WEBVTT NOTE recognizability 0.878 NOTE language en-us 00:00:00.050 --> 00:00:03.937 Leaving us with some of the stock market impact of all this. Gabriela 00:00:03.937 --> 00:00:06.927 Santos, Global market strategist at JP Morgan Asset Management, want 00:00:06.927 --> 00:00:10.515 to get to your latest strategy? Thinking Gabriel? But first, as we 00:00:10.515 --> 00:00:14.103 await the President here and as we're talking about some of the 00:00:14.103 --> 00:00:16.794 geopolitical concerns and the spillover effect to energy, how 00:00:16.794 --> 00:00:19.485 concerned should U.S. equity investors be about this unfolding 00:00:19.485 --> 00:00:22.774 scenario? What are you telling your clients? So what we're telling 00:00:22.774 --> 00:00:26.661 our clients at the moment is that this might be one of the 00:00:26.661 --> 00:00:29.950 geopolitical examples that have a very fleeting impact in the market. 00:00:30.070 --> 00:00:34.678 That's our base case. Unless we see an escalation in the conflict 00:00:34.678 --> 00:00:38.902 that merits harsh economic sanctions which could then result in cuts 00:00:38.902 --> 00:00:43.894 and energy supply by Russia to Europe. In that case, we would then 00:00:43.894 --> 00:00:48.886 see an energy price shock, and we would see growth concerns. We don't 00:00:48.886 --> 00:00:53.494 think that's being priced in at the moment. It's a possibility, not 00:00:53.494 --> 00:00:58.102 the base case. We don't think the volatility is related to growth 00:00:58.102 --> 00:01:00.022 concerns because otherwise wouldn't have. 00:01:00.100 --> 00:01:03.580 Financials outperforming the index by 900 basis points and you 00:01:03.580 --> 00:01:07.060 wouldn't have emerging markets outperforming the US by 800 basis 00:01:07.060 --> 00:01:11.932 points. So we just remind her of esters. That's why we have hedges in 00:01:11.932 --> 00:01:17.152 place just in case. But for now, let's focus on the main risk for the 00:01:17.152 --> 00:01:21.328 market, which is the surge in real yields and the implications for 00:01:21.328 --> 00:01:24.460 valuations and positioning. So let's talk about that positioning. 00:01:24.460 --> 00:01:27.592 Gabriela, you're making some interesting recommendations in terms of 00:01:27.592 --> 00:01:30.028 reallocating within the tech sector and reallocating. 00:01:30.290 --> 00:01:33.670 Out of the tech sector, how do you think about both those things? 00:01:34.610 --> 00:01:38.575 So we are really saying listen to what central banks are saying. They 00:01:38.575 --> 00:01:42.235 see a much stronger growth with much more inflation. Upside this is 00:01:42.235 --> 00:01:45.895 going to be a much quicker withdrawal liquidity than last time. So 00:01:45.895 --> 00:01:49.555 rates are going to continue moving higher and valuations are going to 00:01:49.555 --> 00:01:53.215 matter. So take a look at the portfolio. Don't let the market 00:01:53.215 --> 00:01:57.790 rebalance it for you. Do so now and to do so it means really think 00:01:57.790 --> 00:02:01.755 about using the the value factor, not the value style, but the value 00:02:01.755 --> 00:02:04.805 factor. Think about the price that you're paying for companies. 00:02:05.350 --> 00:02:08.820 Intersector, so for example with intact taking profit from more 00:02:08.820 --> 00:02:11.596 expensive areas like software into least expensive, like 00:02:11.596 --> 00:02:15.066 semiconductors. Also think about the value factor within the equity 00:02:15.066 --> 00:02:19.230 market, so from tech into financials and within regions. So take some 00:02:19.230 --> 00:02:23.047 profit in the US and think about Europe and emerging markets. 00:02:23.047 --> 00:02:27.558 Otherwise you're not going to get the kind of returns we expect over 00:02:27.558 --> 00:02:31.375 the next decade and project only four point, 3% annualized. That 00:02:31.375 --> 00:02:33.804 that's just not going to cut it. 00:02:35.170 --> 00:02:38.613 Those moves have kind of already been the case. Gabriella, that's 00:02:38.613 --> 00:02:41.430 what's that's what's worked. Semis over software financials over 00:02:41.430 --> 00:02:45.186 technology, so you so you expect these trends to continue and the 00:02:45.186 --> 00:02:48.629 volatility to stay. Is that what you're saying? Absolutely, we're not 00:02:48.629 --> 00:02:52.698 going to get any clarity anytime soon in terms of the new central 00:02:52.698 --> 00:02:56.141 bank blueprint. They're trying to figure it out themselves in real 00:02:56.141 --> 00:02:59.897 time, out loud. So we're going to continue seeing some volatility on 00:02:59.897 --> 00:03:03.966 the curve. We still don't think long and guilt are high enough for 00:03:03.966 --> 00:03:05.531 the kind of quantitative tightening. 00:03:05.610 --> 00:03:09.939 That we'll see on the balance sheet, so this is still very much 00:03:09.939 --> 00:03:13.602 a theme and think about the starting point. We had such 00:03:13.602 --> 00:03:16.599 distorted valuations in the market that the corrections that 00:03:16.599 --> 00:03:19.929 we've seen so far have still not corrected those distortions, 00:03:19.929 --> 00:03:23.592 so really important not to panic, but to take some thoughtful 00:03:23.592 --> 00:03:25.590 action here for the decade ahead.