00:00Skylar, we're citing this as the big macro risk event because of the stock market volatility.
00:05We've also seen some of the correlations drop, Bitcoin aside, between what you see in the stock market and what you see in other parts of the market.
00:11Is this as macro of an event as everyone thinks it is?
00:14I mean, yeah, certainly it's a very macro event.
00:17So my colleague Mark Cudmore has done work on what happens exactly after NVIDIA earnings are released.
00:22And what you typically see is that, yes, NVIDIA earnings are actually usually very good.
00:27They kind of support what we've seen from the rest of the tech sector in that those earnings validate your valuation.
00:34So there's a reason the valuations are so high.
00:36But despite that, you get a sell off in the days following because it's just not enough for the market.
00:40And because earnings in NVIDIA matter so much globally or to earnings generally the overall picture, you get feed through to other markets as well.
00:49So something like the euro stocks is only 13 percent tech, but I would expect to see a feed through to the euro stocks as well.
00:55And understandably, then something like tech or industrial is more susceptible to that sell off.
01:00Whereas if you look at, say, utilities, that's more of a defensive stock that might outperform.
01:07And what do you think about the correlation to cryptocurrencies?
01:10Do you think that will stick?
01:11We've seen a big drawdown in Bitcoin alongside this Nasdaq move.
01:15Is that a correlation you think will continue?
01:17I mean, yes, I think the correlation naturally happens because you have things like retail flows that go into both.
01:22People are looking at the markets and naturally linking them.
01:25I don't think I have a strong view on crypto generally.
01:28I worry about assets that you can't value.
01:31There's not a way to say, oh, this looks reasonable or not.
01:34You also have big volatility moves, as was talked about previously.
01:38And so as you get this big gyration, it doesn't necessarily mean that there's an impact in other markets or you'd at least expect the scale of the translation to be smaller.
01:46And Skylar, you've actually been comforted by the extent of the pullbacks that we've seen in markets.
01:51They haven't been panicked.
01:52I know Cameron Christ was writing something similar to this yesterday.
01:55They haven't been panicked.
01:56Yes, we've seen the VIX spike, but maybe that's rational given where we are in valuations and the narrowness of the market.
02:03Yeah, I mean, when I think about whether or not the market's going to be OK, I'm very comforted by the idea that people are very worried.
02:10So if you look at something like the AII bull bear indicator, people are more bearish than not.
02:16And typically what you see when a bubble pops is that you get this irrational exuberance.
02:22And so the fact that we're not seeing that, to me, is very much a positive sign.
02:27I think something that's also worth highlighting is that valuations are not a catalyst.
02:31Yes, you can be nervous because of valuations, but it's not a reason for a sell-off.
02:35And if you think about the current market we're in, yes, you're likely to see wobbles along the way.
02:39We're getting a very chaotic U.S. data release schedule.
02:42Yesterday we had jobless claims released at something like 4 a.m. Eastern time.
02:46So that's quite unusual, and you're likely to see volatility induced from that.
02:50But the fundamental backdrop is still quite strong.
02:53So if you think about what we saw at the beginning of October that continued or had this wobble, it was three negatives.
02:59It was the fact that the U.S. government shut down, China-U.S. trade was going poorly, and people were thinking about a more hawkish Fed recently.
03:08But I don't think any of those have gone negative.
03:11So you have a trade truce, you have Washington reopen, and the terminal rate for the Fed is still 3%.
03:16So that's easing. That's positive for equities.
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