Why the equity bull market isn't over yet

Markets are sending a clear signal: The bull run is not over.

In Part 2 of our Mid-Year Outlook podcast, Zurich's Investment Management team unpack what’s really driving financial markets and where the opportunities (and limits) lie.

Key takeaways:

• Equities remain the top conviction call
• AI is more than hype, it's a structural driver
• Credit markets: Solid, but limited upside
• Regional divergence is widening
• Bonds: Volatility is back and that's healthy

Transcript

0:00

[Music starts][Title: Cover of Mid-year Outlook Report 2026]

Guy Miller, Chief Market Strategist & Economist, Zurich Insurance Group: 0:03

Welcome, everybody to the second part of our mid-year podcast series. podcast series. Hopefully you've heard the first part, which we were looking[Music ends] at the macroeconomic conditions between now and into next year. This time we're focusing on the financial markets themselves. Now our media outlook is titled Making Hay While the Sun Shines. And that applies both to the macro side as well as the financial markets. So what do we think about financial markets from here? Well, we have been big believers in the equity story, the continuation of the bull market and equities. And guess what. We think that continues into year end. Yes there'll be some volatility. But broadly speaking as you'll hear the drivers of equity markets we feel very much remain intact. Now that's not so much the case when it comes to credit markets. Yes they've been performing well. You'll have all seen the massive issuance and the demand that has met that issuance in terms of credit markets. But look how tight spreads are. They're very, very tight and close to that lower bound. So we we don't really see a great deal of upside there. Although we're not expecting frankly a lot of downside either. But in a risk reward basis. Equities we believe are still favored over the credit markets. So what about government bonds. Well actually we think there are around fair value within volatility in government bond yields over the course of this year. And frankly we've said that's a good thing. This is putting pressure on governments to be careful in terms of how they spend to be thinking very much about deficits and the debt levels that they have. So a bit of bond volatility is actually not a bad thing. And we do see that largely continuing through the remainder of this year. But it's more like range trading around the current levels that we've seen. So given that very broad based outlook on a turn to to you, Puneet, to to get kind of a flavor of really why are we thinking that? What are we thinking of the main drivers of that? And how sustainable is this that I'm talking about?

Puneet Sharma, Head of Market Strategies, Zurich Insurance Group: 1:56

I think, I think we think this is the equity bull run is fairly sustainable. We do think that, you know, there are a number of factors behind it actually. First of all, we think that the policymakers are quite keen to actually support our equity bull market. We have seen in. The US policy. The US policymakers in particular. But also, I mean, I think other parts of the world, for example, like Japan, we are seeing a fairly good, you know, changes in the fiscal side which are supporting the markets. And I think that's that's a key positive driver in the first place. Second is that the economy is, by and large, resilient overall in many parts of the world, including in the US, where where it matters the most, despite the fact that we saw an oil price shock for a small period of time. And then we also saw, know, tariff shock in some sense, but has been powering through and we see strong, super strong earnings actually coming through as well. So so the fundamentals of the market are already positive and we expect that to continue. I think the most important driver of the market clearly is the boom in AI or, you know, the continuing AI CapEx cycle, which many of the large hyperscalers that we discussed in the previous section are committed to actually sustaining for some period of time. And we think that's a sustainable moves. This is not something which is a fad today and will be out of fashion tomorrow. We do think we are seeing, you know, improvements in technology, which are very real and, you know, will change the way things happen and therefore the spending and that will come through and will have multiplier effects on the rest of the economy. And that is not yet fully priced into the market. So therefore we would be positive. And the funding for that, also, as we discussed in the previous section, is quite sustainable because it comes from the credit markets, comes from the organic cash flows of these companies. That's why we see, for example, the beneficiaries of the AI boom, such as the semiconductor, is doing extremely well. And that is also across the world. I mean, not just in the US. So by and large, I think the equity story is one which is positive. There will be times where things will get a little bit overdone. I mean, overhaul, you know, too hard to gold in a way. But by and large we do expect the bull run continues.

Guy Miller: 4:07

I think you raise an interesting point, because what you're saying is these very high quality, Hyperscalers as well, these most of them, they've got very robust balance sheets. They're not really taking on a lot of debt, a lot of leverage at all really. And yet they're able to raise that in the markets. And that money is being recirculated in terms of their own spending into other parts of the IT space. I mean, that's basically what you're saying. This is a sustainable move. Exactly. I mean,

Puneet Sharma: 4:33

I think all hyperscalers are not the same. Clearly, there are a couple of exceptions. And we would be, from a credit markets perspective, be a bit more worried around. Not worried as such. But watch closely. Companies like Oracle and CoreWeave etc. but by and large I think yes, absolutely I think and the leverage being increased is not substantial. And despite the fact that, you know, some of these headline numbers are enormous. So if there is any segment, I would be much more worried today if autos were increasing their leverage by the same amount, for example, or they were spending so much. So I think that is a positive which which I think will drive the markets. I mean, in addition to the fact that the economy to start with is fundamentally resilient and, you know, the fact that governments are boosting the prospects of the. Economy,

Guy Miller: 5:22

is there anything you're looking at in the credit markets? Because what we've just described is the credit markets funding a lot of the equity earnings that we're seeing. And as we know, the kind of record levels there. Is there ending in the credit markets that you're watching as that kind of canary in the coal mine to gauge when this might be slowing down? Because I guess we all know that financial markets are about second derivative. So when is that rate of change beginning to become more problematic? Do you think.

Puneet Sharma: 5:46

I don't see that at all right now? I mean, if you think about the demand for these new issues, which is where I would look at you are seeing extremely strong demand, or at least strong demand, let's say, not extremely strong. I mean, Nvidia's and Space X issues again getting oversubscribed four times. I mean, we also saw that in many other issues which have happened as well. I think the key areas to watch for a rate of change would be to monitor the CDs levels of companies like Oracle Company, like we've and also space. Space X is actually quite hot in the market now, having done both equity and bond issues. The CDs has just started trading and people are are focused on it. And I think one of the strategies which I would think many investors would do, would be to hedge some of their upside exposure to equities by using credit markets where your downside is limited through a short exposure. And that's where I think some of these weaker names within the AI space will see a price action before there is any rate of change.

Guy Miller: 6:51

And that is indeed one of our favorite trades. And we'll come back to the credit element perhaps a little bit later. But but taking that positive equity view, I want to turn to you, Tom, because Puneet mentioned a lot about the hyperscalers in the US. I mean, the US is the biggest, deepest, most liquid, most dynamic market in the world, the place that you want to be. We've seen over the last 12 months, it kind of felt a little bit in and out of love with investors. We went from that period about US exceptionalism to perhaps not so U.S. exceptionalism and maybe back on again. So US equities, how do you see the prospects from here? Yes, I've done quite well but not done as well. And we'll hear from from Hahn a minute compared to some of the pure play tech names in Asia. So what are the prospects for US equities.

Tom Liebi, Head of US and UK Market Strategy & Economics, Zurich Insurance Group: 7:35

Well look first of all you have to take the bigger picture. And it's still a very robust framework. In the first video we talked about a solid economic outlook. Clearly if we zoom in on the equity market or on stocks and companies in particular, I mean, earnings growth rates of about 20% year on year, that's that's still a strong number. So you would expect that, yes, some of these tech companies are not cheap anymore. That's true. But if you compare it to the strong growth rates these companies are highly profitable. They have really high margins. They have higher revenue growth. They have pricing power. So clearly it's still a very solid environment. You did mention the ups and downs. And I think that's another positive sign. It's not a sign of exuberance. And like for example, if you compare it to the bubble like everything that has tech or in this case AI written on it needs to be needs to be bought investors to differentiate. They do look at who might benefit from the whole AI boom or the broader. We're not only talking about AI, we talk about quantum technology, about biotechnology, about space development. There's lots of things going on. We're living in very interesting times, but the fact that it's not the whole market valuation is exploded. I think it's a positive sign. So investors still do differentiate. And the ups and downs we see has to do with the fact that clearly, the main beneficiaries of the AI CapEx boom are hardware companies, particularly semiconductors. We'll talk about that even more when you talk about Asian markets. So it's not necessarily all of the hyperscalers like Apple, for example, recently we have seen Apple had to raise its prices because of higher input costs, because triggered by the bottlenecks in the hardware market. So clearly that was not taken very positively by investors because they start to realize not everybody will benefit in the same way. And that's, as I said, a good thing, which means that, well, it's not the sky's the limit. Clearly, there is a robust upsides. We do believe in strong growth rates. We do believe in strong CapEx. But it's important that investors keep differentiating between who's likely winner and losers.

Guy Miller: 9:45

And we should say to our viewers that we're not bulls. And the markets and technology, we know there's a multitude of risks and we might go into some of those in a minute, but maybe one risk actually, or maybe it's not a risk is the amount of issuance. I mean, Puneet had mentioned about the amount of data that's coming to the market. We have seen space come. Obviously grabbed all the headlines, made $1 trillion man out of Mr. Musk or did. I don't know if he still is. Tell me. We've also got the possibility of anthropic coming to the market. OpenAI. One could say we've got a lot of very high profile, very big deals coming. Does that absorb the investor demand? They have to participate in these. They have to sell something else to buy them. What's your view in that kind of.

Tom Liebi: 10:32

Well, my overall view is until very recently people did worry about the de-equitisation or there's fewer and fewer stocks available. So we should actually welcome the big IPOs. I think it's also part of the how the structure of the market works, how private equity market works. They come to to the market later than they used to. So obviously companies are already bigger, but in no way I do think that this kind of dries out funds or liquidity in the market. I mean, we have seen examples. You mentioned SpaceX, clearly a very successful IPO. Maybe you could see a little bit of experience there. But clearly investors were willing to to to soak up all the issue. Although the free float was relatively small for me, that's an indication that at least as of now as we're speaking, there is still plenty of demand for new issues, but also for existing listed tech companies. And that is a positive thing, clearly.

Guy Miller: 11:29

Let's see how that rest of the year develops. But net you think that's not a bad thing for the financial market. So turning to you. Ha. Because again Puneet spoke about this circularity. Hyperscalers are able to have their own balance sheet and raise through debt issuance a lot of or gain a lot of liquidity. That money is being put to work in the space, particularly around semiconductors. And we see that we mentioned again in prior videos about the Dram prices. Now, Asia seem to be one of the purest plays on this move. How sustainable is this? We are seeing triple, not triple digit moves in some of these indices, no less. And within the indices we know that they're heavily exposed to 1 or 2 companies. So is this a pack of cards or a house of cards just waiting to implode, or is there something more long lasting here, do you think?

Ha Nguyen, Head of Asia Market Strategy & Economics, Zurich Insurance Group: 12:21

I think the short term, clearly there are some markets. For example, in Korea, for example, we see a lot of leverage positions just basically on two names, SK and Samsung. So yeah, I don't think is is a healthy market.

Guy Miller: 12:36

ETFs that people are taking on. So if the market goes up by 10%, they go up by 20%. Thank you very much. There's also a downside to that. But that is a concern to you.

Ha Nguyen: 12:44

So I think the market some some markets like Korean markets can be quite frothy. But you know the correction that we saw, the volatility that we saw in the last couple of weeks actually is very healthy to clear out some of the froth of the very extended markets. Now does it mean that we have a bubble bursting or does it mean that we have like the AI story derailed? I don't think so. Because if you just simply layer the price change over the last one year, over the the revenue or the sales and earnings that those companies delivered is actually quite justifiable. And in fact, if we look at valuation, for example, forward P is actually still very cheap. I mean, just to make that clear to our viewers. So basically the stocks and the indices are a lot, but their earnings are up as much or more, which means the multiple the PE is actually come down. And I guess in some cases it's got pretty close to single digits. So it looks optically at least cheap. Is it cheap? I think yes, with the level of revenue and sales that they deliver, just thinking about the the whole world, we have three companies that actually produce memory memory chips Micron, SK Hynix and Samsung. And they can price anything at the moment they have such a pricing power. Thomas mentioned about the supply bottleneck. So you can see Dram prices, token prices also elevated. So clearly demand is outstrip supplies at the moment. And with that pricing power, I think this kind of story from AI is still continue to run. Of course, there's a little bit of a short term corrections and that is very healthy for this company. Continue to deliver from the perspective.

Guy Miller: 14:25

And I said this year, I'm old enough to remember the old days was as an equity investor, encyclicals, particularly semiconductors, you know, you bought them when they were expensive and you sold them when they're cheap. And I know you laugh at me saying that thing, but the reason we did that was because if you were buying them, you know, when there were when they were expensive, you knew that actually the earnings were going to turn and actually suddenly they were going to become cheap for the reasons that you mentioned, because then the surprise and positive equally, you know, if you were buying them when they were cheap and the earnings look great, then it'll turn. I mean, it's just the way cycles go. It sounds this time. We believe there's more visibility in that cycle. That's simply the bottleneck from the way you describe it is so great that time is on earth. Given what Puneet was saying, there is a there is a visibility into the funding, and we know that it takes some time to build out these fabs. So that's what we're playing here. We're playing the fact that this could last for longer. Not that not that the not what we've seen an end of cyclicality to semiconductor please.

Ha Nguyen: 15:27

No I would call it that. This is a tech supercycle really. Because in 2000 we talk a lot about technology. But back then is the born of the internet. And after that we have software actually very capital light. And this cycle is actually a CapEx story. And to build that infrastructure, what you need, you need memory chips, you need equipment. And those Asia, the biggest strength of Asia is manufacturing. And we just not manufacture anything. We manufacture tech. And we have the top companies still sitting in Korea and Taiwan. So if we believe that I really have the transformative power to change the way we work, and clearly I think there's still a lot to run for this company.

Guy Miller: 16:05

We also I mean, you know, you like sort of some of the North Asian economy, some of the EMS there. But you also like Japan. I mean, Japan is also a story you think has got further legs. So why is that?

Ha Nguyen: 16:17

I mean, there are two stories that are happening in Japan. If you look at the index and we break down to sectors, there are a lot of that in technology, in particular semiconductors. So Japan might not be, you know, the countries that produce a lot of chips like Korea or in Taiwan, but they produce equipment. And you know, there are a lot of things come, come together to, to form the tech ecosystem. Right. So Japan can participate in that front. At the same time, we see banking sector in Japan have been doing quite well because profitability picking up. We have Japan. Rates go up. Has risks go up. We have steepening. So both of that I think we can benefit is always a diversification play outside of very concentrated very heavy.

Guy Miller: 16:58

I mean we're still playing Japan for a lot of the tech exposure you kind of imply. I mean, a lot of these big multinationals have got some very profitable, very exciting tech arms, and that's something else that we want to get exposure to. Exactly.

Ha Nguyen: 17:11

And also the position is not to extend that like we see in Korea for example. So that is a.

Guy Miller: 17:15

Good thanks. Maybe before turning to you Gestapo Ross, the exciting element around Asia. Of course is tech related. The exciting element in the United States is around tech. One place I'm not sure there's much tech is Europe. So we spoke about the economics in Europe being a bit dull. The financial markets look a bit dull as well. Is there any reason why we should think about being overweight European equities right now?

Ross Hutchison, Head of Eurozone Market Strategy & Economics, Zurich Insurance Group: 17:40

The honest answer is I prefer to use Europe as a funding leg for other high conviction trades. I mean, we've talked about it at length. I think there are genuine, profound reasons to want to be long. With respect to the AI theme. Europe does have exposure to make this point and clear, Europe does have exposure to AI. I mean, directly, in the case of ASMR downstream with respect to construction of data centers, massive energy builder. But the fundamental reality is, is the constituents within their index. The weights within that index are are just a low quality way to play to play that theme. Generally, there are structural problems that we spoke about before that had think have been coming in slightly more disappointing than expected. And that, in my view, is going to continue to weigh down the broad index. I like some companies within Europe, certainly from an equity perspective aggregate. I think.

Guy Miller: 18:35

It's the thing are we putting a bit too much weight on technology? Because despite the challenges, there are a lot of very good companies in Europe. And we saw last year actually, sometimes Europe appears to be able to punch above its fundamental weight, if you like. Is it a possibility? We see the same thing again. People diversify a little bit, and it only takes a little bit from the portfolios, from technology into perhaps a bit of a hedge. And Europe could suddenly find that it does very well.

Ross Hutchison: 19:01

It's certainly possible. That's a risk to my view, rather than a base case, in my view. Right now, I think actually what's more likely to happen is the allocation out of Europe, given there was a considerable build up of positive momentum from a narrative perspective, a natural flow perspective into European equities, I think, can actually still unwind. And particularly when we look to the second half of this year, i.e. tactically. The other thing I would say, as well as one of the fundamental diversifying drivers of the European equities positive performance, has been banks. That's across regions within Europe. I think it's much less clear from here today you can make a valuation case given how much we're rerating. We've seen within that. That's not to say, by the way, that I think the sector is going to suffer from big non-performing loans, asset impairment, etc.. I just think that fundamentally the kind of the easy money has been made with respect to that valuation story. And then when I look at other industries, it's unclear to me what is a better way of playing the Europe is particularly exposed to. I don't see it.

Guy Miller: 20:07

So I get it. Not yet terribly compelling, but we keep an eye on it. Will have another moment at some point. Just not yet. Now I want to turn to you, Gestapo. Because when we speak about we've heard the upside from ha about the tech heavy Asian markets. Not really the case in Latam. It sounds a bit more European like.

Gustavo Yana, Market Strategist & Economist LatAm, Zurich Insurance Group: 20:26

No, totally agree on that. A guy. I think when we began the year clearly, clearly Latam was a big winner. This information but well erupted the conflict and there was kind of even though it started to be a defensive market, remember that Latam is mostly focused on Brazilian equities and these have a lot of posture on the whole. And gas energy sector well clearly benefited on that. But then a lot of idiosyncratic risks have appeared. I think we cover on the previous video on the macroeconomics, clearly one of the legs that prompted this attractiveness of the Latin America markets was the greatest scope for eastern cycle in Brazil that has reduced in terms of rising inflation expectations or resilient economy, but also more idiosyncratic factors like the political cycle we are entering into the presidential election period for Brazil, and the market expectation have shifted a little bit to the downside, with not pro-market candidate losing momentum. So on that from maybe losing attractiveness of the Latin American market, even though a lot of fundamentals continue to be constructed. Valuation clearly is one of the things. And also, there are a lot of stories going on across the region without Brazil. Clearly we have in Chile, for instance, we have a pro-market shift in terms of boosting investment and also New Mexico, that even though this cloudy environment we are facing, going to the renovation of the USMC clearly is a big structural winner in terms of continue to access the US market. But maybe we have clarity more going into the medium term.

Guy Miller: 22:16

Well, we'll keep an eye on that. As I say, there will be a time and a place for for Latam. Maybe not just yet. Now I just want to round up with you on the credit side. Put it before discussing a little bit about government bonds. But you spoke about the issuance that's coming. Clearly there's massive investor demand for that issuance. What does this do to the credit indices. Is this improving the quality. Because you also say that these are high quality companies. So is this changing fundamentally the nature of some of these credit markets that we're looking at? Yeah, indeed.

Puneet Sharma: 22:45

Actually I mean, many of the companies, for example, are now double AA rated, which are issuing a lot of the bonds. So typically the credit markets have been with a for example, the US investment grade credit markets had around roughly around 50% Triple B's. So as many of the hyperscalers come to the market, I mean, the average quality of the market will increase. And you know, what we'll also find is that people, however, will face some concentration risk because these are just a few names in the hyperscalers. And if they are going to issue quite a few bonds, you will find what people get exposed to in terms of.

Guy Miller: 23:25

And they're also issuing in different currencies. Right. So I guess will help some of that. The duration also varies. So pretty all together. Do you think there's smartly managing this to make sure they can optimize the number of investors that can get in?

Puneet Sharma: 23:37

Yes, absolutely. And I think they're all aware of many of these concentration issues clearly. And I think by issuing across currencies, issuing across tenors, they're trying to improve their own liabilities in a way. I think what I must say is like the demand for the longer end, for example, for Space steel, was lukewarm compared to what it was for the front end. And I think that's that's a function of a few things. I mean, these are rapidly changing technologies. And I think buying like very long dated 50 or 100 or, you know, 30 or 40. Well, it was alphabet. They had 100 years, wasn't it. Are you are you expecting any more 100 year bonds or have we seen it for this cycle? No, no, I think we will have more because there is demand in certain pockets of. Well it was. Yeah. Yeah, exactly. And I think people are shorter duration and certain areas and you know they have the pension fund demand and institutional institutional demand. So there will be more of them. But credit investors I think with respect to pricing of the spread and so on and so forth, do would probably would, I think in most likelihood, price in a discount for the longer dated tenors simply because of the risk. I mean,

Guy Miller: 24:47

I mean, just to be clear, what you're really saying is that the credit markets are actually in pretty rude health, actually, yes. But again, risk reward. We just favor equities over that because there's more upside. Yes. I mean I think mathematically the upside is limited in stress because I mean the US investment

Puneet Sharma: 25:01

grade credit is currently around 70 basis points. But but higher than that. And you know the most it can tighten to is probably a few basis points or so. So that means you will have probably carry like returns maybe slightly positive returns in an environment where equities will return much more. And I think that's that's where the downside is sorry the upside incurred is limited. On the other hand if things do become bad, certainly let us say. Either side is very obvious. The downside is very obvious and correct. So that's why we like the equity versus credit strategy. Good.

Guy Miller: 25:34

So let's switch gears again Tom. So we're talking about these very high quality mega cap US companies and the very high ratings they have got. I mean, I still believe governments generally commander higher rating than even the best companies. But let's turn to the US government because we have seen Treasury markets under a bit of pressure. We mentioned this earlier on thinking about your focal areas, particularly gilts and treasuries. Any particular nuances? We've spoken about them being around fair value. But but are they tradable just now.

Tom Liebi: 26:05

Well look, I mean as I said, you mentioned US treasuries around fair value would say clearly a bit higher than, than in recent years. But that has also to do with overall higher inflation expectations, higher inflation uncertainty. And clearly still a fiscal deficit that is above 5% has been about 5% for years. So while we don't worry about imminent problems with regard to the US fiscal situation, it still can be considered to be a bit. I wouldn't call it reckless, but safe in good times to have money to spend in bad times. And clearly the US is not doing that. So there has been some pressure, but we also mentioned it before, and I think in the first video that particularly the current administration is very kind of sensitive to what's going on in markets. And that applies to both the equity market but also the bond market. And we have seen several situations where the ten year Treasury, for example, approach 5%, 4.9%, and that was usually a bit of a trigger for the turnaround in policies and politics. So I wouldn't say treasuries per say or a massive trading market, because they are at the level that I would consider a fair. Similarly gilt, because you mentioned it, guilds clearly much more fragile because the situation of the fiscal situation is probably even a bit worse than in the US. But clearly the economy has a much weaker backdrop. So, so, so there is much less buffer. So, so to speak in the UK. And on top of that you had political risk. We mentioned it during the macro video. We now have a change in in the Prime Minister. So the UK UK market has been more volatile because it has been more affected by what is happening globally. The spike in all prices, the spike in inflation that clearly, although obviously nothing had directly to anything domestically with what's happening in the UK, the UK market gilt market was more. Effective, like almost a lightning rod around the world because of the size of whatever. So we've seen that move. Exactly. And we have seen the opposite now also, with the massive drop in all prices, inflation expectations globally fell back and gilts actually came back more than other markets and other bond markets. Now one big difference, maybe A11 interesting gap or spread that we look at is we talked about treasuries being maybe roughly. Well maybe a bit of upside risk if inflation is not coming down as far as I expected given the robust economic backdrop. But clearly if we look to Europe for that matter, we have bunds. And I will hand over to, to to Rose for that. But boons clearly also are at levels that we haven't seen very often in recent years. So clearly there seems to be a bit of a mismatch. If you look at the actual fundamental situation and where bond yields are trading. Yeah.

Ross Hutchison, Head of Eurozone Market Strategy & Economics, Zurich Insurance Group: 28:57

Thanks, Tom, for for bringing it up. I think it's totally true. Think it's a very simple story in Europe rest of the year expect European duration or bonds say generally it's implicitly to outperform other developed markets, primarily because the money markets are too pessimistic with respect to expected rate paths, ECB rate hikes and there's too many priced in still that's going to come out. I also think fundamentally the market has not fully reassessed their look in terms of growth and inflation. We talked about in the previous podcast. It's not reflecting that in prices. Yet the risks are clearly skewed in my view, towards lower yields to outperform other other markets particularly of course, by the way, because the ECB is is putting its foot on the brake of what is specifically the main driver of European growth, i.e. massive CapEx growth spending as well in a variety of areas. Last thing I want to say in European is carry positive environment. Generally think things like Italy, Spain, tight levels, historically tight levels back to where they were before the sovereign debt crisis. I think that can persist. Again, we spoke about reasons for that in the previous podcast, France Keep Watching, that I expected to underperform as we head into out of the summer. Risks around there, not just political underlying debt and deficit dynamics are unfortunately deteriorating. Again, I suspect that that will be a point of discussion in our podcast as well.

Guy Miller: 30:24

More pain ahead for Europe, but a money making opportunity as you see it. Let's watch that space for us and see how it develops. I want to just conclude with you hard, because we mentioned the last podcast and credit to you about the views around JBS and where they were going to go this year. At the start of the year, your topical said you would go to 280 for ten years and you thought maybe the upside could be three and we've got it to 80. Will we see three? Are the days of hitting three do you think now past? Has the government tempered its spending ambitions?

Ha Nguyen: 30:56

That's a good question. Thank you. I think for this year we hit 2.8. Clearly the government had not tempered the fiscal spending after the energy crisis. There are a lot of fuel subsidy for example, in a strictest form, basically capped the gasoline price at 170. So basically everything above is going to directly hit the government budget and more measures actually coming out. I mean talking about maybe sales tax cut. Remember last year when we have a supplementary budget that announced that where we see a spike in bond yields and that might be this year, towards the end of the year, we'll have another supplementary budget being announced and maybe more than expected. So I think with that propensity of spending coming from the fiscal policy, I can see market can well test 2.8%. And, you know, the volatility will stay high, whether it's because hitting 3% and staying in 3% of the different things, I think every now and then it can hit 3%. But I don't think that is where where it's going to anchor at that level. Now the the other side of the coins is the BOJ right. So the BOJ is being perceived by the market. That basically is behind the curve. You can see that in the currency is still testing 160 at the moment. And if you have the central bank not having a very decisive move to say we want to anchor inflation expectation, that is where we see bond yields going wild and that dynamics still remain the same. Since I wrote the tropical paper together with Ross beginning at the beginning of the year, nothing have changed really, so that predictions or that forecast still remains in place.

Guy Miller: 32:38

Very good. Yes, indeed. It was a good double act with Ross there. So turning to our viewers, I hope you're still with us. I hope you found that interesting. So you will have gathered, still bullish on the equity market for the kind of the reasons we stated. There's a tech cycle going on. There's abundant liquidity in the markets. There is a hope and view that actually, the worse may well be behind us in the Middle East. We'll have to wait and see. But broadly speaking, with the kind of the normalization of all prices, that's certainly helping. As I said, there is a lot of appetite out there for both stock and for credit market offerings there, but they're being well absorbed by the market. So we always, of course have to expect volatility in market. That's what makes them so much fun and sometimes a bit painful. So we'll keep an eye on a lot of the developments that are going on there. We don't think this will be a straight line into the end of the year. We are expecting of course, further geopolitical challenges ahead. There always are and we will have to get through again, a number of earnings season, watching out for any kind of slowdown in that second derivative. Is there any sign that spending on it is beginning to lose some of its umph? Because I think that will be important. And perhaps the most important thing of all for these financial markets. Where are we really to see the fed moving interest rates up, in other words, the start of a hiking cycle? I think this will be very difficult for risk assets in particular to make a lot further headway.[Music starts] But that's not the view. Our view is that we still see further upside ahead and within the asset class space, we still prefer equities over the rest. Thank you very much for joining us. If you haven't, please look at the macroeconomic view where we take you around the key regions there. As always you can read the full report on Zurich and we will be back again very soon with something else.[Music ends]