00:00I think we're definitely dealing with a new regime coming into 2026, where I think this year was all about AI CapEx, boosting the corporate sector, keeping growth optimism supported, but a bit narrow.
00:13And at the same time, you had a weak labor market, a K-shape, which actually allowed the Fed to be dobbish.
00:18So it was kind of Goldilocks-ish, but not the usual Goldilocks, where you have growth picking up, kind of economic growth picking up with inflation going down.
00:26Inflation was actually quite sticky, if not picking up.
00:30So I think going into next year, it looks much more old-school Goldilocks, where you essentially have growth picking up, you have the big, beautiful bill, you have German fiscal spend ramping up, you have Japan fiscal spend ramping up, but you also have disinflation in the pipe.
00:43You still have a weak housing market, you have a weak labor market, you have the tariff impacts coming out of the inflation picture, and we're actually quite bearish on oil.
00:52So suddenly you actually get much more of a traditional kind of Goldilocks, and possibly that kind of widens the leadership a bit.
00:59There's more broadening out.
01:00And I think this is what the market is focused on, like a proper cyclical kind of impulse coming through the economy.
01:07And there's always the potential, especially if the Fed is a bit easy, that it kind of really accelerates, that you get proper releveraging and restructuring.
01:16And I think this is what the market is betting on right now.
01:18Can I get too far?
01:20Valuations are already pretty high.
01:22Yeah.
01:23You punch them a little bit higher.
01:24Are we getting into this kind of story where actually you could accelerate the economy too fast, you do get that inflation story coming back.
01:30How finely balanced is that kind of we can see a good economy, but it's an economy that doesn't yet deliver inflation?
01:38Yeah.
01:39No, it's a very good point.
01:40Like normally the best accelerations are early cycle, mid cycle, but we are a bit late cycle.
01:46Like unemployment rates are low, profit margins are high.
01:51We obviously have risk premiums that are compressed.
01:54So you're absolutely right.
01:55Like too much is not great.
01:57You have a speed limit that the economy and valuations are giving you for equity returns.
02:02But obviously we have AI, and I think there's a certain element of jobless growth, productivity.
02:08That's what Powell's betting on.
02:10Yeah.
02:10And I think it's right.
02:11I think as you see it already in the last few months where the economy has done really well, the corporate sector has done really well with the weak labor market.
02:18As long as that continues, that's important.
02:21But also really important, you need to keep the inflation anchored.
02:25And I think it's not going to be that difficult because you have these negative tariff impacts, at least initially, coming through.
02:30So inflation should normalize.
02:32Okay.
02:34That doesn't sound like an environment, though, where I need a lot of rate cuts.
02:39The market clearly is highly sensitive to rate cuts.
02:43Do you think the Fed could be done?
02:45Do you think the ECB is done?
02:46Is the Bank of England done?
02:47Is the BOJ going to be hiking?
02:48Are other central banks going to be hiking?
02:50What does that rate trajectory look like next year?
02:53Because stocks have been really sensitive to this story.
02:56So what I always think is like equity investors, they don't really care.
03:00If you get one or two cuts from here.
03:02But they care if the Fed will cut when needed.
03:06And I think that's definitely the case.
03:08So if there is something going wrong in the economy, the Fed has a lot of room to cut.
03:12And I think a lot of inclination to cut.
03:14And the other question is if they will hike.
03:16And I would say that for the Fed, the bar to hike is still very, very high, considering that the labor market.
03:21For the Fed is still very good.
03:22And I would say that for fuckers, I don't know why.
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