00:00Honestly, I'm not so surprised as we are getting closer to the timeline of July 9th that Trump puts some pressure.
00:05So if you think of all the negotiations, I think honestly that's to be expected.
00:10And I agree, right, there's some deal probably with the UK, there's some deal with China in the negotiations, fine.
00:17But the EU deal seems to be very complicated and there are so many other countries.
00:21So that's why I think he puts pressure because at one point in time he wants to get this done to say I can move ahead with other topics in policy.
00:29But I mean, look, there's a taco trade, Christian, right?
00:32The, you know, Trump always chickens out or there's, you know, a belief that actually he's putting pressure but then he, again, doesn't really go quite far.
00:41Is it too risky to underestimate that these tariffs will be very punitive going ahead?
00:47Yeah, I think we should never underestimate the tariffs.
00:49They will be certainly much, much higher, whatever is the outcome.
00:53I think there's a floor of 10 percent than at the beginning of the year.
00:57There is a change in the overall setup in tariffs.
01:01And eventually we think there are inflationary.
01:03So although inflation numbers were okay-ish yesterday, but I think if I look at Q3, there will be an impact on inflation.
01:11And I think the tariff discussion will not end July 9th.
01:14Probably you leads longer.
01:16And Trump has also talked about secondary tariffs.
01:18I've not heard this for a long time, but that might come back.
01:21So I think we will now live for years with that tariff discussion.
01:25What does that mean, again, for when we actually see, you know, that filtering through inflation?
01:30I mean, as you say, for the moment there's bad surveys.
01:33It's not really translating into the economy.
01:35Certainly inflation isn't.
01:36So is it a three-, six-month lag or is there a worry that actually the Fed messes this up?
01:40No, I think there is always a lack in this.
01:42I think some companies, because there's so much uncertainty at this point in time, they try to digest this via the margins.
01:48Right.
01:49But at one point in time, when it's clear, it stays, then you need to take a decision, right?
01:53Sometimes it's good to have clarity to take forward with CapEx, but I think you cannot always say, okay, I take everything in myself.
02:00And that's why I think Q3 inflation probably rise to above 3%, by the way, in the U.S., which is quite a large number.
02:07So what's the idea of building a portfolio in these uncertain times?
02:11So, well, I think what's important is you need to dissect three layers, sorry to say that long.
02:16Like an onion. I like it.
02:18It's like an onion, indeed.
02:20So first you have the political layer, which is a long time period where tariffs might stay forever.
02:25Then you have the macroeconomic input.
02:27What does it mean?
02:28So we say, okay, there are some implications for inflation.
02:31That means yields will probably stay at a higher level for quite some time.
02:35And then if you look at single markets, sometimes I say markets have a memory of what day, right?
02:40So whenever there are companies, different sectors which are doing well, the market will go there.
02:45Look at tech, for example.
02:46In recent weeks, it all came back in a positive way, right?
02:49And I think that's the onion, as you say, you need to peel.
02:53And that's how you build the portfolios.
02:54But do you stay invested no matter what?
02:56Or actually do you get some dips to actually also go back in?
03:00So looking back at this year, we said tariffs will probably come in higher than expected, which happened.
03:06We made sure it's robust portfolios, but we were underweight on the equity side.
03:10But it's never that we say don't stay invested.
03:12You need to, I think, is it's another good example to stay invested with your asset allocation.
03:17But you need to look at regions and sectors.
03:19And if you look at the markets right now, equity markets, they are very rational.
03:24So look, autos are having a lot of stress.
03:27Banks are doing very well.
03:28So the market is really differentiating.
03:31And I think that's something you need to take into account.
03:33I mean, what do you hedge with? Gold?
03:35We like gold a lot, actually.
03:36Everybody likes gold.
03:37Yeah, and I know the ECB has already voiced some concern.
03:41If there's massive movement, there could be something.
03:43But I think if you look at terms of currencies, gold is seen then as a currency.
03:47Yeah, so we joined that call.
03:50But honestly, we were not the last one to get there.
03:52For quite some time, we are there.
03:53Krishna, is there something that the market is misunderstanding,
03:56or as everyone's looking here, should we be looking elsewhere?
03:59I know some of, for example, the trade on Treasury seem very crowded.
04:04Is there something that you want to look at differently?
04:06I think in general the market is not euphoric, which I think is positive.
04:10Yeah.
04:10So I would be concerned if the market would be saying, oh, forget about the tariffs.
04:14Not everything has come back.
04:16Equity markets, sometimes we see maybe they underestimate that there is tariffs coming.
04:21Fixed income market, I think, is different, right?
04:22So yields are higher than before.
04:25CDS spreads on the US are higher than before the so-called Liberation Day.
04:28So also you need to differentiate.
04:30I think equities look from a single-sector company perspective.
04:33And maybe there is some underestimation of the tariffs there, yes.
04:38Is the bond steepening trade to consensus now?
04:42Probably yes.
04:43However, I would say a lot is price of the steepening of the curve.
04:46But the term premium you see is not very high if you compare it to history.
04:50I think we need to differentiate.
04:52The longer end is certainly bound to inflation and growth,
04:55where we say growth is coming down, but inflation is staying higher, so more sideways.
04:59But I do expect central banks to cut.
05:01Although we have a quite tough inflationary environment, at least in the US,
05:05I would still say they look at growth, and that's why there are some cuts,
05:08and that's why there could be some steepening of the curve.
05:11Krishna, is there some kind of trade that you were expecting to work this year
05:15that hasn't panned out yet?
05:17Because of the noise.
05:18I would say if you look at the equity side, we had a lot of discussion on technology.
05:23This has come really back very positively.
05:25And I would say, even people don't say, I would think that could continue.
05:29Or if there is some correction in the whole market for political reasons, trade reasons,
05:34that's where I really say use that buying opportunity.
05:37Because I think the market has probably not looked so much where is productivity gains possible.
05:42And that's the whole Europe story is fiscal.
05:45But eventually you look at the markets where there are some productivity gains.
05:49And I think that's where you really need to look.
05:51And the market has not started to differentiate there.
05:54Krishna, what about the UK?
05:56Do you look at the UK?
05:57You know, it's a small open economy.
05:59It's, of course, not part of the single market.
06:00So are there more opportunities in the UK than in Central Europe?
06:04I think what we see right now is maybe that EU and UK are working closer together.
06:09It's probably not so bad, I would say, because it needs a strong Europe, including the UK.
06:14I think from tariff, UK are probably better off than the EU.
06:17So that's a positive thing.
06:19But then you see some people obviously leaving the country.
06:22There's a lot of discussion with the clients as well.
06:24So I think collaboration makes a lot of sense and that could deepen.
06:27And I think that would be positive for the UK.
Be the first to comment