Oil Jumps & Stocks Drop – What’s Next?

0:04Travis Hoium:The stock market is down on Tuesday. Is this an overreaction or the reaction we should have had yesterday? Motley Fool Money with the Hidden Gems team starts now.

0:20Travis Hoium:Welcome to the show. I am Travis Hoium, joined today by Lou Whiteman and Matt Frankel. And guys, we have to start with the news of the day. The markets are down pretty big. Both the S &P 500 and the NASDAQ composite down over 1.5 percentage points. Crude oil is up 8 % as we're recording. Lou, this is all in reaction to what's going on in the Middle East right now. But what's interesting about this is this didn't happen yesterday. These attacks, all the destructions going on started over the weekend. And you would have thought, theoretically, that yesterday we would have had a big reaction from the market.

1:00Travis Hoium:They waited a day. So, what's going on here?

1:03Lou Whiteman:Great question. I mean, it started to happen yesterday, and then it suddenly turned around and didn't happen. I think part of this, and we're not a political show or anything, but there is what they call the taco trade. I think there is the assumption always out there in the markets that whatever new thing has happened will get turned around before it spirals out of control. Maybe today is comments overnight saying we can go as long as it takes. We're not going to back down. Just kind of that energy seeping out of the market. But also, it could just be, wow, you know, taco trade or not, this is serious stuff.

1:39Lou Whiteman:And it could get complicated quickly. It's risk off because there's a lot of risk.

1:45Travis Hoium:Matt, what are you thinking when you look at the market being down like this? Is this something that we should be worried about? Is it a buying opportunity? Where's your hat at?

1:54Matt Frankel:Well, there were a couple of developments since yesterday that I think are contributing to this. I mean, just to name the big one, a U.S. embassy was just attacked since last night. So I think that's kind of adding to the uncertainty here. And uncertainty is really the word you're seeing here. When I see a broad-based sell-off like this, where pretty much every sector is getting hit, defense stocks are getting hit. I mean, that's the one sector you'd think would be up. Conservative plays like real estate investment trusts are getting hit. Those are normally considered safety stocks. When you see a big, broad-based downturn, it really just tells me it's uncertainty.

2:29Matt Frankel:The market doesn't know what to make. They don't know if this conflict is going to go on for a week, for six months, or whatever. That's really what seems to be driving today's action.

2:39Travis Hoium:One of the things I wanted to get your thoughts on is how this spills over into the regular economy. because the rise in oil prices, I think, is really notable because that's something that people are actually going to feel in the U.S. Even if you're not going to feel all of the attacks that are going on in the Middle East, you are going to feel that I filled my gas tank this morning. It was significantly more expensive than it was yesterday. So the historical parallel, at least in the last 20 years, is that if you go back to the financial crisis, one of the tipping points there was oil and gasoline got really expensive.

3:17Travis Hoium:Suddenly that exposed a whole bunch of weakness in consumers. We'll talk about Target in a little bit. But Lou, is that a concern that these kinds of actions sort of seem isolated from the economy, but the ways that they spill over actually do impact people's pocketbooks? And if something like gasoline, if a barrel of oil goes to$100, suddenly that starts stretching consumers a little bit more. We've already seen weakness. With restaurant stocks, we've seen weakness in certain segments of the retail sector. Is that something that we should at least have on our radar in 2026?

3:53Lou Whiteman:Absolutely. And look, there is all sorts of reasons to be concerned right now. But as an investor, I think you nailed the biggest concern. We've talked a lot, Travis, about the consumer isn't one person. It's just a critical mass of people who are able to get by, keep going with their routine. that's enough to keep the economy going. I don't think what's happening in the Middle East in and of itself can make a good economy a bad economy. But if it is that proverbial straw that breaks the camel's back, that just fewer and fewer people can continue on with whatever they're spending, they're eating out, I think that's very possible.

4:35Lou Whiteman:And that could be just that final push in what has already been an elevated market. I think that, as an investor, that is the exact concern right now.

4:44Matt Frankel:You said that crude was up by about 8 % today. I don't think that, in and of itself, is going to be a big driver of consumer behavior by itself. Now, if oil spikes to$100 a barrel, like you just referenced, it could be a lot different. That could be also a lot of what's weighing on the market right now. Consumers feel squeezed. They just do. That's why Walmart's doing so well, for example. When energy goes up, consumers feel even more squeezed. We've seen energy prices during this inflationary period just go all over the place. That's why they're excluded from the core numbers, because they tend to be really volatile normally.

5:21Matt Frankel:Normally, when we're coming out of winter is the time when crude prices are stabilized, and you're seeing that change now. It's really the uncertainty at this point. I don't think today's move is going to have a big effect on consumer spending. But if it goes much further than that, it could. I mean, the Strait of Hormuz is closed. And if that lasts, then$100 oil is not out of the question. All right.

5:45Travis Hoium:I want to get your thoughts specifically about whether you're seeing opportunities out there today. Obviously, there's different pockets of the market. So there's maybe going to be different opportunities in different places. But when you look at your watch list, is a day like today a day you're going, wow, I really want to be a buyer here? or are you saying, hey, the cash that I do it, maybe I have sitting on the sideline, I'm happy it's there. And I'm going to just kind of let this play out. Where's your head at, Lou?

6:10Lou Whiteman:So first off, I think it's important to say that the most important thing to me is the moves you don't make. The biggest thing to do is not panic sell. Something like this, because inevitably, you sell at the bottom and buy back after. So I honestly think that sitting on your hands is an okay solution. As much fun as it is to brag about buying at the lows if you're at your cocktail parties. And it's great if you see opportunities, go ahead and do that. But the biggest, most important thing for long-term wealth creation is to avoid panic selling. As of buying, valuations were sky high coming in.

6:45Lou Whiteman:I don't really see anything that you couldn't have bought three months ago almost, or they don't have new baggage attached to them like some of these SaaS plays. I am pretty content to just keep an eye out and not really commit. I've thought a couple of things just on valuation, but I think doing nothing is okay here.

7:08Matt Frankel:Yeah, I'm with Lou. Yes, I see opportunities in the market, to answer your question. They're the same opportunities that were on my watch list yesterday. It's a broad sell-off. Most of the things on my watch list are down in the 3 % to 5 % ballpark today. And one of the most important skills I like to emphasize for investors to have is to be okay with doing nothing. When this kind of stuff happens, I've said before, I wake up and I look at my brokerage account and I turn it off, and I say, today's a great day to do nothing. And it's a tougher skill to acquire because people want to rush in before things go cheaper or sell before things get any worse.

7:44Matt Frankel:And being okay with doing nothing prevents you from making knee-jerk decisions. And if something was an opportunity 5 % ago, it's still going to be an opportunity when it comes back.

7:54Travis Hoium:Yeah, taking that step back can be one of the hardest things to do as an investor because, yeah, you're right. This is a broad sell-off. That was one of the first things I looked at this morning. Are there specific names that are down a whole bunch or is it just, is it everything and everything that I have in my watch list and in my portfolio is down? Kind of that same range, 3 % to 5 % max. Maybe we have the same stocks in our portfolio. When we come back, we're going to get to what retailers specifically Target are expecting in 2026. You're listening to Motley Fool Money.

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9:31Travis Hoium:Welcome back to Motley Full Money with the Hidden Gems team. Matt, we got news from Target. This is one of the strange retailers to watch today because it's not the super discount retailer like you have from Walmart, they seem to be doing really well. They're not the high-end retailer. They're sort of stuck in the middle. So Lou's been talking about this K-shaped economy for, gosh, must be almost a year now. And we're kind of seeing this with Target. Their results, not all that impressive on a trailing basis, but they are expecting a little bit of growth in 2026. What did you take from the quarter at Target?

10:04Matt Frankel:Yeah. I mean, their full year guidance is impressive. It suggests that we might be turning a corner here. I love the leadership change. And if I remember correctly, Travis, you live pretty much close enough to Target's headquarters to see it from your window. I do. I wonder if you agree with me that I think Target has a relatively short window of opportunity to avoid becoming the next Kmart. Ooh, ouch. I don't do. I think they're going to go out of business and start doing blue-white specials and things like that. No. But all the things that used to differentiate it from other big box retailers, specifically Walmart, are less apparent than they used to be.

10:39Matt Frankel:just in the in-store experience. Their omni-channel presence used to be better than Walmart's. Now, it's not. It's just one example of it. They need to really get back to giving people a reason to go there, especially times like this when consumers are squeezed. Yeah.

10:57Travis Hoium:Lou, this has been a strange one to watch because the valuation is really compelling, low, low double digits, price-to-earnings multiple. That's why the stock, at least early trading was up on the news, despite the fact that we have a down day. But Matt's right, guidance was for positive results, and it's just better than negative at this point.

11:20Lou Whiteman:Yeah. First of all, three cheers for low expectations, because it's not nothing. They're up 4 % on a day that's just miserable. That's a monster move on a normal day. But yeah, Revenue is down, comp sales down. Basically, the cheer is, it could have been worse and it wasn't. Look, I think that Matt's comparison, I don't think that was meant as a prediction, or maybe it was. I'm not ready to go there yet. But I think it is good for investors to have in mind, because this is an industry where your legacy means nothing. Step one is to get out of a spiral. Step two is to reestablish yourself as a destination.

12:03Lou Whiteman:The Target era is going to be hard to get back. And even Best Buy. Best Buy, if I need electronics, I go to Best Buy. If I need athletics, I go to Dick's. Target is just kind of, well, we got everything. And that's not really a differentiator. I think that that's the really hard thing for management and for investors here. If Target is to thrive, they have to figure out the answer to that question. If not, it's going to be, if not Kmart, kind of just treading water and very small gains. And as an investor, I'm not going to get excited about that.

12:40Travis Hoium:Matt, do you think this is something that can be a turnaround story? Or are things just kind of too far gone? Because you're not going to be able to have these mass discount retailers like you have with Walmart. There's not room for two of them anymore. There used to be three or four, if you include Sears with that group as well. That's what I struggle with right now. What should management be doing? You mentioned that they have a new CEO. Is this a turnaroundable story?

13:09Matt Frankel:It is. They have to, one, normalize their store experience across their brand. Because you probably know I have a vacation house in Orlando, and the target there is always packed. It's beautiful. It's always clean. It's got everything I need. The one near me is the complete opposite. There's never more than two cashiers working at the same time, and it's just a terrible in-store experience. There's a lot to not like about that. I do like that they're really leaning into their membership program, not because I think the$99 membership to Target Circle 360 is going to make a big difference, which was up 25 % year-over-year, but it's still a rounding error in their earnings.

13:46Matt Frankel:But the average member of that spends eight times more than the average non-member. So, I really like that they're leaning into that. They're making the right moves. I don't want to say that this is Kmart yet, but management should be very afraid of this becoming the next Kmart.

14:01Lou Whiteman:Yeah, free tip for them if they want to get their efficiency levels up. Every target around us, they have about 17 or 18 checkout lanes, maybe, like Matt says, one or two occupied, and then two separate self-checkout sections that are mostly closed. I've never been in there where both are open. You could just rip out a lot of technology, sell it, I don't know, best buy, refurbish, and just make money right there. Seriously, I still use Target, but I'm more and more dreading going to Target. I think that this is a challenge here. Maybe they can do it, but as an investor, again, I'm just not looking to lean in.

14:42Travis Hoium:If they do pull it off, it is a very cheap stock today. So multiple expansion would be part of that story in the future. When we come back, we're going to talk about some cheap stocks and some insider buys. Do they mean something or not? You're listening to Motley Fool Money.

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15:32Lou Whiteman:All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. This is a paid advertisement.

15:39Travis Hoium:Welcome back to Motley Fool Money with the Hidden Gems team. Do insider buys matter? This is one of these things that we often talk about as investors. Insiders sell for all kinds of reasons, but they only buy for one reason, because they're bullish on a stock. So at least that's the theory. Matt, we have some insider buys recently, and this is one of the things I've been watching is you have some low stock prices. Are insiders going to buy? Are they going to announce buybacks? We saw Anthony Noto at SoFi, Bill McDermott at ServiceNow, Jared Isaacman at Shift4. Those are some of the bigger names doing buybacks.

16:14Travis Hoium:Is that a big deal, or is it noise for investors?

16:17Matt Frankel:It matters in the same sense that an accelerated buyback is management saying that the stock is cheap. That's especially true if it's on the more aggressive side. Let's take SoFi, for example. Anthony Noto, he just spent$1 million to buy shares. That sounds like a lot, but he owns$210 million worth of shares and is the company's largest stockholder. He increased his position by 0.5%. But what I will say is last time he aggressively bought shares, it happened during the late 2022, early 2023 period. And he did it as a series of buys. It wasn't like he bought$50 million all at once. He bought a million dollars here.

16:55Matt Frankel:A few days later, he bought another million and so on and so on and so on. And if I remember right, the stock was about$6 a share. It was about$6. So even after the recent downturn, it's still a triple from where he bought it. So, if this turns into the first of a series of buys, it might take more notice. But it is nice when companies and the executives who run them start putting their money where their mouth is. It changes nothing fundamentally about the business. Buybacks do that more than insider buying does. But it is nice validation that they also think that the stock is cheap and want to do something about it to help their own wealth.

17:34Lou?