00:00Broadly speaking, you are overweight risk because you still think that growth is very positive,
00:05labour market data remains supportive, and AI investment continues.
00:09So that's a positive cocktail for you.
00:12For how long does that cocktail endure, do you think?
00:15Well, it's been going on for three years, frankly, right?
00:17And we've been overweight risk for three years on exactly that.
00:21Not that there haven't been risks, not that there haven't been lots of things to worry about,
00:24as they are today, but frankly, the underlying macro picture has been so supportive.
00:29And that's been really, really good for earnings.
00:31The AI trade is adding a huge multiplier effect on top of everything else.
00:36And for the foreseeable future, that continues.
00:38Everything that we've heard in the earnings reports would suggest that this carries on for now.
00:42OK. And what would make you question that?
00:44What would make you turn more cautious?
00:46I'm thinking in particular, you said about CapEx and AI CapEx.
00:49What is it specifically about AI CapEx that improves our risk sentiments and what detracts?
00:55Because it seemed to be, in particular, the cloud providers that were met with positive market response to their earnings.
01:02So what are you watching for in AI?
01:04Look, we obviously are at the heart of everything right now is this positive macro story.
01:08An enormous contributor to that is this AI story, right?
01:12So we're talking about in the U.S. alone something like two or three percentage points of GDP growth being
01:17generated
01:18just by this, you know, seven, eight hundred, almost a trillion dollars worth of AI spending every year.
01:23Now, if that starts to reverse or go the other way, it's the opposite of the multiplier.
01:27It becomes the divider effect, right?
01:29And then suddenly the chances of recession, slowdown, labor market weakness, et cetera, start to exacerbate.
01:35That's the biggest risk, right, is recession.
01:37And AI is a massive contributor to that.
01:40In addition, you know, obviously we are clearly, like everybody else, focused on what's happening in the geopolitics of the
01:47world.
01:47Who knows, right?
01:49We're on our 10th round of, you know, negotiations or whatever, and it's been going on for a while.
01:54At some point, you know, the boy that cries wolf is clearly, you know, the parable that comes to mind.
01:58But that's the other worry that's on the horizon.
02:01Not so much because of the geopolitical tensions being what they are, but clearly it's impact on inflation.
02:06That is, and the monetary paradigm that may result, is the other big worry.
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