WEBVTT - Why the Pound Is Headed for Trouble Again 0:00:00.120 --> 0:00:02.679 The pound is a graveyard for like G ten traders, 0:00:02.680 --> 0:00:04.640 the Pound, people only ever lose money on, even though 0:00:04.760 --> 0:00:05.680 it seems obvious. 0:00:07.240 --> 0:00:10.600 So just why is the pound so unpredictable? It was 0:00:10.600 --> 0:00:13.440 a year ago this week that it hit a record 0:00:13.480 --> 0:00:15.600 low against the dollar. Since then it's been one of 0:00:15.640 --> 0:00:18.200 the best performing currencies in the G ten, but now 0:00:18.320 --> 0:00:22.439 analyssa calling for further slides as the outlook for the 0:00:22.560 --> 0:00:27.000 UK darkens. I'm David Merritt. Welcome to In the City, 0:00:27.000 --> 0:00:30.240 Bloombok's podcast connecting you to the conversations at the heart 0:00:30.320 --> 0:00:34.000 of the city of London. This week we dig into 0:00:34.000 --> 0:00:36.200 the outlook for the pound with me in the London studio. 0:00:36.640 --> 0:00:40.040 We have Mark Hardmore, senior macro strategists on our Markets 0:00:40.080 --> 0:00:43.800 Live team and co hosts of our Markets Today program 0:00:43.880 --> 0:00:47.839 on Blouembok Television, and also Sofia Hauta Ecosta from our 0:00:47.840 --> 0:00:49.560 brilliant Markets Today blog. 0:00:51.000 --> 0:00:53.680 I'm already going to expect us to provide some glimmer 0:00:53.720 --> 0:00:56.160 of like light or shed light and how to trade 0:00:56.160 --> 0:00:58.920 the pound, because it's completely impossible. The pound only ever 0:00:58.960 --> 0:01:00.280 does what you shouldn't expect it to do. 0:01:00.440 --> 0:01:03.600 It's the currency you shouldn't trade, or it just doesn't 0:01:03.640 --> 0:01:04.760 behave how you want it to. 0:01:05.000 --> 0:01:06.760 But I say this classic example was that, like you know, 0:01:06.800 --> 0:01:10.039 when cable was above two ten back and seven and eight, 0:01:10.080 --> 0:01:12.320 it was just everyone knew you need to be short. 0:01:12.360 --> 0:01:15.720 It was a wrong price. The fundamentals were so negative, 0:01:16.120 --> 0:01:18.440 and yet it was really really hard to make money 0:01:18.480 --> 0:01:20.080 just because everyone kept on trying to sell it. You 0:01:20.120 --> 0:01:22.240 get this big dip down of fifteen big figures going 0:01:22.280 --> 0:01:24.480 blow to the figure, and then suddenly it'd squeeze higher 0:01:24.480 --> 0:01:26.520 and stop every night, and it's just it's impossible to 0:01:26.560 --> 0:01:27.000 make money. 0:01:27.080 --> 0:01:29.199 I mean, this is what makes the currency a very 0:01:29.400 --> 0:01:32.440 fun currency to cover. You know, I just moved here 0:01:32.720 --> 0:01:34.600 a few months ago, Dave. When I moved here, the 0:01:34.600 --> 0:01:38.039 pound was strengthening, and coming from abroad, everyone will say, 0:01:38.040 --> 0:01:40.720 you know, the UK economies and shambles, you know, there 0:01:40.800 --> 0:01:42.520 was so much doom and gloom, and yet it had 0:01:42.520 --> 0:01:46.280 a strengthening currency. And one of my colleagues on the 0:01:46.319 --> 0:01:48.880 blog said, you know, the pound is strengthening for all 0:01:48.920 --> 0:01:52.880 the wrong reasons. It's the high interest rate environment because 0:01:52.920 --> 0:01:55.480 the BOE has to fight inflation and keep raising interest 0:01:55.560 --> 0:01:59.080 rates for longer. And now Mark is it kind of 0:01:59.080 --> 0:02:02.280 weakening for all the right reasons. I mean, how would 0:02:02.280 --> 0:02:03.240 you kind of frame it now? 0:02:03.400 --> 0:02:07.040 So I've been someone who's been on the wrong side 0:02:07.040 --> 0:02:08.760 of this paneve. I've been burished the pound all this 0:02:08.840 --> 0:02:11.120 year and they've only started weakening recently, and it started 0:02:11.120 --> 0:02:14.160 as weakening as the fundamentals have improved. So up until May, 0:02:14.240 --> 0:02:17.079 we expected the UK economy to contract this year. Since May, 0:02:17.080 --> 0:02:20.000 we now expect a small expansion. The current account deficit, 0:02:20.000 --> 0:02:21.600 which was massive, I think it was more than five 0:02:21.600 --> 0:02:23.960 percent of GDP about a year ago, it's now, I'm 0:02:23.960 --> 0:02:25.920 not sure exactly, less than three percent of GDP. It's 0:02:25.960 --> 0:02:29.040 kurry count deficts has been improving rapidly, and now finally 0:02:29.080 --> 0:02:31.200 we're getting inflation coming down in the UK with the 0:02:31.200 --> 0:02:33.120 outlier because of staying high. So it's it's still got 0:02:33.120 --> 0:02:35.240 deeply negative real yields, but the real fields are going 0:02:35.280 --> 0:02:37.160 the right directions. Almost all the fundaments are improving, and 0:02:37.200 --> 0:02:39.080 now the UK is weakening. I do have a theory, 0:02:40.000 --> 0:02:43.320 tell Us tell us, But I said, I really that 0:02:43.360 --> 0:02:45.920 I've been getting sterling wrong, so I've got to disclaim it. 0:02:46.320 --> 0:02:52.160 I think that really everything in markets the moment is 0:02:52.240 --> 0:02:54.840 all about the consumer and you know, the one thing 0:02:54.919 --> 0:02:57.240 that's been really really getting worse. So you've got the 0:02:57.280 --> 0:02:59.400 economy of roles been getting betternacounts getting better, real rot 0:02:59.400 --> 0:03:01.959 it's getting bet all big macro factors getting better. But 0:03:02.040 --> 0:03:05.160 what we saw is last week and this reiterated, we 0:03:05.240 --> 0:03:07.760 saw the lowest service as PMI in the UK. The 0:03:07.800 --> 0:03:10.639 flash estimate on Friday was the lowest since January twenty 0:03:10.680 --> 0:03:14.360 twenty one. And we also saw another deeply negative retail 0:03:14.360 --> 0:03:15.919 sales print year in year, and it's been negative for 0:03:15.960 --> 0:03:17.520 the past like a couple of years. And what you're 0:03:17.560 --> 0:03:19.760 finally seeing is the people are going okay. The UK 0:03:20.040 --> 0:03:22.840 consumer is finally going off a cliff and I think 0:03:22.840 --> 0:03:24.519 a similar time into the US and that will be 0:03:24.919 --> 0:03:28.720 the fact where suddenly the higher rates aren't helpful because 0:03:28.720 --> 0:03:31.040 they're squeezing the consumer at vulnerable point and that's where 0:03:31.080 --> 0:03:33.240 you start trading the stagflation dynamic. So I think what's 0:03:33.240 --> 0:03:35.720 happening in Sterling now is that up for the past year, 0:03:35.760 --> 0:03:37.640 it's trading in the rates support and now it actually 0:03:37.720 --> 0:03:40.280 might start trading the stagflation dynamic as the consumer suffers. 0:03:40.320 --> 0:03:42.320 And that's another way of saying a recession, right, Yes, 0:03:42.640 --> 0:03:43.040 I think. 0:03:44.840 --> 0:03:48.200 A very very tough recession. Actually a very tough recession. Yeah, 0:03:48.200 --> 0:03:50.640 and because remember, you know, the UK has been forced 0:03:50.680 --> 0:03:53.680 to raise rates more than people anticipated, and it can 0:03:53.800 --> 0:03:55.600 cope the higher UK rates. It's kind of much more 0:03:55.680 --> 0:03:58.120 leveraged economy, and as many people have written about this year, 0:03:58.400 --> 0:04:00.760 it's housing market is much moreulnerable to the rate rises 0:04:00.800 --> 0:04:03.000 because everyone talks about US as long term fixed rates. 0:04:03.120 --> 0:04:05.040 And so even though mortgage rates thirty year mortgage rates 0:04:05.040 --> 0:04:07.160 in the US have gone up officially have gone up 0:04:07.160 --> 0:04:10.040 above seven percent, in practical terms, there's still like below 0:04:10.120 --> 0:04:12.520 four percent. So like, really the US housing markets are 0:04:12.520 --> 0:04:14.480 not being squeezed at all be higher rates, but UK 0:04:14.760 --> 0:04:15.680 really is okay. 0:04:15.760 --> 0:04:19.000 So I like to disagree with Mark and I Marke 0:04:19.040 --> 0:04:22.040 and I famously always disagree, but also just to kind 0:04:22.040 --> 0:04:24.080 of like throw a little bit of optimism here. There 0:04:24.160 --> 0:04:26.640 have been calls for a UK recession for months. I mean, 0:04:26.720 --> 0:04:28.680 we might be in one now. That's what some economists 0:04:28.680 --> 0:04:31.280 are saying that you know, when a recession does happen, 0:04:31.520 --> 0:04:34.040 you only know it until months later there are cracks 0:04:34.160 --> 0:04:36.280 starting to show, but it has been so much more 0:04:36.320 --> 0:04:39.760 resilient and one thing we're seeing, we're hearing from retailers. 0:04:39.800 --> 0:04:42.440 So this is kind of on the ground color that 0:04:42.480 --> 0:04:45.240 we're getting from the likes of Next and those m 0:04:45.279 --> 0:04:47.920 ands as well and older those companies that have been 0:04:47.960 --> 0:04:52.200 doing really well. Is that actually because wages are growing 0:04:52.279 --> 0:04:54.800 faster than inflation even though it you know, there is 0:04:55.080 --> 0:04:57.440 a real pay increase, and the consumer does feel better, 0:04:57.600 --> 0:05:01.080 and we might actually get a stronger u consumer than 0:05:01.680 --> 0:05:04.240 the doom and gloom that people expect. And you know, 0:05:04.320 --> 0:05:07.320 if the UK does have a recession, it might be 0:05:07.400 --> 0:05:10.320 a shallow one and I think that's something if you 0:05:10.920 --> 0:05:13.400 are thinking of where the pound will go. And as 0:05:13.480 --> 0:05:16.960 Mark said earlier, you know, if you have in the 0:05:17.240 --> 0:05:20.599 entire kind of trading community and all those hedge funds 0:05:20.760 --> 0:05:22.920 betting one way, the risk is that you'll be caught 0:05:22.960 --> 0:05:24.960 out when the pound doesn't go your way. 0:05:25.360 --> 0:05:29.120 Yeah. So last week the Bank of England stopped raising 0:05:29.160 --> 0:05:31.600 interest rates the first time in nearly two years. The 0:05:31.640 --> 0:05:36.039 most aggressive tightening cycle for decades came to an end. 0:05:36.240 --> 0:05:38.559 And I suppose it sounds like you're reading that sphere 0:05:38.640 --> 0:05:39.960 is a kind of a good sign because they saw 0:05:39.960 --> 0:05:43.360 the inflation print, they finally conquered inflation. Then the consumer 0:05:43.400 --> 0:05:45.680 can feel a bit better, or Mark, you seem to 0:05:45.720 --> 0:05:48.520 be saying that's because they thought recession is coming and 0:05:48.560 --> 0:05:50.800 we've got to stop now when we possibly overshot. 0:05:50.960 --> 0:05:53.120 I think we can both be right, you know, I 0:05:53.200 --> 0:05:55.479 think I don't think it's a job done for the BOE. 0:05:55.640 --> 0:05:59.680 I think that's more of a US FED story. There is. 0:06:00.560 --> 0:06:02.920 It's still one of the highest inflation rates in the 0:06:03.000 --> 0:06:06.440 developed worlds here in the UK, and Andrew Bailey, Governor 0:06:06.480 --> 0:06:08.960 Andrew Bailey and his team are kind of warning of 0:06:09.360 --> 0:06:12.840 weakening demand. And I do think Mark is right, as 0:06:12.920 --> 0:06:14.680 much as it pains me to say that there are 0:06:16.160 --> 0:06:18.760 cracks in the consumer's story. But I just don't think 0:06:19.120 --> 0:06:21.160 it will be as bad as people fear. 0:06:21.760 --> 0:06:23.200 But you say not as bad as pill fear. But 0:06:23.560 --> 0:06:25.240 and I understand that, like most of the last year, 0:06:25.320 --> 0:06:28.200 people were really really gloomy on the UK. I remember, 0:06:28.320 --> 0:06:30.440 you know, us covering on the show about like the 0:06:30.520 --> 0:06:32.960 peak pessimism was around December last year. It's been improving 0:06:32.960 --> 0:06:36.760 all year. We're now not expecting the economy to contract 0:06:36.800 --> 0:06:38.719 this year. We've got a little bit more negative about 0:06:38.720 --> 0:06:40.440 extra but we'll still expect your expansion next year. So 0:06:40.680 --> 0:06:43.600 the consensus out there is actually the UK to muddle through. 0:06:43.800 --> 0:06:46.600 So I would say that the consensus is not gloomy anymore. 0:06:47.040 --> 0:06:50.440 I agree it was very incorrectly very gloomy. Does that 0:06:50.560 --> 0:06:52.919 mean because Pip got it wrong once that you should 0:06:52.960 --> 0:06:55.600 now fear that downside? Maybe? I mean, we have the 0:06:55.640 --> 0:06:57.640 same dynamic in many other countries in the world, and 0:06:57.720 --> 0:07:00.679 I would say that, you know, the the UK story, 0:07:00.720 --> 0:07:03.440 I do think will be still be very very negative 0:07:03.520 --> 0:07:04.080 as the next rak. 0:07:04.120 --> 0:07:05.359 So what does that mean for the pound? 0:07:05.839 --> 0:07:05.960 Right? 0:07:06.080 --> 0:07:07.680 So we've got the I mean, we've got voices here 0:07:07.680 --> 0:07:10.760 in the Bloomberg story talking about some pretty negative forecasts. Right, 0:07:10.840 --> 0:07:13.680 We've got RBC and HSBC racing from all weakness. Bank 0:07:13.680 --> 0:07:17.760 of America BNP forecasting a sharper slide on the cars. 0:07:17.800 --> 0:07:20.280 We've got forecasts for one seventeen by year in one 0:07:20.440 --> 0:07:24.800 eleven by the second half of next year, according to 0:07:25.520 --> 0:07:28.760 somebody from RBC. I mean's that's a I mean one 0:07:28.840 --> 0:07:30.480 eleven for the pound. I mean you talked about the 0:07:30.560 --> 0:07:32.000 heady days of more than two dollars. I mean, I 0:07:32.080 --> 0:07:34.720 remember those days, right when the pound was above two dollars, 0:07:35.920 --> 0:07:38.480 people were talking about parity. This time last year that 0:07:38.640 --> 0:07:41.120 seems to have receded, but one eleven is in the 0:07:41.160 --> 0:07:43.000 ballpark of parody, Right, we really heard that. 0:07:43.320 --> 0:07:45.920 Well, one I'll say is I think a large change 0:07:45.920 --> 0:07:48.440 in those forecasts is about dollar strength. Right. So we 0:07:48.600 --> 0:07:50.560 entered this year with everyone being super bearish the dollar, 0:07:50.880 --> 0:07:52.720 and there people have kind of given up on that trade. 0:07:52.880 --> 0:07:56.320 And you know, one of the things that personally I'm 0:07:56.480 --> 0:08:00.560 becoming I do believe that the pound can weaken, but 0:08:00.720 --> 0:08:04.360 whether you know whether the dollar actually will be as 0:08:04.360 --> 0:08:06.440 strong when things might be problematic. So I think the 0:08:06.440 --> 0:08:09.000 pat on the Bloomberg Pound Index, for example, I think 0:08:09.000 --> 0:08:10.920 it can continue to weaken. And I do wonder whether 0:08:10.920 --> 0:08:12.600 the eure A sterling styles a chunk of top side. 0:08:12.760 --> 0:08:14.600 Yeah, I think I think That's the other kind of 0:08:14.840 --> 0:08:17.080 important thing to say about this. We are talking about 0:08:17.760 --> 0:08:19.840 pound weakness against the dollar, but maybe some of our 0:08:19.920 --> 0:08:23.080 listeners care more about what the pound does against the euro. Right, 0:08:23.200 --> 0:08:27.880 And the European Central Bank was one of the what 0:08:28.080 --> 0:08:30.040 was one of the only three between the FED, the 0:08:30.120 --> 0:08:34.240 BUE and the ECB that actually raised interest rates in 0:08:34.400 --> 0:08:38.600 this cycle. So what mark, what is the euro pound 0:08:39.080 --> 0:08:40.079 trajectory from here? 0:08:40.960 --> 0:08:43.640 I mean, I'm not super bullish the euro either, but 0:08:43.720 --> 0:08:45.559 I just I think it's a way better way to 0:08:45.600 --> 0:08:47.240 look at the sterling story because I think the dollar 0:08:47.800 --> 0:08:49.800 moves have just been so much more dramatic this year 0:08:50.080 --> 0:08:51.800 than if you start looking at a cable view of 0:08:52.000 --> 0:08:54.600 the sterling dollar exchange rate. You know, it's very eas 0:08:54.600 --> 0:08:56.760 to get conflate whether you've got a dollar view or 0:08:56.760 --> 0:08:57.439 a sterling view. 0:08:59.800 --> 0:09:02.920 I'm the four casts economically view there are not great. Again, 0:09:02.920 --> 0:09:04.880 I'm mean to your point about like these markets are 0:09:05.480 --> 0:09:07.440 interpreting the data in sort of slightly wacky ways. I mean, 0:09:07.440 --> 0:09:09.480 the latest numbers in from Germany, from France have been 0:09:10.000 --> 0:09:12.400 pretty grim on the economic growth front. So do you 0:09:12.440 --> 0:09:14.960 think the UK is actually going to fare a little 0:09:15.040 --> 0:09:15.920 better next year? 0:09:16.280 --> 0:09:20.319 So this is actually really interesting. So European economy is 0:09:20.360 --> 0:09:23.160 a basket case not doing well, particularly Germany and stuff. However, 0:09:24.120 --> 0:09:26.240 going back to the thing is it depends whether you 0:09:26.320 --> 0:09:28.040 think the consumer is key to the story or not, 0:09:28.120 --> 0:09:31.160 because what's happened is the European economy the consumer is 0:09:31.200 --> 0:09:34.520 slightly more insulated during a recession if there's a global recession. 0:09:34.679 --> 0:09:37.000 Not only do they have better savings rates around Europe 0:09:37.040 --> 0:09:40.640 and a less leveraged housing market generally in most countries 0:09:40.679 --> 0:09:44.040 in Europe, but they also have better social security, social 0:09:44.080 --> 0:09:46.120 support system during it a slowdown. So if you think 0:09:46.160 --> 0:09:49.160 there's generally going to be a growth slowdown, UK consumer 0:09:49.280 --> 0:09:51.360 is one of the most exposed to slower growth and 0:09:51.440 --> 0:09:53.880 higher instruates, more exposed in the US, as we said, 0:09:53.880 --> 0:09:58.000 because there's long term mortgages, and more exposed than Europe 0:09:58.040 --> 0:10:00.360 because they don't have those high savings rates and as 0:10:00.440 --> 0:10:03.160 high social security. So if you're a negative on global 0:10:03.200 --> 0:10:05.839 growth and you think the consumer is key, you should 0:10:05.840 --> 0:10:08.200 be very negative pound. If you're more rosy on the world, 0:10:08.320 --> 0:10:09.959 then Pound will continue to confound the bears. 0:10:10.840 --> 0:10:13.280 The post Brexit story for me is really interesting because 0:10:13.600 --> 0:10:15.559 I mean the last time I lived here was just 0:10:15.640 --> 0:10:17.760 after the Brexit votes, so it's kind of like just 0:10:17.840 --> 0:10:20.880 coming back and seeing, you know, the UK trying to 0:10:20.920 --> 0:10:23.319 say we actually grew faster than Germany during COVID and 0:10:23.600 --> 0:10:27.600 kind of this competitive kind of comparing economic growth models. 0:10:27.640 --> 0:10:29.520 But I mean it's a very different story. I think 0:10:29.559 --> 0:10:33.079 the euro Area is complicated given you know, Germany is 0:10:33.120 --> 0:10:36.800 a very different place to say Spain. It seems to 0:10:36.840 --> 0:10:39.520 be the kind of Northern Europe Southern Europe divide is 0:10:39.600 --> 0:10:41.640 going the other way, right, you know, Southern Europe is 0:10:41.800 --> 0:10:44.800 outdoing Northern Europe for growth for the first time in 0:10:44.880 --> 0:10:47.679 a long time. But how does the UK kind of 0:10:47.800 --> 0:10:51.959 factor in amid all that? And I mean, I just 0:10:52.160 --> 0:10:55.400 think people tend to be negative on the UK. 0:10:55.840 --> 0:10:57.480 Is that a Brexit fallout thing? Like we're sort of 0:10:57.559 --> 0:11:00.679 assuming this economy was going to get smashed by Brexit 0:11:00.760 --> 0:11:04.160 and it's yes, we've seen there's impact, of course there is, 0:11:04.280 --> 0:11:07.400 but it's not been the total disaster that a lot 0:11:07.440 --> 0:11:09.920 of people predicted, and its economy keeps on sort of 0:11:10.040 --> 0:11:11.439 surprising on the upside, doesn't it. 0:11:11.880 --> 0:11:14.600 I think it's just difficult to understand what the post 0:11:14.679 --> 0:11:17.760 Brexit story is from here. And I think, you know, 0:11:18.080 --> 0:11:20.960 just from an economic forecast model, where is growth going 0:11:21.040 --> 0:11:23.079 to come from in the coming decades? How do you 0:11:23.559 --> 0:11:25.800 kind of look at the currency story there? I think. 0:11:25.840 --> 0:11:28.000 I mean, when I moved here, I thought, Okay, I'm 0:11:28.040 --> 0:11:30.840 moving to a country that's in crisis, but it really 0:11:31.559 --> 0:11:33.920 it really isn't. There's a lot of difficulties here, of course, 0:11:34.040 --> 0:11:37.000 But you know, I think that on the ground, if 0:11:37.040 --> 0:11:38.560 you go to the high street day of and if 0:11:38.600 --> 0:11:41.360 you go to restaurants and I know London is its 0:11:41.440 --> 0:11:45.240 own microcosm, but the consumer is more resilient to those 0:11:45.280 --> 0:11:48.800 negative news. Maybe it's just used to negativity. It's you know, 0:11:48.880 --> 0:11:52.920 the UK consumer has gone through bouts of crises, and 0:11:53.200 --> 0:11:56.360 I think last year was such I mean, it was 0:11:57.320 --> 0:12:00.559 so volatile here in the UK, the kind of submerging 0:12:00.640 --> 0:12:05.360 market monoker that people used that you know, maybe maybe 0:12:05.400 --> 0:12:07.920 they can just kind of muddel along this time and 0:12:08.200 --> 0:12:10.480 you know, you still move here, right, even they still 0:12:10.559 --> 0:12:10.920 live here. 0:12:11.120 --> 0:12:14.679 That's exactly right. Country and crisis, but people still wanting 0:12:14.720 --> 0:12:17.520 to come and live and work here, and the economy 0:12:17.559 --> 0:12:21.199 is sort of muddling, muddeling through. I mean, you know, 0:12:21.280 --> 0:12:22.880 it's it's a sense of crisis and lots of places 0:12:22.920 --> 0:12:23.439 in the world, right. 0:12:23.840 --> 0:12:26.760 Yeah, I think you're right. I mean, look, UK and 0:12:27.120 --> 0:12:28.920 London in particular is always going to have an appeal 0:12:29.480 --> 0:12:32.679 for international investors, international money. People want to live here 0:12:33.360 --> 0:12:35.280 and it's going to retain that, right, London is one 0:12:35.280 --> 0:12:37.480 of the world's capitals, and so I think that gets 0:12:37.520 --> 0:12:41.360 a there's a there's a bit for UK housing, for 0:12:41.960 --> 0:12:44.439 UK lifestyle at a certain level. Now it's where is 0:12:44.480 --> 0:12:45.880 that level? Where is it ever? Price? But I think 0:12:45.880 --> 0:12:50.240 it does probably protect the UK from the real doom 0:12:50.320 --> 0:12:53.000 mongery prognostications. And you know, you're talking about what is 0:12:53.040 --> 0:12:55.079 the post Brexit narrative, And I think one of the 0:12:55.120 --> 0:12:58.000 things that's hard is that it's clearly not been a 0:12:58.040 --> 0:13:00.199 wonderful story, but it's also been nowhere near the bad 0:13:00.280 --> 0:13:02.080 news story. We've been somewhere in the middle. And also 0:13:02.160 --> 0:13:05.520 that's been really that that middle, middle to slightly negative 0:13:05.559 --> 0:13:08.199 world is in the context we did have a pandemic, 0:13:08.480 --> 0:13:10.839 So like, you know, how much is the pandemic how Brexit. 0:13:10.920 --> 0:13:12.959 So it's it's very hard to judge fairly and I 0:13:13.000 --> 0:13:15.440 don't think the verdict is out on how on how 0:13:15.559 --> 0:13:18.240 brexits worked out. But I will say that one problem 0:13:18.280 --> 0:13:21.079 which might still you know, foster may fester is a 0:13:21.120 --> 0:13:23.400 better whereever the years ahead is the fact that you know, 0:13:23.440 --> 0:13:27.240 the US communication, at least under a Biden presidency, the 0:13:27.360 --> 0:13:29.480 UK shouldn't even bother to seek a grand trade deal. 0:13:29.760 --> 0:13:31.280 Is a bit of a blow to that kind of 0:13:31.360 --> 0:13:34.719 whole UK taking control of its trade and kind of 0:13:34.800 --> 0:13:37.520 really orienting itself in a much more dynamic way. And 0:13:37.559 --> 0:13:39.000 I think you know, it did that a little bit 0:13:39.040 --> 0:13:40.760 around the pandemic and some of its solutions. But I 0:13:40.800 --> 0:13:42.959 think otherwise that that could be a bit of a 0:13:43.080 --> 0:13:46.720 headwind going forward, that it's having to kind of little 0:13:47.120 --> 0:13:49.199 bit part trade deals around the place is going to 0:13:49.200 --> 0:13:50.160 be problematic for its kind of. 0:13:50.200 --> 0:13:52.440 Out But the trend on the European front is definitely 0:13:52.480 --> 0:13:55.240 towards closer hich. I mean, even you know, Richi's sonat 0:13:55.280 --> 0:13:57.560 could manage to take a bit of the heat out 0:13:57.920 --> 0:13:59.800 of the debate. And then we've we've seen just the 0:14:00.040 --> 0:14:06.240 last week's Kissed Arma going to Paris talking about needing 0:14:06.280 --> 0:14:08.839 to renegotiate the deal. So the politics of this is 0:14:08.840 --> 0:14:11.760 that whoever wins next year, we are going to find 0:14:11.880 --> 0:14:14.360 maybe one a bit faster than the other in terms 0:14:14.400 --> 0:14:17.959 of the speed of normalizing relations. But we're on a 0:14:18.000 --> 0:14:20.840 trajectory to a sort of better working relationship with the EU, 0:14:20.880 --> 0:14:22.400 which is only gonna be good for the UK economy. 0:14:23.000 --> 0:14:24.720 Yes, I think so. Actually, insted up, we had this 0:14:24.800 --> 0:14:27.200 open ended question reasoning because UK stock has been discounted 0:14:27.200 --> 0:14:29.840 for a long period of time, and you know, we 0:14:29.960 --> 0:14:31.400 keep people on the show all the time. Okay, UK 0:14:31.480 --> 0:14:33.400 stocks are cheap, and I agree they are cheap, and 0:14:33.440 --> 0:14:35.800 almost any metric. They seem like a great story and 0:14:35.920 --> 0:14:38.080 you're like, what's going to change? They've been cheap for 0:14:38.080 --> 0:14:39.520 a long period of time. What's the catalyst for a 0:14:39.560 --> 0:14:41.880 get upside? So we asked this as an open ended 0:14:41.960 --> 0:14:44.520 question our recent M Live Pulse survey, what will be 0:14:44.560 --> 0:14:47.400 the catalyst? And I would say a plurality of the 0:14:47.480 --> 0:14:50.600 answers was rejoined the EU, which is clearly a tongue 0:14:50.600 --> 0:14:52.520 in cheak kind of answer, but that's a feel think. 0:14:52.560 --> 0:14:55.000 But I do think close relationships with Europe will kind 0:14:55.000 --> 0:14:56.520 of help things. Actually, one of the things in that 0:14:56.600 --> 0:14:58.560 survey I thought was really interesting because it's already been debunked. 0:14:58.600 --> 0:15:00.400 We ran the survey and only two week weeks ago, 0:15:01.160 --> 0:15:05.680 and we said UK tenor yields used to be below 0:15:05.880 --> 0:15:10.120 US tenure yields for years, and then as of trust anomics, 0:15:10.480 --> 0:15:12.840 they blew above them, and then they came back down 0:15:12.960 --> 0:15:16.280 after you know, Liz Trust went and we got new 0:15:16.600 --> 0:15:18.440 kind of government in place and it kind of seemed 0:15:18.440 --> 0:15:20.240 to calm down. But for the past six months, up 0:15:20.320 --> 0:15:22.160 until a couple of weeks ago, UK tenor yields were 0:15:22.200 --> 0:15:25.120 comfortably above US yields. So we asked people when will 0:15:25.240 --> 0:15:28.600 UK tenure yields fall below US tenor yields, and we said, 0:15:28.640 --> 0:15:30.360 you know, will it happened before the end of this year, 0:15:30.400 --> 0:15:32.640 will it happened first half next year? And the third 0:15:32.680 --> 0:15:35.840 answer was UK tenor yields will stay above US tenure 0:15:35.880 --> 0:15:39.080 yields for years because UK has a risk premium post 0:15:39.160 --> 0:15:42.880 list trust. That was the most picked answer was that 0:15:43.080 --> 0:15:45.080 the UK tenory yields will stay above US ten yields 0:15:45.320 --> 0:15:49.160 for it. And ironically we ran the Servitceco and ironically, 0:15:49.480 --> 0:15:51.560 in the past two weeks UK tenure yields have completely 0:15:51.640 --> 0:15:53.920 collapsed and are now twenty basis points below ten years. 0:15:54.400 --> 0:15:57.280 So already it's completely blown people up and confounded people. 0:15:57.440 --> 0:15:58.680 And I think this goes back to your story that 0:15:58.720 --> 0:16:01.640 people who get two doomed angry are probably going to 0:16:01.680 --> 0:16:03.920 be confounded. But I don't think that should be mistaken 0:16:03.960 --> 0:16:05.880 for going to going through a session that people called 0:16:05.880 --> 0:16:08.560 forever came, Let's get positive. I don't think that's the conclusion. 0:16:08.680 --> 0:16:11.240 So somewhere in the middle, which is probably the hardest 0:16:11.280 --> 0:16:12.239 story to trade. 0:16:12.040 --> 0:16:13.680 Right exactly, I think that's the problem with the will 0:16:13.680 --> 0:16:16.600 Always money. I think the story is a negative is 0:16:16.640 --> 0:16:19.240 a negative story, but not a dramatically negative one and 0:16:19.320 --> 0:16:21.880 not a clearly negative untiming. And that's why I think 0:16:21.880 --> 0:16:24.240 it's going to become really, really difficult to trade. And 0:16:24.280 --> 0:16:26.360 what does this mean for like things like stocks, because 0:16:26.440 --> 0:16:28.200 if you got foot to one hundred, it normally benefits 0:16:28.240 --> 0:16:30.680 from a cheaper pound because it's got so much external exposure. 0:16:31.160 --> 0:16:34.520 And again, will UK stocks finally start benefiting if we 0:16:34.640 --> 0:16:37.320 have a kind of muddled through, slightly negative story, but 0:16:37.440 --> 0:16:39.600 a weaker sterling that should actually help foot to you 0:16:39.640 --> 0:16:41.920 one hundred? But oh my god, no one ever makes 0:16:41.960 --> 0:16:42.560 money in this stuff. 0:16:42.880 --> 0:16:45.240 What I'm getting from this conversation is that the pound 0:16:45.400 --> 0:16:48.720 is wildly unpredictable and anyone who tries to ben against 0:16:48.720 --> 0:16:50.600 it seems to get burned. What do you think is 0:16:50.640 --> 0:16:52.000 going to happen in twenty twenty fours? 0:16:52.120 --> 0:16:56.280 Yeah, I mean, I do think having gone through a 0:16:56.400 --> 0:16:58.160 kind of can we call it a crisis? Last year? 0:16:58.240 --> 0:16:58.840 Was it a crisis? 0:16:58.880 --> 0:16:59.480 I think we can call it. 0:16:59.520 --> 0:17:02.160 I think we caning had to intervene to sure up. 0:17:02.160 --> 0:17:04.560 Right, let's call it the crisis. Last year's crisis. I 0:17:04.640 --> 0:17:07.240 think that kind of woke people up, and it's just 0:17:07.400 --> 0:17:10.240 anything like last year is unlikely to happen again. And 0:17:10.359 --> 0:17:13.960 actually the survey which which Mark just debunked because it's 0:17:14.040 --> 0:17:16.800 no longer valid after two weeks. But no, but people 0:17:16.840 --> 0:17:20.280 in that survey now, in all seriousness, really don't expect 0:17:20.640 --> 0:17:23.640 that record load to be hit again. There has been 0:17:23.760 --> 0:17:26.080 a little bit of faith restored in the stability of 0:17:26.200 --> 0:17:28.960 the UK government at least when it comes to economic policy. 0:17:29.880 --> 0:17:32.200 Let's see if that lasts heading into what will be 0:17:32.280 --> 0:17:35.760 an election cycle. I think that will be key. And 0:17:36.400 --> 0:17:38.720 if we're looking at cable again, it's not just a 0:17:38.840 --> 0:17:41.879 pound story. The pound is almost kind of subject to 0:17:42.160 --> 0:17:45.000 how people feel about the US or you know, how 0:17:45.240 --> 0:17:48.159 those yields that Mark mentioned or are moving. Because if 0:17:48.520 --> 0:17:50.840 the UK has a higher yielding currency, then it becomes 0:17:50.880 --> 0:17:54.800 more attractive for overseas investment because people just get more 0:17:54.880 --> 0:17:57.640 bang for the book. And also will the UK stock 0:17:57.720 --> 0:18:00.720 market start to get inflows again? Is that a value 0:18:00.760 --> 0:18:02.760