00:00Mark, good morning to you. I see that the Asian stocks are negative. U.S. futures are negative.
00:05And in particular, U.S. tech looks a little weaker this morning. Nasdaq futures on the back foot.
00:10Is this just precautionary as we head into a big data point? What's new when it comes to the tech
00:16sell-off?
00:19Yeah, it is very much tech focused. It is, I guess, a little bit kind of technical in terms of
00:25that this has been the boom era of the stock market
00:28or the boom sector. So, therefore, people are just taking a little bit of money off as they're getting a
00:33little bit more nervous.
00:34What's interesting is that some of the physical names have really suffered over the last couple of days,
00:38which was kind of the latest sector of AI to really kind of take off in recent weeks.
00:43I do think, you know, and we've talked about this a lot in the last week or two,
00:47that I think that we're now in the kind of the more problematic endgame phase of the AI bubble more
00:54generally.
00:54Now, how long does that endgame last? That's the multi-trillion dollar question that I can't pinpoint.
01:00I think, you know, in prior bubble cycles, we saw that increase in volatility as markets reached fresh all-time
01:06highs,
01:08whether in the dot-com bubble or 2008, it wasn't the stock market that made fresh all-time highs.
01:12But we saw commodity markets and emerging markets outperform as we were in that kind of end phase when markets
01:18were trading broken.
01:19I feel we're in that phase now. Does it last months? Does it last, you know, nine months?
01:24I don't know. I think it's probably only a couple of months phase.
01:27So in the very short term, yes, this is just technical ahead of CPI.
01:30People are worried about a headline print expected at 4.2 percent probably as upside risk of anything.
01:36And you're certainly seeing that in yields. You're seeing that in other assets in the reaction.
01:39We're expecting there's nervousness that yields might be going higher again.
01:42And we're going to have to really shift the narrative around what the Fed is going to do this year.
01:46So it is technical in the short term. But I think overall, the increased volatility suggests that we're in the
01:52end game phase, the AI bubble.
01:54But I emphasize that's an end game that in prior bubble phases lasted for six months, subjectively saying.
02:01So, Mark, there is more. Are you seeing more market sensitivity around this inflation print from the U.S.
02:08than maybe typically we would see, given the backdrop that you've just outlined for us?
02:13Completely in context that, like, up until last Friday's jobs data, we've been kind of ignoring macro data recently.
02:20Really, we've just been trading the AI tech bubble versus the idea of, like, what's happening in the latest U
02:25.S. and Iran headlines.
02:26And in many ways, we've kind of been quick to move beyond U.S.-Iran headlines and really focused on the
02:31AI tech bubble.
02:33Friday's jobs print changed the game. I mean, that was a very, very strong print.
02:37And it really, jobs is the one bit that people are nervous about that will kind of prevent the Fed
02:42from being backed into hiking rates.
02:45So now, with that CPI print coming on the back of that jobs print, if we do get an upside
02:51surprise today, which is very likely, there's real kind of sensitivity in this market.
02:56Now, what's interesting is we've priced in such nervousness since Friday.
02:59I actually think there's probably two-way surprise risk now.
03:03I'm not sure it's quite as asymmetric as I would have said maybe a few days ago.
03:07And I reiterate, my narrative for the Fed is either they're probably on hold or they hike multiple times.
03:13Because I think by the time they get backed in, forced into doing a hike, that means they are acknowledging
03:17they're behind the curve and they'll have to go multiple steps.
03:19So it's a little bit binary on the rates path as well.
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