00:00I know you tend to advise looking through geopolitics but is this war an exception.
00:06It is different from the geopolitics that we've seen in the past Lizzy in the last two years we've
00:11seen geopolitics that didn't really have an impact on either credit conditions or earnings and those
00:17are the two transmission mechanism on risk markets with those credits or equities. Now there is a
00:23powerful transmission mechanism and that's energy prices. So the longer this conflict lasts and
00:29also the more the damage to the energy facility obviously the more impactful that transmission
00:37mechanism is going to be. And so when you look at the equity picture so far has it been complacent
00:42or is it resilient. So that is very interesting. I think this market has actually told us what we
00:51already knew from the past two years which is that the playbook of the risk the flight from risk to
01:02safety and the traditional safe havens are just not working anymore. I would say that equities have
01:09been calm given the situation. I would also say that that flight to the US dollar yes we've seen
01:17the US dollar the typical safe haven up what 2.4 percent versus currencies globally. That's not a lot
01:25if you consider what is happening in the world right now and it's only up three and a little bit
01:30percent
01:30versus emerging market currencies. Emerging markets would have been the typical beta trade in a situation
01:37like this. So that playbook where yields are going down because of the flight to safety it's simply not
01:43working anymore. And investors are looking more for diversification as their best way to keep their
01:50portfolios resilient. How does that story evolve if we got one of two extreme different scenarios. One
01:55there is a there's an agreement between the two sides before April the 6th. Two you see actually members
02:00of the US military on the ground in Iran. How would that how would that change your thinking those two
02:05potential outcomes. Well that that is really the issue here that we don't know what those outcomes are going
02:13to be and it's so binary right at some point this conflict is going to end. But we don't know
02:18when
02:18we don't know what what level of damage. So it is very difficult right now taking a position on the
02:23market only based on oil prices. You need to go one step beyond that. You need to still think about
02:29the
02:29longer term themes that you believe will continue to be valid after this end. And so think about this energy
02:37security is coming to the fore. It's really important the G7 are getting together. That is going to be a
02:42big part of what they're going to talk about. Think about infrastructure. There's a lot of
02:46rebuilt and also resiliency that has to be put into that infrastructure. And think about innovation.
02:52Companies are finding their markets being completely fragmented. And so innovation is going to help them
02:58to have more pricing power. Where else are you finding balance sheet resilience in this environment.
03:03You know the interesting thing is if you look at the overall indices the volatility has been quite
03:09limited given what is happening. But when you look at under those indices you look at the stocks within
03:17different sectors. The dispersion in price behavior has been significant. Think about sectors such as
03:23technology but also in consumer and industrials. And you've seen also sectors are not behaving as you
03:31would expect such as for example the energy sector as of late. So there is a lot of balance sheet
03:36resiliency
03:37but it's really and again we talked about this in the past is stock by stock security by security exercise.
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