00:00Mark, I mean, overnight developments, there was an excuse to take risk off the table into the weekend, I suppose.
00:06But markets haven't necessarily taken up that opportunity.
00:09Yes, we saw oil prices spike. They are a little elevated, but not by much.
00:12U.S. futures pointing higher.
00:13How do you think about the market's response to what has been an uptick in violence in the Strait of
00:19Hormuz?
00:22I think it makes sense. And I think we'll continue to see higher prices in equities next week.
00:27I thought that clip that you just played there of Market Voices was really outstanding and kind of summed up
00:32the situation very well.
00:34That away from the conflict, the fundamental picture is incredibly positive.
00:38We talked about this in February. Before the conflict, we said it was probably the most bullish environment ever recalled
00:43for global stocks, macro stocks.
00:45Then we got the conflict. Now, what's happened is, as outlined there by our colleague Skylar,
00:50you know that the backwardation of the curve is seeing a flattening of the curve.
00:53And therefore, that's likely to feed through longer term into the rates market.
00:56We're going to see an impact in earnings later on the year.
00:59But at the moment, we're just not seeing that kind of immediate impact.
01:03Consumers not being derailed. Earnings are staying strong.
01:06And the AI theme is just kind of glossing over where we are seeing some damage.
01:10There is some real damage already been seen, particularly in emerging markets, particularly in Asia.
01:14But that is being overshadowed or like dominated by what we're seeing from the AI sector.
01:18So I think we see higher prices next week.
01:20When does this change?
01:22Well, one is we get one big material negative catalyst.
01:24Of course, the Iran conflict can flare up at any point.
01:26But for me, I don't think that's going to happen before the Trump-She summit or that gets cancelled.
01:30I am worried about the Trump-She summit.
01:32I do think there's been the history of the Trump call where he tends to throw a curveball when markets
01:37are at their strongest.
01:38And I think given the recent gains, that's a risk into next week.
01:41But beyond that, there's not an obvious negative catalyst.
01:44I'm not sure NVIDIA earnings will really do it either.
01:46So I think, you know, we're really probably going to have to wait till the macro fundamentals get worse.
01:50And that's probably later on this year.
01:53OK.
01:54Is that, is the, what is the catalyst for that?
01:56Is it the higher oil price?
01:57Is it central banks raising rates?
01:59Can the AI trade survive a recession, Mark?
02:05Do you know, probably not.
02:07But I think we're a long way off recession.
02:08You know, what drives that?
02:10I think the whole point is the war is a genuine stagflationary impulse.
02:14Now, how powerful it is, is yet to be clear.
02:17And certainly it's not been as dramatic as we expected so far.
02:21What timeline it impacts on is also something we have to work out in certainty.
02:24It's like when we had COVID and had supply chain disruption.
02:28People struggle with the time span of when it will come through.
02:30It's definitely there.
02:31It's just how strong it is.
02:32So I might, the worry is, and I think you should overall stay, you know, very constructive.
02:37But when you want to get nervous is at some point later on this year,
02:41you've got to assume you're going to get the combination of probably worse growth dynamics
02:45as we also get higher yields.
02:47We're almost certainly going to get higher inflation prints.
02:49The higher yields dynamic is the one that's going to be scary.
02:51If that comes into strong growth, it's fine.
02:53But if it comes into a dynamic where growth is also being impacted,
02:57the consumer is being squeezed, that's when you get more worried.
02:59But that's still quite a way off.
03:00So until then, it's trade the volatility.
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