00:00Julian Emanuel of Evercore writing,
00:01The base case remains the tech-led bull to $77.50.
00:05The independence of stocks and the economy from malign triple-digit crude will not be sustainable.
00:10Julian joins us now for more. Julian, good morning.
00:12Good morning.
00:12Good to see you, sir. Are we reaching a tipping point?
00:14Well, what you just put up is kind of a contradictory statement.
00:19We think that the bull market is predicated on number one earnings,
00:25which have been off the charts, absolutely off the charts.
00:29But you are at this point where the malign effects of oil will not be ignored if this goes on
00:38much longer.
00:38Well, let's go with the last 24 hours.
00:40What do you believe is more consequential?
00:41The moving crude, the earnings we got, or what we heard and saw from the Federal Reserve?
00:46Yes, all of them.
00:47You can't pick one, all three.
00:49I would have to say that earnings.
00:52Look, again, and we've been very adamant about it.
00:55We've been adamant throughout the entirety of this three-and-a-half-year bull market run
01:00is that if you look at a multi-decade chart, earnings and stock prices have a very, very close correlation.
01:09And it is no surprise if you think back 30 days ago where we were in the depths, you know,
01:16despair,
01:17but yet you're still in an environment where the market has ripped higher, as crude has ripped higher,
01:24as yields, as you pointed out, have ripped higher.
01:27Why?
01:28Because earnings are ripping higher.
01:29This is the big question.
01:30Lisa talked about the bond market.
01:32Yields are back to where they were and through those levels in some cases at the end of March.
01:36And we went for the reasons that we've got through crude back to wartime highs,
01:40at least briefly, in the last 24 hours.
01:42All of those stories have gone back to the end of March, with the exception of equities,
01:46which have had a move of 13% off the lows of March.
01:49Do you really believe that story is insulated because of earnings from what's happening elsewhere in other asset classes?
01:55In the medium term, it cannot be.
01:59In the near term, it is, again, because going back to, you know,
02:03the call we made at the end of last month is that the hedging that we had seen in the
02:09markets
02:09was unlike anything that we had seen over the last 30-plus years of doing this.
02:14And so almost by default, unless the world was ending in that moment,
02:19you were going to get the degree of rally which you got,
02:22which by a lot of measures was as strong as what started this generational bull market in August of 1982.
02:29But, again, just going back to where the situation is,
02:33there's an optionality component here to, at some point,
02:37triple-digit oil is going to cause the economy to slow
02:41and is going to cause earnings to slow with it.
02:44We just, you know, our work has said the four-month window is really, really
02:49sort of the time looking at past spikes.
02:52Where that comes into play, we're getting close.
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