00:00It feels like a more risk-on kind of start to the week than maybe we thought we'd get,
00:04judging by the action we saw last week.
00:06Yeah, I mean, maybe it's just a Monday morning thing.
00:08We tend to be less optimistic on Fridays in the past couple of weeks.
00:12What I would say is we had bank earnings last week, the start of the earnings season,
00:16a key thing to watch.
00:18Those earnings actually came in quite strongly,
00:19despite the fact that you had analyst expectations ramping up into them.
00:23But maybe more importantly is within this data vacuum, that is the U.S. government shutdown,
00:27it was a strong signal to the U.S. economy, and there are a couple of things I'll point to.
00:31The first is loan growth.
00:32That's bounced, and that tells you that banks are not really that worried about credit conditions
00:37if they're more willing to lend, but also that households and corporations are confident enough to borrow.
00:43And then more importantly is loan loss provisions,
00:45and those were at healthy levels consistent with previous quarters.
00:49So you're able to absorb losses, but you're not unduly worried about them.
00:52And that data also fits with what we've seen elsewhere.
00:55So the Fed has some data on household disposable income relative to debt servicing costs,
01:02and again, healthy levels.
01:03So everything is fine, is basically what I'm hearing.
01:07I think, yeah, I mean, that's generally what I'm seeing in terms of,
01:11you get concerning headlines, as in bankruptcies are higher than they were three years ago,
01:16and that obviously creates some flashpoints in terms of that sounds very worrying.
01:20But what I'd say is a few years ago, we were at very distorted levels.
01:23So because you had COVID, this massive stimulus, both from a monetary and fiscal perspective,
01:29it meant that your bankruptcies were at multi-decade lows.
01:33And so we're now just normalizing from those levels rather than seeing something more concerning.
01:38And it actually looks like we're stabilizing at a good level now, and the delta is improving.
01:43And in particular, if you look at business bankruptcies, they're down from a year ago.
01:46And you'd also just think you're more likely to have a systematic issue on the way up than on the way down, right?
01:52So we did see some vulnerabilities exposed when the Fed was hiking.
01:55SVB is the notable one.
01:58But, you know, we've had 125 basis points easing behind us, and we're also getting fiscal stimulus.
02:03Skylar, I'd also think what last week showed us is that fears of a credit deleveraging or a credit event
02:09really outweigh that of an equity bubble that could have a more meaningful impact on U.S. economic growth.
02:15How are you weighing those two risks at the moment, thinking about overvaluations in AI versus these credit fears?
02:22Yeah, I mean, I think about overvaluations in terms of how the market's trading.
02:25So we saw that last week and the week before, right?
02:28You get more reactionary to headlines because you have valuations that are very elevated levels,
02:32and some parts of the market are looking more frothy.
02:35So one of those is gold, but I don't think it's unjustified because you have earnings that are coming in quite strongly.
02:41So the reason you get shaken is because you worry about growth.
02:44Now, that's understandable.
02:45You have quite a lot going on in terms of tariff worries, inflation worries, politics worries.
02:51But I think you need to recognize it's creating a choppy trading environment.
02:55But as news comes in, you need to think about the actual economic implications of that rather than anything else.
03:01And that should guide you.
03:02And we will actually get some U.S. data this week.
03:04So we will certainly be watching that closely.
03:06We're going to get a lot more regional banks this week, though, aren't we?
03:08Yeah, but the ones that came in on Friday were very good.
03:12I mean, the loan loss provisions came in lower than expected for Truist Financial.
03:16It jumped 5 percent after those results.
03:18It really led the whole sector to turn around on Friday.
03:21It might just be that this is kind of a snap worry and we're over.
03:24I mean, you think about what actually happened.
03:27And Zion's had a 50 million write down and it caused a 1 billion market cap loss.
03:34I mean, it was it was very out of proportion with what was going on.
03:37But that was just kind of reminding us that there is this worry out there that these small one off events might all start putting into a bigger bucket.
Be the first to comment