00:00There was no more than 3% correction since Liberation Day, so the market has gone up in a straight line, and there is a lot of falseness in the market.
00:08Valuation in tech, positioning, some retail exuberance as well, and I think we are starting to scratch our heads to find more upside into next year.
00:17So a bit of a pullback at this time of the year, I think as welcome developments.
00:22I think this is going to be short-lived.
00:24I think a lot of people have been missing the train in the last few months, and will use any dip to buy and to add to equities.
00:31We are trying to keep it simple.
00:33There is a lot of things going on in this market around the world, but we are trying to keep it simple.
00:38We have three key drivers of the market.
00:40The big one is the Fed.
00:41The Fed is still a support to the market.
00:44We think they are going to cut rates in December again.
00:47The QT is coming to an end, so the Fed put is underpinning this bull market to some extent.
00:53Number two, earnings, which is what you said earlier.
00:57Earnings have been very strong in Q3.
01:00Earnings revisions are basically moving higher, and that's a key backstop to the equity market.
01:06Thirdly, we think growth globally is getting better.
01:11We just got Europe and PMI this morning, much better across the board.
01:15The point is that if you have fiscal and monetary stimulus coming together, that should provide some support to the economy and help the economy to rebound into next year.
01:25Ex-AI, a lot of things are quite depressed.
01:29CapEx, consumer spending, and all these things should get some support for monetary and fiscal stimulus into next year.
01:34Can I just put a pin in the monetary policy piece?
01:37Because you made that statement that you do think they cut in December.
01:40Jay Powell causing some concern among some, in his language, suggesting that December is not a foregone conclusion.
01:46First of all, what gives you the confidence they go in December is at the labor market.
01:50Secondly, if they don't go in December, how much of a risk is that to the markets?
01:55Look, I think Jay Powell had to manage expectations.
01:57But we think the labor market is softening.
02:01And look, we don't have too many data to prove it because, you know, with the shutdown now being the longest in history, the data is very scarce.
02:09But we think the labor market is softening.
02:12We got a pretty decent inflation report two weeks ago.
02:15CPI is coming down.
02:17And, you know, the Fed is still in a restrictive policy level, right?
02:21So we have a pretty high conviction that they will cut.
02:25And the market, by the way, is still pricing a 70% chance of a cut in December.
02:30Obviously, the warning will be quite important because, you know, there's a question about how much they will cut next year.
02:35If ultimately growth is recovering and the labor market is, you know, holding up, are we going to see three or four more cuts next year?
02:42We don't think so.
02:43We have two more cuts for next year.
02:45But look, we still believe there is a path ahead for the Fed to be easing.
02:48And bear in mind that there is a lot of, you know, talks about the new Fed leadership as well and the Fed independence.
02:55So they will probably lean to the side of caution.
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