00:00It's a big week, but certainly there's a lot of questions about the AI trade, which started off very positive the start of the year.
00:06And now it seems like things are just getting more negative. How should I assess the rest of the year?
00:12Well, I guess overall, I think it all depends on the Fed in particular.
00:15So I do think that if the Fed keeps on cutting or at least signaling that there's more interest rate coming, the equity market definitely has more upside.
00:23Overall, fundamentally, I think actually market is very healthy. Earnings have been very, very strong in the third quarter.
00:29I do believe that a lot of people are positioned. So there's a little bit of profit taking from time to time.
00:34Depends on the macro data. Now, this week, we will get a lot of macro data since the U.S. has reopened up.
00:40We get FMC minutes as well. That's right. I do believe that the Fed still has potential to cut in December, but that brings volatility.
00:49But overall, they actually do think the market is quite healthy and could actually go further up from here.
00:54It's still a liquidity driven rally, you think? That's still the most important component to your point?
00:58Well, I believe, I mean, there's a lot of fundamental behind that. I mean, the earnings are really, really strong.
01:03We need the Fed, as you point out, though.
01:04I do believe. But for me, the Fed actually, the overall story on the Fed is really about their neutral rates are on 300 basis points.
01:12We're still at 400 basis points.
01:14So if there's negative news coming through, they have a lot of potential to cut.
01:18In their own thinking, they actually have to cut below 300 basis points to really become stimulative and dovish.
01:24And I think that's sort of the Fed put is very much on, and that will help the market.
01:29And if we don't get the cuts, then because we get strong macro data, and that should be positive for earnings overall.
01:34It seems like this year was, I don't want to say easy, but it seemed like there was everything that was rallying, right?
01:42And for someone that watches multi-assets, I'm just wondering, can we see a similar success next year where correlations are actually positive?
01:50Or have those correlations and relationships actually flipped back to normal now?
01:53I actually think it was a very difficult year on the one hand, and very easy on the other hand.
01:57Yes. You just put money at work at the beginning of the year.
02:01You don't touch. You're most likely up quite significantly.
02:04But actually, there was a lot of rotation shifts coming in.
02:07The U.S. massively underperforming first quarter.
02:09Then we had the sell-off in April.
02:11Then suddenly we had the AI rally back on.
02:14We had the dollar declining 10%.
02:16And since everybody speaks about a weaker dollar, it's actually flat.
02:19So you could also do a lot of things wrong.
02:21But overall, I actually think for next year, the outlook remains very, very healthy.
02:27We probably see a re-acceleration of growth with lower interest rates.
02:31We see earnings sale coming through.
02:33And actually, correlation between bonds and equities started to flip.
02:36So we actually see this negative correlation.
02:38It's perfect for the environment for a multi-asset class portfolio.
02:42And as I said, with the Fed probably, at least on the fence,
02:46and be able with a lot of an emission to help if something goes wrong,
02:50we actually should get a positive year.
02:53Wall will stay high.
02:54Maybe even go up, the higher valuation is.
02:57But I'm actually remaining very, very positive,
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