WEBVTT - Surveillance: Weighing Equities with Kettner 0:00:05.120 --> 0:00:09.280 Welcome to the Bloombergs Surveillance Podcast. Hometim Keene along with 0:00:09.440 --> 0:00:13.080 Jonathan Ferrill and Lisa A. Brown Witz Jaylie, we bring 0:00:13.119 --> 0:00:17.119 you insight from the best an economics, finance, investment and 0:00:17.239 --> 0:00:23.320 international relations, Fine Bloomberg Surveillance and Apple podcast, SoundCloud, Bloomberg 0:00:23.360 --> 0:00:29.160 dot Com, and of course on the Bloomberg terminal. Let's 0:00:29.160 --> 0:00:32.159 set the stage. We come into three. The consensus is 0:00:32.159 --> 0:00:34.199 pretty clear. The first half is gonna be tough. We've 0:00:34.200 --> 0:00:36.160 gotta pay the bill for the tightening of the last 0:00:36.159 --> 0:00:38.240 twelve months. Got it. Second half is gonna be better. 0:00:38.400 --> 0:00:41.360 You get a recovery. The year starts boom, everyone's wrong. 0:00:41.560 --> 0:00:43.760 Then that's Stack one hundreds up about eight percent year 0:00:43.760 --> 0:00:47.160 to day, the stocks fifty, the euro stocks fifty here 0:00:47.159 --> 0:00:49.440 in Europe is up about nine percent year today. Max 0:00:49.520 --> 0:00:54.120 Kenna of HSBC said, get on board. Max joins us. Now, Max, 0:00:54.120 --> 0:00:55.840 I have to say once I new is coming to 0:00:55.880 --> 0:00:57.240 London for a week. You were the man I wanted 0:00:57.280 --> 0:00:59.280 to catch up with that note from a couple of 0:00:59.280 --> 0:01:01.680 weeks ago, and I'll share the quote with our audience 0:01:01.760 --> 0:01:03.600 just in case they missed it. So he bears the 0:01:03.600 --> 0:01:07.000 whole of twenty two super underweight max underweight. Then you 0:01:07.040 --> 0:01:09.520 said this to start twenty three having been staunched bear 0:01:09.560 --> 0:01:11.759 so much of twenty two we think the consensus is wrong. 0:01:12.000 --> 0:01:14.040 We see a variety of reasons to be less bearish 0:01:14.080 --> 0:01:16.720 on risk assets in the first half. So let's talk 0:01:16.720 --> 0:01:18.240 about what you see so far. Do you like what 0:01:18.319 --> 0:01:20.640 you see so far? So far? I think yes, But 0:01:20.680 --> 0:01:22.200 we've got to be honest and also say there has 0:01:22.240 --> 0:01:24.559 been some you know, some easing also on the bond 0:01:24.600 --> 0:01:27.280 side of things, right, So it's not just been cyclical strength, 0:01:27.280 --> 0:01:29.520 but it's also been strength on the bond side of things. 0:01:29.560 --> 0:01:32.440 So that has been taken pretty positively, I would say 0:01:32.480 --> 0:01:34.280 by risk acters as well. That's part of the reason 0:01:34.319 --> 0:01:37.039 also why the nastag was out performing, why growth and 0:01:37.120 --> 0:01:39.400 text dogs were out of performing. Now, I do think 0:01:39.400 --> 0:01:42.000 if we look at the consensus, right, I do think, look, 0:01:42.040 --> 0:01:45.400 we've got very pessimistic expectations. I think everyone is saying, look, 0:01:45.560 --> 0:01:48.520 earnings expectations are still too high. I don't disagree with that, 0:01:48.560 --> 0:01:51.520 but I disagree with the sequencing. I disagree with the 0:01:51.560 --> 0:01:54.559 timing right, because if we've got pretty much everyone agreeing 0:01:54.600 --> 0:01:56.840 that age one is going to be tough if we've 0:01:56.880 --> 0:02:00.200 got you know, economists agreeing like they've never agreed before. 0:02:00.240 --> 0:02:02.480 Look at the Philadelphia Fed survey right on this, on 0:02:02.480 --> 0:02:05.720 this recession probability that's on like as the highest in 0:02:05.840 --> 0:02:09.160 fifty years. So we've got consensus agreeing on the probability 0:02:09.160 --> 0:02:11.760 of a recession, on the factors driving it, and on 0:02:11.840 --> 0:02:15.160 the timing. Now, what's the dime downside surprise? Then? Right? 0:02:15.240 --> 0:02:17.959 What's the downside surprise to earnings? If you've seen a 0:02:18.040 --> 0:02:21.440 queue for and now in Q one those earnings revisions 0:02:21.480 --> 0:02:25.040 down what's particularly in the cyclicals, in consumer discrestion, in materials, 0:02:25.080 --> 0:02:28.600 in the megacaptain, I T and communication services, so exactly 0:02:28.600 --> 0:02:30.880 where we want to see them, what's the what's the 0:02:30.919 --> 0:02:33.919 actual downside surprice? Now I would I would argue, look, 0:02:33.960 --> 0:02:36.200 if we get an average recession, right, it's not going 0:02:36.240 --> 0:02:38.520 to blow anyone's boats. It's not going to be like, 0:02:38.520 --> 0:02:41.200 oh yeah, this is a massive surprise, you know, this 0:02:41.240 --> 0:02:43.000 is this is why we need to get baris No, 0:02:43.160 --> 0:02:45.200 not at all. Actually, what we need now is we 0:02:45.240 --> 0:02:49.120 need to get something properly going wrong right well, and 0:02:49.160 --> 0:02:51.640 we need to have something break. Then you can be barish. 0:02:51.720 --> 0:02:53.840 You clearly thought it was upside risk. We've got a 0:02:53.840 --> 0:02:56.200 squeeze right now, that's clear. I'm trying to work out 0:02:56.280 --> 0:02:58.800 one of the durable tail with for this market. I 0:02:58.840 --> 0:03:00.760 get it. Everything you've said had a lot of people 0:03:00.800 --> 0:03:03.480 on board with it. What's durable about what we're saying. 0:03:03.840 --> 0:03:06.800 I think it's still durable because sentiment and positioning is 0:03:06.840 --> 0:03:09.720 still so, you know, so down beat. I mean, let's 0:03:09.720 --> 0:03:13.280 not forget. We've just updated our sort of aggregatet real 0:03:13.320 --> 0:03:17.320 money invested positioning study on Monday, and that still shows 0:03:17.639 --> 0:03:20.800 underweight positions on aggregate in equities and in high yield credit. 0:03:21.080 --> 0:03:24.119 That's normally not the case, right, That's historically been rarely 0:03:24.200 --> 0:03:27.399 the case that you see outright underweight positions. You see 0:03:27.440 --> 0:03:28.720 the same thing, right If you look at c t 0:03:28.840 --> 0:03:31.800 A equity beaters, they're still down. Yes, they've gone up 0:03:31.800 --> 0:03:34.360 a bit, but there's still on the in level terms, 0:03:34.360 --> 0:03:36.840 still down. Look at equity beaters of u as equality 0:03:36.840 --> 0:03:40.640 funds massively underweight, multi acid fund beaters are sort of average. 0:03:41.040 --> 0:03:43.440 None of that is telling us, oh yeah, like everyone's 0:03:43.440 --> 0:03:45.840 already gone bullish. And if anything, when we talk to 0:03:45.880 --> 0:03:48.160 clients in the last of two three weeks, the biggest 0:03:48.160 --> 0:03:50.640 pushback we've got was, well, I know that everyone else 0:03:50.720 --> 0:03:53.160 is already bullish, Therefore I have to continue to be 0:03:54.280 --> 0:03:56.920 let's break this up Equodi's versus credit and Star with equities, 0:03:57.200 --> 0:04:00.400 Microsoft desmonic or rather after the close yesterday, how many 0:04:00.440 --> 0:04:02.960 messages did you get saying look at Microsoft, you're runk. 0:04:03.240 --> 0:04:06.600 What did you say back? Now? Look, I mean what 0:04:06.640 --> 0:04:09.160 I would say is it's not the time yet to 0:04:09.240 --> 0:04:12.640 go full on max overweight equities. Right with that, I agree, 0:04:13.120 --> 0:04:15.640 But that is mostly very very tactical because look at 0:04:15.640 --> 0:04:17.920 what's priceton for the FIT for the next two meetings. 0:04:18.160 --> 0:04:20.920 We've got less than fifty basis points priced in into 0:04:20.960 --> 0:04:23.920 FIT funds now cumulatively from the next two meetings. So 0:04:23.960 --> 0:04:26.040 they're just gonna come out next week and say, look, 0:04:26.040 --> 0:04:29.919 we're gonna go go, but we'll do another in March. Right, 0:04:29.960 --> 0:04:32.400 they're going to guide us to towards that, And even 0:04:32.400 --> 0:04:35.560 that would already be a slightly hawkish surprise, and that 0:04:35.560 --> 0:04:38.400 would weigh on high multiple tech stocks and so on. Right, 0:04:38.440 --> 0:04:40.960 it would weigh on valuations again, perhaps a bit of 0:04:40.960 --> 0:04:42.760 a higher rates well, but a bit of higher real 0:04:42.839 --> 0:04:45.800 rates than that means than weighing on multiples in tech, 0:04:46.240 --> 0:04:49.880 so very tactically. I don't like equities like you know, 0:04:50.040 --> 0:04:53.800 I'm not massively massively bullish on equities just yet. I 0:04:53.839 --> 0:04:57.400 would say in a modeling through scenario right where you say, look, 0:04:57.440 --> 0:04:59.760 it's gonna be not neither here or there, right, we 0:05:00.040 --> 0:05:02.760 uddling through in terms of growth, slow grind lower rather 0:05:02.800 --> 0:05:05.760 than really a swoshdown and the recovery and H two. 0:05:06.120 --> 0:05:08.720 That means that credit, you know how yeld credit is fine. 0:05:08.800 --> 0:05:11.520 Emerging market debt is fine. I G debt is fine. Right, 0:05:11.600 --> 0:05:14.400 all of that you just turn over the carry. That's fine. Well, 0:05:14.440 --> 0:05:17.000 let's talk about emerging markets, and let's talk about credit 0:05:17.160 --> 0:05:19.919 emerging markets. I think it was more constandy investment management yesterday. 0:05:20.040 --> 0:05:22.720 Get on board, They're not alone. That's quickly becoming consensus 0:05:22.760 --> 0:05:25.679 em international outperforms. Can we talk about domestic US credit? 0:05:26.160 --> 0:05:29.200 Triple C's City came out yesterday, and I have to 0:05:29.200 --> 0:05:31.719 say it was a nuanced report, but the headline is 0:05:31.760 --> 0:05:33.680 by Triple CS, how much risk do you want to 0:05:33.720 --> 0:05:35.680 take in credit? Do you want to go right to 0:05:35.720 --> 0:05:37.719 the bottom of the quality stack and get into high 0:05:37.760 --> 0:05:40.520 yield in Triple CS? Yeah? I think that doesn't make sense. 0:05:40.520 --> 0:05:42.440 To an extent. Right, if we look at triple Bees 0:05:42.760 --> 0:05:46.680 versus single A's and we compare that against P. M. Myers, 0:05:47.120 --> 0:05:49.240 there is actually much less weakness price. Then if you 0:05:49.240 --> 0:05:52.240 look at triple cs versus double Bees, that looks you know, 0:05:52.240 --> 0:05:55.640 it looks much fairer priced relative to where macro indicators on. 0:05:56.040 --> 0:05:58.279 So there you could actually argue, well, the weakness as price, 0:05:58.360 --> 0:06:00.719 particularly if you compare it right with then high yield, 0:06:00.920 --> 0:06:04.000 that weakness is pretty much under price. So that's good, right, 0:06:04.279 --> 0:06:06.160 it would be much worrying I think if we talk 0:06:06.240 --> 0:06:08.719 about the macro side of things as well. One of 0:06:08.720 --> 0:06:11.279 the pushbacks we got is I remember we had a 0:06:11.320 --> 0:06:13.440 note doubt, and you know, people said, but look at 0:06:13.480 --> 0:06:15.679 the I M look at the services or something. He orders, 0:06:15.680 --> 0:06:20.719 it's forty credit with turn more constructive. Now. My answer 0:06:20.800 --> 0:06:24.120 is very simple. I wouldn't turn constructive. It was if 0:06:24.160 --> 0:06:26.600 it was still at fifty five or sixty, because then 0:06:26.640 --> 0:06:29.200 now leading indicators would still point out and we'd say, 0:06:29.360 --> 0:06:32.159 hey we've got another ten fifteen points lower. Be careful 0:06:32.279 --> 0:06:34.440 now you're at forty five. I look at him like, well, 0:06:34.480 --> 0:06:37.039 this is exactly what I wanted to see done. Right, 0:06:37.200 --> 0:06:39.480 Let's get on Max Kenny, You make it sounds simple, 0:06:39.680 --> 0:06:41.760 it's not. We've got a challenging year ahead of ahs 0:06:41.839 --> 0:06:54.960 v C. Max Kenner there of HSPC has framed the 0:06:55.000 --> 0:06:57.920 last twelve months. This is important. We've been wrestling worldwide 0:06:58.040 --> 0:07:00.400 with inflation and central banks have made a move. The 0:07:00.480 --> 0:07:02.400 u c B has gone to fifty, the Bank of 0:07:02.440 --> 0:07:04.880 England's gone to three fifty, the Fellow Reserve has gone 0:07:04.920 --> 0:07:08.160 to four fifty. The Bank of Japan, the b o J, 0:07:08.400 --> 0:07:11.440 has done absolutely nothing. Is that going to change this year? 0:07:11.520 --> 0:07:13.800 Jane Furley of Rabbit Bank alongside us and the beating 0:07:13.800 --> 0:07:15.880 card of foreign Exchange, Jane, fantastic, the catch up with you. 0:07:15.960 --> 0:07:18.520 Let's start there sub zero with the b J. Is 0:07:18.520 --> 0:07:20.520 that going to change this year? You know it might, 0:07:21.040 --> 0:07:22.840 but it might not. And I think that's the really 0:07:22.880 --> 0:07:25.440 crucial here, crucial point here because if we saw, you know, 0:07:25.480 --> 0:07:28.240 the meeting in January, it's all speculators all egging on 0:07:28.320 --> 0:07:30.160 for a change in your curve control, and what do 0:07:30.200 --> 0:07:32.760 they get? Nothing? And I think this is the risk 0:07:33.520 --> 0:07:35.280 the market is now assuming that we're going to get 0:07:35.280 --> 0:07:37.960 a replacement for Corroda in in April. Of course, as 0:07:37.960 --> 0:07:40.120 he steps back and they're assuming that we're going to 0:07:40.200 --> 0:07:44.000 get maybe a significant change in policy. We might get 0:07:44.040 --> 0:07:46.640 a change in policy, but it may not be significant, 0:07:46.680 --> 0:07:49.320 and that's the point. We might get another tweek two 0:07:49.320 --> 0:07:52.160 your curve control. We may get an interest rate high. 0:07:52.240 --> 0:07:54.040 We may not because if you look at the type 0:07:54.040 --> 0:07:55.920 frame for the Bank of Japan, they're probably not going 0:07:55.960 --> 0:07:58.000 to be hiking interest rates next year, when, for instance 0:07:58.000 --> 0:08:00.480 of the FED could be easy in another central So 0:08:00.520 --> 0:08:02.120 you know you've got a limited time frame. But then 0:08:02.160 --> 0:08:06.080 you look at the fundamentals. At the fundamentals, yes, inflation 0:08:06.240 --> 0:08:09.120 is above its target, but only because import prices are 0:08:09.160 --> 0:08:12.320 not because it's domestically generated, which is the golden goose 0:08:12.440 --> 0:08:15.760 for the Bank of Japan. And if Corona gets replaced, 0:08:15.800 --> 0:08:17.920 as a very good chance that he gets replaced, maybe 0:08:17.920 --> 0:08:20.320 by one of his deputies, maybe by somebody else from 0:08:20.320 --> 0:08:22.360 the Bank of Japan, all of which have been supportive 0:08:22.440 --> 0:08:25.160 of the very accommodative policies for a long time, so 0:08:25.440 --> 0:08:27.440 disappointment could be coming. Well, let's pick up on what 0:08:27.480 --> 0:08:29.240 you just said, is the replacement. I think that's what 0:08:29.560 --> 0:08:32.080 everyone's attention. The fact that we have this final meeting 0:08:32.320 --> 0:08:35.400 with Corona in March and then the handoff in April, 0:08:35.640 --> 0:08:39.600 which chalice carries the most poison? Does Governor Corona handover 0:08:39.679 --> 0:08:42.640 policy already sit on a path to move away from 0:08:42.679 --> 0:08:45.319 your curve control and towards higher interest rates? Or is 0:08:45.320 --> 0:08:48.240 he handover what there is right now? Which chalice carries 0:08:48.240 --> 0:08:50.360 the most poison? I think it depends on the outcome 0:08:50.400 --> 0:08:53.000 of the Spring wag Weight rounds, really, and you know 0:08:53.040 --> 0:08:55.480 that the indicators are that, yes, the Spring ray Weight 0:08:55.640 --> 0:08:59.040 rounds are going to bring some moderate increase in domestically 0:08:59.080 --> 0:09:01.600 generated inflation age in plation, which is what they wanted 0:09:01.640 --> 0:09:05.120 to see. And you know that could lay the framework 0:09:05.160 --> 0:09:07.600 for a change in your co control and another tweak. 0:09:07.960 --> 0:09:10.200 Will it lay the phonework for a change in interest 0:09:10.240 --> 0:09:12.559 rate policy? You know that's a little bit further down 0:09:12.559 --> 0:09:14.480 the line. I don't think we can make that decision yet. 0:09:15.320 --> 0:09:18.600 But you know that the the the Corona might be 0:09:18.720 --> 0:09:21.040 leading the Bank of Japan, but he leaves it with 0:09:21.040 --> 0:09:24.640 a whole board, and that board won't necessarily be changed 0:09:24.720 --> 0:09:27.080 that much. So I think there is not going to 0:09:27.120 --> 0:09:30.520 be this massive change towards a very hawkish central bank. 0:09:30.720 --> 0:09:33.680 You may get a slightly less dubbish central bank. The 0:09:33.679 --> 0:09:36.400 perspective within the BOJ was that this was perhaps a 0:09:36.520 --> 0:09:40.080 once in a generation opportunity to reset inflation and expectations higher. 0:09:40.480 --> 0:09:42.160 He's been doing this now for ten years. I think 0:09:42.160 --> 0:09:44.040 we all remember when he took this on back in 0:09:45.480 --> 0:09:49.840 Does he leave walk away with any success whatsoever? I 0:09:49.880 --> 0:09:52.440 think there is some success. I mean again that that 0:09:52.520 --> 0:09:54.640 hurts back to that the whole Peter Pan issue, that 0:09:54.720 --> 0:09:57.000 the whole psychological issue, that he thought that if you 0:09:57.040 --> 0:10:00.560 would bring in an inflation target, people would assume inflation 0:10:00.640 --> 0:10:03.920 might be higher and they would alter their spending behavior accordingly. 0:10:03.960 --> 0:10:05.880 But as we know, that really has taken a very 0:10:05.880 --> 0:10:09.080 long time. But you know, with inflation around the globe, 0:10:09.480 --> 0:10:11.920 this perhaps has given a little bit of an inPulse 0:10:12.440 --> 0:10:15.440 impetus into inflation. So there is a little bit here. 0:10:15.720 --> 0:10:18.920 You've got the government of the Bank of Japan behind Coroda. 0:10:19.280 --> 0:10:21.920 You've got the Prime Minister saying to fans, yeah, you know, guys, 0:10:22.000 --> 0:10:25.880 you need to raise wages, and therefore you get what 0:10:25.920 --> 0:10:29.040 they're looking for, which is a virtuous circle behind higher wages, 0:10:29.120 --> 0:10:32.960 high domestic demand, higher profitability, etcetera. And there are some 0:10:33.080 --> 0:10:36.040 glimmers of optimism that this might be coming but I 0:10:36.080 --> 0:10:38.760 don't think there's a huge amount of confidence that they're 0:10:38.760 --> 0:10:41.439 there yet, Hence the cautious take you've implied there could 0:10:41.480 --> 0:10:44.720 be some disappointment Dolly's come back from one fifty subone 0:10:44.760 --> 0:10:48.240 thirty about right now, push that through the ethics market 0:10:48.280 --> 0:10:50.240 for me, where does that leave Dolly, Anne, I think 0:10:50.240 --> 0:10:52.440 we can still see one in three months. Of course 0:10:52.480 --> 0:10:55.199 we we are, assuming it was the dollar is weak 0:10:55.240 --> 0:10:57.360 and that's perhaps a large part of that movement back 0:10:57.360 --> 0:11:00.319 from one fifty, So you know, is possible, can say, 0:11:00.400 --> 0:11:02.720 you know, there is the possibility of another movement, another 0:11:02.720 --> 0:11:05.679 tweak in your curve control, maybe some indication that they 0:11:05.679 --> 0:11:07.719 could move away from that in the months ahead. But 0:11:07.760 --> 0:11:10.119 the problem is again is that the wind of opportunity 0:11:10.320 --> 0:11:13.280 is quite short. So is possible, you know, maybe even 0:11:13.280 --> 0:11:15.640 one six and in the middle of the year, But 0:11:15.720 --> 0:11:18.280 I don't think we're going to be, you know, falling 0:11:18.640 --> 0:11:22.080 hugely in Dolly. And you mentioned the U. S. Dollar. 0:11:22.120 --> 0:11:24.840 I remember Tom, Lisa and I sitting here with you 0:11:24.920 --> 0:11:27.240 maybe in September. I think it was back end of 0:11:27.320 --> 0:11:29.400 September we were looking at cable at one oh three 0:11:29.720 --> 0:11:34.280 fifty strong dollar Euro dollar ninety five something strong dollar. 0:11:34.360 --> 0:11:36.000 It's all back away since then. I think it's been 0:11:36.040 --> 0:11:39.240 a ten eleven move on the x y. I'm sitting 0:11:39.280 --> 0:11:42.000 here this week trying to work out what's durable about 0:11:42.040 --> 0:11:44.520 all of this, particularly for euro dollar. I know there 0:11:44.559 --> 0:11:46.520 is a positive surprise. I know that we've got that 0:11:46.559 --> 0:11:48.840 adjustment as we move away from the risk of recession. 0:11:49.320 --> 0:11:51.760 What's durable about these tail winds that we're seeing start 0:11:51.800 --> 0:11:54.120 to build? Well, you know, I think this is really 0:11:54.160 --> 0:11:56.160 particularly interesting when you come to the Euro part of 0:11:56.400 --> 0:11:58.840 euro dollar, because you know, the market has now priced 0:11:58.840 --> 0:12:02.080 in a much better situation then was it was supposed 0:12:02.120 --> 0:12:04.360 to be. We were supposed to be in recession for Germany, 0:12:04.440 --> 0:12:08.120 and now we've got the Schultz the chancellor last week, 0:12:08.160 --> 0:12:11.080 so no recession for Germany. We've got the governors of 0:12:11.120 --> 0:12:12.800 the Bank of France, the governors at the Bank of 0:12:12.800 --> 0:12:16.160 Italy saying, yeah, you know, our outlooks are improving. You 0:12:16.160 --> 0:12:18.480 look at the performance of European stocks this year relative 0:12:18.520 --> 0:12:20.840 to US, so that the market has been buying into 0:12:20.880 --> 0:12:23.640 this far better than expected story for Europe, and we've 0:12:23.640 --> 0:12:25.679 got euro dollar in a touching this week at at 0:12:25.760 --> 0:12:28.360 one oh nine. I think the big question is how 0:12:28.440 --> 0:12:30.640 much of that is priced in and how much further 0:12:30.720 --> 0:12:33.120 can the Euro sort of dine out on on that story, 0:12:33.160 --> 0:12:35.960 because you know, it looked this week at the Poms 0:12:36.000 --> 0:12:37.920 the perms were like, oh, you know, they're not really 0:12:37.960 --> 0:12:40.000 that good. There are still head winds coming and as 0:12:40.040 --> 0:12:42.480 we move into the certainly into the summer and the autumn, 0:12:42.600 --> 0:12:44.560 we could have another phase of the energy crisis. We 0:12:44.600 --> 0:12:46.320 don't know how cold next winter is going to be, 0:12:46.360 --> 0:12:50.560 so there are still head winds facing the Euro. And 0:12:50.720 --> 0:12:53.320 the market now was quite long of the Euro, so 0:12:53.440 --> 0:12:56.199 don't think it's going to be that easy to push 0:12:56.280 --> 0:12:59.000 up to another leg. But of course a crucial element 0:12:59.040 --> 0:13:02.280 of this is the honor and will the market continue 0:13:02.320 --> 0:13:05.559 to disbelieve the FED guidance the interest rate outlet for 0:13:05.600 --> 0:13:07.559 this year? So I've asked this question three times this week. 0:13:07.600 --> 0:13:09.439 Maybe you've heard me ask it. Let's make it four. 0:13:09.559 --> 0:13:11.440 Who hikes more this year the feed of the CP. 0:13:11.920 --> 0:13:13.800 I have heard you asked that, and I have had 0:13:13.840 --> 0:13:15.160 the answers, and I think you know what I'm going 0:13:15.200 --> 0:13:17.040 to say too, because it's the same as everybody else. 0:13:17.200 --> 0:13:19.400 You know that that the CP is likely to to 0:13:19.480 --> 0:13:22.040 hike more. But the question really is is that in 0:13:22.080 --> 0:13:24.800 the price now or not it's fourth or four and 0:13:24.840 --> 0:13:27.559 that's an important question, that's for sure, Ji of Rabba Bank, 0:13:27.600 --> 0:13:29.160 that's tasting the cash up with you here in London. 0:13:33.080 --> 0:13:35.000 Let's get to it. If you're if you're in Global 0:13:35.040 --> 0:13:37.679 Wall Street, this is with our question your interview of 0:13:37.760 --> 0:13:40.120 the day. If you need to be optimistic, there's no 0:13:40.240 --> 0:13:42.760 better place to be in a Deutsche Bank with their 0:13:42.800 --> 0:13:45.520 chief global strategist and how to ask an allocation bank 0:13:45.520 --> 0:13:49.479 from Charter. Mr Charter has made clear he is enthusiastic 0:13:49.640 --> 0:13:52.680 and as it hasn't happened, he's simply moved his timeline out. 0:13:52.920 --> 0:13:56.360 We're got an update this morning from BANKI Charter, Banky, 0:13:56.440 --> 0:14:01.040 you're at fort hundred, no what it believes you. You've 0:14:01.120 --> 0:14:04.680 never been this lonely in your storied career. Give us 0:14:04.720 --> 0:14:09.760 the X access. When's the timeline when Schota Nirvana happens. So, actually, 0:14:09.840 --> 0:14:12.160 what we have in terms of our outlook for this 0:14:12.400 --> 0:14:16.599 year is really the rally in Q one, which we 0:14:16.760 --> 0:14:19.760 think of as basically a continuation of the rally that 0:14:19.920 --> 0:14:24.400 began late last year. I wouldn't necessarily describe it as 0:14:24.960 --> 0:14:28.680 you know, sort of a bullish view on fundamentals. Uh, 0:14:29.680 --> 0:14:32.600 the the basic driver of the rally in our view, 0:14:32.760 --> 0:14:36.680 is really a positioning squeeze. As we know since late 0:14:36.760 --> 0:14:40.200 April of last year, it's all really been about the 0:14:40.360 --> 0:14:44.239 central banks. And if you look at our measures of positioning, 0:14:44.960 --> 0:14:48.800 you know, the fundamental investors we call them the discretionary 0:14:48.880 --> 0:14:53.240 equity investors, you know very quickly moved down to neutral 0:14:53.320 --> 0:14:56.280 too slightly negative. What got squeezed as a result of 0:14:56.360 --> 0:15:00.600 the last six months of last year is really systematic strategies. 0:15:00.680 --> 0:15:03.240 Systematic strategies ned to follow the market. So to have 0:15:03.360 --> 0:15:07.080 this big divide between systematic strategies, you know, two Z 0:15:07.280 --> 0:15:11.200 scores below neutral, let alone where they most of the 0:15:11.400 --> 0:15:15.320 slugged out on the CFS and Chase Well Fan Kompor 0:15:15.400 --> 0:15:19.200 and technical analysis is adamant we made in October low 0:15:19.280 --> 0:15:22.600 and the dal Jones industrial average. He's as bullish as 0:15:22.720 --> 0:15:25.880 you are. So there's a short squeeze. We're squeezing out 0:15:25.920 --> 0:15:29.160 the bloom. I get that. What's the then what after 0:15:29.280 --> 0:15:32.160 we squeeze out the bloom for you? And Mr ran Kampora, 0:15:32.440 --> 0:15:35.000 so you know we have our your end target, which yes, 0:15:35.120 --> 0:15:37.200 I understand it looks bullish. I would say it's only 0:15:37.240 --> 0:15:40.240 a little bit more than ten percent up from where 0:15:40.240 --> 0:15:42.960 we've been recently. We see most of that happening basically 0:15:43.040 --> 0:15:46.080 in Q one, and then we have basically, as you know, 0:15:46.360 --> 0:15:49.080 a call for a recession in the US starting in 0:15:49.240 --> 0:15:53.120 Q three, so second quarter, keeping in you know, in 0:15:53.280 --> 0:15:56.720 line with the recession playbook. Historically we have the market 0:15:56.760 --> 0:16:01.120 going sideways. So that's still we have if the recession 0:16:01.160 --> 0:16:04.720 happens in Q three, Uh, pretty severe sell off which 0:16:04.720 --> 0:16:06.880 would take us all the way down to thirty two fifty. 0:16:07.000 --> 0:16:09.640 But I think you know, very important aspect of the 0:16:09.760 --> 0:16:12.200 recession playbook to keep in mind if you're thinking about 0:16:12.280 --> 0:16:15.280 twelve months is that equities, you know, pretty robustly bottom 0:16:15.320 --> 0:16:18.520 about halfway through. So if we have a two quarter recession, 0:16:18.920 --> 0:16:21.760 they will come all the way back basically in Q four. 0:16:21.920 --> 0:16:25.760 And so my Q one target is my year end target. Yeah, 0:16:26.280 --> 0:16:28.960 you said something pretty radical that it's all been about 0:16:29.000 --> 0:16:31.520 the FED. It is not necessarily about some of these 0:16:31.560 --> 0:16:33.600 other issues like earnings, which we keep getting in a 0:16:33.640 --> 0:16:35.880 lot of people keep looking at. So how do you 0:16:35.960 --> 0:16:38.640 push back against that? And how much do you expect 0:16:38.720 --> 0:16:41.560 tech to continue to lead regardless of the up or 0:16:41.640 --> 0:16:44.560 the down because of that macro play. Yeah, so a 0:16:44.760 --> 0:16:47.680 tactically our call is to be you know, the rally 0:16:47.720 --> 0:16:50.720 will be led by tech in the financials UH and 0:16:50.880 --> 0:16:53.520 and and some of the consumer six goals where you know, 0:16:54.000 --> 0:16:57.480 priced in of an average recession. I think it's UH 0:16:57.840 --> 0:17:04.080 starts to make things pretty asymmetric. Um. You know, I'm 0:17:04.080 --> 0:17:06.479 sorry I lost the last part of this is an 0:17:06.480 --> 0:17:10.600 issue because right now we're looking to just because of me, 0:17:10.880 --> 0:17:12.800 you know, this is an issue interesting issue because right 0:17:12.800 --> 0:17:14.760 now I'm watching earnings and people are saying there's a 0:17:14.760 --> 0:17:17.920 real fundamental shift underneath the market that you have tech 0:17:18.040 --> 0:17:19.959 that's not necessarily going to lead in growth, even though 0:17:20.000 --> 0:17:23.359 they now are leading in returns to simply because it 0:17:23.440 --> 0:17:26.040 cuts etcetera. And I'm wondering whether you see that, whether 0:17:26.080 --> 0:17:28.480 we're heading back to a different normal in terms of leadership, 0:17:28.560 --> 0:17:30.720 or whether we're heading back to the same regime. It's 0:17:30.720 --> 0:17:32.720 just sort of dependent on the FED. So you know, 0:17:32.760 --> 0:17:36.120 in terms of earnings UH for the year as a whole, 0:17:36.359 --> 0:17:38.600 you know, if you put in a recession in there 0:17:38.720 --> 0:17:40.720 like we have, you know, we're talking about a hundred 0:17:40.760 --> 0:17:44.119 and so the question is, you know, what happens if 0:17:44.200 --> 0:17:47.680 the alternative, which is a very popular question given the 0:17:48.000 --> 0:17:51.760 market price action, and it's more likely to go sideways 0:17:51.840 --> 0:17:54.680 and even just start to recover. I think in terms 0:17:54.720 --> 0:17:57.800 of thinking about earnings, you know, everybody talks always about 0:17:57.960 --> 0:17:59.920 growth rates. I think it's also important to keep in 0:18:00.000 --> 0:18:02.919 mind where the levels are. You know, equity evaluations come 0:18:02.960 --> 0:18:06.440 off of levels, and and earnings have been running you know, 0:18:06.600 --> 0:18:10.720 sort of well well above trend levels, and and and 0:18:10.960 --> 0:18:14.399 and so you know, we have this issue where I mean, 0:18:14.440 --> 0:18:16.840 even if you looked at real activity, you know, the 0:18:16.880 --> 0:18:19.680 good side of the economy, it's essentially been going sideways 0:18:19.800 --> 0:18:25.520 for two d Now you know SPX and what Mr 0:18:25.680 --> 0:18:28.680 Chat has just said there, Lisa is religion to me? 0:18:29.400 --> 0:18:33.400 Which is it financial? TV is addicted to change movements. 0:18:33.440 --> 0:18:37.120 Stay with us Microsoft right now down under two thirties six, 0:18:37.280 --> 0:18:40.920 that kind of stuff. He's looking at levels and this 0:18:41.160 --> 0:18:43.560 is the bathtub story. You're looking at the water coming 0:18:43.600 --> 0:18:45.680 in and out of the bathtub, or you're looking at 0:18:45.760 --> 0:18:49.159 the level. Olivier Blanchard and his new monograph is on 0:18:49.240 --> 0:18:52.440 the same page in economics has been from Chatta inequities. 0:18:52.760 --> 0:19:00.159 Levels matter, the levels, the scale the mass of Microsoft matters. M. 0:19:08.880 --> 0:19:12.320 William mcdonnaugh is founder, he's chief executive officer. They've got 0:19:12.359 --> 0:19:14.840 a bunch of other titles for him and Element Funds. 0:19:15.400 --> 0:19:18.880 What he is is one of the wisest people across 0:19:19.000 --> 0:19:23.080 a span of this thing called wealth management, is managing 0:19:23.160 --> 0:19:27.000 money and really really trying hard to do the hardest thing, 0:19:27.560 --> 0:19:30.200 which is not lose money. We are thrilled that William 0:19:30.240 --> 0:19:33.680 McDonagh can join us today. It's wrapped around Tesla, It's 0:19:33.680 --> 0:19:36.360 wrapped around what Mr Musk is doing in these historic 0:19:36.920 --> 0:19:39.560 Muskie and times, but there's about eight other things to 0:19:39.640 --> 0:19:42.639 talk about as well. Well, thank you for joining us. 0:19:42.720 --> 0:19:45.920 You really center and in your research note that the 0:19:46.080 --> 0:19:51.200 Tesla cars are a trojan horse. So many people agree 0:19:51.280 --> 0:19:57.040 with you on that. What does Mr Musk really up to? Well, 0:19:57.119 --> 0:19:59.000 you know, let's look back to two thousand six when 0:19:59.080 --> 0:20:01.280 Musk really kicked the thing off and and and his 0:20:01.400 --> 0:20:04.040