00:00How were you set up coming into 26? What have you changed and why have you changed it?
00:05Good morning, Jonathan. So coming into the year, we already made some shifts at the end of 2025.
00:11I think most of those were in line with what everyone is referring to as the broadening
00:15after it. We were bringing back some of our AI exposure. We were trimming our tech exposure,
00:22adding to cyclicals like industrials. And also because we were also bringing down
00:27some of the growth overweight in favor of a more balanced portfolio, if you're going to add a bit
00:33more value, have a bit less growth, one of the implications of that is you're probably going
00:37to own a bit more international and have a little less of the U.S. overweight. And that's exactly
00:41what we've been doing really since the back half of 2025. So, Russ, many people describe this as
00:47a cyclical rotation, an improvement in cyclical appetite around the world, an improvement in
00:52so-called risk appetite. Yet, Russ, last week took on a bit of a different flavor.
00:57Lisa mentioned it, a recessionary theme starting to go into the sector price action. When you see
01:02staples at all-time highs, utilities at record highs, and the banks start to sell off. Russ,
01:07what does that tell you? It tells me the market is confused. And I share kind of the questions
01:14around this very strange rotation. If you look at the best performing sectors year to date,
01:19you can be forgiven for kind of, you know, being a little bit uncertain about what the market's
01:25thinking. You've got industrials, energy, materials. And then, as you and Lisa pointed
01:30out, you've got staples and utilities. So, that combination of we love cyclicals and we're
01:34hiding out in defensives is very unusual. Now, my own view is I don't think we're looking at
01:39a recession. As you all mentioned before we joined, or I joined, the labor market report
01:45was very solid. We're seeing manufacturing rebounding. In general, most of the economic indicators
01:51are fairly solid. And if anything, some of the concerns we had about the labor market
01:55one or two months ago, maybe they're a little bit less acute today. So, instead, I think what
02:00we're seeing is a change in sentiment around the tech and the AI trade. You saw it during
02:05the earnings season. You know, rather than applaud these $100, $120 billion CapEx announcements
02:11from the hyperscalers, the market actually punished them. So, to my mind, this rotation and this
02:17odd coupling of cyclicals and defensives, more about a change in sentiment, more about a rotation
02:22out of tech, and less about an economic view.
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