00:00Mark, we'll start there, shall we? The fact that the global equity markets seem unmoved, unworried perhaps by another failure
00:06to reach a resolution to the war in the Middle East.
00:10Bond markets, though, on the other hand, really do seem to care and we see yields going higher. How do
00:14we square this circle?
00:17Yeah, the resilience in European equity markets in particular is quite notable given the jump up in oil prices.
00:23But essentially, just the AI enthusiasm is kind of so strong that it's kind of adding resilience to other stock
00:30markets, that those AI stocks are powering so much further ahead that just, you know, other stocks are having to
00:37play catch up and they're not dragging the index down despite that increase in oil prices.
00:41But as you mentioned, we're actually seeing a little bit of a disconnect because yields are higher this morning. Yields
00:45are reacting to what's happening in oil markets.
00:48FX is a little bit caught in the middle. I mean, FX has been a bit more of a dead
00:51market for a long period of time now.
00:52It's not where the excitement is. But we are seeing that disconnect between bonds and equities that isn't probably long
00:58term sustainable, but short term.
01:00It just emphasizes that, you know, from a market's point of view, people have moved on from the Iran conflict
01:05until it really takes a big turn again.
01:07It doesn't matter the incremental headlines. It's either resolved or major military invasion.
01:14But apart from that, we'll just care about the AI trade.
01:18So what about the AI trade? How much longer can the Cosby keep doing what it's doing on a daily
01:22basis?
01:24Well, one of the things that's really miraculous is the Cosby's up, whatever, 230 percent since April last year.
01:31It's cheaper. It's actually, you know, basically towards the cheapest it's been in history on a forward looking PE basis.
01:40Now, basically what's happening on the earning side is much more dramatic than the nominal gains.
01:45Now, the Cosby is a unique case where, you know, you've just seen a market that's gone absolutely stellar but
01:50continues to get cheaper.
01:51But that is what's happening in the AI moment. We're in this AI bubble. We're in the inflation stage.
01:56How long will it last? I think a long time still.
01:59I think, you know, this is this is, you know, a golden era of kind of bullishness around the AI
02:04trade.
02:05We're going to get volatility from things like the Trump-Xi summit and from Iran.
02:09But ultimately, until until the AI trade collapses, then all those dips are to be bought.
02:14When the AI trade collapses, then there'll be tears.
02:19Mark, can you just let us know when that happens, please? Just ahead ahead of time.
02:22Mark, what what what do you what what which parts of the market are most sensitive to the Xi Trump
02:26meeting later this week?
02:29Yeah. Sorry, Tom, just to answer your first question, I know it's been a little bit, you know, rhetorical.
02:34But the idea is actually is the gains are going to be so strong first that you can you don't
02:39have to preempt the turn and you shouldn't try to preempt the turn.
02:42In fact, it's what you should what you should realize is that when it's a negative risk event that is
02:46AI focused, that's when you suddenly panic and turn bearish.
02:50But you don't need to preempt it.
02:51I think as to what happens, the Trump-Xi thing, again, ultimately, as long as AI is fine, I think
02:56we'll move on from whatever noise that creates.
02:58My one worry in that event is that in the in the opposite to the Fed put, we have something
03:03like the Trump call, which is this idea that when stock markets are at global highs, what he really cares
03:08about.
03:08That's when he kind of takes the risk of being more hard line and some of his other objectives.
03:12So as stocks doing so well into this meeting, I do see a scenario where maybe Trump takes a slightly
03:17harder line with Xi and that creates headline risk.
03:20But as long as AI is OK, we're OK.
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