Wells Fargo's Cronk: Raising rates in an oil shock 'is a categorical mistake'

Darrell Cronk, chief investment officer at Wells Fargo Wealth & Investment Management, says he expects inflation will top 4% during the summer, which will put pressure on the Federal Reserve to hike interest rates, but that could dramatically increase the potential for recession because rate hikes and oil-driven inflation stocks, historically, have been a recipe for trouble. Cronk, who also serves as president of the Wells Fargo Investment Institute, says that virtually all economic and market outlooks hinge on questions around reopening the Strait of Hormuz, but his outlook remains positive, noting that markets have nearly eclipsed in five months Wells Fargo's forecast for the year, with solid earnings poised to drive things higher from here. In spite of the economic concerns, Cromk is optimistic that it will be "a good year when we put 2026 in the history books."
Jim Lee, founder of StratFi, says the technicals show a market that is somewhat overbought, making it due for a minor pullback of about 5 percent "in the next month or so," but says he would buy the dips because the market has the potential to deliver 20 percent gains when 2026 is done. Lee notes that he particularly likes the "HALO stocks," "heavy asset, low obsolescence" plays that tend to be old-economy dividend-payers, which have done well in 2026 and have momentum that he expects to continue, even if it takes longer than expected to resolve the war in Iran.
Plus, Gordon Hamilton, senior managing director for Kayne Anderson — portfolio manager for the Kayne Anderson Energy Infrastructure closed-end fund — says 'historic' oil drawdowns are setting up a major call once a peace deal is done for U.S. energy infrastructure companies to meet global demand for propane, butane, crude oil and natural gas. Coupled with an energy "supercycle" driven by artificial-intelligence needs, it has created what should be a persistent long-term opportunity for infrastructure investors.