Market and economy largely isolated from oil shock of Iran war, says Wells Fargo's Ohsung Kwon
Speakers
Ohsung Kwon
— Chief Equity Strategist, Wells Fargo
Summary
Ohsung Kwon from Wells Fargo discusses equity markets, arguing they are insulated from the Iran oil shock and should continue rising due to fiscal stimulus. He is bullish on tech, especially hyperscalers, and prefers semiconductors over software. The market is expected to experience a 'sugar high' over the next three months.
- Markets have recovered losses despite ongoing war.
- Oil intensity of the economy has decreased significantly.
- Fiscal stimulus provides tailwinds for the next six months.
- Bullish on hyperscalers due to AI-driven free cash flow inflection.
- Likes NASDAQ broadly.
- Prefers semiconductors over software due to valuation resets.
- Software has derated and lacks catalysts.
Trade Ideas
Markets to rise on stimulus and oil insulation.
The market and economy are largely insulated from the oil shock from Iran, with oil intensity down 75% since the 1970s and only 1.4% of S&P OPEX from oil. Tailwinds from fiscal stimulus, such as the 'one big, beautiful bill', will provide cushion for the next six months, leading to a sugar high for the market over the next three months.
Bullish on hyperscalers from AI cash flow.
Tech is going higher, specifically hyperscalers (the Mach Seven). Turned bullish recently due to free cash flow inflecting higher as top line accelerates, demand outpaces supply, and compute power increases with AI growth, indicating they are not overinvesting.
Bullish on NASDAQ index.
Likes the NASDAQ more broadly, indicating a bullish view on the tech-heavy index.
Long semiconductors, avoid software due to valuation.
Prefers semiconductors over software because software has derated significantly, now trading in line with department stores, and lacks upside catalysts despite earnings revisions, while semiconductors are more attractive.
Long semiconductors, avoid software due to valuation.
Prefers semiconductors over software because software has derated significantly, now trading in line with department stores, and lacks upside catalysts despite earnings revisions, while semiconductors are more attractive.
