Listen to the full episode, here.
John Norris (00:30):
Well, hello again, everybody. This is John Norris at Trading Perspectives. As always, we have our good friend Sam Clement. Sam, say hello.
Sam Clement (00:36):
John, how are you doing?
John Norris (00:37):
Sam, I’m doing fantastically and I hope you are. I’m
Sam Clement (00:40):
Doing great. Not a lot to complain about.
John Norris (00:42):
Not a lot to complain about. I think a couple of weeks ago whenever the last trading perspective was public, we talked about the World Cup and I got a little blow back some from friends of mine said I sounded like a little bit of a socialist there when I was complaining about the high cost of tickets and how something needs to be done. What do you think about that?
Sam Clement (01:00):
I would like to hear that argument. I’d be open to hearing that.
John Norris (01:05):
So we are not going to talk about that any longer. Moving on.
What we’re going to do is we’re going to move onward and maybe not upward, but we sideways. Some people might say downward and we’re just going to ask ourselves the fundamental question. Sam, have investors moved on from the conflict in Iran and what would it take for it to matter again? And Sam, I’m going to tell you, at the end of February, I think what? February 28th, we started bombing over there and in March that’s all we cared about. Crude oil prices spiked. And then really for all intents and purposes, April, May, here we are end of June when we’re recording this. You’re listening to this in the middle of July more than likely. And Iran has taken the back burmer in my estimation. No one’s talking about it around here. We aren’t having clients talk very much about it, any of it. So are we kind of unusual in this or have the markets in general pricing all the risk with the Orion problem?
Sam Clement (02:05):
Well, I would start by saying the markets obviously got punished when this first started, right?
John Norris (02:12):
And we are much higher than – March was horrible.
Sam Clement (02:15):
And the markets have moved in an upward direction in general
John Norris (02:18):
Assessment. Yes, in general.
Sam Clement (02:21):
Hard to argue that investors have not moved on a little bit. I mean, a little bit being kind of generous. I mean, the market’s moved up. We get news every weekend just about of some tension or friction and a few bombings here and there and then an agreement to come back to the table to negotiate right before futures open Sunday night. And that seems to be the cadence. And the market just has seemingly moved on in my opinion.
John Norris (02:48):
Well, I would tend to agree with you on that. Obviously crude oil prices spiked during March, went from 60, $70 a barrel. I’m not looking at the screens to tell you exactly where they were in the mid to end of February, but it went up pretty sharply. Up over $110 per barrel of light sweet West Texas intermediate crude or something along those lines. And of course, people were worried that this would just cause rampant inflation and cause input prices for manufacturers to soar and the consumer was going to get absolutely reamed at the pump, all this stuff and it was going to cause a whole bunch of economic rack and rowing. And that’s what the concern was in March and then in April and then in May. And then in June, crude oil came down a little. We kind of flipped and flopped and belly flopped and did some, but it seems like been there, done that.
Okay, the president comes out and says, “We’re going to sign a deal. It’s going to be huge. It’s going to be great.” And all that stuff in the Iranian say, “No, you don’t.” And then next thing you know, we start it all over again. It goes down, then it comes back up a little bit more, goes down, goes back up a little bit more. It’s like taking one step back and two steps forward every time we had any sort of ceasefire.
Sam Clement (04:01):
I was about to say, instead of forward and backwards, it was kind of like two steps down and one step up where we were moving in a
John Norris (04:07):
Downward
Sam Clement (04:07):
Trajectory for where –
John Norris (04:08):
Yeah, with crude oil prices. With crude
Sam Clement (04:10):
Oil prices, yes. And if we got bad news about Iran one night, crude was up. And then when we got good news about it, crude was down seemingly a little bit more than it was up the day
John Norris (04:19):
Before. Yeah. And here we are recording this again on the last day of June 2026. And for all intents and purposes, the last time I checked today, crudal futures, light sweet West Texas intermediate, cash contract a little bit higher than where we were in the middle of February, but not so much that anyone would lose sleep over. And so really in terms of investors, in terms of impact on the economy, it seems like we did what, three months of just real unpleasant, maybe four months of real unpleasantness, but are things really fundamentally different now than they were at the end of February?
Sam Clement (04:58):
No, not necessarily. And you mentioned it and I’ve heard this brought up about whether something’s priced in or not, right? And I’ve heard the argument that, well, if stock prices are going to move after it happens, that means it wasn’t priced in. And as you know, that’s not really the case. I mean, you’re always weighing the probability.
John Norris (05:16):
It’s a great argument to explain something that’s already happened.
Sam Clement (05:19):
Yeah. When things are priced in, it’s priced in on the probability of it happening. And then when it happens, it moves to 100% probability. And so then prices move based off that. And so it’s hard to argue that the market doesn’t react pretty quickly and pricings and pretty quickly, especially over the last few years. And I’d really bring it back to 2018 with the tariff tantrum that we had or the Chinese trade war in the fourth quarter of 2018
John Norris (05:48):
And really just tariffs in general. Remember last year, what was that Independence Day and my Lord or the stock liberation day, I think the first – Liberation
Sam Clement (05:57):
Day or the –
John Norris (05:58):
And the stock market fell apart then a month later, two months later, who cares?
Sam Clement (06:03):
Yeah.
John Norris (06:04):
And so really the first question we’re trying to address here today, have markets already priced out the Iran risk? I would say I don’t think anyone’s really paying sharpening very much attention to Iran right now. Yeah, we’re taking a look at crude oil futures and the impact on inflation and all that stuff. But in terms of, I hate to say it, I mean, conflagrations with Iran and dead bodies in the Middle East, I don’t think US investors are worried about that at all. So what does this teach us about domestic investor psychology? I mean, is it, what have you done for me lately? It’s clearly the psyche when it comes to returns, but is it in terms of geopolitical headlines? It’s heavy news one day, but the next day people tend to forget it. Is that the case?
Sam Clement (06:50):
I think it is at least partially true. And again, I really think it goes back to 2018. We’ve had these scenarios and they’ve all been in the big ones that I think of have been in the Trump administrations of 2018, COVID, the tariff tantrum, the – Something that
John Norris (07:12):
Said what they’re calling it now.
Sam Clement (07:13):
Yeah. The 2023, the mini banking crisis that was under Biden. But nonetheless, the big ones being 2018, 2020, and then the tariffs of last year, the market recovered so quickly to these events. I mean, even COVID, which I would argue obviously took a little bit of time, but by and large, you looked at it by the end of the year and things were back to normal, right? Things were rock and rolling. 2021 had great earnings growth in the market. The stock market was booming. It was like this thing never happened that was still present. And so I believe the market has become a lot more resilient over the last eight years than it may have been previously.
John Norris (07:52):
I think you might be right about that. People understand perhaps the importance of being a long-term investor a little bit more. People are less prone to freak out. I think that maybe they were certainly back since we opened up Oak Worth Capital Bank all the way back in 2008, rarely do I get a phone call, people terribly worried about the stock market at any given time. And granted, we’re coming off several years worth of excellent returns, but back even in 2022, I don’t remember a lot of panicked sort of people or clients calling us up going, “Oh my God, the sky is falling.” Whereas a decade previous, that’s all we would have gotten. And so I do think that perhaps maybe investor psyche has changed a little bit along with the size of investor portfolios that maybe a 10% pullback now, “Hey, that’s not fun, but that’s not as detrimental to me as it would have been five, 10 years ago.
So I’m not going to lose any sleepover.”
Sam Clement (08:48):
Yeah. I believe the two biggest changes from what I mentioned, what’s changed over the last eight years is one, you have the post great recession, people that may have gotten out and regretted it, or people who didn’t get out and are glad they did it right. You have two people that had very big learning lessons from it one way or another coming off of that. And then you have a whole new cycle or a whole new group of people that are entering and investing in the last…
John Norris (09:16):
I mean, people you’re age. Yes.
Sam Clement (09:18):
And take people my age. I started here in 2018 and the fourth quarter of 2018 felt horrible.
John Norris (09:24):
It was horrible. It was
Sam Clement (09:26):
A bear market, but you were rewarded for buying the dip there. You were rewarded big time in COVID for buying the dip there. You were rewarded in 2022. It took longer. That was nine months of a draw down, but you were rewarded for buying that. The banking crisis in 23, the tariffs in 25, we’ve had these events every other year since I started working, we had some kind of bear market for a while.
John Norris (09:50):
It seems like
Sam Clement (09:51):
It. 2018, 2020, 2022, short 23 and then
John Norris (09:57):
In 25.
Sam Clement (09:57):
So we’ve had a lot of them and you’ve constantly had the same story over and over again, don’t get out, buy more if you
John Norris (10:03):
Can’t. Well, and also along the way, do you think that perhaps whether consciously or subconsciously, and I’ll let you decide about it, there is the belief amongst domestic investors that if things get too bad, the Fed will just throw money out of a helicopter and make everything right at Capital.
Sam Clement (10:20):
I think that’s a big part of it. I think the Trump administration’s a big part of it and that’s why we brought up that a few of these real big ones in these quick turnarounds because the administration is so willing to change things on a dime it seems like. And investors, it’s hard to argue they haven’t become inclined to buy the dip. I mean, that has become such a common saying. We see people saying 3% dip, hey, start buying the dip. It’s like that’s not a dip. Well,
John Norris (10:50):
I mean, people calling up after a little bit of a pullback saying, “Hey, should we put some more money to work?” But then also remember in 2022, after that horrible year, people were saying that the 60 / 40 portfolio is dead. I don’t read any headlines about that any longer. And that also, I mean, really you’re right. I mean, people have learned over the last really, I’d say, gosh, it’s now been 18 years that, hey, if you just hold onto it long enough, it’ll come back. And if you try to time it too closely, Europe might get whacked. And so best thing to do is just not sweat it too much and just hang on. So if that’s the case, what would force US investors to pay attention to what’s going on in the Middle East again? I mean, is there something… I mean, obviously I would say just what’s going on now lobbying a couple missiles, a couple of drones coming back the other way, this sort of…
Sam Clement (11:49):
Tit for tat.
John Norris (11:49):
Tit for tat really… I don’t even know what it is. I mean, people aren’t hot and bothered about it. No one’s talking about it. It’s almost, is it war? Is it not war? What’s going on? I would say, Sam, to answer my own question, what would the forest investors pay attention? Again, I would say clear evidence that this is escalating well beyond anyone’s expectations, that the Russians, the Chinese are getting involved – Boots on the ground. And boots on the ground and it is firefight after firefight and I mean thousands of people are losing their lives as opposed to, “Okay, I’m going to lob a drone somewhere or I’m going to do this. ” And that’s what I think would really force people and that’s what people were worried about. That’s why March was so bad, but when it became pretty evident, hey, the Russians and the Chinese aren’t going to get involved, it’s not going to really expand, it’s not going to get out of hand as it were and people just kind of ignored it after that.
I mean, although that might be a strong word, but I think it would really for people to pay attention, we’d have to go back to that fear that we had at the beginning of March that this is going to cause a World War II.
Sam Clement (12:59):
Yes. Boots on the ground, trying to take Karg Island from Iran if the US did that or a complete shutdown of the straight again, I think are the world three, if you’re going to say most likely, most likely scenarios to cause this to truly reescalate in a just full on cancellation of talks with Iran. I think some combination of that is what it will take for the market to say, “Oh, we are not through this. ” Right now, it’s this back and forth, nothing’s really changing. Crude keeps moving lower and things are by and large okay.
John Norris (13:32):
Well, let me ask you this. I mean, what do you think the, this isn’t necessarily part of our outline either, but what do you think it would take for the average American to look at this, what’s going on in the Middle East and say, “We have success here.” Understand that public opinion polls according to real queer politics and a number of different places suggest that the average American, and it’s obviously it’s very partisan, but the average American is kind of unclear what exactly the end game is here. What would it take for people of your generation and your estimation to go, “Okay, that was worth our
Sam Clement (14:07):
While.” I’m kind of at a loss for words because I don’t really see a scenario where young people look at this and say, “That was great.” Glad we did that because if the goal is just to get things back to where they were, get crude prices back to where they were, have the stock market continue to move up –
John Norris (14:27):
We can invest the case, then why did we go to all the trouble in the first place?
Sam Clement (14:30):
Right. And it seems as if the administration and investors in the whole world has moved past this idea of regime change
John Norris (14:38):
Really.
Sam Clement (14:39):
I remember when it first happened, I know some
John Norris (14:40):
People – Yeah, the former Shaw’s son, the former Crown Prince and people were thinking that the streets of Iran or Tehran were going to rise up and that – Trump was even
Sam Clement (14:50):
Saying
John Norris (14:51):
It.
Sam Clement (14:51):
They had talked with some great, I think you used the word candidates or people they were talking to.
John Norris (14:56):
Well, that clearly didn’t happen.
Sam Clement (14:57):
And it obviously wasn’t going to happen. And
John Norris (14:59):
I don’t think is going to happen.
Sam Clement (15:02):
No, it’s no, I guess
John Norris (15:06):
I guess for a lot of people, and I’d say maybe if you were to force people to come up with a pad answer to that, they’d probably say, make sure that Iran doesn’t have a new queer program. I would imagine that would be the answer. And I think the likelihood of that, unless we’re willing to go win with boots on the ground is absolutely next to zero. And the reason why I say that is because that is Tehran’s bargaining chip. You’re going to sit there and I’m going to freely hand over my bargaining chip. Well, you better be willing to pay up. And the paying up aspect of it is I don’t think what Americans would really cotton to, to use a Southern expression, just how much money would Tehran need to get in order to freely give up its nuclear program and I don’t think it’s a hundred billion dollars.
Sam Clement (15:50):
No. And if the end result of this is something along the Obama deal where it’s give some money back and process –
John Norris (15:57):
I think we’ve already tried to do that.
Sam Clement (15:59):
I know with more money, that is just a hard pill to swallow as the end result of success. I mean, if all it is, is going back to kind of the Obama deal with maybe saying you’re checking they’re not making nuclear weapons a little differently
John Norris (16:17):
Than – 10
Sam Clement (16:19):
Times, 30 times the amount of money.
John Norris (16:21):
Well, I mean, it’s obvious that I think Washington, I think most Americans would agree that probably it would be best not to have Tehran be a nuclear power and capable of lobbying intercontinental ballistic missiles in us, probably the best, particularly when they’ve said death to the great Satan and all that stuff. People say they want to kill you and then they’ve got the means to do it. People generally don’t like that very much. However, I really strongly don’t believe we’re going to get that uranium, those nuclear physicists, that whole program out of Iran for good, unless we are willing to go in their boots on the ground and show up with, I mean, truckloads of cash and that neither one of those is going to get past the average US citizen in my estimation.
Sam Clement (17:09):
I agree.
John Norris (17:09):
So what’s the biggest takeaway from all this? I mean, that’s a whole deal. It’s like we’ve gone past any real public interest in my estimation, at least in terms of investors, we’ve completely gone past it. The market as defined by the S&P 500 is higher now than it was at the end of February. Crude oil prices a little bit higher than they were in February, but within spitting distance – Kind of in that sweet spot on this. Kind of with these deals we’ve gone over there, we’ve spent, I don’t know how many billions of dollars lobbed, I don’t know how many missiles at the Iranians and they’ve responded with drones and a couple thousand people debt. I mean, I’m not trying to make light of that, but in terms of global conflagrations historically, that’s on the lower end of it. And so we go through all this four months of, I mean, maybe some saber rattling, maybe some unpleasantness, but where are we?
I mean, what’s the takeaway here? I mean, I’m struggling to find one.
Sam Clement (18:04):
The takeaway to me is the same takeaway when we’ve talked about elections where we’ve said that gridlock is not the worst thing for markets. They want to be left alone. And so with regards to the Iran conflict, they want to be left alone. They want crude to be in a decent enough range where the energy companies continue to be profitable, but it’s not too much on people’s wallets to where it hurts the economy. If you do that and leave us alone by and large, the markets as a whole have and seem like they would just continue to focus on what’s more important to them. Because we’ve talked about it, Iranian GDP is not a significant
John Norris (18:39):
Global. No, it’s 23 basis points or something. It’s
Sam Clement (18:42):
The straight of hormones and the amount of crude that goes through it. And if you solve that a little bit or if it’s not too big of an issue, then the rest of it really isn’t that big of an issue to global markets. I don’t know how you can look at it really that
John Norris (18:55):
Differently. I might add to it a litle bit or take a litle bit of a spin on it. In March there was uncertainty in April it was pretty clear that this was not going to escalate and once that uncertainty kind of dissipated, investors just got back to focusing on profits, which is what they normally do. And that’s the biggest lesson that I guess I would have to say if there is one that ultimately stock market comes down to corporate profits. And if corporations are making more money, then generally stock prices do okay. I mean, that’s just as a general rule. When the economy’s growing, corporations tend to make more money, when they tend to make more money, it tends to be okay for the stock market. And what we saw and what we have seen in April, May, June, after a very difficult March is the US economy’s kind of chugging along, maybe not great, but not falling apart completely.
First quarter earning season for most of corporate America was pretty good and investors have looked past it. Crude oil prices have now come back down a little bit. And so I’m taking a look at things and I’m going, “Hey, if in order for the average US investor or consumer to care about this, we’re going to have to get into a major conflagration. Again, boots on the ground, but that doesn’t seem likely. So the biggest takeaway from all this is kind of what you were saying. If you just leave me alone, I’ll be happy.”
Sam Clement (20:16):
Leave me alone and let me focus on what I want to focus
John Norris (20:19):
On. Which is corporate profitability. Yeah. I mean, that’s it. That’s kind of it. I mean, are we wrong? I
Sam Clement (20:25):
Don’t think so.
John Norris (20:29):
Guys, thank you all so much for listening. We always love to hear from you also. If you have any questions or comments, please by all means, let us know. You can always drop us a line at or you can leave us a review on the podcast out of your choice. Of course, if you’re interested in reading more or hearing more of what we got to say or how we think, then by all means go to oakworth.com, O-A-K-W-O-R-T-H.com and take a look underneath the thought leadership tab for all kinds of exciting information.That includes links to previous Trade and Perspectives podcast, links to previous episodes of our newsletter/blog common sense, links to our quarterly analysis and then also links to pieces by our advisory services group headed up by Mac Frazier. It’s all in there and it’s all good. Sam, what else you got to say today about this exciting topic?
Sam Clement (21:17):
That’s all I’ve got.
John Norris (21:18):
That’s all I’ve got today too. Y’all take care.
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