00:00There are idiosyncratic factors that are driving the Korean stock market in particular,
00:04most notably the ample leverage in the system.
00:07And yes, we are seeing a high degree of correlation with the U.S. Nasdaq.
00:11But I think at this juncture, we're not overly concerned about drawdowns in the tech space.
00:16And that's largely because of the earnings backdrop does remain exceptionally robust.
00:21There's questions around the return on investment from a lot of this CapEx spend,
00:26but we're not yet seeing signs of cracks there.
00:28And even if we look at margin expansion, really it's being driven by tech.
00:33So not any meaningful concerns.
00:35The key risk, I think, to watch for is when we see that first hyperscaler signal they're going to pull
00:41back on CapEx.
00:42I think that's when we could start to see some of this momentum really start to falter.
00:47Yeah, it's interesting, isn't it?
00:48As we look ahead to so many earnings reports from these hyperscalers, Laura,
00:52you're pointing to the CapEx number, which I'm sure is where everybody is focused.
00:56But it's hard to know how the market is going to receive these CapEx numbers.
00:59Because on the one hand, if you give a big number, does that express confidence?
01:03But also then does that make people nervous about how much you're spending and how quickly?
01:07So is there kind of a Goldilocks hope when it comes to CapEx and hyperscalers?
01:12I don't know how they get it right this earnings season.
01:14Well, and it's a key question for investors.
01:16You know, how much patience do they have before they start to see real meaningful returns on some of this
01:21investment?
01:22So far, investors seem to be continuing to want to bet on these big AI ambitions.
01:27And I think that's going to continue to dominate.
01:30If we take a step back, though, and look at valuations, we are seeing valuations come off their June peaks,
01:35but still well above the five-year, 10-year averages, looking at that S&P 500.
01:40So I don't think we're going to see these AI ambitions really drive more multiples expansion.
01:46It's really going to come from that earnings backdrop.
01:48And because tech continues to show such robust earnings, we think that's going to continue to drive the market higher.
01:56Albeit we're going to see these bouts of volatility, particularly in August, when we're going to see lighter liquidity.
02:02And we'll think more about the European earnings season in just a moment.
02:04But I wonder how the central bank narrative then rubs up against the tech story.
02:08Because do we think that the tech narrative is robust enough to withstand higher interest rates?
02:14And will they come from the Fed even as soon as this week, Laura?
02:17What's your thinking?
02:17There's two great questions in there.
02:19I think on the one hand, you know, the hyperscalers and the amount that they're tapping into the debt capital
02:23markets in particular,
02:25at the longer date of the curve, that's actually adding to this higher for longer yield backdrop.
02:31So that does add a little bit of a conundrum, let's say, for the Fed.
02:34But I think the Fed is going to be really the key event risk of the week.
02:38And that's because very unusually markets are pricing in, you know, about a third chance that they could hike.
02:45That's double where they were a week ago.
02:47And that's very unusual.
02:49If we look over the past decade or so, the Fed has well telegraphed what the moves could be.
02:54And so I think this is investors having to grapple with this new worse regime of no Fed guidance.
03:00So I really am watching for that great decision tomorrow.
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