WEBVTT - Surveillance: Risks Report With AXA's Buberl 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:30.520 and of course on the Bloomberg terminal. We are honored 0:00:30.520 --> 0:00:32.920 that the chief executive officer of ax And, Thomas Burble, 0:00:33.000 --> 0:00:35.800 joins US now in support with Ian Bremer and eraisia 0:00:35.840 --> 0:00:40.080 group of actually quantifying risk. Thomas, I've got to say 0:00:40.120 --> 0:00:45.200 congratulations on the acuity of your study. You go out 0:00:45.280 --> 0:00:49.920 and speak to thousands of people, explain why this study 0:00:49.960 --> 0:00:52.760 is different from last year or the others of the 0:00:52.880 --> 0:00:56.760 thousands you talked to. Thanks Tommy. I'll be doing this 0:00:56.840 --> 0:01:00.000 study now for the eight ya. The extra futurisquit pol 0:01:00.240 --> 0:01:02.640 And what's important for us is to understand how risks 0:01:02.680 --> 0:01:05.840 are perceived, but also how we can map them out 0:01:05.959 --> 0:01:08.679 and what you can see that obviously the hierarchy of 0:01:08.800 --> 0:01:12.280 risks is changing over the time. Well, last year, obviously 0:01:12.360 --> 0:01:15.319 pandemic was the number one risk. We are now seeing 0:01:15.400 --> 0:01:18.000 that climate is back at the top. So it's for 0:01:18.080 --> 0:01:21.000 us very important to understand what are the key risks 0:01:21.120 --> 0:01:24.320 and also how can they be solved. Walk me through 0:01:24.319 --> 0:01:26.240 the key risk right now, then tell us frame the 0:01:26.240 --> 0:01:30.199 climate debate for us from a company perspective. People worried 0:01:30.240 --> 0:01:33.039 about climate change change in their business, or they're worried 0:01:33.040 --> 0:01:35.520 about stakeholders turning them back on their business because they're 0:01:35.520 --> 0:01:38.920 not worried enough about climate change. I would say all 0:01:38.959 --> 0:01:41.520 of the above the issues today that we have a 0:01:42.080 --> 0:01:47.000 very very many evidences around us that climate change does 0:01:47.440 --> 0:01:49.960 matter to us, just change our life. I think when 0:01:50.000 --> 0:01:52.080 you look at COVID nineteen, this could also well be 0:01:52.120 --> 0:01:55.400 connected to climate change, and the issue is really what 0:01:55.560 --> 0:01:57.480 can we do about it? How can we change it? 0:01:57.520 --> 0:01:59.520 We see that in the political arena there is a 0:01:59.600 --> 0:02:03.720 strong desire now on the legislative front to really um 0:02:04.040 --> 0:02:08.359 uh push the transition, and so companies, investors and insure 0:02:08.440 --> 0:02:12.200 US will have to align. And we've been very early 0:02:12.240 --> 0:02:14.920 on in this game making sure that on the investment side, 0:02:14.919 --> 0:02:17.400 but also on the underwriting side, we are going in 0:02:17.440 --> 0:02:21.720 the direction of helping society, helping the companies to really 0:02:21.800 --> 0:02:25.080 make this climate change happen, because it is the top risk, 0:02:25.520 --> 0:02:29.320 not only in the general public, but certainly also for 0:02:29.360 --> 0:02:32.079 the young people that for the first time we actually 0:02:32.560 --> 0:02:35.440 put a specific focus on in that eighth edition, keeping 0:02:35.520 --> 0:02:38.760 some numbers on that for the underwriting business specifically, Thomas, 0:02:38.760 --> 0:02:42.880 how if you changed how you do business? So essentially 0:02:43.320 --> 0:02:46.360 we are looking at firstly, how can we make sure 0:02:46.480 --> 0:02:50.280 that we are avoiding uh companies risks that are clearly 0:02:50.320 --> 0:02:53.320 pulled us. If you take the coal industry, it was 0:02:53.360 --> 0:02:56.440 in two thousand fifteen that dacts are decided to exit 0:02:56.600 --> 0:02:59.560 call on the investment side, and we've also followed the 0:02:59.600 --> 0:03:02.400 same lot on the underwriting side, making sure that we 0:03:02.400 --> 0:03:07.080 are redeploying that investment and capacity in green in the 0:03:07.120 --> 0:03:10.160 green area. However, this is not enough if you look 0:03:10.360 --> 0:03:13.240 the meat of the transition and the key area is 0:03:13.240 --> 0:03:16.480 really how to help industrial companies to move from a 0:03:16.520 --> 0:03:19.720 mix that is not sustainable to something that is more sustainable. 0:03:19.720 --> 0:03:23.920 And this transition area, helping to invest in companies that 0:03:24.000 --> 0:03:26.960 have a very clear and credible transition plan and also 0:03:27.040 --> 0:03:29.680 doing the same on the underwriting side is the journey 0:03:29.680 --> 0:03:32.359 by going now, Thomas, is your have to in dealing 0:03:32.360 --> 0:03:35.000 with this issue as a company more on the insurance 0:03:35.000 --> 0:03:38.000 side or more on the underwriting side more on the 0:03:38.040 --> 0:03:42.000 investing side. It is on both sides, but I do 0:03:42.040 --> 0:03:44.760 believe Lisa that on the insurance side it is even 0:03:44.760 --> 0:03:47.240 more powerful. On the investment side, we are one of 0:03:47.320 --> 0:03:50.880 many investors, and if you want to find funds for 0:03:50.920 --> 0:03:54.840 a call factory today, you will. However, on the insurance side, 0:03:55.120 --> 0:03:57.480 if you don't have an insurance, you will not find 0:03:57.520 --> 0:04:00.920 any investment. And we have launched recent lee the net 0:04:01.000 --> 0:04:04.320 Zero Insurance Alliance, which is an alliance of eight insurers 0:04:04.360 --> 0:04:07.000 under the lead of AKSA to make sure that we 0:04:07.080 --> 0:04:10.920 get the largest insurer commercial insurers together to make sure 0:04:10.960 --> 0:04:13.600 that these risks are not underwritten anymore, and that we 0:04:13.640 --> 0:04:17.760 are really helping focusing our insurance on the companies that 0:04:17.839 --> 0:04:20.640 are in transition. So has this been effective? Have you 0:04:20.680 --> 0:04:23.520 seen those companies that will not get insurance from the 0:04:23.520 --> 0:04:27.920 big companies actually struggle or or actually shift their businesses 0:04:27.960 --> 0:04:32.960 in response. So on the on the question around avoiding coal, 0:04:33.080 --> 0:04:35.640 we've clearly seen it, and I've personally been involved in 0:04:35.720 --> 0:04:38.520 quite a few customer conversations as you can mention, this 0:04:38.600 --> 0:04:41.239 is not easy, but if we don't go this way, 0:04:41.520 --> 0:04:43.800 we will not make that transition happening. So on the 0:04:43.880 --> 0:04:48.120 coal side, it has already happened. The transition side is 0:04:48.160 --> 0:04:51.560 currently in the making, and we are now putting the 0:04:51.600 --> 0:04:54.559 coalition together to also act on this level. It's almost 0:04:54.600 --> 0:04:56.560 from the coal side just quickly. If you made the 0:04:56.560 --> 0:04:59.919 decision that you don't think those companies should be insure, 0:05:00.320 --> 0:05:02.280 if you make the decision that you can't put a 0:05:02.320 --> 0:05:06.920 price on the insurance, no, we believe these companies should 0:05:06.960 --> 0:05:11.400 not be insured because somebody who does not contribute to 0:05:11.520 --> 0:05:14.880 the transition of our climate, it's not somebody that we 0:05:14.920 --> 0:05:18.839 would like to invest in, because we obviously see the 0:05:18.880 --> 0:05:21.160 negative effects on this. On the other side, we are 0:05:21.160 --> 0:05:23.880 also a large health insurance so when you look at 0:05:24.880 --> 0:05:28.360 climate related health issues, they have arisen a lot. So 0:05:28.440 --> 0:05:32.440 for us, it makes absolute sense to be true to ourselves. 0:05:32.480 --> 0:05:34.799 How can we avoid these risks on the insurance side 0:05:34.960 --> 0:05:37.599 to also make sure that we have a better experience 0:05:37.640 --> 0:05:40.320 for our patients. Fascinating position to put yourself in, Tho Thomas, 0:05:40.320 --> 0:05:43.120 to decide which companies should or should not fail, which 0:05:43.160 --> 0:05:46.440 companies deserve insurance, and which companies don't. Does it start 0:05:46.440 --> 0:05:50.960 an end with climate change? Lets this's go somewhere else. Look, 0:05:51.000 --> 0:05:52.960 I mean you also have other areas. If you think 0:05:53.000 --> 0:05:56.559 about again health related issues, you have got the question 0:05:56.560 --> 0:05:59.360 around tobacco, and so for example, in areas where we 0:05:59.440 --> 0:06:02.880 clearly see that there is a direct link between an 0:06:02.920 --> 0:06:06.560 industrial activity and negative consequences for health. So, for example, 0:06:06.560 --> 0:06:09.200 on tobacco, as of the first cigarette, you have a 0:06:09.240 --> 0:06:12.080 negative effect. We've also taken the decision in two thousand 0:06:12.080 --> 0:06:15.680 and sixteen to exit this and to redeploy our investment. Means, 0:06:15.839 --> 0:06:19.120 um this needs to continue, but it needs to continue 0:06:19.120 --> 0:06:22.919 in a way that we are accompanying our customers, that 0:06:22.960 --> 0:06:25.600 we are accompanying the companies we invest in to make 0:06:25.640 --> 0:06:29.919 sure that we help this transition and we don't penalize. Interesting, 0:06:30.000 --> 0:06:32.840 some people might think that's controversial. That's a conversation for 0:06:32.880 --> 0:06:36.520 another day. Thomas just quickly someday Man City Liverpool, can 0:06:36.560 --> 0:06:41.320 we get a prediction sir? It is clearly that Liverpool 0:06:41.360 --> 0:06:44.720 will be winning, and because they are so well positioned, 0:06:45.120 --> 0:06:48.080 it would not underwrite the insurance of Man City. Tom, 0:06:48.279 --> 0:06:51.359 I think is the message you're trying to He just 0:06:51.480 --> 0:06:55.039 took undone as an insure. If you can make that 0:06:55.080 --> 0:06:59.040 decision as well, which team succeeds and fails. Thomas Bobo there. 0:06:59.080 --> 0:07:08.200 Thank you, sir, access CEO. Right now we're gonna shift 0:07:08.200 --> 0:07:10.880 to the equity market with someone who does observe the 0:07:10.960 --> 0:07:14.840 yield space as he gauges his bullish view and equities. 0:07:14.880 --> 0:07:19.160 Benjamin Laidler is the Global Markets their strategist and he 0:07:19.280 --> 0:07:23.240 joins us this morning to reaffirm on equities. Ben Laidler, 0:07:23.360 --> 0:07:27.200 you talk about the priors of yield, you talk about 0:07:27.280 --> 0:07:30.160 the other moments where we've seen yield surge, and you 0:07:30.280 --> 0:07:35.760 do say this time is different. I think the speed 0:07:35.760 --> 0:07:38.000 has been different markets. I think I'm reacting to the 0:07:38.000 --> 0:07:40.320 speed of the body yield move you know, not necessarily 0:07:40.560 --> 0:07:42.560 to the level twenty basis points in a week if 0:07:42.560 --> 0:07:44.840 you extract like that. This is the basically the biggest 0:07:44.840 --> 0:07:47.760 move that we've almost ever had, even more than we 0:07:47.800 --> 0:07:49.760 had in in first quarter, which is you know, close 0:07:49.800 --> 0:07:52.400 to record itself. Um. Yeah, Having said that, you know, 0:07:52.480 --> 0:07:54.320 I think we've sort of seen this movie before. Right 0:07:54.400 --> 0:07:56.200 first quarter we had the you know, nearly a hundred 0:07:56.200 --> 0:07:58.960 basis point moving yields. Over the quarter, we saw a 0:07:58.960 --> 0:08:01.360 lot of movements, you know, to your point under the surface, 0:08:01.400 --> 0:08:03.520 there was a lot of sort of sector rotation, but 0:08:04.000 --> 0:08:06.720 you know, the opal market came up six percent, and 0:08:06.760 --> 0:08:08.120 that wasn't as similar to what we saw on the 0:08:08.120 --> 0:08:10.560 table tantram back in which is the best year of 0:08:10.560 --> 0:08:14.560 the decade for for equities. So you know, I think 0:08:14.560 --> 0:08:16.480 the markets sending us some messages here. I think it 0:08:16.520 --> 0:08:18.120 means a lot more per sectors than it was to 0:08:18.160 --> 0:08:21.040 the market. And I think this sort of pain is 0:08:21.040 --> 0:08:23.480 is going to be temporary as um sort of market 0:08:23.720 --> 0:08:25.680 um as the sort of reprice this a little bit. 0:08:25.720 --> 0:08:27.600 But I think that's sort of bulld case of you know, 0:08:27.760 --> 0:08:30.520 fed forbearance and the strong earnings of probably remained in place. 0:08:30.640 --> 0:08:33.440 Have we had enough of a draw down, a pull 0:08:33.520 --> 0:08:37.320 back where it shifts the use of cash game for 0:08:37.400 --> 0:08:44.679 corporations um, And we've had, I mean the story for 0:08:44.720 --> 0:08:46.120 this year, but it has really just been the lack 0:08:46.200 --> 0:08:48.760 of volatility, right, I mean, we've had this huge rally, 0:08:48.760 --> 0:08:50.600 who had one sort of fighter sent pull back this 0:08:50.679 --> 0:08:53.040 year are than the three we've normally had. So you know, 0:08:53.120 --> 0:08:55.800 the VIX remains sort of very low. I mean, you know, 0:08:55.800 --> 0:08:57.880 back in the first quarter of VIX peaked at thirty seven, 0:08:58.280 --> 0:09:00.160 So you know, you can make the case for we 0:09:00.240 --> 0:09:03.920 might get more volatility, especially with everything that's coming out 0:09:03.960 --> 0:09:06.960 of d C and and everything that's coming out of China. 0:09:07.440 --> 0:09:10.679 So you know, I think the outlook is one for 0:09:10.800 --> 0:09:13.080 probably more a bit more volatility in the short term. 0:09:13.120 --> 0:09:15.280 But I think you've been set up for, you know, 0:09:15.480 --> 0:09:17.160 for a sentence Santa rally into the end of the 0:09:17.240 --> 0:09:18.960 year as we sort of clear this sort of DC 0:09:19.040 --> 0:09:21.960 in China noise, as the sort of growth bear subside 0:09:22.360 --> 0:09:24.400 in virus cases in the US down thy percent in 0:09:24.520 --> 0:09:27.520 two weeks, and I think that sets us up for um, 0:09:27.640 --> 0:09:30.560 you know, growth recovery into the quarter. With the quarter 0:09:30.559 --> 0:09:32.480 earnings coming up in two weeks, which I think is 0:09:32.480 --> 0:09:35.680 going to be you know, expectations look very low, so 0:09:35.720 --> 0:09:38.200 I think we've been set up for another earnings beat. 0:09:38.760 --> 0:09:42.240 And I think the policy support remains Marion is very strong. 0:09:42.240 --> 0:09:43.840 Whether yields are one and a half percent on the 0:09:43.840 --> 0:09:45.960 ten year or two that there are a fraction of 0:09:45.960 --> 0:09:48.240 where they were coming out of priory sessions, and I 0:09:48.320 --> 0:09:50.439 think that gives you a lot of supports evaluation. And 0:09:50.520 --> 0:09:52.360 then you've touched on something important. I think a lot 0:09:52.360 --> 0:09:54.320 of people are waking up this morning looking at some 0:09:54.320 --> 0:09:57.440 of those popular holdings, the likes of Microsoft, Apple, Amazon, 0:09:57.480 --> 0:10:00.360 they're downheart since the start of September. That dream what 0:10:00.440 --> 0:10:02.840 to do in the face of rising yields been. I 0:10:02.880 --> 0:10:05.320 know you can't do single names, but for those big 0:10:05.320 --> 0:10:08.640 stories that sector, what do you suggest they should do? 0:10:10.880 --> 0:10:13.640 The story? So first quarter, which is our nearest parallel, 0:10:13.679 --> 0:10:15.120 I think here, you know, na's that kind of terms 0:10:15.120 --> 0:10:18.600 stample back and then it then it fairly quickly recovered. 0:10:19.080 --> 0:10:21.600 And the difference of now versus then is, you know, 0:10:21.600 --> 0:10:24.120 I think the yield move then was was much more significant, 0:10:24.160 --> 0:10:25.880 and it was sort of first time out. I think, 0:10:26.080 --> 0:10:28.560 you know this time around UM and I think you 0:10:28.559 --> 0:10:31.439 know what we saw then was yes, you know, higher 0:10:31.440 --> 0:10:34.360 bond yields, you know, hit stocks with higher valuations and 0:10:34.480 --> 0:10:36.600 these sort of long duration cash flows, which is Tech. 0:10:36.920 --> 0:10:39.040 But then very quickly I think we just get reminded 0:10:39.400 --> 0:10:40.640 UM and I think we'll see this in the third 0:10:40.679 --> 0:10:42.640 quarter of just you know how strong the earnings power 0:10:42.640 --> 0:10:44.680 of these companies are on the fortress balance sheets that 0:10:44.720 --> 0:10:48.359 they have UM. So I wouldn't expect tech to necessarily 0:10:48.440 --> 0:10:50.640 lead from here in a rising yield environment. I think 0:10:50.679 --> 0:10:54.480 that's going to be commodities, financials, and value, but I 0:10:54.840 --> 0:10:57.000 certainly see them going up Lisa, this is a big 0:10:57.080 --> 0:10:59.720 chunk of market cam Microsoft seven percent from the middle 0:10:59.720 --> 0:11:03.760 of sep Tember. Apple down nine plus nine plus since 0:11:03.800 --> 0:11:06.000 the start of September, the first week of September. They 0:11:06.000 --> 0:11:08.800 are big moves. And the interesting thing is that they're 0:11:08.840 --> 0:11:11.520 big moves despite what Bernar is talking about here, the 0:11:11.559 --> 0:11:14.640 idea that revenues are tremendous. But at what point it 0:11:14.679 --> 0:11:17.840 can big tech tech start moving in lark step with 0:11:17.920 --> 0:11:22.319 bond yields. I don't think this is all about bond yields. 0:11:22.360 --> 0:11:24.320 I think that's an important ingredient. It was all about 0:11:24.360 --> 0:11:26.480 bond yields, then you know, if you look at the 0:11:26.480 --> 0:11:29.280 macro level, places like Japan and Europe where bond yields 0:11:29.320 --> 0:11:31.120 are you know, dramatically lower, would have done a lot 0:11:31.160 --> 0:11:33.840 better and be trading a lot more expensive than than 0:11:34.160 --> 0:11:37.280 you know they are right now. UM. You know what 0:11:37.920 --> 0:11:41.360 the value sectors and this recovery and growth potentially sets 0:11:41.400 --> 0:11:43.280 us up for is you know, those sectors which are 0:11:43.320 --> 0:11:46.120 most exposed to that growth and those spectors which are 0:11:46.200 --> 0:11:49.079 least exposed to higher bond yields. I'd have the lowest valuations, 0:11:49.120 --> 0:11:52.000 will do you know, will do better? Um, And and 0:11:52.040 --> 0:11:55.319 that is commodities and financials, and and tech which doesn't 0:11:55.360 --> 0:11:57.600 have those two things, which has less sensitivity to this 0:11:57.640 --> 0:12:00.120 growth rebound, which I think we should be talking more 0:12:00.000 --> 0:12:03.960 about now that virus cases are coming down, um and um, 0:12:04.160 --> 0:12:06.280 you know, more sensitivity to sort of high on yours 0:12:06.280 --> 0:12:09.360 well will naturally lag. But I don't think you can 0:12:09.360 --> 0:12:11.160 say that they're going to do particularly badly. I mean, 0:12:11.280 --> 0:12:13.640 evaluations have actually come down quite a lot for big tech. 0:12:14.120 --> 0:12:17.760 And the surprise of this year is that those very 0:12:17.800 --> 0:12:20.280 strong growth rates which you saw last year having maybe 0:12:20.320 --> 0:12:22.800 come down as quickly as some as many thought they 0:12:22.800 --> 0:12:25.480 would do. Then the story of this week is the 0:12:25.520 --> 0:12:28.839 reflation trade has changed. It is a renew reflation trade. 0:12:28.840 --> 0:12:31.280 If you take a look at which sectors are doing 0:12:31.320 --> 0:12:33.640 the best, you're looking at energy, You're looking at financials 0:12:33.640 --> 0:12:37.600 with the prospect of perhaps maybe uh seeper yield curve. 0:12:37.679 --> 0:12:41.200 It's not industrials, it's not materials. It's not consumer discretionaries 0:12:41.200 --> 0:12:43.440 that have to absorb some of these higher gas prices 0:12:43.760 --> 0:12:47.840 and supply chain constraint issues. Does this mean something to 0:12:47.960 --> 0:12:50.360 you in terms of what the reflation trade will look 0:12:50.400 --> 0:12:54.559 like over the next six months. Yeah, I think it's 0:12:54.559 --> 0:12:56.360 going to be much more specific. I mean there are 0:12:56.360 --> 0:12:57.679 there are. I mean I think one more sort of 0:12:57.679 --> 0:13:00.480 a tune to some of these supply Chaine shooes them 0:13:00.640 --> 0:13:03.640 we worked for. We obviously have a bunch of concerns 0:13:03.679 --> 0:13:06.720 on sort of Chinese growth out there, which obviously feeds 0:13:06.720 --> 0:13:10.040 through tectifly materials which maybe we didn't have we didn't 0:13:10.040 --> 0:13:14.080 have last time. I would also just say, um, I 0:13:14.120 --> 0:13:16.160 think we'll maybe right at the beginning of re engaging 0:13:16.160 --> 0:13:18.479 in this sort of reflation trade. I mean, inflation expectations 0:13:18.520 --> 0:13:22.080 are really barely budge market inflation expectation. I mean five year, 0:13:22.160 --> 0:13:24.480 five year is still you know, two twenty three, ten 0:13:24.559 --> 0:13:26.880 years to thirty eight. I mean they really haven't moved, 0:13:27.120 --> 0:13:30.240 you know very much. Um, you know this perceived fed 0:13:30.440 --> 0:13:33.280 you know, hawkishness. I mean they basically moved the dots 0:13:33.320 --> 0:13:36.560 in line with where the market already was look last week. 0:13:37.120 --> 0:13:40.000 So I think, um, I think we're really the beginning 0:13:40.040 --> 0:13:42.720 of that, rather than having had a big move already. John, 0:13:42.800 --> 0:13:46.680 let's review the statistics of the greatest equity car coming 0:13:46.679 --> 0:13:49.760 out of the urgency of two thousand eighteen. Late two 0:13:49.760 --> 0:13:56.040 thousand eighteen, Laidler up, sp X UP eighteen percent. The 0:13:56.120 --> 0:13:59.760 next year up fifteen percent. John's so far this year 0:14:00.040 --> 0:14:02.920 that's a lonely group. I remember it, Tom, I remember 0:14:02.960 --> 0:14:06.640 it well, Ben Laidler, Can we ever repeat when everybody 0:14:06.640 --> 0:14:09.040 starts freaking out about the removal of accommodation and this 0:14:09.080 --> 0:14:12.240 equity market flies. I remember that year. Most people do 0:14:12.559 --> 0:14:15.880 what they forget sometimes because the treasury move is so 0:14:16.000 --> 0:14:18.640 burnt in the memory, but they forget sometimes just that 0:14:18.679 --> 0:14:21.200 the equity market was up almost thrty percent on S 0:14:21.280 --> 0:14:23.600 and P five hundred. Ben, how different are things this 0:14:23.640 --> 0:14:28.000 time around? I think we've already had a lot of this, right, 0:14:28.040 --> 0:14:30.120 I mean again, we've got stress tested. In the first quarter, 0:14:30.160 --> 0:14:32.720 we had this huge move in treasury yields and equities 0:14:32.720 --> 0:14:35.200 are up six percent. You know, equities up, you know, 0:14:35.440 --> 0:14:37.760 gotting on for no well until a few days ago, 0:14:37.760 --> 0:14:40.360 we were up for the year already. This was you know, 0:14:40.400 --> 0:14:42.800 this is a big, big move for equities. As I say, 0:14:42.800 --> 0:14:44.600 I mean, we've got some balls early to get through, 0:14:44.600 --> 0:14:46.280 whether it's coming out of the bond market, coming out 0:14:46.320 --> 0:14:48.480 of DCD, coming out of China over the next sort 0:14:48.520 --> 0:14:50.200 a month or so. But but again, I think we're 0:14:50.240 --> 0:14:52.440 being set up for you know, this sort of Santa 0:14:52.520 --> 0:14:55.440 rally into year end. As those concerns sort of fall away, 0:14:56.000 --> 0:14:58.600 we refocus on the growth pace, which I think is 0:14:58.600 --> 0:15:01.520 sort of the stealth catch up just about to re accelerate. 0:15:01.600 --> 0:15:04.040 All this week economic data you've been we've been seeing 0:15:04.040 --> 0:15:06.360 over the last you know, few weeks, all backward looking 0:15:06.480 --> 0:15:09.240 like it was all when US virus cases global virus 0:15:09.280 --> 0:15:14.200 cases were higher than than they are right now. And again, 0:15:14.240 --> 0:15:16.680 I think policies, the policy's support remains in place the 0:15:16.840 --> 0:15:18.920 order a fraction of where they were coming out of 0:15:18.920 --> 0:15:21.400 previous recessions, and that just means that evaluations are going 0:15:21.440 --> 0:15:25.240 to stay high. Ben Laidler still constructive of ETA Global 0:15:25.280 --> 0:15:33.880 market strategists. Can we see a transatlantic linkage here? Any 0:15:33.920 --> 0:15:35.960 whisper of that is what I would listen for joining 0:15:36.000 --> 0:15:39.640 us now on this als RBC Global head of Effect Strategy. Also, 0:15:39.720 --> 0:15:41.320 we've got to talk a lot about what's happening with 0:15:41.360 --> 0:15:43.520 this dollar, a real break out in the past twenty 0:15:43.520 --> 0:15:46.320 four hours. Let me start with this one, though his 0:15:46.440 --> 0:15:50.840 chair power dangerous man from your perspective, I think you 0:15:50.920 --> 0:15:53.680 summed it up well when you said Senator Warren was 0:15:53.720 --> 0:15:56.840 looking for people like you to bite the bait, and 0:15:56.920 --> 0:16:01.760 you did look also at the dollar strength. You are 0:16:01.880 --> 0:16:06.040 truly expert. It's summing it all together, particularly with a 0:16:06.120 --> 0:16:10.840 continental europe perspective. What is the character of this dollar strength. 0:16:12.400 --> 0:16:15.080 That's a really interesting question, Tom, because I think what 0:16:15.160 --> 0:16:19.680 was so unusual about yesterday was the bond and equity 0:16:19.920 --> 0:16:22.560 joints seller. So you know, we're used to being in 0:16:22.600 --> 0:16:25.640 an environment where either bonds are rallying and equities are 0:16:25.680 --> 0:16:28.360 selling off, or vice versa. But when bonds and equities 0:16:28.400 --> 0:16:32.040 are selling off together, historically, that actually means a very 0:16:32.120 --> 0:16:35.040 positive environment for the U s dollar, even against what 0:16:35.080 --> 0:16:37.360 you typically think of as a safe haven like the 0:16:37.400 --> 0:16:40.720 Swiss frant. Well, let's get back to Lignos one oh one. 0:16:41.080 --> 0:16:44.560 Is this gonna be about relative interest rates or is 0:16:44.560 --> 0:16:49.720 it gonna be about flows of capital? You know, both 0:16:49.880 --> 0:16:53.120 clearly matter. When when we think about capital flows, We've 0:16:53.160 --> 0:16:55.240 done a lot of work in the past looking at 0:16:55.280 --> 0:16:58.640 how much money European investors have piled into US equities 0:16:58.840 --> 0:17:01.040 and I was actually just updated in this chance last night, 0:17:01.280 --> 0:17:03.840 and you can see that's increased over the past year. 0:17:04.160 --> 0:17:06.400 So if we do go into an environment where US 0:17:06.520 --> 0:17:09.480 equities were on to perform in relative terms, that would 0:17:09.480 --> 0:17:12.199 potentially create some downside risk for the dollar. If this 0:17:12.280 --> 0:17:14.639 is a global risk of environment, though, or if it's 0:17:14.640 --> 0:17:17.479 a global exty bond seller, that's a far better environment 0:17:17.480 --> 0:17:19.240 for the US dollar. So the capital flows, like you say, 0:17:19.240 --> 0:17:21.480 are really key. What's the pain trade right now? Elsa 0:17:21.520 --> 0:17:26.400 the dollar getting a lot stronger or the dollar materially weakening. Honestly, 0:17:26.480 --> 0:17:29.560 I think you know, people are relatively likely positioned in etfects. 0:17:29.600 --> 0:17:31.679 Probably the biggest pain trade would be a massive increase 0:17:31.680 --> 0:17:34.320 in volatility. Nobody is looking for that now. You know, 0:17:34.359 --> 0:17:36.920 We've seen people try to position for that before and 0:17:36.960 --> 0:17:39.760 it's spailed every time. And so in this environment where 0:17:39.760 --> 0:17:42.120 we just don't really expect anything to happen. What about 0:17:42.119 --> 0:17:44.440 the euro weakness that we've seen, the euro a weakening 0:17:44.680 --> 0:17:47.480 to some of the weaker levels that we've seen in 0:17:47.520 --> 0:17:50.280 about a year. Is this the story or is it 0:17:50.320 --> 0:17:54.320 more a dollar story. It's definitely more of a dollar story. 0:17:54.359 --> 0:17:56.840 I'm really excited to see it happened, because that's been 0:17:56.880 --> 0:17:58.720 our core law year and it was a pretty lonely 0:17:58.720 --> 0:18:02.240 place to be in January. But it's certainly a broader 0:18:02.320 --> 0:18:04.840 US dollar move. It's nothing specific to the ear. In fact, 0:18:05.040 --> 0:18:07.040 if you look at the Euro against how yesterday, it 0:18:07.080 --> 0:18:09.359 was actually a relative out performance. Let's get to that 0:18:09.440 --> 0:18:12.160 sterling story. So if we can bring up sterling into 0:18:12.240 --> 0:18:14.639 day we came very really, really really close to break 0:18:14.680 --> 0:18:17.399 in one thirty five. We've had a hawkish tilt from 0:18:17.400 --> 0:18:19.880 the Bank of England. It's failed to anchor sterling. You've 0:18:19.880 --> 0:18:24.080 got a short on here else, sir? What's going on? Yeah, 0:18:24.160 --> 0:18:26.800 like you said, we've got a short sterling card recommendation 0:18:26.840 --> 0:18:29.160 at the moment. We put it on at the start 0:18:29.160 --> 0:18:31.680 of the week. It's really looking at the upcoming event 0:18:31.760 --> 0:18:34.439 risk in the week ahead. I think what's happening at 0:18:34.480 --> 0:18:36.280 the moment. We had a lot of questions on sterling 0:18:36.320 --> 0:18:39.280 yesterday from clients. People were wondering, is this the Bank 0:18:39.280 --> 0:18:41.919 of England making a policy mistake? Are we beginning to 0:18:42.000 --> 0:18:45.000 price credit risk for the UK? You know, it's very 0:18:45.080 --> 0:18:48.120 unusual to see yields going higher and the currency going lower. 0:18:48.160 --> 0:18:50.800 That's typically more what we see an emerging market. I 0:18:50.800 --> 0:18:52.960 wouldn't try and read too much into the price action 0:18:53.000 --> 0:18:55.639 of a single day, but I do think that the 0:18:55.680 --> 0:18:58.320 Bank of England is very optimistically priced in my view, 0:18:58.400 --> 0:18:59.960 and we should think a bit more as a best 0:19:00.080 --> 0:19:02.919 case scenario in terms of how many hikes we could get, 0:19:03.040 --> 0:19:05.600 rather than a central scenario. So that's really important. You 0:19:05.640 --> 0:19:08.239 pushed back against this idea that we'll have this rate 0:19:08.320 --> 0:19:10.760 path kick in at the Bank Amingland anytime soon? Why 0:19:10.880 --> 0:19:14.520 is that ours? But it's not so much that that 0:19:14.560 --> 0:19:17.080 will won't get hikes at all. It's more that I 0:19:17.080 --> 0:19:19.520 think people are factoring in too many hikes, and the 0:19:19.520 --> 0:19:21.920 Back of England have been fairly clear with us and saying, 0:19:22.080 --> 0:19:23.840 you know, we'll hike a couple of times and then 0:19:23.880 --> 0:19:26.560 we'll pause. And alongside of that you have all sorts 0:19:26.560 --> 0:19:28.679 of supply chain disruptions at the moment here in the 0:19:28.800 --> 0:19:32.119 UK which are creating some inflationary prescious but not the 0:19:32.119 --> 0:19:35.280 type that central Bank would typically respond to. Governor Bailey 0:19:35.359 --> 0:19:37.520 was very clear on that on Monday, and I don't 0:19:37.520 --> 0:19:40.000 think people have necessarily listened to that message and factored 0:19:40.000 --> 0:19:42.600 it into the way they're trading. Sterling's really really important 0:19:42.640 --> 0:19:50.119 comments there at the end, ABC Global head of Fax Strategy, 0:19:52.280 --> 0:19:57.040 this is a joy in exceptionally well timed Inmbassador Hormance 0:19:57.119 --> 0:20:00.560 joins US now Rabbit Hormanes with time and advisers. They're 0:20:00.600 --> 0:20:03.199 managing director, but far more. I needed to finish a 0:20:03.240 --> 0:20:06.040 book strong a million years ago and I finished with 0:20:06.160 --> 0:20:11.600 Robert Hormats talking about expectingly unexpected on Asia, and we 0:20:11.680 --> 0:20:14.560 are thrilled Ambassador Hormats could join us this morning on 0:20:14.680 --> 0:20:19.520 the new unexpected of China. Robert Hormats with President g 0:20:20.080 --> 0:20:25.120 what should we expect? Well, I think we can expect 0:20:25.160 --> 0:20:31.320 a strongly nationalistic China. Uh. He wants to have China 0:20:31.520 --> 0:20:35.879 come back from two centuries where he considered that the 0:20:35.920 --> 0:20:39.719 West had taken advantage of China. China was fragmented internally. 0:20:40.359 --> 0:20:43.000 Now he's trying to pull it together under very strong 0:20:43.080 --> 0:20:49.040 party leadership and exercise enormous international influence. And he sees 0:20:49.119 --> 0:20:53.040