Stocks & Markets Podcast: Key S&P 500 Levels to Watch as Oil Prices Surge

March 11 (39:51)

In the latest installment of the Stocks & Markets podcast, Chris welcomes back Pro Portfolio contributor Bob Lang.

Chris and Bob tackle the renewed uncertainty and swings in oil prices that have increased market volatility. Bob shares his concerns for the market in the months ahead, as well as some key levels he’s currently watching for the S&P 500. In that vein, the two discuss how they weigh probabilities for potential scenarios to help position the Pro Portfolio for what’s ahead.

The two also talk about some more defensive and recession-resistant areas of the market as well as why investors should contemplate second and third derivative impacts should oil prices remain elevated for longer. Bob also shares his thoughts on the Portfolio’s EPS Diplomats strategy and weighs in on a recent Portfolio addition.

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Transcript

CHRIS VERSACE: Hey, folks. I'm Chris Versace and this is the latest episode of The Street Pros Stocks and Markets podcast. Joining me, the Pro Portfolios-- I can't even say he's a good friend. He's an indispensable resource. You know who I'm talking about. Bob Lang. Mr. Lang, I look forward to our next 25, 30 minutes together so we can chew the fat, talk about the market, talk about the disruptions that we're seeing, and maybe walk away with some ideas for members. What do you say?

BOB LANG: That sounds great, Chris. It's been a real volatile market lately. A lot of ups and downs. Feel like you're on a roller coaster ride. All I'm going to tell you is this. Buckle up for safety, because it's probably not going to get any easier as we move into the spring and later on in the summer.

CHRIS VERSACE: Well, let's get to that. But let's work our way there. So the market ended in February, kind of waiting to see what would happen between the US and Iran, as we've seen over the last several days. Conflict, to say the least. Some people are using a word that begins with a W, but we'll stick with conflict for now. We've seen oil prices bounce all over the place.

But Bob, as I was getting ready for our conversation, I saw that Reuters is running this week's headlines and it says Iran tells world to get ready for oil at $200 a barrel as it fires on merchant ships. And apparently to the article, it's fired on multiple ships. Excuse me. It has laced the Strait of Hormuz with mines. This doesn't quite sound like the, very quick, it's almost over, comment from President Trump recently. What do you think?

BOB LANG: Well, Chris, let's understand that the rhetoric that we hear in the media and even from the White House over there really has zero correlation with what's happening in the economy at the time or in the stock market. However, what we've noticed quite much lately, Chris, is that the stock market tends to respond to anything news driven, whether it's fake news or real news or potential news coming out of the media. So I think it's interesting that you mentioned that about the $200 oil.

You would think that the stock market wouldn't like that. And that maybe the only thing that would like that or companies that would like that are like ExxonMobil and Chevron and ConocoPhillips or even the gas stocks. But actually out here in Massachusetts, Chris, we haven't seen very much difference in gas prices, even though it's been about a week or so. Yeah, that's right. We haven't seen really a large surge in gas prices. I know you sent me one from California.

CHRIS VERSACE: Yes.

BOB LANG: Which I'm not sure if that was real or not, Chris, because my son lives in California and he said maybe up $1 a gallon or something like that over the past four or five days, but nothing really crazy, like the approaching double digits.

CHRIS VERSACE: Right. But that's fascinating to me when you say that. I mean, you said a lot of things there. I want to break one or two of them down. But the notion that the average national gas price per gallon is up $0.30, $0.40, you're already saying California up $1. That's crazy.

BOB LANG: Well, don't forget, California embeds a lot of taxes into the price of gasoline. I don't know if you heard that they're trying to pass a bill in California that's going to increase the taxes in gasoline. I think it almost happens annually. It's a ritual with that state that they're going to increase the price of gasoline, which ironically, I think California has probably the most Teslas on the road.

So what do those people care about the price of gasoline, right? They're just plugging their cars into the electricity. As long as the electricity prices don't go up, they're fine. So I think it's interesting that around the country you're seeing the reaction or the response to higher gasoline prices as somewhat of a blasÃ© thing. And I think you mentioned it earlier today, Chris.

You said that it won't be until about a month or so from now when we see the prices filtering through to consumer prices. We had CPI today on March 11. Maybe in about a month or so, maybe even in May when we get the April numbers, we probably won't see that filtering through those numbers for another couple of-- another month or two.

CHRIS VERSACE: Yeah, no, I think that's right. I mean, I've been pretty vocal that whether it was the government shutdown that we had in the fall or some other things between then, the question of duration, to me, is always the greatest one because the longer it goes on, the odds are we have less of a blip, more of a protracted impact. And I think that that's what you're talking about.

And just given the timing. We started the current conflict between the US and Iran on February 28. Obviously, it won't be picked up in the February data, and it's going to have an impact, again, depending on how long it lasts. March data, April data. But we're already seeing some companies, Asian airline companies, putting on surcharges. They're seeing demand shrink because of the incremental prices of those higher fares that they're putting out.

There is some concern about how much the consumer can bear and how much companies, I think are able to pass on incremental price increases. And I say that because we tend to think a lot about gasoline, as in passenger cars and the consumer. But at the same time, diesel prices have moved significantly and we know that companies have to face transportation costs. And if they go up, they tend to try and pass that on through to their customers.

BOB LANG: And let's not forget about fuel costs, Chris, for airlines. Airlines are going to be hit with a big charge. And listen, as we see data that the economy is starting to slow down a little bit. We're seeing that obviously the fourth quarter was a bit of a disappointment. I think we could attribute a lot of that to what happened when the government shut down.

We'll see a little bit of that come back probably in the first quarter of 2026. So a little bit of a payback there. But I'm a little worried that some of these companies that have been producing a lot of nice profits over the past several quarters, they're going to show some slowdown. I think the stock market is telling you this is probably going to be happening over the next four to five quarters.

CHRIS VERSACE: All right. So that's what your point was about maybe some additional pain in the spring, the summer. Now, you know I tend to track these consensus EPS numbers pretty carefully for the S&P 500. And at one point, Bob, they were up as we traversed through the December quarter earnings season. 2026 was expected to be up about 15%. And I think that we're starting to see some concerns, whether it's, as you pointed out, the speed of the certain parts of the economy, the impact of higher energy prices.

One of the things that as we go into the second half of March and we have these investor conferences, one next week with airline companies presenting, I'm going to be listening for what they have to say on their margin line, because I am really concerned that certain companies, more manufacturing or product companies, may not be able to pass through the incremental price increase from transportation costs.

We read all about this in these PMI reports each month, that it's become increasingly harder for companies to pass through what they call output prices or prices that they charge customers. So I'm growing, again, a little wary about margins and guidance, candidly, for the second quarter when we start getting it in April.

BOB LANG: And years ago, Chris, as it relates to airlines, some of these companies used to hedge their fuel costs with buying futures. Not very many of these companies do that anymore. Back in the day, before some of these companies went into bankruptcy, like American Airlines and United Airlines, they used to use a lot of their extra cash. Instead of sending it back to shareholders, they used to buy oil futures.

Southwest Airlines, I think, still does it to a lesser extent, but still. If you're unhedged right now, it means you're vulnerable to a big hit on their margins and earnings down the road. And the longer-- you said, the perfect word, Chris, duration. And the longer this goes on, the war goes on and the higher oil prices go on, the more pain these companies are going to suffer. And look, it's not just airlines.

You talked about trucking. You talked about a lot of other companies. Listen, I mean, to just look at some of these manufacturing companies and some of these staples companies. Look at Johnson & Johnson. They produce Vaseline and also shampoos and so forth. A lot of these products have oil in them. So yeah, the costs are going to go up across the board, even on things that you don't even think about and on things that are not so obvious.

CHRIS VERSACE: Well, a couple points on that. So first and foremost, Bob, to the extent we see inflation kind of chug higher when we get the March data. I know Fed Chair Powell is coming up on his final FOMC meeting, perhaps his last ever. We'll see about that. But I would think that the economy slowing down, that horrible, horrible February employment report that we got where we shed 92,000 jobs.

On the one hand people would be like, oh, the Fed's got to do something. But at the same time with these incremental inflation pressures-- and Bob, I'm not hearing anybody mention the step up in the global tariff to 15% from 10%. That's another aspect that could spark potential inflation or margin pressure. So I think the Fed, when it comes on the inflation front, the Fed could be in a little, let's just say a bind.

BOB LANG: Well, listen. You know what? The thing about taxes is this. We all know that tariff taxes, the passthroughs are through consumers. And if somebody tells you differently, they're just lying to you. And I truly believe that the consumer is getting hit hard in certain spots for tariffs. I do also believe that some of the deregulation that's happened since the Trump administration came in is also easing some of the pain on consumers and thus companies as well too.

But to your point about earnings, I mean, I heard you say that double digit growth in earnings. That boggles my mind, how we've had double digit growth in earnings for the past couple of years. How can you just continue to look to raise the bar on some of these companies in the economy when things are clearly starting to slow down and you have all these uncertainties out there and market volatility is pricing all that in?

CHRIS VERSACE: Agreed. But on the other hand, market volatility, that is good for a certain class of financial stocks, i.e. your bank, your Goldman Sachs, your Morgan Stanley, your JP Morgan, where-- and you know this better than most, Bob. Market volatility spurs trading. That's great for their market revenue. And I even believe Citibank CEO came out earlier this week at the RBC conference and said something along those lines. She also gave a very reassuring word about M&A activity and overall investment banking activity.

BOB LANG: Yeah. So I think that that's encouraging. But on the other hand, Chris, some of these companies have had some major write downs in some areas that you didn't really expect. I heard this morning JP Morgan writing down very, very large numbers in private equity or private--

CHRIS VERSACE: Private credit.

BOB LANG: Private company investments. Private credit, right. And I think that, to quote our good friend Jamie Dimon, who's the CEO of JP Morgan. When you see one cockroach, there's probably many more out there. I suspect there's going to be other banks that also announce the problems with private credit. I think we heard it from Blackstone.

We've heard it from Blue Owl, who is a kind of a fledgling company that's come out there and said that, you know what? We're going to halt the redemptions. This is the thing that happened 17, 18, 19 years ago, right before the financial crisis came around. Now, am I--

CHRIS VERSACE: Yeah, it's--

BOB LANG: Am I saying that that's going to happen again? Of course not. But that was an extreme that people really took-- didn't take seriously enough. But still, you know what? History doesn't necessarily repeat itself, but it certainly rhymes, right?

CHRIS VERSACE: Right, right. So I mean, let's just talk about that for a second because 2008, 2009, a lot of what led up to that was the decoupling between mortgage origination and servicing. Credit standards got extremely lax. We were all wondering how everybody's remortgaging their house, getting a new TV, getting a new car, and all these crazy things.

I think this time around, I don't believe it's quite across the board, these private credit issues. I do think there's going to be some pockets of weakness. I think it's going to reveal which banks and other financial institutions have really high acumen, high lending standards. So as Warren Buffett, to go quote to quote with you, Bob, it's only when the tide goes out we know who's swimming naked.

BOB LANG: Yes. So one footnote on that, Chris, I want to mention is about on the private credit. Look, if you looked at some of these companies as public companies, many of them would probably require higher levels of interest rates for them to get financing. In other words, they're probably high yield or junk debt. And when those spreads start to widen that tells you a lot about what's happening in the markets.

There's a little less interest in those vehicles. And I would say similarly with private credit, some of these companies, they don't have to worry about an Apollo or a KKR or a Blackstone. They don't have to worry about balance sheet problems, and so forth. They can just hold on. Technically, they're the only companies forever-- quote, unquote, "forever." And forever is always until they spin them off. But they don't have to worry about that sort of stuff.

But I would say that the balance sheets of some of these companies and the businesses that they're in are very similar to what we see in high yield and junk debt. And one thing I learned a long time ago, Chris, is that you don't want to be in high yielding companies like that and this junk debt when we're heading into a recession. Coming out of recession? Sure. But heading into a recession, there's going to be a lot more failures, a lot more bankruptcies coming down the pike.

CHRIS VERSACE: So are you saying we're heading towards a recession?

BOB LANG: I'm saying that it's on the table, Chris. I'm saying it's on the, table because with the slowdown in the economy, with the job losses that you mentioned-- now, look, one data point doesn't mean much to me. I want to see a couple, 2, 3, 4 months in a row of job losses, and then things are going to start getting serious.

But I don't really think that we're going to be back in the 3 and 1/2%, 4% growth range like we were in the third quarter of 2025. I do think we're going to catch up in the first quarter from what we missed out on in the fourth quarter, but maybe up to about 2 and 1/2%, 3% first quarter. And that's probably about it. And I think we're headed for a slowdown. The slowdown could certainly move us down into negative territory and growth.

CHRIS VERSACE: OK. So it sounds to me like, if I'm listening to what you're saying, and I am, the new order numbers in the March PMI report and the April PMI reports, which will tell us what the ensuing months look like, both for manufacturing and services, those are data points that we're really going to want to focus into. That, to me, sounds kind of along the lines of what you're saying. Because it'll tell us. We're coming out of the quarter. It'll give us the setup for the second quarter.

We'll start to see what the velocity of the second quarter is. I would also say, too, that you-- and I think this bears fleshing out just for a moment. You and I always talk about a wide array of scenarios all the time. And is robust growth a scenario? Of course it is. Is medium growth a scenario? Yeah, of course it is. Is slow growth or recession scenarios?

Yeah. And there's all sorts of things in between with various puts and takes. What we do, folks, is we sit back and we try to assess the probability of any one of those. If the probability is increasing for a slowdown or a recession, we have to take that into account of our thinking, how we're positioning our investments or the portfolio, what have you. Same token, if we're getting signs that the economy is accelerating, what does that mean, areas that might benefit.

We have to start thinking about that in terms of the portfolio. That's why we always say it's never fix it and forget it. We are active investors. Not traders, but active investors at the Pro Portfolio and elsewhere at the Street Pro. Bob, you said something earlier. I just want to go back to it. There's some conflict here between real news, fake news. How are you making sure you are seeing and understanding what the real news is, avoiding the fake news.

BOB LANG: Well, when you hear some hyperbolic statements come out from some people, and you see and you have a good feel for what the market is doing, or it looks like it's going to take a tumble, or maybe it's going to go take off to the upside or something like that, when you could have a good feel for that, and you start seeing some of these statements out there that are just really absolutely ridiculous.

Well, then you know you got to take it with a grain of salt and just move on and not pay attention to that. I was very careful about who I listen to and where the sources and where it's coming from. There's a lot of people out there who choose to deceive other people. That's a shame because everybody's out there trying to accomplish the same goal, trying to make money and get smarter as they're doing it.

But I think it's a shame when people try and take advantage of others who don't really know or are just trying to figure things out. So I try to answer your question. I try to filter through it all, and I honestly throw away about 80% of what I read as-- dismiss it as something that's not useful or phony and not really paying attention to it. But I will tell you this, Chris. Everything I read from you, 100% I believe in.

CHRIS VERSACE: I was just going to say, as long as I land in that 20%, I'll feel OK. Now, I hear what you're saying--

BOB LANG: Chris, One thing I wanted to mention too as well-- and I heard today that one of our colleagues out there, Tom Lee from Fundstrat came out with a big target for the end of the month of March. He says he thinks that we're going to get to 7,300 on the S&P 500 by the end of the month. Not much time left for that prediction. But 6 and 1/2%, 7%, pretty good move.

However, he did also say that later on in the year, he's expecting at least a 20% down bear market in the S&P 500. So if you do the math, if he's right, we get to 7,300, say in March. From that point on, if that's the peak of the year, Chris, you're talking getting back down under 6,000 on the S&P 500, which for most people seems unfathomable. We couldn't do that. We couldn't get there. But if it does happen and Tom Lee is right, who knows?

CHRIS VERSACE: Yeah. Some folks are fans of making those bold and brash statements. I think if we were to track the track record, it would be kind of revealing. But I mean, look. In today's increasingly attention-deprived environment, Twitter, social media, blah, blah, blah, blah, blah. I mean, what's the old expression?

Squeaky wheel gets the oil. So sometimes I guess you gotta have the over-the-top statement in order to get people to listen to you. But I'd rather just continue to hit base hits, maybe a stand up double every once in a while, and help the Pro members out when and where we can.

So you're concerned about the future. You see a risk to the downside. Maybe not as dire as Tom Lee you just mentioned, but you're concerned about 2Q and into the summer, you said. Are you getting a little more defensive, whether it's increasing your use of puts? I know you're a big fan of puts. You believe people should have puts working all the time. But are you looking for more defensive sectors? And what might those be?

BOB LANG: Well, yes, I am looking a little bit more defensive right now. But I think in this time frame right now, Chris, the attention span of the traders is about as long as long as a gnat. So you really have to have very little attention span and remembrance of what's happening in the markets because things are flipping around daily. Again, as we mentioned earlier, this market is very much news driven right now and not moving on real data yet.

And the data that we talked about with retail sales last week and we had CPI number today, this is real hard data that the market should be focusing on. But right now, what it is, it's in this vacuum of news that's related to this war in Iran and oil prices and the ridiculousness of that price move on Sunday night into Monday morning. I think oil went up to 119, Chris. 119 a barrel.

CHRIS VERSACE: I think the term Bob is it kissed it.

BOB LANG: It ticked it. And right back down again. But then we're back into this 80's, 80 stage over here. Look, there's not a problem with supply here. There's a problem with demand. And demand is going to start picking up as oil prices stay elevated. They're going to start seeing more opportunities to buy oil before it goes right back up again.

And getting gasoline again at these lower prices that I mentioned. Again, we didn't really go up that much in Massachusetts, but we keep oil prices up here in the 80's for the next three to four, six weeks, we're going to see $5 gas at the pump very, very quickly. So I think that eventually that's going to happen.

CHRIS VERSACE: So let's just say that that might happen. And we'll also say that despite claims that the war is-- or the conflict is almost over, a lot of other reports said that the military was really gearing up for a hundred days, some estimates as long as September. Hopefully it won't go that long. But that just tells you that it's going to be longer.

And I suspect that the White House, to some extent, is trying to jawbone down anxiety over higher oil prices, what that could mean to inflation, what that could mean for consumer purchasing power. Because the midterms are coming. And there was actually an article in Politico this morning. I referenced it in the Great 8 or the eight key things driving the market today. I don't know why I said the Great 8. They're great to me.

But it was about how the White House, the Trump administration has about three weeks or so to get this conflict over and done with before it really starts to impact the economy and consumers. So all Iran has to do-- I hate to play devil's advocate. They just have to drag this out. And what's interesting, if you just look at the headlines today-- and again, how much is true? How much is posturing? Don't know. But after some pretty aggressive attacks on Iran, the fact that they are still able to do things suggests that perhaps this thing could go on a little longer than people were thinking.

BOB LANG: Well, I think if you look at the war that's happened for over three years now in Ukraine and Russia, a lot of people thought that that was going to be over in six months. And here we are three plus years later, still going on. So no, I won't underestimate Iran. I won't underestimate anyone.

And I'm really hopeful, Chris, that the United States is not being looked at by the rest of the world as a bully. I really do. I really hope not. Because that would really-- and this is just my opinion. It would really hurt sentiment here in the United States. It would hurt the economy eventually. It'll hurt travel. It'll hurt a lot of different things, a lot of different areas if we are considered a bully.

And that is not a reputation that you can just turn off and on very, very quickly. I think the United States for many, many years has been a good neighbor. It's been helpful. It's been useful. It's been, in most cases, has been there to benefit other people and to bring, lift them up, especially in bad times, even in good times. But again, if we're getting this reputation as a bully worldwide, it's not going to look good for us.

CHRIS VERSACE: OK. Let's get back to you becoming a little more defensive.

BOB LANG: Sorry, I didn't mean to get on my soapbox there, Chris.

CHRIS VERSACE: No, no, that's fine. That's fine. That's fine. It's all good. But let's get back to the comment where you agreed you're getting a little more defensive. We have started to take a look at some other areas that we haven't really ventured into the portfolio. I chatted with you about this, a very defensible sector known as pet care.

We're continuing to do our little work on a company we put in the bullpen, IDEXX. I know you like another company in that arena. I do know that as I look around here at the Pro Portfolio research team passed out right at my feet. You have your own research team passed out at your feet. My man, my main man, Tony.

BOB LANG: Yeah. Yeah, yeah.

CHRIS VERSACE: What is that other pet care company that you like, Bob?

BOB LANG: You know, Chris, I like Zoetis, which is a old spin off from Pfizer. ZTS is the symbol of that one. And I kind of like this one there. Look, I think I heard a commercial that said know, you know what? We love our pets more than we love people, which I'm sure in your case and my case, it's probably true.

CHRIS VERSACE: I always like it when you speak for me on these topics.

BOB LANG: So I'm sure there's a lot of truth there. But, we love our pets very much and we want to make sure that they have good, long lives, healthy lives. And Zoetis is one of those great companies that comes out with progressive medications and drugs for dogs and for cats and for other animals and so forth. I think ZTS is a great company. IDEXX is also top notch as well too. I would not have a problem buying either one of those, putting either one of those in the portfolio.

I know we have, as you mentioned, IDEXX is in the bullpen right now. But either name would be a great company to have. And I hate to say it, Chris, probably recession proof. I mean, it doesn't really much matter where-- I mean, obviously I think Apple is one of those recession proof companies. People are going to have their phones and have their services. But also, people are going to spend money on their pets regardless of where they are in the situation.

CHRIS VERSACE: Yeah. I would say it's more recession resistant, right?

BOB LANG: Resistant? OK.

CHRIS VERSACE: Yeah. And I think other companies that we have in the Pro Portfolio that land in that camp, Welltower, just because you have to deal with the aging population. I certainly am more than familiar with that. I would also say waste management lands into that camp as well, because garbage-- I mean, the old joke about garbage companies, Bob. You know what it is?

BOB LANG: Go ahead, lay it on me.

CHRIS VERSACE: They're always picking up.

BOB LANG: [LAUGHS]

CHRIS VERSACE: So bad. So bad, it's good.

BOB LANG: I like that.

CHRIS VERSACE: So bad it's good. So we're going to continue to flesh out, some other areas that are a little more in that defensive nature. But your point, though, earlier about oil, or really petroleum and its inputs into a variety of consumer and personal products, something to keep in mind because to the extent that oil prices move substantially higher and they stay at elevated prices-- even from here, that could be, as we like to say, a real tailwind-- sorry, headwind. Headwind for companies like Procter & Gamble, for example.

BOB LANG: No question. No question. And Kimberly-Clark is another one. Colgate-Palmolive is another staples name. And as it trickles down, Chris, into other companies, how are they going to affect-- listen, you know what? I mean, one company that we have in the portfolio we love is Costco. And how are these increased prices, not just for their shipping and their trucking, going to affect Costco? But also, they have rather thin margins as it is on the products. Where do they make their money? They make their money on--

CHRIS VERSACE: By design.

BOB LANG: Right. But are they going to be able to raise prices to meet some of those cost increases from their manufacturers? I mean, obviously to make their money with the subscriptions, with the memberships and so forth. But are they going to be able to meet those price increases?

CHRIS VERSACE: By that token, if we're concerned about diesel prices, then you got to start thinking about PepsiCo and the fleet of trucks that it has to deliver its products. Coke as well. So I think what we're hitting on here, Bob, is that if the duration is extended, we and others who invest have to really start asking yourself, questions about not just the first derivative. Oil prices go higher. Who's impacted? But work it down the line. And then ask yourself, do they have pricing power? And if they don't, could their margins and their earnings expectations be vulnerable?

BOB LANG: So Chris, we have a recent sample or a study, if you will, about duration and policy decisions based on duration. And I'm talking about the shutdown of the government last year. And when you look at the previous shutdowns, they lasted anywhere from about seven to eight days. How long was this last one? Was it 40 days? 42 days? Something like that.

CHRIS VERSACE: Around that. Yeah.

BOB LANG: So, you know what? When we hear a lot talk about, oh yeah, the war is basically completed or it's coming to an end or so forth like that. You've got to really wait until you see the whites of their eyes before you believe anything that comes out of anybody's mouth anymore. And you can't really use-- you can't really use the rhetoric to start making choices and decisions based on your investment.

CHRIS VERSACE: I was going to make one other point on that, but I think you covered it rather well. No need to go deep into it. One last question, Bob. I can't let you go without asking this. As we sit here every Monday, you take a great look at the S&P 500. Just share with folks, what are the key levels for that index that you're watching these days?

BOB LANG: Well, I've been watching the December lows, which come in at 6,720, Chris, on the S&P 500. That was the low level that was hit in December. Now why is that important? Because if you look back historically, when the stock market breaks that December low, it's generally pretty negative for the rest of the year. Now, we did that last year in 2025. We

Broke that actually in January and came down quite sharply into Liberation Day. So I'm going to count that as a win for that particular indicator. We broke it earlier this week. We broke it last week and bounced back on Friday. And we broke it this week. And we're trading just above that level right now currently on March 11.

So I'm watching that level pretty closely. If we break that level, we got some room down to about 6,500 on the S&P 500, slightly below where the 200 day moving average is. That's going to be an important level to hold as well too. I think that if we start coming down, cascading down, volatility is going to increase again.

Look, the market is starting to get comfortable with volatility in the mid 20's, Chris. That's not good because it just simply means that we're going to have large moves up and down. Now what is-- just as an example, Chris. What does a VIX of 24% mean to the market? It means that there's an average move that the market is expecting of about 1.5%. And what is 1.5%?

Well, look at the S&P 500. That's almost 100 points on the S&P 500, which is 1.5%, 1% being 6,700. Add another half. About 100 points of S&P 500 movement. Now, not that many people are very comfortable with the market's moving up 100 points a day, intraday, back and forth. 50 up, 50 down, or whatever. So I think it's going to make a lot of people uncomfortable, Chris, especially if we cannot come down on the volatility.

CHRIS VERSACE: OK. Well, Bob, usually our conversations are a little more uplifting. I would say this one's a little more sobering. But it's always good. It's always good. And folks should know that-- I say this, but it is true. You and I talk and message, I mean, multiple times a day because we like to bounce ideas off each other. And I always value your input, Bob. It's helpful, to say the least.

BOB LANG: Well, Chris, I did want to mention to you and give you some kudos this week for adding the SH, which is the short S&P 500. Listen, you know what? As long as you've known me, you've always known that I'm having some protection in the portfolio. It doesn't matter really what the size is, just having that protection on.

Obviously, we always have good size loads of cash, which is good. Also is a position which is also defensive. But still, having that SH on tells everybody, tells the members, says, look, you know what? I'm a little worried about the downside here. Because if the risks are starting to pile up for the market, for the economy and if you don't have some protection on right now, you're going to be wishing you did when the market is down 10%, 15% lower.

CHRIS VERSACE: So I'm going to ask you one other question, Bob, which might be a little bit of a surprise to you. You, I know, have been a fan of the EPS diplomats that we put in the portfolio. It has performed rather well.

BOB LANG: No question.

CHRIS VERSACE: So here's my question, Bob. At the end of the month, should the Pro Portfolio keep its exposure the same when we reconstitute it, meaning 2%, or should we take it higher? What do you think?

BOB LANG: I think you should take it higher. At least to total of 6% or 8% for the names. We're currently right now, it's a quarter of a percent for each. So it's about-- what is it? About 2%.

CHRIS VERSACE: It's about 2%. Yeah.

BOB LANG: Yeah. So maybe up to 6%, Chris. Maybe even a little bit higher than that. I think that these are performing extremely well. You've been selecting some good names in here that have performed well even when the market is down. So I guess, again, this is related to earnings. Strong earnings don't always drive stock performance. But in this particular case, in two quarters now you've picked names for the portfolio that have been driven higher due to strong earnings. And listen, you know what? The proof is in the pudding right there.

CHRIS VERSACE: Yeah. So just to be clear for folks who haven't heard us talk about this before, the EPS diplomats, it's a basket of eight stocks that are downselected from the top, let's call it 1,000 US large cap stocks with the best prospects for earnings growth over the next-- over the current year, next year, over the total two years. And, though, they had to have double digit EPS growth in the past.

So it's a little bit of a black box, a little bit of math involved. That's all I'm going to say about it. But Bob, we will take your recommendation under consideration. 2 to 6? I can't say we're going to do that. 2 to 4? Maybe. I guess folks will have to stay tuned, as will you, to see what we do. And once again, Bob, thank you so much for joining us and digging through all that. You know I always appreciate it. And folks, that is our Stocks and Markets podcast episode for this week. We will be back with you with a fresh episode before you know it.