00:00Skylar, how much relief is there? Will it be sustained?
00:02How are you thinking about the risk environment that we're now seeing after the challenges of earlier this week?
00:08Yeah, I mean, I think markets are hesitant to price these big policy outcomes
00:13because there has been this pattern where Trump makes big statements that he then backs down from.
00:18I think that's also why you see on the other side, in this case, Europe, not escalate,
00:23because they're hoping for some kind of deal and saw with Canada that retaliation doesn't really work out well.
00:29Now, yesterday, we got a reversal of the moves that were attributed to the tariff threats.
00:32The U.S. assets and the dollar were perkier and equities bounced.
00:36I think, you know, you can get a bit of a continuation of that.
00:39But there are some trades that just make sense in this environment generally, right?
00:42So if you're worried about tariff threats or just geopolitics from a broader scale,
00:47then you should be positioned in commodities.
00:49And gold in particular, there are structural tailwinds from a central bank perspective, too,
00:53that makes that trade make sense.
00:55And so while it's crowded, I think people will continue to play that out.
00:58And it's the same with, like, the defense sector.
01:00So you're not necessarily thinking about individual trades, like Europe's going to get tariff rates of 25 percent relative to 10 percent.
01:07But you're just thinking about how has the overall environment changed and how does that change my allocation?
01:13Yeah, it's really interesting if markets start to ask themselves if the politics is becoming increasingly performative, Skylar,
01:19then, you know, do they risk getting it wrong sometimes when it isn't?
01:22And I'm interested, though, in us getting back to data.
01:26We're getting back to data.
01:27We're going to get some PCE data, GDP data today.
01:30Is it all too old, Skylar?
01:32Will it tell us anything useful?
01:34I don't think it really will.
01:36I think it'll largely kind of be glossed over by the market in terms of the PCE data in particular.
01:42It's quite old, isn't it?
01:43It's October and November data.
01:44We already have CPI, and we saw with those data prints that there was some skepticism over how accurate they were.
01:51And so I think with these prints as well, we'll get that.
01:54And we do have big catalysts coming next week, and we're also, like, looking for headlines.
01:58So I think as we head into next week, we've got the Fed meeting on Wednesday.
02:01And increasingly, because we are now getting that backlog of data come through, the Fed has a lot of data to look at as we head into this meeting.
02:08And on aggregate, it's surprised to the upside, I'd say, if you look at a measure like ESI, so the Economic Surprise Index, but generally, too, just the labor market's been a bit stronger.
02:17So there's a question of will they address that hawkishness?
02:20Does that mean that that break in the 10-year yield that we've gotten kind of sustains, as well as questions over who will the next Fed chair be?
02:27Will Powell resign?
02:29And everything going on there, I think, is of increasing relevance.
02:34Skylar, how big a risk is the BOJ tomorrow to bond market volatility?
02:39I think it's relatively low.
02:40They don't like to muddy the waters that much.
02:42And it's one of the places where you see central bank back down when there's something like an election or volatility.
02:48That's very much the mandate across the authorities you see in Japan.
02:52They don't want to create more volatility or speculation.
02:54And nothing's really expected from the meeting.
02:56It's expected to be a pause.
02:58And generally, what you see, too, is if they are going to make a policy move, they telegraph it a couple of weeks beforehand.
03:03So that's when you get the surprise rather than at the meeting.
03:06I don't think that means that the risk of the yen going lower or JGB yields going higher is completely eliminated.
03:13I think it just means that you're looking more from the fiscal side of the equation and you're looking more towards the election than the Bank of Japan.
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