00:00Lori, is it your expectation that there's more pain in store for this equity market?
00:04So it wouldn't surprise me. I mean, we define on our tiers of fear, and I know I'm scaring everybody
00:09by talking about this.
00:10I'm actually not that bearish. But the. Not at all, actually. I'm not. I'm actually. No, I'm actually pretty neutral.
00:16But, you know, part of it right last year around tariffs, actually heading into that situation, we kind of formalized
00:22our process for thinking about drawdowns.
00:24And so we sorted them into four tiers, which we call the tiers of fear. And tier one is a
00:28garden variety, five to 10 percent drawdown.
00:30We tend to have these often. Right. We had one last October and November that bottomed out at five point
00:36one percent.
00:38It's possible this could be it. Right. I mean, that one that we had last fall felt like it would
00:42go much deeper and it didn't.
00:44And the U.S. is benefiting right now from kind of the safe haven trade at the moment.
00:48So, you know, it's certainly possible this could be it. But it wouldn't surprise me at all to see us
00:52go down a bit deeper.
00:53And if you kind of hit that 10 percent mark, sixty three hundred is about where you go.
00:56Now, we have said that the second tier of fear, which is what we had last year, that 18.9
01:01percent drawdown.
01:02We've had five of those since the great financial crisis where we've had peak to trough declines of 14 to
01:0820 percent.
01:09Risks of that have grown. But you have to get to a point. Right.
01:13Where there's genuine fear of either a recession or some sort of contagion.
01:17And I don't think that's where we are yet. I don't think we're really even close to that, frankly,
01:21from talking to clients, from seeing what companies have been saying.
01:24I was at our financials conference last week and the tone was solid and steady.
01:28So I understand the fears and kind of looking at that left tail worst case scenario.
01:32But we're just not at that point yet where you'd even kind of get to a tier two.
01:36Did you see the John Zito story in the Wall Street Journal today?
01:39On private credit. Top dog at Apollo.
01:42Yeah. Not just private credit, though.
01:43He said, I told my wife last night, I feel like the market should be down at least 10 percent.
01:47Yeah. And that was last month. That was before we invaded Iran.
01:52Yeah. Well, look, I mean, I don't want to sort of speculate. I wasn't in the room. Right.
01:57But in terms of why we've been so resilient in the U.S. equity market, we've been watching P.E.
02:02multiples creep down since last August. Right. And it's been A.I. jitters.
02:06It's been private credit fears. Geopolitical tensions, frankly, started to really balloon back in January.
02:11I was up in Canada the first week of the year.
02:14We talked mostly about Greenland, not really about Iran. But I went back and looked at betting market data
02:19and we actually saw expectations for the U.S. to strike Iran spike back then.
02:23And that's around when the S&P turned choppy and the energy trade really took off relative to the S
02:28&P.
02:28So I do think there was a tremendous amount of preparation going into those strikes.
02:33I think obviously people were not anticipating the extent of it.
02:37And, you know, when I talk to my colleagues sort of on the derivative side of the business, right,
02:40it seems like a lot of people have been very well hedged coming into this.
02:43So I think there is a lot of nervousness, but I think there's also a lot of protection on it
02:47as well.
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