Dan Niles: Investors need to be broadly diversified to get through market period in better shape

Asks Dan Niles about the broader market sell-off, Iran war, higher oil prices, and yields, questioning whether to look past it.

Host (Kelly)

Dan Niles

You can't look past it. The key question is whether the war is short (hopefully a month), medium-term, or long-term. If oil goes above $100, it could cause a global recession.

References Russia-Ukraine war as an analogy where oil prices were contained and the market ripped in 2022 despite no end in sight.

Points out irony that software/tech has outperformed since the conflict began, which wouldn't have been the obvious trade.

Host (Kelly)

Dan Niles

Wrote that the software rally would continue. Even if you believe software will continue down (like 2000-2002), you still get counter-trend rallies.

Cites Block laying off 40% workforce citing AI, yet software index finished up 1% last week. Notes IGV ETF has been bought for 8 straight days on above-average volume. A 35% sell-off from September lows suggests a counter-trend rally could regain half of that.

Notes Nasdaq 100 is down 1.7% YTD while small/mid-caps are higher, and questions if markets are overly complacent given risk of running out of significant commodities if war continues.

Host (Brian)

Dan Niles

It's not the news, it's the reaction to the news that matters. Price leads the narrative. The market is telling him this will get resolved.

Again references Russia-Ukraine where similar commodity fears existed but 2022 market was up 27%. Believes stocks should be lower but market signals resolution.

Dan Niles

You need to be hyper-selective and diversified. Utilities, materials, energy, staples, industrials are up 9-25% YTD. You're only suffering if you're in tech.

Russell up 3% YTD, Magnificent Seven down 7%, equal-weighted S&P up 4%. Need sectors that won't get wiped out by AI obsolescence and have heavy assets.

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