00:00Max Kettner of HSBC writing the close to 100% EPS beat rate coupled with strong forward guidance of the
00:06U.S. tech sector in Q1 is cushioning the overall equity market.
00:10Max joins us now for more. Max, we've talked about it repeatedly. Max Kettner, Max Overweight.
00:15And Max, we got into your danger zone at one point in this bond market. This market didn't blink. What
00:20gives?
00:22Yeah, look, thanks for having me, John. I think the danger zone for now, at least we can ignore it.
00:27We can ignore these higher yields because there's a couple of things, I think, happening over the last two, three
00:32months.
00:32We've obviously seen yields start to go up in treasuries in conjunction with that much, much better earnings season.
00:40You guys were just bringing up that tech had an almost 100% beat rate.
00:44So almost all of the companies and tech surprising to the upside.
00:47I would look also at the worst beat rate. If you look at telcos, telcos had an earnings beat rate
00:51that was just the average beat rate of the S&P in the 2010s.
00:55That, at the moment, is the worst beat rate across the sectors.
00:59That's how strong and how broad-based of a reporting season and of upside surprises we had.
01:06And that, of course, was cushioning really the equity market and risk assets overall.
01:11And that made us maybe care a little less about higher yields.
01:14The other thing that I would say is, if you look at yield increases in the last few years, where
01:19we went into that danger zone, where yields really were popping a little bit too quickly, where the velocity was
01:25much more vicious, that actually was seeing volatility in rates way, way higher.
01:30When you look at the move index, we've only spiked to around 80.
01:32In the last couple of episodes, we spiked to around 130, 140, even 180.
01:37Now, the high was only at about 80 in the move index.
01:40So that lower equity vol also really led to a little bit of less of a multiple compression.
01:47So to me, that is perfectly rational, what the equity market spreads and the broader risk asset complex have done
01:53in the last few weeks.
01:54Más.
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