Will The Iran War Oil Price Shock Sink Stocks? | Lance Roberts

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**Lance Roberts** (0:56)
I've laid out kind of three scenarios for the markets. And this is what we're working through right now, is kind of these three scenarios. How long does this actually take? And what's the impact to markets, GDP, etc.?

**Adam Taggart** (1:09)
Oh, this is awesome. This is what everybody wants to see. Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart, welcoming you here at the end of the week for another weekly market recap featuring my good friend, the epically furious portfolio manager, Lance Roberts. Lance, how you doing?

**Lance Roberts** (1:31)
Why am I epically furious?

**Adam Taggart** (1:33)
Well, because we're gonna talk a little bit about the impact of the war, and it is Operation Epic Fury.

**Lance Roberts** (1:38)
Ah, got you, got you, okay.

**Adam Taggart** (1:40)
Yeah, real quick before we get-

**Lance Roberts** (1:42)
I was over here furiously working, so.

**Adam Taggart** (1:45)
Well, you work furiously, you're kind of epic. Sometimes, you make me furious. Sometimes, you make me epically furious.

**SPEAKER_6** (1:51)
There you go.

**Adam Taggart** (1:52)
Applies in all sorts of ways. And real quick before we jump into the details here, just a reminder for folks, if you're watching this video the day it launches, which is Saturday, you have like less than 48 hours to purchase your ticket for the Thoughtful Money Spring Online Conference. If you haven't already, I'll remind everybody about all the details about it at the end of this discussion. But it is our best faculty yet, could not be more timely, especially with everything that's going on in the Middle East. So if you haven't bought your ticket yet, sorry, it's your last chance to buy your ticket at the last chance to save price. So the conference itself isn't until a week away from now, yeah, exactly a week away from now. But the price goes up to the full price at midnight on Sunday. So you can still get it at the last chance to save discount by going to thoughtfulmoney.com/conference. And that link also has all the details, everybody in the faculty, the whole agenda for the day. It's going to be wonderful. All right, Lance.
So we've talked a little bit about the impact of the war on the markets. You've said in general, these tend to not drive market actions that much unless until and unless it impacts the market's earnings expectations. And what we have seen in this war is that the price of oil has become much more volatile. It's raised materially, got up as high as about $120 a barrel briefly. It's now down more like around $100 a barrel, though I haven't looked at it yet this morning. But obviously, if that is something that the markets think could sustain, then that does start to roll into corporate profit margins. Obviously, we've seen the markets be a bit more weak and some additional volatility entered into the markets here. Right now, what type of discount do you think, more discount the markets are applying, and do you expect that all things being equal to get worse from here?

**Lance Roberts** (3:56)
Couple of things.
In general, your statement is absolutely correct. But you also have to drill down into the areas of the market, they're going to be impacted most. For instance, at the beginning of this year, you and I were talking about this reflation narrative. I wrote a couple of articles about this reflation idea that this economic growth resurgent this year was going to occur, and that was benefiting areas like staples, energy, materials, industrials, utilities. They were trading exceptionally well. Emerging markets and international markets were trading exceptionally well. Ever since this started, those have been the areas that have been hit the hardest, and the companies like NVIDIA and the MAG 7 actually have been holding up much better. We've seen this rotation back to growth a bit because the impact of the war, it's not a war, we haven't declared war. The outcome of this military conflict and what's going on on oil prices isn't going to impact the earnings of Google as much as it's going to impact the earnings of, say, a Walmart or Target where higher gasoline prices are going to impair the consumer. So if you think about where an oil spike is, and some of the estimates are, this is sustained for 90 days or 180 days at these price levels, that's $600 to $800 in additional energy costs that a consumer will pay. Well, they don't have an extra $600 to $800. It has to come from somewhere else in their budget, right? And that will obviously cut back on them shopping as much at Target or shopping as much at Walmart or Costco or whatever it is. So that's why we're seeing this bit of risk-off rotation in the areas that were the most beloved areas, and we had a lot of that momentum chase in those areas, and that's been unwinding pretty sharply over the last couple of weeks. So again, this is why the headline index hasn't come down that much, because you take a look at the S&P 500, yes, it's come down, but those five, six sectors of the market, they make up less of the market cap than technology alone. So again, that's why the overall index hasn't come down as much as some of these other sectors.