00:00Market direction right now dictated by arguably the hardest asset class to forecast.
00:04And that asset class, the guys in it, energy forecasters right now, the energy experts,
00:09the geopolitical experts, they seem far more concerned about the moment we're in
00:13than the equity market participants that we speak to on any given day.
00:17What explains the difference?
00:18I think a couple of things there.
00:19I think one, equity markets tend to focus on like the middle of the oil curve.
00:22So like front month crude is up, call it 20%.
00:25Two-year crude is up 5%.
00:27And equities tend to like respond more to that medium to longer term oil price.
00:31So I think that's a bit of it.
00:33Equities are also, I think, a little bit of a once, bit and twice shy on this.
00:36You know, when you think back to Russia, Ukraine, there was all these concerns,
00:38oil is going to 120, oil is going to 150.
00:41It never quite got there.
00:42And then, you know, equity markets were able to kind of compartmentalize that and move on.
00:46So I think you're in a situation where the underlying fundamentals, earnings, economy,
00:51et cetera, are still pretty positive and people want to own this equity market.
00:55They're sort of being held on the sidelines now by these incredible uncertainties that
00:58you just don't know how far they could spill out.
01:01I would say the bar for bad news is quite high right now.
01:04I mean, some of the headlines we've seen in isolation, you would have thought would have
01:08been extremely negative for U.S. equities.
01:10And the five-day trading range of the S&P is less than 3%.
01:13I mean, it's been pretty well contained in the U.S., Europe and E.M., obviously a different
01:18discussion.
01:18That's the difference I wanted to explore.
01:20The comfort you might have around the U.S. story.
01:22Do you have that comfort for the international trade?
01:24I would say definitely not.
01:25Not right now.
01:26I mean, like Korea, I think, is more of a positioning issue.
01:29But clearly, Japan and Europe are trading based on the increased or the higher exposure
01:34they have to energy cost inputs and shipping.
01:37And that's kind of impacted them.
01:38Look, it helps that the U.S. is a net energy exporter as well.
01:41But it certainly seems like, and you're seeing that with ECB pricing as well, right?
01:45The market is pricing a much trickier balancing act in Europe than they are in the U.S. right now.
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