00:00Marcus, there's still too much in your view in terms of the equity markets. Is there complacency around the energy
00:07shock and the inflationary impacts of the conflict in the Middle East?
00:12Completely. I think it's going to get a lot worse for stock markets before the weekend. I'm not a geopolitical
00:17expert, so I'm pretty simple about this.
00:20The three main protagonists, the U.S., Iran and Israel, have all been consistent that they are planning to keep
00:26on attacking for some time.
00:28The U.S. and Iran have both denied that there are any talks going between them or that they want
00:33any talks, and Israel has never wanted any negotiations either.
00:37So there are no negotiations happening, and all are planning to continue conflict.
00:40Now, I know things can change quickly, but I think assuming the conflict might end quickly is just, I don't
00:46know where that's based on.
00:46It just doesn't seem to be any evidence at all for that.
00:48So, therefore, if you think there's not going to be an energy problem, you've got to assume that the Strait
00:53of Ramirez doesn't really matter,
00:55which goes against everything I've been told in my whole career.
00:58So maybe the past 25 years have been a lie, and the Strait of Ramirez doesn't really matter.
01:02Perhaps there's a bit of a fudged explanation that it matters less than normal, given that China's been stockpiling energy
01:07for a while,
01:08given that U.S. is so much bigger producer now, given it's the right time of year in Europe that
01:12there's not much need.
01:14You know, we got past the cold weather snap, et cetera.
01:16That's probably perhaps true.
01:18But I think that the Strait of Ramirez still does matter to some extent.
01:21That's what all the commodities experts tell me.
01:24And, therefore, I still think we've got higher energy prices coming through, and I think that that impact through markets
01:29will ripple through.
01:30What I am trying to dismiss is that the idea of – there's many reasons to be optimistic, and I'm
01:35structurally super bullish in the global macro environment beyond the conflict.
01:38I just think there's a big correction coming on the conflict.
01:40So there are many other bullish reasons out there.
01:42This is not a, you know, a bear-mongering call generally.
01:45It's just that this conflict is not priced.
01:46What I want to kind of make clear is that any optimistic view that relies on a very optimistic narrative
01:54around the geopolitics just does not fit with anything we're seeing on the news flow.
02:00So, Mark, markets complacent in your view, and yet we have traders adding to wages on an ECB hike this
02:06year, more so this morning.
02:08But your team warning that traders should be wary of pricing that.
02:11Where do you sit?
02:14Yeah, look, I think there's going to be a bit of a debate whether you worry about the inflation bit
02:18or the, you know, a growth impact.
02:21You know, traders adding to ECB hikes at the moment makes sense, given that we've definitely got more of an
02:25inflation impact than a growth impact.
02:27I think at some point, you know, there might get more worried about the growth impact if we see a
02:31transmission through markets, which we're not seeing at the moment.
02:34So at the moment, it is right to be more worried about the inflation side.
02:37I'm not worried what's happening in rates markets.
02:39They're trading fine, in my view.
02:41You know, FX markets, fine.
02:43You know, dollars strengthening, EM currency selling off.
02:45They're more logical.
02:46I think it's right.
02:46The precious metals are starting to weaken.
02:48To me, equity is the problem.
02:49And the real equity markets that are being complacent are really probably in Asia and Europe.
02:54They have suffered this week, but they have suffered what is a minor flesh wound in context of the gains
03:00of the past year.
03:00And I think that if you continue to see much higher oil prices, which all the news flow implies, well,
03:07then the Asian and European stock markets have a much more substantial correction ahead of them and probably quite soon.
Comments