00:00Where is your focus this morning?
00:04I am interested in the mispaced perception on market strength that I feel is out there.
00:09As you know, Tom, I have been quite bearish on stocks this month.
00:13I think they have a lot further to fall.
00:14I got asked on radio earlier, you know, why stocks don't seem to be bothered by war.
00:18I got a European colleague saying, why aren't stocks crushing it?
00:21Well, the MSCI All-Country World Index is having its worst month in three and a half years
00:25since the last bear market for that index.
00:29It's falling at an annualised pace of more than 60%.
00:34So I would say the pace of declines is quite sizable over the last two weeks.
00:38What is interesting, though, is that there is that perception of resilience out there.
00:41Why is that?
00:42Well, the NASDAQ 100 is only down 1.2% for the month.
00:46And I think there are two observations to make about that.
00:49First of all, U.S. stocks, the narrative going into the context was that U.S. stocks
00:53would be relative underperformers for another year this year.
00:55So people were underweight U.S. stocks relative to the rest of the world.
00:59As they de-risk, that should help U.S. stocks be an outperformer.
01:02We also know that the U.S. is a net energy exporter.
01:05So we always thought that in terms of stock markets, the U.S. stock market would be a
01:09relative haven to the crisis.
01:12And the final bit is one of the most performing sectors in U.S. stocks is software.
01:17And that's because, again, you know, with the software sector having fallen 26% in the
01:21prior four months, it's up 5% this month because people are de-risking.
01:26They're closing prior shorts.
01:27That's not a sign of strength, even though it's helping the index of the margin.
01:30So, sure, U.S. stocks are not down much at all.
01:33But U.S. – sorry, global stock markets are collapsing at a fast pace this month.
01:38Now, I think that misplaced perception of resilience is in feeding complacency and is
01:44actually going to help people underestimate the negative wealth impact we're seeing and
01:48therefore the greater damage we're going to see in stock markets globally over the
01:51next coming weeks.
01:53Mark, is this dollar strength going to continue?
01:55How long can it continue?
01:58Yes.
01:59I think it'll – actually, I was going to give you the glib answer there, Lizzie, that it's
02:04going to continue for as long as the straight stays closed.
02:07That's not entirely true.
02:08I think that the beta of dollar gains to kind of oil prices declines as the oil problem
02:15goes on.
02:16Yes, you know, essentially, U.S. is an energy state.
02:20It benefits from oil gains.
02:21It also benefits because its primary alternatives, things like the euro and yen, are major energy
02:26importers and are really suffering from this conflict.
02:29So, the dollar is doing well.
02:30Also, again, it's about squeezing positioning.
02:32People are bearish the dollar going into the conflict.
02:34So, for all those reasons, dollar did really well at the start of the conflict.
02:36I think it has more to gain because I'm not seeing a resolution to this conflict.
02:40But I think that the beta of its strength will decline.
02:44So, it's not that I expect it to start weakening drastically until the conflict is over.
02:49But I think it's probably only got a small bit of upside.
02:52So, I think we've got extra complications like with the BOJ later on this week, we might see
02:57dollar-yen head higher into the end of the week.
02:59Will that raise the risk of intervention, changing the narrative there?
03:02So, overall, dollar's got a bit more to gain in percentage, but quite a bit more in duration
03:07of time.
03:08Will that raise the risk of intervention?
03:08Will that raise the risk of intervention?
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