00:00We've seen an incredible rally. Guy was talking about some of the stats that really stand out.
00:03The strength of these markets, the rebound we've had has been quite incredible.
00:07We've seen we look as if we're on track for three weeks of gains of more than 3 percent on
00:11the S&P.
00:11This just doesn't happen very often. Is this sensible?
00:15Does this look proportionate to the situation on the ground?
00:19Yeah, no, I think you mentioned already we've been in this fast and furious recovery phase,
00:24kind of news flow relief, and it's probably been exacerbated a lot by technicals.
00:29I think we look at systematic investors, options positioning, hedge funds.
00:33There's been a lot of de-risking throughout this period, and there's a lot of forced re-risking.
00:37So that has contributed. Now we're all stepping back and trying to understand if this rally can continue.
00:43And I would argue that normally there's like three reasons why you want to buy a dip.
00:47The first reason is you get a major valuation or positioning flush out, and we haven't really gotten that this
00:52time around.
00:53I actually find that a lot of the investors we speak to outside of the fast money have done very
00:58little.
00:59Which is not a bad strategy around geopolitics because it's so difficult to get the twists and turns right.
01:04The second reason why you would buy the dip is a second derivative improvement in the macro data so that
01:09things don't get worse.
01:10But we're still in the process of things getting worse. We're still learning about supply disruptions.
01:14The inflationary impacts seems a bit too early.
01:17So then we come to the third reason why people would buy a dip.
01:21And this is a lot linked to whatever got you into trouble getting better.
01:25And I think that's what's at the core currently of this relief rally.
01:28Obviously oil prices, energy shock, Middle East war.
01:32And I find that we're going into the deadline next week, and we don't have necessarily incremental information compared to
01:39the fact that they're talking.
01:40So markets are taking a bit of a step back.
01:42Are we seeing a mismatch, though, between different assets?
01:45I mean, the fact that we can be so much higher on stocks and we're still, what, $30 higher on
01:51oil prices.
01:52And that's not the physical market. The physical market's way higher than that.
01:55But is there a disconnect between what those two asset classes are assuming about the economy from here?
02:02Yeah, there's multiple disconnects.
02:03I mean, first of all, you have the energy prices not coming down that much yet.
02:07You have the equity market having rallied a lot.
02:09But also what we found is credit has lagged versus equity a bit.
02:13So you start to see that there's much more divergence.
02:17Why is that?
02:18I think the equity market, first of all, is always the fastest moving asset, the one that might actually have
02:22more systematic investors as well.
02:24Systematic investors don't trade credit as a macro market.
02:27They trade equity as a macro market that might contribute.
02:30The other thing is obviously that equities are more exposed to AI, and AI has been an absolute steam train,
02:37continuing to deliver good results.
02:40Semiconductors were mentioned earlier.
02:42So from that perspective, that helps equities maybe on a relative basis a bit.
02:45But I think one thing is important is the rates market.
02:48So equity and credit, both of them have seen relief.
02:51Equity maybe a bit more.
02:52But the rates market has not retraced as much.
02:56And as was mentioned earlier, actually this morning is selling off a bit again.
03:00And in order to keep this recovery, this rally resuming, I think we need central banks to shift back to
03:07a bit to where we were before.
03:09We need the rates relief to come.
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