00:00When we're kind of looking ahead to the next year, I mean, we kind of think about the drivers that provided us with a very strong support for stocks this year.
00:08And it was, okay, corporate profits, that was a good support and normalization of monetary policy, particularly in the U.S.
00:17And I think we're still in that world where corporate earnings are being strong.
00:22We see positive earnings revisions overall and policy is normalizing.
00:26So I think at least in the foreseeable future, before events start hitting us, we're very constructive on Outlook for next year.
00:35You're very constructive for next year.
00:37And let's talk tech then, Maria, because you're always such a supporter of tech and you're always a big fan of tech stocks.
00:42Now, you say in your notes that there is still no alternative, and I'm sure you'll have reason for that.
00:48But just to throw a little counter at that argument, I've got a chart here that shows the S&P.
00:53She's done her homework, Maria.
00:55Well, I'm sure Maria will have an answer, which is why I'm doing this.
00:59S&P 500, you know, most recent part of 2020, I've got the fourth quarter, basically, on this chart, which shows the S&P 500 and what's happened to tech stocks.
01:09And actually, it's been healthcare and banks that have been doing really well of late.
01:13And so I wonder, is it still right to make that argument, that there is no alternative to tech stocks?
01:17Yeah, okay.
01:19So there are two parts to this argument.
01:22First, I mean, I do believe that tech is probably going to lead next year, but healthcare is another very interesting conversation we can have.
01:31I mean, starting with tech sector, I mean, the reason we love tech is, I mean, we still strongly believe that earnings growth would be the key driver of relative performance in the market.
01:45We're still saying that sectors and styles and countries where earnings growth is stronger than somewhere else will continue to kind of garner investor support.
01:54That was true for the last couple of years, and, yes, it drove valuation to kind of very high levels, and you can have, like, this wonderful chart of looking at earnings expectation versus valuation.
02:07And, yes, tech is expensive, but it's the one sector that's expected to grow very, very fast.
02:13Everything else is trading at a discount because earnings growth is slow, and I think we're still not seeing that dynamic changing.
02:20So that's kind of your case for tech.
02:22I think healthcare is really, really interesting.
02:25Up until kind of start of summer, it was the biggest underweight institution investors had in our custodial database.
02:33Investors were really, really negative on the sector.
02:36And, I mean, there is kind of – there are lots of fundamental challenges for the sector, but it was a huge regulatory risk.
02:42And it's beginning to change.
02:44And we saw very strong investor buying, and absolutely correct.
02:48That was the best-performing sector in Q4.
02:50However, what we're seeing a lot of it is position adjustment.
02:54So you start with a huge underweight.
02:56Prices start to go up with a little bit more.
02:59I mean, activity happening in the sector.
03:01We see a little bit more.
03:02I mean, you just mentioned some more drug kind of permissioning in U.S. happening.
03:08So prices start to go up.
03:11And people who are underweight of the sector, which we know it's a huge position, they begin to buy.
03:15Price goes up.
03:16They begin to buy.
03:16So it creates its own momentum.
03:18And we're still in a very, very underweight territory for sector holding.
03:22So, yes, healthcare looks an interesting sector for us.
03:25Not so much that fundamentals really improve, but it creates this kind of position unwind and kind of short squeeze in the sector.
03:32So we're still there.
03:33But, Maria, what is your answer to those who question when the capex into AI is going to translate into productivity gains and big, juicy returns?
03:43Yeah, no, that's kind of not even a million-dollar, a trillion-dollar question.
03:47And I mean, I think what's important for investors is that who would be the beneficiary of this capex?
03:54I mean, we know, we hope this new technology is transformational and it's multi-decade improvement in productivity kind of going forward.
04:03But in the medium term and short term, who benefits?
04:06And for now, it's really the people who kind of, I don't know, picks and shovels, the kind of infrastructure buildup.
04:12Those companies already benefiting, think of kind of NVIDIA's of this world or Microsoft's or Google's of this world, people who provide infrastructure for AI.
04:23So for them, the path to monetization is much clearer, much easier, much more transparent.
04:29And those companies, kind of in our view, that's easier case to make in terms of monetization.
04:35What will happen later on, I think we still need to kind of technology needs to develop and their kind of case needs to be proven.
04:41But those mega-cap companies that are doing majority of investments, for them, the monetization case is a lot clearer and that's what they're kind of trading.
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