Gloom and boom

Katie Martin (0:06)

Pushkin.

Money is a tough old game. Markets don't care about your feelings. They don't care about what's right and wrong and what is pure in the world. Stocks, in particular, care about how much money companies are making, how much money is flowing into the market, and that's about it. So it's actually not that weird that markets are doing fine, even though we're now entering month three of the US-Israeli war on Iran. The problem, though, is it's becoming increasingly clear that energy prices are going to be much higher for much longer. Is this really okay, like indefinitely? This week, we got a bunch of central banks and really big company earnings reports to help us understand what it all means. So today on the show, bear with me here, is Donald Trump actually a master of getting markets exactly where he wants them?

This is Unhedged, your friendly markets and finance podcast in the Financial Times. I'm Pushkin. I'm Katie Martin, a markets columnist at the FT in London. Where it's warm, it's cold, it's warm again. No one knows what to wear. It's chaos. And I'm joined through the miracle of technology by the larger than life, Mr. Robert Armstrong, all the way over there in New York City. Rob, how is the Big Apple?

Rob Armstrong (1:27)

Katie, it is a beautiful, sunny, cool day here in New York, a perfect spring day. And I know markets don't care about our listeners' feelings, but I do.

We here at the Unhedged podcast, we really care.

Katie Martin (1:45)

We're here for you, listeners. So look, it's maybe like a riddle and it's maybe not, but it's definitely a thing that like the cuffs and the dollars in markets just don't match at the moment, right? You were out in Switzerland talking to energy people the other week, and I was writing about this yesterday. All the sort of energy analysts are saying, I don't like this much. I think the Strait of Hormuz is going to be basically impassable for much longer than I previously thought. I think oil prices are going to be much higher than we previously thought. I think this is going to go on for longer. I think it's going to be economically more painful than we perhaps thought at the start of this crisis.

And yet markets are still like, dee dee dee dee dee.

Rob Armstrong (2:31)

I think we can make sense of this. Not perfect sense, but maybe as good sense as we can ever make of the wild squiggling that characterizes all markets everywhere, always. I mean, I thought your column on this was excellent, Katie, but the numbers they are talking about.

Katie Martin (2:50)

That's nice, Rob. You're never nice.

Rob Armstrong (2:52)

I'm never nice. There's something, I've taken some kind of a new pill this morning, and they're working. I don't know.

Anyway, the numbers they are talking about there are higher, higher than we are now and well higher than we were before the war. However, well, the oil prices, you mean? The oil, so Brent is what, at 110 or something now? Do you have that number in front of you?

I feel like from the work Hack Young has done and that I've done, if we can keep it under 150, for the American economy, at least, that's bearable. Maybe a different story for Europe, certainly a different story for Asia. But the danger zone, I think is still above what most analysts are talking about. I, of course, allow for the unpleasant possibility that the analysts are not pessimistic enough, which is, you know what I mean? But, you know, I think the central hypothesis remains, sometime in the next couple of months, they managed to get the straight open, oil never touches 150, and we all breathe a big sigh of relief. There is a right tail that is awful, and we should talk about that. But the central hypothesis, the most likely outcome, I think, is markets friendly, given everything else we know about the economy and what the market is doing now and so forth.

Katie Martin (4:17)

Well, let me throw you a curveball, Rob Armstrong, because just before we came to record this show, a headline broke saying that the United Arab Emirates said on Tuesday it was leaving OPEC, the organization that effectively controls oil prices, a bunch of big oil producing countries. They get together and talk about how much oil they're going to produce, how much they're not going to produce, and roughly what they think that's going to do to oil prices. It's been around for like ever. It's a really important part of the fabric of global finance. And the UAE is saying, right, after 60 years, we're off. And everybody I've mentioned this to has gone, huh?