00:00Mark, your view this morning, don't fight the tape.
00:05Absolutely. I do not understand people who are trying to turn this tariff headline and the uncertainty that surrounds it into an argument to be bearish in the short term.
00:15I think that this kind of federal court ruling that Trump's tariffs are illegal and that they'll have to be paused.
00:22They've been given 10 days to effectuate the order.
00:24I think this is, you know, it's uncertain what this ultimately means.
00:29And it doesn't change the long term story, which is U.S. stock underperformance, which is set to sustain for the coming years.
00:36It's been valid for the last four or five months. It'll continue to be valid.
00:40People will want to cut their exposure to the dollar. That remains valid.
00:43U.S. Treasuries are likely to have a difficult year ahead as people get worried about the sustainability of U.S. debt situation.
00:49None of those things are changed that story. But that doesn't mean that in the short term you fight the bullish momentum.
00:55And the reason is the biggest, single biggest theme of this year has been Trump's trade wars.
01:00That's been the single biggest negative that U.S. stocks have been largely overcoming to some extent.
01:05So given that that theme has taken a big block from this reeling, a big knock, I should say, even if we don't know what happens, this is not the time to be proactively bearish.
01:13So I think that U.S. stocks underperformance will remain valid.
01:16But that does not mean you'd be bearish in U.S. stocks in the short term.
01:18What do you be bearish on in the short term?
01:26That's a good question, Kriti.
01:29I think, first of all, right now, I think it's going to be I think the technicals for bonds has got a little bit more supportive after a sell off in the very short term.
01:38But I think it's hard to be very constructive on bonds right here, given that the underlying story is very negative, as we see increasing term premium priced and increasing concern about debt loads.
01:50And then suddenly we get this news flow, which is positive for growth.
01:53So therefore, that should boost the inflation story.
01:55We might also have got the end of the disinflation cycle on the U.S. side, which means there might be more upward pressure on the Fed story as well.
02:01So I think if anything, I'd be bearish still on bonds overall, even though the short term indicators suggest they might have a little bit more of upside in the very short term.
02:10Otherwise, longer term, I remain bearish the dollar.
02:14Absolutely.
02:14And I think that's very, very valid.
02:16I just think short term, this is not the time to get excited on that view.
02:20What do you make of the Cameron Cry's perpetual motion story?
02:25Basically, he's saying that at some point, stocks cannot continue to be this positive in the long term, that there's too much resistance in the machine to keep them going.
02:37Is that a medium term story in 30 seconds or is that something that I need to think about in the long term?
02:44I think it is medium term.
02:45So I am someone who is actually pretty bullish global stocks.
02:50I think that the next year will be very difficult for U.S. stocks.
02:55I'm surprised they've already rallied so much in the last couple of weeks, even though I expected some sort of relief rally.
03:00I think the overall story is that perpetual motion of U.S. stocks will be disrupted.
03:05So I think it's a valid story for the next six months, not just longer term.
03:08But it's not a particularly bearish story.
03:09It's just more volatility ahead.
03:12But does that volatility, I'm just kind of curious, where is the vol risk the largest?
03:16Is it in the equity market or is it in the long end of the bond market?
03:20For macro investors that are trying to maybe zero in on one asset class or the other, what should they be more worried about?
03:27Yeah, I am much more worried about a breaking moment happening in both the dollar and in treasuries than I am in stocks.
03:36I think that U.S. stocks are expensive, but they're not a broken story.
03:41The U.S. stock market still produces a lot of profits every year, and that compounds at a very good level.
03:49So I think it's very, very hard to be particularly bearish U.S. stocks, even if you think they're expensive.
03:54That's why I kind of phrase it much more as U.S. stocks underperformance, not about an outright bearish view.
03:59I am worried that that volatility translates to a sudden breaking moment at some point in treasuries and in the dollar.
04:06Now, I don't think we're close to either of those breaking moments, but I think that both of them are likely later on this year.
04:12So I think it's potentially a 2025 story where we get a short-term, really severe scare in treasuries and likewise in the dollar.
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