00:00Just hearing there about the Japanese story, the role that Japanese bond markets are playing
00:03is a really interesting one right now. Looking at the US Treasury market though, 4.6% on the 10
00:08year. We spoke to a guest earlier on who was talking about, you know, this likely to go to
00:125% in his view and even that might not encourage him into the market. How are you thinking about
00:17the global bond conversation at this stage? Well, first of all, a longer term view, I completely
00:24agree with that guest. I think ultimately yields are going a lot higher. I just think this does
00:30not happen rapidly or in a straight line. I've had that view for the last, you know, number of years
00:35and I think, you know, we're going into a much higher range and that plays out over years. And
00:39the reason that is, is that ultimately there are a lot of people who are income collectors who will
00:43basically seize jumps in yields as a chance to just buy into long-term bonds. So the kind of
00:49transition to a higher yield environment takes place over months and if not years. But I think
00:55we do need to move into that world. In the short term, I don't think bonds are quite out of
00:59the
00:59current sell-off just yet. We've paused in the short term. I think some of the political concerns
01:04in the UK have damped down a little bit with, you know, the comments from Mandy Burnham last night
01:08about being a little bit more fiscally restrained or expressing sentiment in that regard. And also
01:14Trump, again, providing some people who I think are real optimists out there that there might be
01:19a diplomatic solution to the Strait of Ramos. So it's temporarily paused. But I think this sell-off
01:24has more to go in the short term. Then we'll get those dip buyers and bonds. But later on this
01:28year,
01:28yeah, we'll see much higher yields again. How do stocks do if yields are going higher over the long
01:33term? So I actually think that stocks can cope okay with higher yields if it's for the right reason.
01:43If that's because the economy is doing really well, then that's actually okay. Now, the problem is,
01:49we have higher yields for some good reasons. There is a relatively resilient and strong economy. And
01:55we've got a lot of spending in the AI space, which is driving the K-shaped economy or supporting the
02:00K-shaped economy. But we also have higher yields for a lot of bad reasons. We have the supply-side
02:04inflation shock, which isn't being resolved. And we have fiscal concerns. So that's an image to say
02:11that I think it's going to ebb and flow. Ultimately, higher yields are bad for stocks. But it's maybe
02:16less dramatic kind of at some binary level. I will say that given the move higher yields the last
02:21couple of weeks, I actually think right now bonds are closer to the dip buying moment than stocks.
02:27We talked about this yesterday. I think we're now in a couple of weeks where stocks can retrench a
02:31bit only in context of the extraordinary gains. This is not the end of the bubble. The dip will be
02:35bought again. But the dip won't be bought that quickly.
02:39Mark, I was going to follow with that, with what the dip buying impulse will be, particularly when it
02:43comes to the semis and the sell-off that we've seen in the US and Asia today as well. You
02:46think
02:46that could happen, but maybe at a more moderated pace?
02:51Yeah, I just think you've got to put it in context of two things. One is we've just seen
02:56extraordinary gains. So quite sizable headline pullbacks will still leave us like massively up
03:03on any reasonable look back window. So it's not kind of blowing up this kind of this
03:08bubblicious bull market we're seeing in this sector. We've also got just massive
03:13herding because everyone's using the same AI advice for these trades. So that's why I
03:18think it can be quite painful. It'll clean out the first initial dip buyers who then
03:22get cleaned out. So maybe this lasts a few weeks this time.
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