00:00Lisa Shannon of Morgan Stanley writing, the U.S. equity market is relatively placid.
00:04Despite much higher gas and oil prices, clearly investors are confident that this is transitory.
00:09Lisa joins us now for more. Lisa, good morning.
00:11Good morning.
00:12Do you share that confidence?
00:14I don't. I mean, one of the things that has amazed us really, quite frankly, since 2022,
00:20is the lack of risk premium in this market.
00:24Whatever, you know, the world has thrown at this market, you know, we've kind of priced it in a day
00:32and then it's over and the patience of investors to hold risk premium and to demand it
00:40has been extraordinarily low.
00:43You know, we even look at the bond market and marvel, you know,
00:47that the term premiums are still incredibly benign versus history, right?
00:51You know, 65, 70 basis points on the long end versus a long-run average of 150.
00:57So, you know, in my career, you know, I have never experienced so much uncertainty.
01:04And yet valuations of almost every asset class are, you know, kind of in their top 10% in the
01:11last 20 years.
01:12It's been quite a two months and 11 days.
01:14Our next guest, Jeff Curry, formerly of Goldman, would often talk about the difference between two asset classes,
01:19that commodities have to clear demand and supply at spot and equities are an anticipatory asset class.
01:25Can equities take any comfort by how deeply backwardated the curve is and where futures prices are trading at the
01:30moment?
01:31I think that that is 100% what the equity market is looking at.
01:36They are looking through.
01:37They are assuming that this is absolutely a short-term phenomenon.
01:42And I think, you know, as you all have been discussing, I just don't think it's as simple as that.
01:49And the secondary and tertiary effects, whether we're talking about chemicals and fertilizers and the spill-through to consumer goods,
01:58I just don't see it being discounted quite yet.
02:02And it may take the quarterly earnings, right, for CEOs to start talking about these things and saying,
02:09oh, whoops, you know, our Q1 numbers aren't going to be as good as we thought
02:13because for people to actually wake up and start pricing it.
Comments