00:00The sell-off in U.S. Treasuries is weighing on Asian investors.
00:04Major Asian markets closed lower on the final trading day of the week.
00:07South Korea's KOSPI fell 1.8%, dragged lower by chipmaker Samsung Electronics and SK Hynix.
00:14Japan's Nikkei 225 dropped 1.9%, while Hong Kong's Hang Senn Index slipped 0.6%.
00:21Let's bring in Matt Maley, Chief Market Strategist at Militaback & Company.
00:25He's also the author of the Maley Report newsletter.
00:28Hello, Matt.
00:29So, we've just heard from James talking about the sort of triple threat of the inflation, the diesel price, and
00:36the bond markets.
00:36Would you agree with the assessment that the Federal Reserve's not going to have much of a choice but to
00:41hike rates next week?
00:44Yes, Sally.
00:45They definitely, I mean, they put themselves in a box.
00:49They said if the inflation numbers, the upcoming inflation numbers are high, are hot, they're going to have to raise
00:56rates.
00:57Well, they've been high.
00:58And they've been hot.
00:59So, they'll lose a lot of credibility if they step back from those statements.
01:05And it is interesting, though.
01:07I will note that the market is getting very, very oversold in terms of price, the Treasury market.
01:14And it's also, the bearishness is very, very heavy.
01:17So, it will be interesting to see if we kind of get a, sell the rumor, you know, of the
01:21rumor of the cutting, I'm sorry, hiking rates, and then see investors buy the news.
01:28You know, they say, buy the news, which would cause yields to come down.
01:32But if that happens, I think it will be a short-lived phenomenon.
01:35I want to get your input on the oil price.
01:38We've seen the Houthis poised to take full control of the Bab al-Mandab Strait.
01:43That means there will be a second chokehold now in the Gulf.
01:47While the price of crude is up, it didn't go completely wild on this news.
01:53Where do you see it going in the midterm?
01:57Yeah, it looks like it wants to head higher.
02:00I mean, there's little question.
02:02Now that we've got, as you mentioned, two chokeholds on the situation.
02:05And, again, on a technical basis, oil is getting overbought, so maybe we do see some sort of a pullback.
02:10But another thing that we have that's hurting the price of oil or helping the price of oil continue to
02:16rally is that President Trump has kind of lost the ability to jawbone the markets.
02:22Last year, every time he jawboneed the markets in one direction or another on tariffs, the markets moved.
02:27And the same thing this year, on the first half of the year, when it came to what was going
02:32on in the Middle East.
02:32Not so much anymore, ever since that June agreement fell apart.
02:37People, even if they get an agreement, people are not going to believe that it's going to hold up for
02:41very long.
02:41So the line of least resistance is higher.
02:44And until the situation in the Middle East settles down, it doesn't look like that's going to happen anytime soon.
02:50We're talking a lot about the U.S. economy because it's the biggest in the world, and it has an
02:55impact on global markets.
02:58What are you seeing in the weeks and months ahead?
03:01One of the things that we really need to keep a close eye on is the housing market here in
03:06the U.S.
03:07We see that the housing stocks are going down, and a lot of that, of course, has to do with
03:11interest rates going up.
03:13In other words, mortgage rates, which were down near 6 percent, 30 years mortgage, about 6 percent at the beginning
03:20of the summer, are now up at 7 percent.
03:22And that's having a negative impact.
03:24But I'm also following the price of lumber, which has come down in the last month, month and a half.
03:30And that's kind of indicating that it's not just an interest rate thing.
03:33It's a little bit of a broader issue.
03:36Some of that does have to do with the tariffs issue with Canada.
03:39But still, you know, the housing industry is very broad and very important to the U.S. economy.
03:45So if we see more weakness there, that's going to tell us that the economy is slowing a lot more
03:50than people were thinking.
03:51How much is any of this hitting the average American?
03:55We know that Donald Trump is making a really strong push for Republican support in the midterms.
04:01But the economy is always such a crucial factor.
04:05Yes, and this, you know, people have tried to, again, jawbone, some politicians have been able to jawbone and say
04:11that the K-shaped economy is disappearing.
04:16And that really isn't the case.
04:18And especially now with these prices moving up, because it's not just oil prices.
04:22I mean, you see the price of wheat.
04:24You see the price of copper until very recently, and we're rising strongly.
04:28So these have wide-ranging impacts on everybody's, on all prices, and especially what you talked about previously when it
04:36comes to diesel fuel.
04:38So when you have 60 to 65 percent of the people in the U.S. living paycheck to paycheck, these
04:43things are having a real bite.
04:44And so this is a real problem for the president as they move into the midterm elections.
04:49Thank you so much.
04:50Matt Maley, chief market strategist at Miller Tobacco & Company.
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