00:00These are somewhat contrarian views because what you have seen, of course, is that haven
00:03demand for the dollar perhaps still further to go with that and a lot of concerns, particularly
00:09when it comes to Asia-Pacific economies, on an outsized negative impact from an energy
00:15crunch.
00:16How do you counter that?
00:19That's right.
00:20Well, I'd say that our outlook from the start of the year was working quite well in terms
00:24of non-U.S. assets outperforming, dollar weakening due to Fed rate cuts, and overall a risk-on
00:34move for equities over fixed income.
00:37The recent developments in the Middle East certainly upends that outlook, although I'd
00:43argue that that's only just for a temporary blip.
00:46We've looked and we've studied the past six supply-side shock to oil impacts on the markets
00:54and on average it takes around four to five months for oil to return back to kind of the
00:59pre-supply-side shock level and also for the S&P and for stock markets levels to return around
01:06that five-month level time.
01:07So I still think that sticking with our outlook that we prefer in the U.S., cyclical, small-cap
01:14stocks, but at the same time we also prefer things like emerging market equities.
01:18In the meantime, we are expecting central bank decisions, of course, and the Bank of Japan,
01:22the big one here in Asia, not any change expected when it comes to the rate, but what will you
01:28be watching for the future direction of the markets, especially at a time when the yen
01:31seems to be pretty volatile, too?
01:35Well, I think overall central banks around the world, we have a slew of central banks meeting
01:41this week, will be watching very closely any kind of inflationary impulse that the developments
01:47in the Middle East will have on headline inflation.
01:50And I think that for any central bank that was looking to ease, for example, like Indonesia,
02:00Thailand, India, that they could be on hold for a while.
02:05And any of the central banks that were looking to tighten, for example, like Australia, which
02:09tightened which hike rates earlier this week, that this development in the Middle East could
02:14expedite that tightening path.
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