00:00What scenarios have you mapped out and what strategies can you attach to those scenarios?
00:05There are so many permutations possible at this point that investors are really struggling, right?
00:09On the one hand, in the near term, this situation is still ongoing, so you should expect impacts on equities
00:15via four channels, right?
00:17One is that risk aversion is happening and you can see positionings being degrossed a little bit, although not a
00:23lot so far.
00:23Secondly, a variety of commodity prices that, like you guys were talking about, have been going higher and that affects
00:29both, has winners and losers, right?
00:31Both within sectors and within markets.
00:34Then you start to think about, oh, what's going to be the impact on inflation and how are central banks
00:38going to react to this and how are bond yields going to react to this?
00:42And that's starting to become a big story.
00:44You know, if you look at market projections for policy moves from across central banks, we are now expecting more
00:51and more hikes, right?
00:52And the final thing is, like you mentioned, Yvonne, what's going to happen about the Trump-Xi meeting, which is
00:57very critical to how risk perception is seen in China equities.
01:00So, on the one hand, near term, you obviously want to be sensitive to these developments, and so the trade
01:07is to move from semis, semiconductors, to semi, which is staples, energy, materials, and industrials.
01:14Oh, okay. I was wondering where you're going with that.
01:16Okay.
01:17So, that's the sector trade, which a lot of investors have been looking at.
01:22Similarly, you can use options to hedge.
01:24J.P. Morgan has just gone tactically bullish on the dollar, so that's another way to look at it.
01:29But longer term, the other option is to just look through these, right?
01:33History tells us, at least in the last 15 years, that geopolitical incidents have always been good buying opportunities, entry
01:39points,
01:39and for investors to scale back into their existing positions or stuff that they like.
01:44We're not quite there yet, but, you know, you can just choose to look through this volatility.
01:49Is it still the oil price that is really going to dictate how you position right now?
01:53What does $100 oil mean for, like, investors' psyches if it goes on for weeks and months?
01:58Right. So, three things to track, right?
02:00First is just the oil price.
02:01So, if it stays above $100 for a month, that starts to become a bigger economic challenge.
02:08Secondly, we're looking at indications that positions have been wiped out, which, like I said, we aren't seeing that yet.
02:15If you look at hedge funds positioning in our prime book, the degrossing that we have seen so far is
02:19very minimal.
02:20If you look at damage in the quant portfolios and factor performances, that's very minimal.
02:26So, we haven't seen that quite yet.
02:28The third thing is to track, like, how are these geopolitical events themselves evolving, right?
02:33And I think the biggest focus from investors is on the straight-of-home moves and how soon that can
02:38reopen.
02:39And now we have betting markets odds on these things, so you can track that in real time.
02:44Both option markets and betting markets are suggesting about a 35% probability that the straight-of-home moves will
02:49at least partially open by the end of the month.
02:51So, we are tracking that very closely.
02:53So, we're tracking that very closely.
02:53So, we're tracking that very closely.
02:53So, we're tracking that very closely.
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