How Tentative U.S.-Iran Deal Affects Oil, Yields & Fed

本站添加: 2026-05-30

[00:00:00]today. All right, welcome back to Morning Trade Live. It's time now for the big picture. So, let's welcome in the team from Charles Schwab. We're joined by Liz Ann Saunders, chief investment strategist, Schwab Center for Financial Research, and Cooper Howard, director of fixed income research and strategy. Good morning to you both.

[00:00:14]Look, Liz Ann, let's just start with you because of very busy morning on the economic data front. And now we've just got these reports from Axios. Just walk us through how you're tying it all together. Does it change the narrative for the market?

[00:00:26]>> Well, clearly the the war deal news, to the extent it's validated, uh helped turn things around. And and and that's part of the course when you get uh some of these announcements, you get a a quick reaction on the part of markets. But what's been more interesting maybe is when so many of them ultimately never came to fruition, the market still performed fairly well.

[00:00:48]I think there are so many players in the market that are very short-term uh focused, and they tend to every day look for the shiny new object, whether it's uh some sort of, you know, narrative change as it relates to the war or something at the more micro uh level.

[00:01:03]You know, the economic news was kind of, you know, stagflation with a lower case S. You saw the downgrade to GDP. You saw um yet again a somewhat hotter PCE number. It wasn't out out of bounds relative to expectations, but um that story of high still, you know, decent amount of inflation pressure and a kind of middling growth story, uh I think that's here to stay.

[00:01:28]>> Yeah, I like that stagflation with a lower case S as people like to call it, sort of stagflationary light. Um particularly when, as KG and I were talking about and I saw you tweeting about this this morning as well, the personal savings at its lowest in 4 years. No doubt something to keep an eye on. Um how are you thinking about the PCE this morning, Cooper, as it pertains to the rates market?

[00:01:48]>> Yeah, I would agree with Liz Ann's that we're kind of seeing a stagflationary light environment. And I think really digging into the numbers a little bit, my concern is that we did see flat income, but higher spending.

[00:01:58]So, what that suggests is that the average consumer is really dipping into their savings to kind of sustain their lifestyle. So, the concern is if that is something that's likely to continue and we do see elevated oil prices and elevated gasoline prices, and that puts a pinch on the consumer, then potentially that's cause for a slowdown in the economy. Now, in terms of what that likely means for yields and where the Fed is likely to go, Sam, I think that longer-term yields are likely to stay elevated from here. A lot of the reason is we still see that elevated inflationary environment, and I do think that that's going to continue to stay.

[00:02:32]So, that puts really a floor on how much lower longer-term yields can go, and we don't really expect inflation to come back down to the Fed's 2% target anytime soon. So, that just limits the amount of downside that we could see on yields going forward.

[00:02:47]>> You know, Lizanne, uh one of my uh favorite sort of titles or descriptions of this market, even though it's a bit disgusting, has been bad breadth. And you know, you've pointed out that only 16% of the S&P 500 stocks have outperformed the index itself in the last 2 months. You know, yesterday was interesting because we did start to see a rotation into more sort of a a defensive-type trade, discretionary performing well on lower oil prices. I'm just wondering what would be the green light or a catalyst uh to see a little bit more broadening out beyond what's really just been seen as a sort of oil reflex?

[00:03:22]>> Well, I I think Sam, I think you're right pointing out that I you know, just before we came on, the casino stocks, so some of those classic discretionary areas that could see a benefit to the extent there is a resolution in the war, and we start on a path toward lower oil prices. My concern is that uh lower oil prices are probably still very much in the future because even if the Strait of Hormuz is opened fairly quickly, there's been so much production that has taken offline, um storage is full. It's going to take a while for that to work its way into the uh the system. So, I think we might get small bouts of some rotation, kind of knee-jerk moves on the part of shorter-term investors looking maybe to find a bit of a dip-buying opportunity.

[00:04:06]But, in general, I think it really does require uh a sustainable move down in energy prices to provide that lift to segments of the market that have lagged in the last 3 months.

[00:04:18]>> [snorts] >> Mhm.

[00:04:19]And Cooperman, getting back to you, obviously, we've heard a lot of Fed officials uh speaking this week, and it's becoming abundantly clear that the big question now is who on earth supported that easing bias? I I mean, I'm just wondering what you can expect from the data we're getting and some of the commentary we've had this week.

[00:04:38]>> Yeah, so our expectations, Sam, in terms of the Fed, is that they're likely to be on an extended pause. Uh we do think that it's probably going through the end of the year. Obviously, a lot does depend on the situation with inflation, the state of hormones, and the situation in Iran. But, we do think that the likely next move is probably a hike rather than a cut. That's currently what is being priced into the market, and it seems fairly obvious in terms of why they that would be a potential hike rather than a cut. And I think that it all really boils down to the inflationary environment. Like Liz Ann had mentioned, we're still in kind of an inflationary environment. Yes, PCE was a little bit better than expected, but it is still very high. So, and I don't really see that many catalysts that are out there that's going to pull inflation that much lower. So, we do think that um we'll continue to see a uh Fed that's going to be on hold. And in terms of what that means for our investors right now, Sam, we are suggesting that many of our investors move to a little bit shorter than a benchmark duration. So, if they're using like the Bloomberg uh US aggregate bond index as a benchmark, that has a duration of about 6 years.

[00:05:41]So, roughly in the four to five average can make sense. We don't think that it's prudent to hide out in cash. That's not really a good investment strategy, even though the Fed might be on hold and you can still earn attractive yields in cash. We don't think that it's a good strategy to hide out there, though.

[00:05:57]>> Okay, good to know. Really appreciate both of your time this morning. Thank you so much. Liz Ann Sonders, chief investment strategist Schwab Center for Financial Research and Cooper Howard, director of fixed income research and strategy.