00:00Good morning to you. I'm not sure there is much new to say on the Fed that has not been
00:04said already in the preamble to Kevin Walsh's first meeting.
00:08But let's have a go anyway. Are you expecting still a hawkish hold? That was the expectation going into this
00:13week, it seemed, from a lot of places.
00:14I don't know whether changes in the Middle East changed that. What's your big expectation?
00:21I think there's a good chance that he'll manage to surprise by being less hawkish than expected.
00:27I'm not sure I necessarily want to call it dovish, but I think that, you know, expectations are clearly now
00:33very hawkish compared to where we were a couple of months ago,
00:36compared to where we were when Walsh was, you know, given the role.
00:40So I think that I think he might be, you know, he doesn't want to give aggressive forward guidance.
00:45That's that's a key kind of part of how he thinks about this, which means, you know, avoiding to kind
00:51of confirm the idea that the Fed is going to be higher for longer may be seen as dovish.
00:55So I think that the risk of him managing to somehow sound dovish in the press conference or or less
01:02hawkish than people are pricing is a is a serious risk out there.
01:06It is hard to have strong views on where the asymmetric risk reward is ahead of this meeting because it
01:11is his first meeting as Fed chair.
01:13So therefore, I'm very open minded. I think it's a pretty interesting one.
01:17It's going to set the game again for Fed markets, but it's not one to go in advance with a
01:21strong position.
01:23If he is dovish, how do assets react? Is it does it start with the dollar?
01:29What happens at the front end? Do stocks take off again?
01:34So I think the first thing is, is that you'll see some the front end rates come a bit lower,
01:40but I think ultimately they'll transition into a bit of a steepening move.
01:43I'm not saying long end yields go higher, but I don't think long end yields come lower as well.
01:48I think they stay stickier and I think over time you could see them drift higher because it would be
01:52a message that the Fed is is not tackling the clear inflation problem that's there.
01:56But I think that's probably a secondary move for a few days later.
01:59Short term, you see front end yields a little bit lower.
02:00You see dollar definitely a little bit softer and it supports risk assets.
02:04And I think that the backdrop, given what we're seeing on Trump determined to sign this Iran deal,
02:09given what we're seeing from SpaceX, given the likelihood of of Warsh being dovish of anything tonight,
02:14I think the momentum is still slightly positive for the stock market, but the risk reward is still terrible.
02:20I hate I hate this market at the moment, given the valuation of SpaceX, given the terrible deal that looks
02:25like it's going to be signed.
02:26But you can't be bearish right now because there's not a clear catalyst just yet.
02:31OK, and so is there more in terms of that support for the stock market, Mark?
02:35We seem to have covered the Iran story a lot this week in the in the the run up to
02:39this signing that is expected to take place on Friday.
02:42Now we have more details of the MOU. Does this have more to deliver?
02:46It's certainly some of the detail weighed on the oil price just yesterday.
02:51I think because people are so disappointed by the terms in the MOU that, you know, there's now a decent
02:59tail risk that there's a problem with it getting signed,
03:01or at least that's how people are perceiving in the market, which means that if it actually gets assigned on
03:06Friday,
03:06it has a bit more of a positive impulse to to supply. So it's not fully priced yet.
03:10I think at the moment that, you know, into next week, if it's signed, we'll see another small boost up
03:16for stocks.
03:17Of course, if it fails, that's a bit of a disaster for risk assets.
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