00:00What is the strategy today? Do you buy Europe because it was beaten up? Do you buy tech because, you
00:05know, we've been loving tech even through the war?
00:07What's the focus this morning? Just before I answer that question, I just want to say, look, 27th of February
00:12is when sort of the kinetic phase of this conflict began, right?
00:16In fact, the oil market started taking notice on the 26th of January when the U.S.S. Abraham Lincoln
00:20moved into the Persian Gulf.
00:22We've had on any measure three and a half to four and a half months since then. And the markets
00:27have passed a major test, right?
00:29I mean, if the Hormuz Strait is going to be shut for three and a half months and the oil
00:33prices sort of peak at 120 and then settle at about 80.
00:36That's success. That's success. That's a major test passed. Right. If this genuinely holds, we don't we don't know that
00:42as yet.
00:43But hard data hasn't weakened considerably so far. Soft data has been weaker, but hard data hasn't. Look at earnings.
00:49Right.
00:49I mean, it's certainly better than any of us around the table would have thought. Right. Again, it's been helped
00:54by AI. Now let me answer your question.
00:57Yes. In the very near term, the sectors that would have been hurt the most with high energy prices will
01:02obviously benefit.
01:03And I think consumer cyclicals will rip. Banks, as Tom said, are going to do quite well.
01:08And this will bring people to Europe in the near term. Right. But I think that's the near term trade.
01:14Right.
01:14And the reason I think it's only a near term trade is because it's not like Europe's in distress. You're
01:19still expecting 16 percent earnings growth.
01:21You were through through the Straits of Hormuz being shut, 16 percent earnings growth in Europe.
01:25And if there's any place where data has deteriorated, it is in Europe. In the U.S., in fact, data
01:31has accelerated.
01:32So the U.S. economy is doing just fine, much as even earnings expectations in the U.S. are quite
01:38high.
01:38They are more likely to be realized than in Europe. So I do think there's a reasonable chance that Europe
01:43does very well in the near term, driven by sectors such as consumer cyclicals, driven by sectors such as financials.
01:49But I think that's a one week trade more than a more than a three month trade.
Comments