00:00You're constructive on stocks to some degree. It's really constructive on global equities,
00:05but not over the next week or two, but over the next six to 12 months. Right. And really what
00:11is
00:12happening right now in the market, we have to put it in the context of what has happened
00:16in the past few months. So global equities are 10 percent up in the first half of the year,
00:22despite all the all the negative news flow that we've had and potential economic shock via higher
00:29energy. And yet we are up. Right. Major indices around the world are hitting or are close to all
00:37time highs. So some pause was really inevitable. And of course, as we've been coming out of this
00:45economic potential pressures via higher oil, the market has started to hope for some broadening,
00:53the long awaited broadening. Now, for that to happen, you need to have some rotations and rotations
00:59tend to happen in quite a violent way sometimes. And this is what we are seeing right now. So stepping
01:07away from the near term volatility, the question is over the next six to 12 months, do you want
01:12to own stocks? And the answer is most likely yes. OK. And so to see broadening then, Beata,
01:19do we have to see we have to see some reasons to be excited about things other than tech?
01:24But do we also have to see tech underperform then? Is that a feature of broadening? And we
01:28shouldn't necessarily see that as a as a huge negative then? Yes. In theory, yes. So you should
01:34have two conditions. Number one, you need to see signs that from macro fundamental
01:39perspective, this broadening to other sectors is plausible. We are seeing a lot of that right now.
01:46And the other one is, of course, you want to you should see tech being on pause, but not really
01:54selling off too much not to drag the market down. Right. So there is still a question mark how this
01:59is
01:59going to resolve in the very short term. But in terms of the signs of broadening, city economic surprise
02:05indices picking up everywhere in Europe, actually the strongest deltas and historically that correlates
02:11quite well with a relative outperformance of Europe. And that has been happening in the past few weeks
02:17for other reasons as well. And then what is the most encouraging and that's the most encouraging,
02:23especially in Europe, but is happening around the world is the dynamics, the latest dynamics in the
02:29earnings revisions. So the direction of the analysis forecast, are they upgrading or are they
02:35downgrading? So earnings revisions actually have been picking up for a few weeks, but they've been
02:40picking up until recently via just upgrades to tech or commodities. So what we are seeing right now is
02:47interesting. So we have three dimensions of positivity. Number one, the levels actually European
02:55area on Monday has hit almost all time high. So 30 percent, only a handful of times was it around
03:02these levels or higher. So from that perspective, you could say, well, maybe it's not going to go much
03:08higher as we are almost there. But there comes the second dimension, which is breadth. So 80 percent of
03:15sectors in Europe are seeing upgrades right now. And this broadening we are seeing in other sectors
03:22around the world. And it tends to be a good lead on outperformance of cyclicality over the next
03:27three to six months. And the final, very important, all of these upgrades have been happening against
03:34negative seasonal trends. So in pre-reporting season, four weeks into the reporting season,
03:40you should start seeing downgrades. We've been seeing big upgrades. And again, that's a good lead
03:44on upgrades continuing.
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