00:00Looking at what you've been writing over the last couple of days, it seems as if you maybe think that
00:04markets aren't reacting quickly enough to the developments in the Middle East.
00:08In which assets do you see that most notably, Mark? Is that a stock story? Is it oil?
00:15It's not so much the speed of reaction. It's kind of the delayed attitude is very complacent.
00:21I think that over the weekend, what we saw was a game changing event.
00:24I'm always in favor of not being too knee jerk. Monday's price action didn't surprise me too much.
00:29But as we've had time to process it, it is fair to acknowledge that almost nobody I spoke to expected
00:35the Iran situation to be like this this week.
00:39They did not expect the scale of attacks. They did not expect the scale of retaliation from Iran on all
00:44its neighborhood.
00:45They did not expect the disruption we've seen to the Strait of Hormuz.
00:48So everything we've seen is game changing.
00:50Now, some people may dismiss it as it's only temporary, but people aren't yet acknowledging that, you know, we've had
00:55a major event happening.
00:56And we are seeing an energy price shock.
01:00Some people, I'm glad to see, you know, Will is very much my cap there, talking about the energy price
01:04shock, talking about the supply chain shock.
01:05But many people yesterday were dismissing about, oh, the one day move is irrelevant.
01:09It's only 8%. That's not a big factor.
01:12That ignores the fact that Friday close was the highest close since July last year.
01:16We are already trading before the weekend 10% above the average of the last year, almost 10% above
01:21the average last year in Brent crude.
01:23We're now 20% above the average of the last year. Gas prices are more than 50%.
01:28UK gas prices are something like 70% above the average of the last year.
01:30We're having an energy shock.
01:32Yes, we can debate about what extent, how long it extends, but we've got an energy price shock.
01:36We've got a supply chain shock.
01:37We're therefore going to get higher yields because we've got an inflation impulse coming through.
01:40And that's not good for what we're happening in the credit sector.
01:43So consumer sentiment is going to get hurt by wealth effect, by higher prices, by higher yields.
01:49And just generally, they're seeing images of war on their front page around the world.
01:52So I think equities will reprice significantly lower over the coming weeks.
01:58Yeah, well, we're certainly starting to see that in the Asian session today, aren't we?
02:01With some really heavy selling across the benchmark, but also in places like Korea.
02:04Mark, do you think we rewrite the playbook then for central banks as well this year on the back of
02:10what we're seeing in the Middle East?
02:13Look, I mean, the Fed was the main one in trying to push through easing.
02:18And many people in the market were already cynical about that.
02:20I do think it's going to make it more complicated for central banks.
02:23I think the Fed is still going to be under pressure to cut, given half a chance, which is going
02:28to be complicated.
02:29But yes, I mean, look, I think we're getting some sort of inflationary impulse here.
02:33In a world where yields have dropped a long way, and that's, I think, part of the problem here, is
02:39the positioning was not ready for this.
02:41You know, we had seen dollars softer, and the dollar is the ultimate haven for this asset.
02:46We'd seen yields much lower.
02:47And we'd seen the main stock markets gain be those Asian equity markets that are of major energy importers, things
02:54like Korea, Japan, China.
02:56So I really think the market is not positioning this for all.
02:58Now, I'm not expecting a shock move, but I just think that the risk aversion is going to gradually deepen
03:03over the next coming weeks.
03:04And I think we're going to see a much larger sell-off.
03:07And yes, that will mean yields higher as well, but a bit more mixed.
03:10For now, I'll be coming to be my guest.
03:11I'll be coming to be my guest.
03:11All by the end.
03:11Why aren't we현 who you convert?
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