Ted Thatcher on Bull Case for Stocks Despite Treasury Yield Spike, Crude Oil Pressures

SPEAKER_1 (0:00)

I do want to welcome in our next guest, though, joining us this morning, Ted Thatcher, President at Bright Lake Wealth Management. Ted, always great to have you on. I'm looking at the big board. I've got a sea of red here. I was talking about a tenure that touched 24-year highs. I mean, how are you looking at the market right now?

Ted Thatcher (0:18)

You know, Marlee, yeah, we have got a sea of red this morning, but only after an all-time high we closed that yesterday. Of course, we get a negative headline out of, you know, the war in Iran and out of the Middle East, and you know, you see oil spike up a bit. We see, you know, equities sell off here. But really, I think that the broader narrative here, and the question I think investors are asking anytime we hit a high, is just, hey, do we have a lot more room to run? You know, we start to ask some questions about, you know, how sustainable this is. And, you know, ultimately, in my view, Marlee, you know, this is driven by so much pent-up demand, fundamental demand. You know, you're seeing GDP revisions come up substantially. You know, Q3 projections now at 3.7 percent.

Corporate profits have expanded, you know, in a huge way this year. And the projections for Q3, some I'm seeing at nearly 30 percent. And so you put that together with, you know, consumers, you know, in 2025, you know, incomes across the US up about 3.1 percent after taxes from a median standpoint. You know, obviously, there's a lot of consumer pressure headlines, but you put all that together, and I think that's what's driving this rally.

SPEAKER_1 (1:26)

All right. So Ted, I want you to answer those questions that everybody's asking themselves. Do we have more room to run? And how sustainable is this rally?

Ted Thatcher (1:35)

Yeah, you know, when you think about all the pressure we have had on equities, what does it come from? Well, it's come from, you know, the concerns about rates going higher, the inflation pressures that we've seen, oil at over $100 a barrel. And so, you know, I think that that weight has been so substantial. Again, though, what have we had? We had this coiled spring in the markets. I think that if we had not had this war in Iran, we would be well beyond 8,000 in the S&P. I'm in the camp that we still likely see that before the end of the year. But in my view, if we didn't have those things, we could be far, far beyond that number. And so, what I think, you know, I'm looking at most right now, certainly is this discrepancy between oil and fuel. So, you know, we've actually seen a huge recovery out of the Gulf. 14 million barrels has been the headline that has been coming out now. Basically, an 80% recovery of the oil exports. But what hasn't recovered yet, Marley, is the fuel exports. That's diesel, regular and certainly jet fuel, only reaching about 50% of its pre-war capacity. Why is that? Well, because effectively those refineries were damaged early on in the war because of all of the conflict. And so, that is something I think that is continuing to lean on consumers because we haven't seen all the relief that we want to yet, of course, at the pump. And then the inflation pressure that creates because of all the transportation costs that feed into the services and the goods that we buy throughout our day-to-day lives.

SPEAKER_1 (3:04)

And how concerned are you that these diesel and gasoline shortages and the lack of recovery there in actual fuel is going to keep inflation elevated even as we start to perhaps see oil prices fall?

Ted Thatcher (3:20)

You know, if we do see a big move down in oil prices, Marley, I think that the market will take that and start to price in a lot of positives very quickly. So I think that probabilities for rate hikes would drop down substantially. And certainly, you know, forward-looking projections for inflation would start to come down. So if we can get that oil back into the, you know, geez, certainly 70s or even the high 60s, my goodness gracious, that would be just absolutely fantastic for markets. But I think that's really what's really important for investors to realize to here and consumers broadly, is that just because of all this pressure, I think I'm almost tired of hearing that the markets can't move higher because of it. We saw early on in the Iran War, equities and the AI trade especially traded much higher throughout an incredible amount of pressure in the Middle East. We're seeing it again with new highs yesterday, despite oil at 100, obviously the sell off this morning. But just because the market is very choppy right now, Marlee, I'm not seeing that as necessarily a barrier to higher moves. I think investors need to be patient and prepared and take what the market gives us here.