What Today's Fed Decision May Mean for Equities

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00:00How important is today's Fed decision to what happens next in 2026 for global equities?

00:05Yeah, great to be here, Guy. I mean, of course, it's always important. And there is an expectation

00:09of a cut. But I think what we all expect is that the narrative around the cut is actually going to

00:14be the more important thing. The expectation is going to be more of a hawkish cut. And we had,

00:20of course, originally priced in quite a few cuts kind of through to the end of the year and into

00:24next year. Now, if that starts to stabilise a little bit, then of course, from an equities

00:29perspective, this incredible rise in equities we've seen this year might see a little bit of a

00:34pause. But as long as the narrative is not too much of a hawkish narrative, as long as there is a

00:42feeling of, OK, we have this in control, we're just managing it sensibly, I don't think it's

00:46going to be anything too much to worry about. I was talking to Skylar about this a few minutes ago.

00:50She's talking about overheating. There's the risk of overheating that the Fed might actually have

00:53to hike in 2026. But if it comes, which one do I deal with first? Do I deal with the fact that

00:59actually growth could be better? Or do I deal with the fact that the Fed might have to hike as a

01:04result of it? Which one of those two narratives is more important? I think the narrative of growth

01:09being stable and in good shape is the most important one for the markets at the moment.

01:14I think there's an expectation that there won't be anything which is overheating. If there is an

01:18overheating, that would not be good for markets. But a relative feeling of stability is the most

01:23important thing. And that, I think, is what we're also seeing in Europe this morning. You mentioned

01:27earlier on, Guy, about the European banks. The reason the European banks are up, actually,

01:30is that there is a narrative coming out that there is stability. Stability drives loan growth.

01:35Loan growth is what is driving those banks' prices this morning. So the narrative of stability is

01:40the single most important one. Are rate hikes good for European banks? Just sorry to jump in.

01:43Not, not, not, not. I mean, rate hike is always OK for banks, but they're not what is driving

01:49banks' prices at the moment. The thing that is driving banks' earnings, we're in a kind of sweet spot for

01:55rates. When you're in the level we're at now, a quarter bit, a quarter bit, it's neither here nor

02:00there. The thing that really drives is the loan growth. And that is what's important. So not,

02:05it wouldn't be bad, of course, but I think actually, from an overall perspective,

02:09where we're sailing at the moment is the sweet spot for banks.