00:00We've had a 5% decline that ultimately got bought. Is that masking the amount of repricing we're
00:05seeing beneath the surface? It is, John, and there's a number of ways you can look at it.
00:09We've, at this program, talked about the average member drawdown level being much more significant
00:15than the drawdowns we've seen at the index level. So in the case of the S&P 500, you're right,
00:20we've only had about a 6% drawdown maximum year to date, but the average member has had a 16
00:27%
00:29average drawdown. If you look at the NASDAQ, it's even more extreme. So the NASDAQs had a little
00:34bit more of an index level drawdown, but at the average member level, the maximum drawdown is
00:38negative 29%. Another way to look at it is there's about 120 or so names that are trading in a
00:46similar
00:47band as what the S&P index is trading in, that kind of 5% up and down band, but
00:53almost the same
00:54number of stocks have moved by up more than 20% or down more than 20%. So the tails of
01:00that
01:00distribution are larger than they have been. I think that kind of backdrop is likely to continue.
01:05So picking up on some of the dislocations, people trying to work out if this is a moment to step
01:10in,
01:10particularly around some discretionary names. We've had headlines from Delta this morning,
01:14American Airlines just moments ago, guiding higher for revenue. Lizanne,
01:18is this a moment to step in and maybe pick up some of the pieces? I think at the sector
01:24level,
01:24I think it's really difficult environment to just make a monolithic call, say on consumer
01:28discretionary. I think there's opportunities within every sector. I think it's profit margin
01:34stability, profits outlook, to your point about some of the airlines. I think that's really key
01:40in this environment. And that's also reflected down the cap spectrum. Unlike last year, this year
01:46within the Russell 2000, the profitable stocks are handily outperforming the unprofitable stocks. So
01:52I think it's that profitability angle that is really key. And that's where you have to go
01:56individual stock by individual stock, as opposed to just making a monolithic sector call.
02:01Can you bleed that stock by stock picking kind of approach into whether you're looking at the
02:07equal weight or the tech universe as really driving any kind of rally going forward from here?
02:12At the beginning of the year, people were talking about that broadening out,
02:16about how more stocks outside of tech would really lead this. Now you're getting a reversal of that.
02:21How much are you shifting your view for the rest of 2026?
02:24But not a heck of a lot. I think what's happening now with some of the reversion trades that we
02:29have
02:30seen, I think that's all about positioning. And I think positioning is really important in this
02:34kind of market backdrop. We all know, you certainly do, reporting on it every single day,
02:39that trying to gauge what the next announcement is going to be, whether it is from the administration
02:44about the war, you know, going back pre-war, tariff-related announcements. We're in this
02:50mode of instability right now, and trying to gauge what the trigger points will be is very difficult.
02:56But what we can do is assess what the positioning backdrop is. And throughout the course of the last
03:02two and a half weeks since the outset of the war, we have seen a change in positioning. You've seen
03:07that de-risking on the part of the systematic funds, on the part of the long-short hedge funds.
03:14We've seen it in retail in terms of individual positions, you know, single stock kind of holdings.
03:21Overall retail has not really pulled back their positioning to a significant degree. You have seen
03:26it with the CTAs. So positioning is such that we could get a pretty significant rebound because
03:33you've washed out some of that positioning. We can think of the market backdrop as being able to
03:39get assessed via the positioning. That goes back to early April last year. Trying to gauge these
03:45tariff-related announcements was difficult. But if you looked at positioning, you could see where both
03:49the pain trade is likely to be and maybe where there's upside if you get even a modicum of better
03:54news.
03:55And Lizanne, just to sort of build on that, we saw that from the fund manager survey from Bank of
03:59America today, that the cash build increased the most going back to the pandemic from February to
04:05March. Are you getting more constructive right now? So the cash build is an interesting one. If you look
04:10at the $7 or $8 trillion that's in money market funds, that is a record high level. I think one
04:16of
04:16the errors, though, is looking at a number like that in a level sense, in an absolute sense,
04:21without putting it in the context of the overall capitalization of the stock market.
04:25I haven't run the numbers very recently, but when we were at about $7 trillion not all that long ago,
04:33it still only represented about, I think it was 12% or 13% of total stock market capitalization,
04:39which is historically very low. So if we think about sort of cash on the sidelines, so to speak,
04:45and I don't love that terminology, we have to look at it relative to the overall cap in the stock
04:52market, because that's how you measure is that fuel that if it decides to, you know, shift its
04:58attention more to the equity market, how powerful is that fuel? It's less powerful when you're talking
05:03about a fairly low share of total equity market capitalization. Lizanne, you mentioned catalysts.
05:10This year, right now, the focus is squarely on what's going on in the Middle East and the war
05:14with Iran. Last year, it was tariff-induced headlines that potentially moved the market.
05:18Can you position a portfolio in the Trump era that ignores Washington?
05:24No, you can't, but you can also, it's also impossible to gauge what those next triggers are
05:29going to be, which is why I think you have to focus more on the positioning. I think we've never
05:34seen a greater connectivity and, you know, short-term volatility being driven by decisions coming out
05:41of Washington. There's more, typically there's more of a disconnect between those two. You don't
05:47have to kind of draw that dividing line as closely as you do now, but trying to anticipate it, given
05:53how unstable policymaking has been and just the manner with which policies get announced is a much
06:01trickier backdrop, certainly for longer-term investors, but also for traders.
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