00:00Mark the dollar. I think we were to resume the structural depreciation trend next year. I think there are potentially a number of factors around that. The most important is because of the Trump administration's pressure on the Fed. We know that the setting for monetary policy wherever it's at will be easier than orthodox economics would recommend. And that is at a point when the rest of the world is coming to generally coming to the end of their easing cycles. I still think that the
00:30trade dynamics has an ongoing pain. It is true that it's had less pain from the trade war than many expected. But it's still continuing to seep through to the economy. That's a bit of a negative there. There's an argument that some part of this year second quarter third quarter this year saw repatriation flows from U.S. corporates for the U.S. domestic capex under pressure from the U.S. administration. That's now largely run its course. And that's what kind of propped up the dollar over the last kind of five six months. On top of that I still think diversification trade continues. And I think particularly in Europe
00:59we will see hedging ratios continue to escalate as well. So there are a number of dynamics for the slow and steady dollar depreciation trend to resume in 2026. When exactly to get on board that? That's harder to say.
01:14If there's dollar depreciation in 2026 does that just mean the stock market is going to go higher and higher because it's cheaper to enter the S&P 500?
01:23A weaker dollar is an easing of financial conditions. We have plenty of liquidity out there. I think the global backdrop remains good for stocks but it's more of a benefit for the rest of the world. It's more of an easing of financial conditions for the rest of the world.
01:40And it also amplifies the returns that you get from foreign investments which is going to further encourage those diversification trades. 2025 was about the end of U.S. markets exceptionalism.
01:50We saw that the U.S. saw a declining share in its share of global market cap and that will resume further in 2026 and the dollar is a key part of that.
01:59So you're right, Critty, that it's a stock's positive but it's not so much a U.S. stock's positive. It's much more of a positive for the rest of the world and encourages that diversification trade.
02:08Mark, can I just come back to this issue of the Fed and the fact that the Fed is going to be under pressure to cut rates?
02:14How does the market react to that? Because this is the bit that I can't get my head around.
02:19So many people I talk to in the market believe that the Fed is going to be forced into cutting rates effectively, that it's going to cut rates maybe more than it should.
02:29Is that going to be seen as a good thing or does at some point we get a weird reaction from the market?
02:35I think the general consensus is the pressure, they'll cut rates a little bit more aggressively than they would have done without that pressure.
02:45Not that they're going to kind of completely abandon independence wholeheartedly, but ultimately that kind of juicing at the margin is good for asset prices.
02:54Now, at some point, yes, you'd expect that this might see a steepening in the curve and concern about the central bank situation.
03:01We've not seen any sign of that yet. Steepener has been one of the kind of widowmaker trades of 2025.
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