Shutdown to Dampen Market Risk-Taking, MUFG's Goncalves Says

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00:00George Concarvus of MUFG writing the following,

00:02if a shutdown lingers, it will end up delaying upcoming economic data releases

00:06and likely dampen risk-taking.

00:08George joins us now for more.

00:10George, good morning.

00:10Good morning.

00:11I want to get to the final point there.

00:12Why will it dampen risk-taking?

00:13Do you sense that this is somehow somewhat different?

00:16Look, so this is a year full of disruptions, contradictions.

00:20You guys opened up with how markets have been risk-on,

00:22climbing the wall of worry.

00:24Nothing really phases these markets.

00:25But there's always that moment in time

00:27where you're kind of compressing towards the end of the year.

00:30Good gains.

00:31Maybe you use this as an excuse.

00:32It's a catalyst to say, you know what?

00:33Take some chips off the table.

00:35It's been a good year.

00:36If this were to linger, it could be disruptive.

00:38So it's just a theory that there's something potentially

00:41that could disrupt things, so you might as well sell.

00:43Does that actually fly for you?

00:45What would you actually sell if you're going to de-risk?

00:47Well, look, I mean, you're already seeing the weakness in the dollar.

00:50I mean, it's your traditional macro products.

00:52It's going to be about a relative value play.

00:57Equities have had a great run.

00:58Let's not kid ourselves, right?

01:00So I do think that there's, you know, again, let's see if this lingers.

01:04If it does and it goes on to the weekend, I think it will matter.

01:07I feel like every single month people are saying,

01:10there is something that will matter because I'm nervous about valuations.

01:13Does that sort of work anymore,

01:15given the fact that the underpinnings of this have been proven out in the earnings,

01:19have been proven out in some of the investments,

01:22particularly from the tech giants?

01:23Look, I mean, I think we can't conflate all that stuff.

01:27I think, again, as my point earlier, it's the time of the year.

01:30I mean, like, you have a lot of gains.

01:32This is where you could get defensive if you wanted to.

01:35Do you think if the market takes a downturn,

01:37that will be enough to maybe push Congress to actually act?

01:40That's a great point.

01:40The way the bond market pushed Trump to act in April?

01:43That's a great point.

01:44So, I mean, I think risk markets here matter more.

01:46The dollar matters a lot, too.

01:47But, I mean, it only matters if it really changes the foreign flow,

01:51which has been largely coming in as a hedged flow.

01:54But if the dollar were to change, I think that would matter.

01:57And I think, you know, if equities take a turn.

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