this, the world is saying. You're right. You know what I mean? This is a bearable equilibrium. Now, that can of course be wrong.

Oil nerds keep telling us, if the blockade of the blockade stays in place for a long time, that it's not going to be a linear increase in oil prices, that oil prices will move in spiky ways suddenly, and kind of geometrically rather than arithmetically. So that-

Katie Martin (3:43)

It will be scary and horrible. Right.

Robert Armstrong (3:45)

But the market persists in believing that this piece of water is so important to global commerce that one way or the other, people will figure it out and get this thing open.

Katie Martin (3:56)

They'll figure it out.

Robert Armstrong (3:57)

That is the market's assumption.

Katie Martin (3:59)

So the market is saying, look, a few things can go wrong. Yeah, one of them is the oil price just hockey sticks goes to like $200 a barrel and stays there. Another is the central banks have a bit of a kind of brain freeze and jack up interest rates really hard to deal with inflation risks, which I think everyone agrees would be a bad idea. And it's something that they're certainly suggesting they're not going to do just yet. And the third thing is that like the US economy falls into a recession, which nobody thinks is terribly likely. They are things nonetheless that could happen, but they haven't happened yet. So vibes are good, which is why you get really, really stupid things happening in markets.

Now, here's a stupid thing. Rob, you quite often have incorrect views about footwear. However, please tell us about a company called Allbirds, which I'm not familiar with.

Robert Armstrong (4:55)

So Allbirds made some kind of hippie sneaker made out of wool or hemp or something like that. I don't know. It's a shoe. They were quite a hit for a while, and then it all went wrong and the stock collapsed.