WEBVTT - Yields Aren’t Done Yet 0:00:01.320 --> 0:00:13.200 Scrap on your parachute. It's time for What Goes Up? Hello, 0:00:13.240 --> 0:00:17.000 and welcome to What Goes Up, a Bloomberg Weekly Markets podcast. 0:00:17.280 --> 0:00:20.360 I'm Mike Reagan, a senior editor at Bloomberg, and this 0:00:20.400 --> 0:00:23.759 week on the show, the alarming rise in treasury yields 0:00:23.800 --> 0:00:27.120 finally cooled off this week. But does this really the 0:00:27.320 --> 0:00:30.640 end or do rates have further room to move higher? 0:00:31.120 --> 0:00:33.560 And what does it all mean for this rotation into 0:00:33.640 --> 0:00:37.120 value in cyclical stocks. Our guest will share some thoughts 0:00:37.159 --> 0:00:39.720 on this issue, as well as explain why he's looking 0:00:39.840 --> 0:00:43.800 at stocks in the United Kingdom among other international markets. 0:00:44.440 --> 0:00:47.440 But before we get to that, since Sarah abandoned us 0:00:47.440 --> 0:00:50.600 all here sadly, I've decided we will bring in sort 0:00:50.640 --> 0:00:55.120 of a rotating cast of reporters, editors, and strategists from 0:00:55.160 --> 0:00:57.840 throughout the Bloomberg universe to fill in for her on 0:00:57.920 --> 0:01:01.480 a sort of rotating basis. And as listeners know, I 0:01:01.520 --> 0:01:03.640 can't resist a good gimmick, so I'm going to call 0:01:03.680 --> 0:01:06.959 it the mystery co host of the week. So Charlie 0:01:07.040 --> 0:01:09.160 Pellett take it away and tell us who this week's 0:01:09.240 --> 0:01:13.360 mystery co host is. This week's mystery co host is 0:01:13.520 --> 0:01:17.119 pretty gup dog Pretty as a reporter for Bloomberg's Market 0:01:17.160 --> 0:01:20.880 Live blog and a regular on Bloomberg TV and radio. 0:01:21.400 --> 0:01:24.679 She's a texting at heart and owns a dog that 0:01:24.840 --> 0:01:28.319 resembles an old man. It is true, and I'm very 0:01:28.400 --> 0:01:30.199 proud of it. Even when I got him as a puppy, 0:01:30.280 --> 0:01:31.959 he was only a month old, and he still looked 0:01:32.000 --> 0:01:34.679 like he had, you know, twenty years of experience, which, 0:01:34.720 --> 0:01:37.160 to be honest, is actually pretty interesting because when I 0:01:37.200 --> 0:01:38.560 was a little that's what my mom used to say 0:01:38.560 --> 0:01:40.679 about me. So I think it's only fitting that I 0:01:40.720 --> 0:01:43.600 got this dog. It's fitting for me because I'm an 0:01:43.640 --> 0:01:46.680 old man who looks like a dog. So I feel 0:01:47.080 --> 0:01:51.520 comradeship here. I think we all have our weak points. Mike, 0:01:51.560 --> 0:01:55.560 I'm just not going to comment on yours. So but anyways, 0:01:55.560 --> 0:01:58.080 though that's enough about my dog. I do want to 0:01:58.120 --> 0:02:01.400 introduce our guests though. This week's guests the head of 0:02:01.520 --> 0:02:05.040 investment strategy for City Personal Wealth Management. His name is 0:02:05.080 --> 0:02:07.440 Shawn Snyder. Sean, Welcome to the show. Thank you so 0:02:07.560 --> 0:02:09.720 much for joining us. I do want to dive right 0:02:09.760 --> 0:02:12.760 in here to the tech slash yields component, and we've 0:02:12.760 --> 0:02:15.720 been talking about it for weeks, this inverse correlation that 0:02:15.760 --> 0:02:18.840 you're seeing, and the narrative seems to be that if 0:02:18.919 --> 0:02:22.280 text kind of future earnings are based on longer term growth, 0:02:22.320 --> 0:02:24.200 based on this idea that all of their growth is 0:02:24.240 --> 0:02:27.120 coming in the future, therefore they're more going to be 0:02:27.160 --> 0:02:29.360 more sensitive to yield. But how can you make that 0:02:29.480 --> 0:02:32.840 argument when perhaps the last ten years of growth you've 0:02:32.840 --> 0:02:35.560 seen a tech isn't necessarily indicative of the same margin 0:02:35.639 --> 0:02:37.519 of growth you're going to see in the same sector 0:02:37.600 --> 0:02:39.240 for the next ten years. So how how do you 0:02:39.280 --> 0:02:42.239 how do you justify that? Sure? I think the most 0:02:43.080 --> 0:02:47.080 simplistic way to think about what's happening is essentially, if 0:02:47.080 --> 0:02:50.560 you have inflation rising, a dollar today is worth more 0:02:50.639 --> 0:02:54.560 than a dollar in the future. And technology stocks are 0:02:54.600 --> 0:02:58.480 generally considered long duration assets, so they're particularly sensitive to 0:02:58.480 --> 0:03:01.000 the rising yields. But not just us the rise in 0:03:01.160 --> 0:03:04.720 tenure nominal yields, but really the tenure real yield. That's 0:03:04.720 --> 0:03:08.079 what it matters the most. They've actually tracked fairly well 0:03:08.120 --> 0:03:11.480 together in an inverse correlation over the last say six 0:03:11.520 --> 0:03:14.080 months or so, so it's really what's happening to the 0:03:14.120 --> 0:03:17.600 real yell that matters most. For technology, I will argue 0:03:17.639 --> 0:03:21.359 that you are right. Technology today looks very different than 0:03:21.360 --> 0:03:23.440 it did in the past. Right when we had the 0:03:23.480 --> 0:03:26.240 technology bubble, you have really extreme valuations and not a 0:03:26.240 --> 0:03:28.800 lot of earnings. A lot of these companies now actually 0:03:28.840 --> 0:03:30.960 have significant earnings, so it is different. I would say 0:03:30.960 --> 0:03:33.720 that maybe a little bit less vulnerable than they were 0:03:33.760 --> 0:03:37.720 back then. Seans it's this all sort of the lynchpins 0:03:37.720 --> 0:03:41.960 who to all this rotation is in the bond market. Um. 0:03:42.000 --> 0:03:44.600 This week we did see that that ten year yield 0:03:44.680 --> 0:03:48.760 sort of come down a little bit. Walk us through 0:03:48.800 --> 0:03:51.360 what you're thinking about the long end of the curve 0:03:51.440 --> 0:03:53.440 and the yield curve. I know you've done some some 0:03:53.480 --> 0:03:56.040 work looking about looking at that and thinking about it. 0:03:56.360 --> 0:03:59.280 I don't think anyone is very confident that this surgeon 0:03:59.360 --> 0:04:02.200 yields is over yet. I mean, is this kind of 0:04:02.200 --> 0:04:04.000 a head fake that we're saying this week? What's your 0:04:04.000 --> 0:04:07.440 take on on this sort of uh many correction back 0:04:07.480 --> 0:04:10.600 lower yields that we're seeing. I think the last week 0:04:10.680 --> 0:04:12.880 or so it could probably be chalked up to COVID jitters. 0:04:13.360 --> 0:04:17.320 You've seen some renewed lockdowns in Germany, although very short lived. 0:04:17.360 --> 0:04:19.800 I think they end. Uh. You know, you know, in 0:04:19.800 --> 0:04:22.240 a week or two. I think it's April eighteenth or something. 0:04:22.320 --> 0:04:23.960 I don't remember the exact date. But it's not a 0:04:24.000 --> 0:04:26.719 long lived lockdown. Uh. You saw it's a very similar 0:04:26.800 --> 0:04:29.599 thing in France. UH. And I think there's some concerns 0:04:29.640 --> 0:04:34.159 that these you know, new strains, UH, maybe spreading a 0:04:34.160 --> 0:04:37.839 bit more rapidly than we initially anticipated. So I don't 0:04:37.839 --> 0:04:41.640 think that delays the recovery significantly. You know, you heard 0:04:41.680 --> 0:04:44.159 President Biden talk about raising his goal from a hundred 0:04:44.160 --> 0:04:47.560 million shots to two million today. Um, they are on 0:04:47.640 --> 0:04:49.800 pace to get there at the current pace, about two 0:04:49.800 --> 0:04:52.840 and a half million doses per day. Uh. To get 0:04:52.839 --> 0:04:55.000 that extra seventy million needed to hit his target, it 0:04:55.000 --> 0:04:57.640 only takes about twenty eight days. But I do think 0:04:57.680 --> 0:04:59.599 that's sort of y Yields have kind of backed up 0:04:59.640 --> 0:05:02.279 a little bit, UM when you mentioned what's going to happen, 0:05:02.320 --> 0:05:04.760 and over the long run, this is not a new 0:05:04.800 --> 0:05:08.400 phenomenon to see the yield curve steepen. It's happened when 0:05:08.400 --> 0:05:12.880 the U. S economy exited recession during the last four recessions. UH, 0:05:12.920 --> 0:05:15.800 And eventually the spread between the ten year yield and 0:05:15.800 --> 0:05:17.440 the two year yield, which is what we call the 0:05:17.520 --> 0:05:21.719 yield curve, actually peaked at about two point four percenter. 0:05:21.800 --> 0:05:24.880 So during those last four recessions. Right now the spread 0:05:24.920 --> 0:05:27.040 is about one and a half percent, so that would 0:05:27.040 --> 0:05:30.560 imply there's probably further upside here to go. And if 0:05:30.600 --> 0:05:33.080 we look at the past four recessions again, it took 0:05:33.120 --> 0:05:36.240 about twenty two months on average from the end of 0:05:36.240 --> 0:05:39.680 the recession to the yield curve peaking. Now, the recession 0:05:39.680 --> 0:05:41.720 has probably ended a while ago, right it may have 0:05:41.839 --> 0:05:45.360 ended in September. I'm not the one who's the arbitr 0:05:45.360 --> 0:05:49.039 of when recession visually ended, but we're probably at least 0:05:49.480 --> 0:05:53.160 several months into the recovery, so some of this has 0:05:53.160 --> 0:05:55.599 already been priced in. The yield curve has already steep end, 0:05:56.279 --> 0:05:58.360 but we probably have further to run based on what's 0:05:58.360 --> 0:06:02.400 happened in historical example. That's fascinating that you say that, 0:06:02.440 --> 0:06:05.520 because you've talked about post recessionary periods. But something else 0:06:05.520 --> 0:06:08.240 that's pretty common in post recessionary periods is this idea 0:06:08.279 --> 0:06:10.560 that value stocks continue to rise. And I think the 0:06:10.560 --> 0:06:13.120 connection to that, for example, with the yield picture, is 0:06:13.160 --> 0:06:15.400 going to be that financials will rise as well in 0:06:15.480 --> 0:06:18.599 line with those yield curves. But how do you decide 0:06:18.640 --> 0:06:20.839 how long that that rally runs up? I mean it 0:06:20.839 --> 0:06:24.320 makes sense to buy things like financials like I mentioned, 0:06:24.400 --> 0:06:26.480 or commodities or e M for example. But when do 0:06:26.560 --> 0:06:29.839 you decide that that period about performance is over? When 0:06:29.839 --> 0:06:31.400 do you decide that we're now going to be in 0:06:31.440 --> 0:06:34.920 a growth environment? Again, that is an absolutely great question 0:06:35.000 --> 0:06:38.280 to determine when exactly something ends. I think there's further 0:06:38.520 --> 0:06:40.240 room to run if you just look on a very 0:06:40.320 --> 0:06:44.320 very basic level, the Russell one thousand growth index versus 0:06:44.320 --> 0:06:46.480 the Russell one thousand value index and you look at 0:06:46.520 --> 0:06:50.640 how they perform. Since the end of the growth index 0:06:50.680 --> 0:06:54.600 is up about the value index is only up about ten. 0:06:55.160 --> 0:06:57.080 So to me, that suggests that there's further room to 0:06:57.160 --> 0:07:00.320 run in the value space. And it really is picular 0:07:00.360 --> 0:07:04.040 for financials because you think that steepening yield curve benefits 0:07:04.080 --> 0:07:06.719 them through net interest income. And they also took a 0:07:06.760 --> 0:07:10.360 lot of loan loss reserves in anticipation of this pandemic 0:07:10.520 --> 0:07:14.760 causing credit issues, and because we've got so much significant stimulus, 0:07:15.240 --> 0:07:17.880 they really haven't quite seen that. So eventually that's going 0:07:17.960 --> 0:07:20.360 to be released, and that will turn into profits. Now, 0:07:20.480 --> 0:07:23.240 some of that's priced in, probably, but I still think 0:07:23.240 --> 0:07:25.920 there's some room to run there for financials, particularly for 0:07:26.040 --> 0:07:30.200 talking about another one percent higher or steepening in the 0:07:30.280 --> 0:07:34.520 yield curve. You're shut. I keep thinking of a word 0:07:34.760 --> 0:07:37.440 that I haven't used or heard in a in a 0:07:37.480 --> 0:07:41.000 long time, and that's goldilocks. I feel like the market 0:07:41.040 --> 0:07:44.000 is really hoping for sort of this goldilocks recovery. If 0:07:44.040 --> 0:07:46.160 it gets a little too hot, if inflation is a 0:07:46.160 --> 0:07:49.640 little too hot, that's obviously going to raise rates and 0:07:49.680 --> 0:07:52.040 be an issue. But as you point out now, with 0:07:52.160 --> 0:07:54.840 Germany locking down even here in my home state of 0:07:54.880 --> 0:07:58.160 New Jersey, they've kind of halted the reopening to some degree. 0:07:58.800 --> 0:08:02.760 I wonder, you know which is sort of a more 0:08:02.840 --> 0:08:05.960 painful event for the market. Is it too hot of 0:08:05.960 --> 0:08:09.480 a recovery that that causes yields to rise and people 0:08:09.520 --> 0:08:14.560 bring forward their timeline for the fed UH normalizing policy, 0:08:14.800 --> 0:08:18.320 or is it that this recovery is not as robust 0:08:18.400 --> 0:08:21.480 as sort of this rotation and and the excitement over 0:08:21.520 --> 0:08:25.040 the rotation into cyclicals and value sort of implies, which 0:08:25.160 --> 0:08:28.920 which one kind of scares you more. I think what 0:08:29.000 --> 0:08:31.720 scares me the most is if we're wrong about the 0:08:31.760 --> 0:08:35.280 path of the virus, that changes everything, Right, If these 0:08:35.559 --> 0:08:40.000 strains come out spread more rapidly than we expect or 0:08:40.080 --> 0:08:42.320 aren't covered by the vaccines, then that's kind of a 0:08:42.320 --> 0:08:44.559 game change. Or now that's not the base case. It 0:08:44.600 --> 0:08:47.320 doesn't seem like that's happening, you know, And I do 0:08:47.440 --> 0:08:52.160 think that our treatment levels have improved greatly, number of hospitializations, 0:08:52.200 --> 0:08:54.640 deaths likely come down. And I think really importantly, you 0:08:54.640 --> 0:08:58.160 have a very significant portion of the sixty five plus 0:08:58.200 --> 0:09:01.520 population already vaccinated. So you know, I think they're right 0:09:01.600 --> 0:09:05.000 to be optimistic about the future. And you know, if 0:09:05.040 --> 0:09:07.200 we do get six and a half percent growth, like 0:09:07.200 --> 0:09:10.480 the fattest projecting, then you're looking at the strongest growth 0:09:10.559 --> 0:09:13.400 since the early nine and I think we will hit that. 0:09:13.960 --> 0:09:16.240 Um So, to me, I think that's the most important 0:09:16.240 --> 0:09:18.720 point of all of this. It's not rising bond yields. 0:09:18.800 --> 0:09:21.560 It's that we are exiting a recession and this is 0:09:21.600 --> 0:09:24.160 probably just the beginning of a new economic cycle, and 0:09:24.160 --> 0:09:27.880 those tend to last five, six years, maybe longer. That's 0:09:27.920 --> 0:09:30.400 really the important point because that's what's going to create earnings, 0:09:30.640 --> 0:09:32.600 and that's what's going to sustain the stock market over 0:09:32.600 --> 0:09:35.360 a longer period of time. Do you see corrections because 0:09:35.360 --> 0:09:37.920 of bond yields? Maybe, But at the end of the day, 0:09:38.400 --> 0:09:40.760 it's really about the economy recovering in the beginning of 0:09:40.800 --> 0:09:56.280 a new economic cycle. De Sean, what's the trade here? 0:09:56.320 --> 0:09:58.960 And here's why I ask. I'm on a team that's 0:09:59.000 --> 0:10:01.840 filled with X trader and they always ask me what's 0:10:01.880 --> 0:10:04.200 the trade? Uh? So I'm very curious when you have 0:10:04.320 --> 0:10:07.920 this risk, or this continuing risk of this virus of 0:10:08.240 --> 0:10:11.920 perhaps more variants, can you really dive into the deep 0:10:12.040 --> 0:10:13.920 end with the value play or do you still have 0:10:13.960 --> 0:10:16.880 to have some sort of exposure to things like tech, 0:10:16.960 --> 0:10:19.560 to things like utilities, those kind of names that you 0:10:19.559 --> 0:10:23.400 can really continue to rely on. Sure, I don't think 0:10:23.400 --> 0:10:26.520 you just abandoned technology or growth stocks. I mean, over time, 0:10:26.920 --> 0:10:30.480 they will continue to provide growth as they're called, uh 0:10:30.480 --> 0:10:32.880 and you will see positive earnings in those spaces. So 0:10:32.920 --> 0:10:35.000 I don't think it makes sense to completely get rid 0:10:35.040 --> 0:10:38.319 of technology. But you know, you have a lot of 0:10:38.480 --> 0:10:41.160 people that have been heavily invested in technology since the 0:10:41.200 --> 0:10:46.000 beginning of the pandemic, and that scenario where we're all 0:10:46.040 --> 0:10:49.840 staying at home is potentially unwinding. So it's not all 0:10:49.920 --> 0:10:54.199 technology companies, right. There's some that i've really strong cash 0:10:54.520 --> 0:10:57.440 cash on their balance sheet, they have strong curpet earnings. 0:10:57.480 --> 0:11:00.360 There's some that don't have a lot of earnings. There's 0:11:00.400 --> 0:11:04.800 also some that are uniquely benefiting from the pandemic exercise equipment. 0:11:05.120 --> 0:11:07.960 So it really it's not just tech, it's which type 0:11:08.000 --> 0:11:11.520 of tech. Yeah, I feel like the really the most 0:11:11.520 --> 0:11:14.920 speculative sort of earnings way off in the in the 0:11:14.960 --> 0:11:19.160 distant future type of tech. Uh, really the the arc 0:11:19.320 --> 0:11:22.440 you know, Cathy Woods type of of hopes and dreams 0:11:22.480 --> 0:11:25.280 type of stocks that are really getting hit the hardest. 0:11:25.360 --> 0:11:29.600 Is there something I mean? Is that all simply a 0:11:29.640 --> 0:11:33.000 reverse of the side of the coin to the yields picture? 0:11:33.080 --> 0:11:35.200 I mean, what would it take to get that kind 0:11:35.200 --> 0:11:41.000 of really gung ho, uh gusty spirit towards those those 0:11:41.040 --> 0:11:43.000 types of stocks brewing? Again? Is it? Is it just 0:11:43.080 --> 0:11:46.439 as a simple matter of which way rates are going now? 0:11:46.679 --> 0:11:49.480 I think it's valuations. I think if you see those 0:11:49.600 --> 0:11:52.480 stocks correct enough, you'll get people back into the space. 0:11:52.880 --> 0:11:55.480 I just don't think they feel completely confident yet that 0:11:55.520 --> 0:11:58.600 it's over, that it's corrected enough where the valuations are 0:11:58.600 --> 0:12:01.080 really appealing at this point. Uh, And it's not so 0:12:01.200 --> 0:12:03.680 that people are kind of nervous about how things look 0:12:03.720 --> 0:12:06.800 as we exit this recession. There's a lot of uncertainty. 0:12:06.840 --> 0:12:10.000 We don't know what's going to happen with inflation. We 0:12:10.040 --> 0:12:13.120 think we know you can look at gasoline prices alone 0:12:13.240 --> 0:12:15.840 and that will point towards the CPI that's about three 0:12:16.320 --> 0:12:19.280 for the remainder of the year. So there's really high 0:12:19.480 --> 0:12:22.640 probability that we get higher inflation, but we don't know 0:12:22.720 --> 0:12:25.920 if it's simply going to be for a couple of 0:12:26.000 --> 0:12:28.080 quarters and then moderate, or if it's going to be 0:12:28.160 --> 0:12:31.920 something more significant. And that's really the uncertainty that keeps 0:12:31.960 --> 0:12:35.000 you from maybe going all back in on these high 0:12:35.120 --> 0:12:40.400 valuation areas. So tell me you talked about valuations. How 0:12:40.480 --> 0:12:43.280 much does liquidity play into this, because I think in 0:12:43.840 --> 0:12:46.080 the middle parts of last year have to say there 0:12:46.080 --> 0:12:49.160 were companies who were just in free access of the 0:12:49.200 --> 0:12:52.560 debt market here. I mean you had airlines really basing 0:12:52.559 --> 0:12:55.320 a cash bunch and then getting these kind of massive 0:12:55.320 --> 0:12:59.000 amounts of cash and issuing these bonds for ten premiums. 0:12:59.040 --> 0:13:02.760 Tech coming in issuing bonds for literally no premium So 0:13:02.840 --> 0:13:06.600 what here's the role here of those extra cash cushions 0:13:06.600 --> 0:13:09.280 that tech may have, but now other kind of battered 0:13:09.320 --> 0:13:12.400 sectors have to from airlines to cruise, lene etcetera. Where 0:13:12.400 --> 0:13:16.120 does the liquidity piece of the equation come in? Sure? 0:13:16.200 --> 0:13:18.319 So I'm not sure I'm going to answer this exactly 0:13:18.360 --> 0:13:20.040 the way you'd want me to. But if you think 0:13:20.080 --> 0:13:23.360 of how much stimulus has been done, you've seen personal 0:13:23.400 --> 0:13:26.959 income rise one point one trillion dollars last year for 0:13:27.200 --> 0:13:29.440 the nation as a whole, and a lot of that 0:13:29.480 --> 0:13:32.960 money went into some of these technology things, exercise equipment, 0:13:33.000 --> 0:13:35.319 all those stay at home type stock. So that is 0:13:35.360 --> 0:13:39.040 liquidity in the sense that it actually reached consumers. Consumers 0:13:39.080 --> 0:13:41.440 actually spent it. But are they going to continue that 0:13:41.480 --> 0:13:44.160 same behavioral pattern or they going to move towards the 0:13:44.200 --> 0:13:47.760 services sector the economy. Are they going to start booking trips? 0:13:47.800 --> 0:13:50.120 Are they going to start going back to hotels? Are 0:13:50.120 --> 0:13:52.439 they're going to do those types of things? Um So, 0:13:52.480 --> 0:13:54.719 to me, that's kind of where the liquidity plays. And 0:13:54.800 --> 0:13:58.720 you're absolutely right when you talk about technology and airlines 0:13:58.760 --> 0:14:01.400 and some of these with debt. But if you look 0:14:01.400 --> 0:14:06.080 at the SP five, nowhere near the same performance for 0:14:06.280 --> 0:14:09.520 the other four hundred and ninety stocks. Right, So you 0:14:09.559 --> 0:14:11.800 had significant run up, maybe a hundred and thirty percent 0:14:11.880 --> 0:14:15.000 return in those top five stocks, and then maybe not 0:14:15.080 --> 0:14:17.400 even half of that, maybe six and the other four. 0:14:18.720 --> 0:14:21.400 So when I hear about liquidity just insanely driving up 0:14:21.440 --> 0:14:24.160 the market, it's not all of the market. There's plenty 0:14:24.200 --> 0:14:27.320 of areas that are still beaten down. Yeah, So I 0:14:27.360 --> 0:14:31.080 wanted to get to that notion about the value in 0:14:31.080 --> 0:14:34.920 in overseas markets, and you would pointed out the UK market, 0:14:34.960 --> 0:14:38.360 you know, looking at the foot see here. Uh never 0:14:38.480 --> 0:14:41.600 did quite reclaim that that record back I think it 0:14:41.680 --> 0:14:44.440 was two thousand and eighteen. I mean, I guess there's 0:14:44.800 --> 0:14:48.600 always handwringing over Brexit and the trade situation and that 0:14:48.680 --> 0:14:51.760 sort of thing. But yeah, we're still down a good 0:14:51.800 --> 0:14:55.720 fifteen percent for the foot see from from that peak, Um, 0:14:55.960 --> 0:15:00.200 walk us through what is attractive there? Obviously, valuations, I'm 0:15:00.200 --> 0:15:02.080 sure part of it is it is a kind of 0:15:02.120 --> 0:15:05.720 hand in hand with the the rotation into the more 0:15:05.760 --> 0:15:09.240 cyclical parts of the of the market. Is that kind 0:15:09.240 --> 0:15:11.520 of the story for the UK and and a lot 0:15:11.560 --> 0:15:14.080 of the bullishness towards uh, you know the rest of 0:15:14.120 --> 0:15:17.320 the world compared to the US at this point. Yeah, 0:15:17.320 --> 0:15:19.720 that's right. So what I think of UK equities, I'm 0:15:19.800 --> 0:15:22.240 not thinking that it's going to be some hot stock 0:15:22.320 --> 0:15:24.080 so to speak, that you get rich on, right. This 0:15:24.200 --> 0:15:27.240 is not one of those types of investments. But what 0:15:27.280 --> 0:15:30.040 it is is something that trades about fourteen times earnings, 0:15:30.080 --> 0:15:34.400 which is about discount the U S stocks UH significant 0:15:34.400 --> 0:15:36.600 weighting of the foot Seed one hundred is an energy 0:15:36.600 --> 0:15:40.040 and financials which are both positively correlated with yields. That 0:15:40.040 --> 0:15:42.480 means the fields go up, those sectors tend to benefit, 0:15:42.760 --> 0:15:45.040 and it doesn't have a lot of exposure to technology. 0:15:45.080 --> 0:15:47.760 It's under a two percent waiting in the index of 0:15:47.760 --> 0:15:51.400 the foot So it's not that it's necessarily going to 0:15:51.480 --> 0:15:54.320 make you rich instantly, but if you're looking for an 0:15:54.400 --> 0:15:58.720 area that is still offers value probably as upside to hear, 0:15:59.440 --> 0:16:01.880 we think it's attractive. And I also want to point 0:16:01.880 --> 0:16:04.560 out that this has been a rolling healthcare crisis the 0:16:04.720 --> 0:16:07.920 entire time. Right it started in China, then it spread 0:16:07.960 --> 0:16:10.240 to Italy, then it spread to the U S. We're 0:16:10.320 --> 0:16:13.600 essentially seeing the reversive that now where you're going to 0:16:13.680 --> 0:16:16.920 have lots of vaccinations in the US, then you're going 0:16:16.960 --> 0:16:19.400 to have vaccinations in Europe that maybe it moves to 0:16:19.480 --> 0:16:23.960 Latin America, so those areas will recover, but slower and 0:16:24.080 --> 0:16:27.800 later than we do in the US. I love that 0:16:27.840 --> 0:16:30.760 you brought up vaccinations because that's been something that people saying, 0:16:30.760 --> 0:16:33.360 how do you trade on this? Uh? Something back in 0:16:34.080 --> 0:16:36.480 that was happening is people were trading to the opposite 0:16:36.480 --> 0:16:38.880 direction about in terms of case counts. They were buying 0:16:39.040 --> 0:16:42.280 US markets because Europe and China was more supposed to 0:16:42.280 --> 0:16:44.640 the virus in the US was at the time, and 0:16:44.680 --> 0:16:46.400 then it kind of got flipped on its head. So 0:16:46.520 --> 0:16:49.880 how do you trade the opposite We're to talk about vaccinations, 0:16:49.920 --> 0:16:52.880 for example, where you have perhaps the US or even 0:16:52.880 --> 0:16:55.760 the UK leading in those vaccinations. But like you said, 0:16:56.000 --> 0:16:59.280 e M is not well. I guess one way to 0:16:59.320 --> 0:17:01.080 think about it in the gain not sure and perfectly 0:17:01.080 --> 0:17:04.800 answering the question. But the more vaccinations you have, then 0:17:04.840 --> 0:17:06.760 it's more likely that you're going to pull back on 0:17:06.800 --> 0:17:10.080 some of the stimulus over time. Right, So eventually these 0:17:10.080 --> 0:17:12.920 central banks are going to start to exit from the 0:17:12.960 --> 0:17:16.159 massive amounts of stimulus they've provided, and I think that 0:17:16.280 --> 0:17:18.959 that will be a considered not necessarily immediately we hear 0:17:19.000 --> 0:17:20.760 in Fuss just talking about it in the US right now. 0:17:20.800 --> 0:17:23.240 What the Federal Reserve is gonna do. Are they really 0:17:23.240 --> 0:17:25.880 going to wait until the end of three to raise 0:17:25.920 --> 0:17:27.639 interest rates or they're going to do it towards the 0:17:27.720 --> 0:17:31.919 end of Will they start to taper asset purchases at 0:17:31.960 --> 0:17:35.240 the end of this year or is it early? And 0:17:35.480 --> 0:17:38.080 I think those things will be issues for markets down 0:17:38.119 --> 0:17:41.560 the road. UM. So as far as vaccinations increasing, it's 0:17:41.560 --> 0:17:43.240 a great thing. We all want to get back to life. 0:17:43.280 --> 0:17:46.040 I think that's important, um. And I also would point 0:17:46.040 --> 0:17:48.520 out economy is not the stock market. Stock market is 0:17:48.560 --> 0:17:50.960 not the economy that old adage. Um. I think there 0:17:51.000 --> 0:17:53.119 may be more truth to that as we get further 0:17:53.200 --> 0:17:57.920 along in this where the vaccinations increase the economic outlook 0:17:57.920 --> 0:18:01.119 and the growth outlook, but kind of decreases the amount 0:18:01.119 --> 0:18:04.320 of stimulus that we're seeing in the market. You know, Sean, 0:18:04.359 --> 0:18:07.200 I think it's a it's a fascinating time to try 0:18:07.240 --> 0:18:10.840 to figure out what the Federal reserves next move will be. 0:18:11.040 --> 0:18:13.960 As you point out, you know, everyone trying to determine 0:18:14.000 --> 0:18:17.320 when that tapering begins. I mean, it seems to me 0:18:17.880 --> 0:18:20.840 that they're gonna have a hard time tapering, uh, without 0:18:20.880 --> 0:18:24.159 causing some adjecta, as they say, in the market one 0:18:24.160 --> 0:18:26.399 way or the other. But I also wonder, you know, 0:18:26.800 --> 0:18:30.040 is there an equal chance that we get a surprise 0:18:30.080 --> 0:18:32.720 from them in the other directions, some kind of yield 0:18:32.760 --> 0:18:36.200 curve control or some kind of operation twist to keep 0:18:36.240 --> 0:18:39.240 those that long end tam is that I wonder if 0:18:39.240 --> 0:18:43.199 the market is in some way almost begging for that 0:18:43.560 --> 0:18:46.600 or wishful thinking for that type of scenario. What do 0:18:46.680 --> 0:18:49.480 you think? Yeah, I think it's fascinating that you bring 0:18:49.480 --> 0:18:51.240 that up. I was thinking about this the other day, 0:18:51.320 --> 0:18:53.920 and you know, it almost feels like investors are kind 0:18:53.920 --> 0:18:55.720 of this mindset that the Federal Reserve is on the 0:18:55.760 --> 0:18:57.320 sidelines and they're not going to help us out and 0:18:57.359 --> 0:18:59.800 can't count on them anymore. But if you think about 0:18:59.840 --> 0:19:02.440 what they're saying, they're saying, we need to see either 0:19:02.640 --> 0:19:06.520 substantial for the progress and the recovery or a market 0:19:06.520 --> 0:19:10.119 deterioration in financial conditions. What would get you a market 0:19:10.160 --> 0:19:12.920 deterioration and financial conditions is if the stock market sells 0:19:12.920 --> 0:19:16.480 off sharply. So if the stock market sells sells off 0:19:16.520 --> 0:19:20.200 sharply and corrects because of these rising bond yields, then 0:19:20.400 --> 0:19:22.359 you actually have more impetus for the FETE to step 0:19:22.359 --> 0:19:26.200 in and do a program like QI twist where it 0:19:26.240 --> 0:19:29.480 would actually once again help markets. So I think there's 0:19:29.480 --> 0:19:32.800 support there that people are maybe ignoring. It's almost like 0:19:32.840 --> 0:19:35.199 the the proverbial poal put. You know, we're we're all 0:19:35.240 --> 0:19:37.920 trying to figure out what that type of altility would 0:19:37.920 --> 0:19:39.520 look like to to get us there. I don't. I 0:19:39.520 --> 0:19:41.960 guess no one knows once we see, right. I mean 0:19:41.960 --> 0:19:45.120 maybe if you get you know, real tenure treasury yields 0:19:45.119 --> 0:19:47.320 in your zero, that would maybe be concerning. I don't 0:19:47.320 --> 0:19:50.760 think there's much appetite for a positive real yield or 0:19:50.800 --> 0:19:54.760 if you saw stock market sell off, you know, I 0:19:54.800 --> 0:19:57.320 do think you'd see action. So it's not like they're 0:19:57.359 --> 0:20:00.880 completely gone. The Federal Reserve has not disappeared. They're comfortable 0:20:00.960 --> 0:20:03.840 with their stance for now, but things could change. So 0:20:03.880 --> 0:20:07.399 speaking of a fifteen stock correction, what might be the 0:20:07.440 --> 0:20:10.600 catalyst of that if not the FED and a deterioration 0:20:11.080 --> 0:20:13.879 from there, and what else could possibly create that kind 0:20:13.920 --> 0:20:17.400 of move. That's a really good question. I do think 0:20:17.440 --> 0:20:20.000 the tapering is something that you know, I don't think 0:20:20.040 --> 0:20:22.720 it would create a bear market. I just don't see that. 0:20:22.800 --> 0:20:26.320 I think there's such strong tail winds right now, but 0:20:26.520 --> 0:20:29.080 a goat, any change in the path of the virus 0:20:29.400 --> 0:20:32.640 would be something to consider. Maybe if earning is really 0:20:32.640 --> 0:20:37.080 disappoint maybe if you saw these rising yields become a 0:20:37.119 --> 0:20:40.320 credit market issue, which I don't think there's really signs 0:20:40.320 --> 0:20:44.359 of that yet, um, but it could be something. It's 0:20:44.480 --> 0:20:46.720 it's always tough to say what exactly the catalyst is 0:20:46.760 --> 0:20:49.359 going to be when you have stretched valuations. It doesn't 0:20:49.359 --> 0:20:51.959 always take a whole lot, and it usually comes out 0:20:52.000 --> 0:20:55.720 of nowhere, you know. Sure, I am picturing the clients, 0:20:56.200 --> 0:21:01.000 the city wealth clients as being you know what, sophisticated 0:21:01.040 --> 0:21:05.720