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. Not at all, actually. I'm not. I don't think you're bearish at all.
00:14No, I'm actually pretty neutral. But, you know, part of it, right, last year around tariffs, actually heading into that
00:20situation,
00:20we kind of formalized our process for thinking about drawdowns.
00:24And so we sorted them into four tiers, which we call the tiers of fear.
00:27And tier one is a garden variety 5% to 10% drawdown. We tend to have these often, right?
00:33We had one last October and November that bottomed out at 5.1%. It's possible this could be it, right?
00:40I mean, that one that we had last fall felt like it would go much deeper, and it didn't.
00:44And the U.S. is benefiting right now from, you know, 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% mark, 6,300 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
01:02% drawdown,
01:02we've had five of those since the great financial crisis, where we've had peak to trough declines of 14%
01:08to 20%.
01:08Risks of that have grown, but you have to get to a point, right, where there's genuine fear of either
01:14a recession or some sort of contagion.
01:17And I don't think that's where we are yet.
01:19I don't think we're really even close to that, frankly, from talking to clients, from seeing what companies have been
01:23saying.
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.
01:41Top 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%.
01:48And that was last month.
01:50That was before we invaded Iran.
01:52Yeah, well, look, I mean, I don't want to sort of speculate.
01:56I 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.
02:03multiples creep down since last August, right?
02:05And it's been AI jitters.
02:06It's been private credit fears.
02:08Geopolitical tensions, frankly, started to really balloon back in January.
02:12I 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, and
02:19we 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, it
02:41seems 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
02:48as well.
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