00:00Beata Mathie of Citi writing, we remain comfortable with our call for further earnings driven upside for equities into mid
00:06-27.
00:07However, we must acknowledge rising stagflation risk. Beata joins us now for more.
00:11Beata, welcome to the program. Are we all just crude market traders now in the equity market and bonds alike?
00:18Morning, guys. Definitely quite a few risks for the equity markets to think about.
00:23Well, actually, the levels are pretty decent. But bottom line, everything is interconnected, right?
00:28So we have rates risks, we have geopolitical risks and we have political risks.
00:33And one common denominator is what is happening with the oil market and energy prices.
00:38And you could see the sensitivity in the rates market sell off in the past few days or how they
00:44rally when the oil prices go down versus up, right?
00:49So really, a lot of the future path for equities does depend on how quickly the situation in the Middle
00:57East will be resolved.
00:58And energy prices move lower.
01:00With that in mind, how finely balanced is your outlook as Citi together with the team, Beata?
01:05Can one week of very careful diplomacy flip the outlook?
01:10Well, that would be wonderful if it did, right?
01:14If it does, energy prices normalize very, very quickly.
01:18Probably the rates market responds very quickly and the odds of more hawkish central banks come through as well.
01:26And equities will react to that very, very well.
01:30Because as you quoted me at the beginning, the setup for equity markets moving higher with the cyclical tilt is
01:38there.
01:39So global economy, all cyclical parts of global economy are doing well despite the risks.
01:48There is a level of resilience, especially in Europe, where I sit, right?
01:53The same has happened, the same we are observing in the earnings revisions.
01:58So earnings revisions continue to move higher through a wide set of sectors.
02:02So this is a great setup, but geopolitics is the biggest risk out there.
02:08And if that gets resolved, we have quite an optimistic pass-through.
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