That's what dollar Dutch gets you, exactly. We aren't going to talk much about the Dutch guilder today, I'm sorry, Tony, but anyway. Okay, let me talk you through a bit of the agenda. The agenda, as Tony said, evolves over time. There are a couple of things that are really quite different this year. The first part will be very familiar to you. We're going to lay the macro table in the first session - first two sessions, really - looking at the macro outlook, and of course, inflation, which we have a distinct advantage in terms of measuring. Then from there, we're going to look at market narratives, the stories that the media tell us drive markets and how to measure them. Then one particular narrative, which has the power to rule them all unfortunately, which is the political narrative, which Tony mentioned. We've got our newest SSA partner, Dan Drezner, speaking just before lunch. Then, and this is where it's a little bit different. Those of you that have been to this before will notice this. In the afternoon, the agenda isn't just about what's driving markets, but it's actually about what's driving the asset management industry itself, and the themes that are particularly pertinent for the UK. With that, we've got Toby Nangle who is an FT commerce, but also former head of global asset allocation at Columbia. We've also got a practitioner panel with Martin Gilbert as one of the participants, and also, Josh Lerner talking about private markets, because private markets are a much bigger thing than they were. The agenda is evolving, as Tony said, but that's the plan for the day. Like all good plans, you also always have to have a Plan B. So, our keynote this morning, he landed 20 minutes ago in Heathrow, so he's currently testing the pace of the Elizabeth Line. If he gets here on time for his keynote, it's going to be an advert for the Elizabeth Line. What we're going to do, we're going to change the agenda around a little bit and we're going to start with my section, and then Ronnie's going to talk about narratives, and then we'll have Alberto at 11 o'clock. All the online agendas are now updated, but just so you're aware that we've changed the order a little bit. To get us going, the thing that always makes these events what they are is we get your participation. Now, this is a nice small room, so we'll definitely take hands for questions. Of course, we also do like you to participate in Slido and the polling questions. Now it's a little bit more complicated because we're not in a hotel, so you have to get onto State Street's Wi-Fi network. Fingers crossed everyone. Some of you have seen - you might have these on your chair. You should be able to scan in the QR code. There is a manual way to do this. I don't recommend it, but you can give it a go. It's there as a backup. Then once you're doing that, you can scan in - there's lots of QR codes, I'm afraid - you can then scan the Slido QR code here. With that, there are lots of things that we'll then use that for during the day. The first will be polling. You can also submit questions through it for our speakers, which will appear on this iPad here, which will then vocalise the speaker. We'll also use it to rate our speakers. Now, the first question I'm going to ask you, I think the one that fundamentally is the biggest question we're probably all mulling and trying to address at the moment. When we talk about the outlook, when we talk about the economic outlook, there is so much uncertainty. We're back to wondering whether the Fed is going to hike rates rather than cut rates. The ECB has cut rates. We're not quite sure whether they're going to cut rates again. The political outlook is - well, I mean, after the last week or so, let's just call it uncertain. I've actually already seen a version of the talk you're going to see on the US election. It's terrifying and it's a coin flip. Even though we've got all of that uncertainty, we have vol on the floor. We have equity markets close to record highs. That feels like an odd juxtaposition. So, that's the question that I'm now going to say. Lauren, do you want to throw out the polling question? Let's see if people have managed to get on to the go on to the Wi-Fi, and let's just see what you think about this question. Do you think financial markets are too complacent as viewed through the volatility levels? The way we can kind of justify it, you might actually say, 'Well, hang on. Okay, Michael, you've said about the economic outlook being uncertain, but it might be that we get no more central bank moves. European economies recovering, US economy is just doing fine. Inflation has come down. Why shouldn't vol be low?' So, there are two sides to this argument. The polls are just beginning to get there. I think in general though, and especially given some of the some of the talks you're going to see later today, you've got to wonder about that first point, that markets just look a little bit complacent. We're split 30/30. Just specifically on political risk, we asked investors ahead of the Mexican election whether they thought the Mexican election was going to be market-moving or not. 30 per cent said there was a risk that dollar peso would rise significantly. So, a not insignificant minority kind of got it right, even though that result was expected. Why don't we go on to my slides now? I should add, that this is myself, and Carlin Doyle is going to come up and talk about emerging markets, because obviously, that question about whether markets are too complacent definitely has an emerging market component to it. What I'd like to do for the next 30 minutes or so is just ask the question, what are the things that could disrupt markets from this - we're going to call it a careful or cosy consensus that we currently have. Might it be simply about positioning? Might it be that the equity market rally simply runs out of cash? What do we mean by that? How do we measure it? I think the other part of it, and I could have dug into that question, I suppose, a little bit on the volatility question, is that so much of the optimism this year is based on the idea that the US is just superb. We've started using this term 'US exceptionalism' quite a bit. Obviously, if you're exceptional, that tends to mean that you're really good, but it also might mean that there are no alternatives. We'll have a quick look at whether there are, in fact, any alternatives. So, let's get into it. Time to cash out. This is something, obviously, at State Street we've got a really good lens on, at least in - well, actually, in fact, in public and private markets I'll show. Here's our biggest top down indicator of investor behaviour that we have, how investors, across the indicators we see, how are they allocating funds across equity, fixed income, and cash holdings. Now, before our last conference, it was actually in November last year, this is what it looked like. Investors were neutral on equity. They were underweight fixed income by quite a way, and they had an overweight in cash. The bars here are showing where you are relative to the long run average, and then the numbers above the bars are what the actual allocations are. In October, investors have allocated 28.4 per cent of their funds to fixed income. Imagine what it shows today. It's very different. So, that equity overweight at nearly 54 per cent. 54 per cent of investors' portfolios are currently in equities. That's the highest since the GFC. At the same time, that fixed income holding is the lowest from the GFC. Obviously, that makes sense, shows that they're extended. Arguably, the most important bar is the one on the far right, because that shows that the excess cash is has and actually investors are now underweight cash. Now, when I say underweight, what I mean is that they're just holding less than they normally do on average over the last 20 years. So, from now going forward, the way to think about it maybe, is that the news needs to be really good because investors need to go underweight cash from here. Just be aware, and you're probably already aware of it in your own portfolios, that the equity allocations are quite stretched. They're already at 15-year highs. The really good news really needs to keep going. Just to look at that in terms of a longer-term time series, because people often ask, well, hang on, isn't there a long-term trend in cash holdings? Some of our indicators go back to '98. As Tony said, we've been doing this an awful long time. Actually what you see is the average cash holding there, it's just around almost 19 per cent. That's been fairly stable actually. I don't think there is a long-term downtrend in it. The thing that has changed and that we have to pay a lot more attention to now, which is why it's on our agenda today in Europe for the first time as far I can remember, is private markets. Actually, private markets, we do have data on that as well. Our measures of dry powder in private equity and private debt are actually quite high. There's a lot of money there left to be allocated, and so that's an open question as to whether, yes, public markets might be running out of money, but there is this wall of private money, private funds looking for a home that's yet to be allocated. Interestingly enough, that's hard data on that chart in the middle. The survey I'm referencing on the right, that was a survey of more than 100 investors asking about their intentions, about their private allocations. In all cases, investors said they were going to allocate more, not less, to private markets in the future, even though private equity funds, private debt funds are struggling to allocate. So, this wall of money keeps coming. This is something that Josh Lerner is going to talk about a little bit this afternoon. If we look through the lens of public markets, it looks a bit vulnerable, but that private money which is growing in importance, there is still quite a bit of dry powder there. So, I'm balanced so far in terms of the risks, I think. Let's start to look at the US, because if the US falls over, you've got to assume that the rest of it will, because the US by far and away has been the outstanding performer. So, can it carry on? Because the US story is very centred on tech and AI in particular, I thought, you know what, I want a cartoon that will display the US's exceptionalism. I asked Dall-E, which is the drawing version of ChatGPT, which I'm sure many of you know. I said, 'Can you draw me a cartoon that shows that the US economy is exceptional?' This was its first go at it, and I thought, wow, actually, that's quite cool. I'm quite pleased with that. I couldn't have drawn that. But then I noticed that it's spelt exceptional wrong, and I don't know why. It might just be me because, personally, I'm a terrible speller, and so maybe ChatGPT has figured this out and assumed that I wanted to see a misspelled cartoon, but anyway. Maybe it just suggests that maybe AI is not perfect, and maybe the US exceptionalism story is not perfect either. So, when we tell ourselves the story about why the US is the best, it's largely - and this isn't all the reasons, but most of them are that it's the fastest growing economy, best relative earnings. Marija, hands in the air, they're always telling me they're always the best earnings. Marija, your chart's next. You know what's coming. It's one of the highest-yielding currencies. Not only that, not only does it have growth, but actually, US assets seem to perform well in market dislocations. So, it's a safe haven as well. On top of that, and understandably, in general, the US has seen incredibly robust asset market flows. There's a lot to like here. So, let's just start to pick it apart. Starting with that last point. If you've had an economy that's performing so well, it's no surprise to know that that's a crowded trade. Here, I'm just going across different cuts of our indicators to show that. The one interesting thing to note here, actually, is where the underweight is, I suppose, because that is different. US equities on a regional basis, big overweight still there. In sectors, it's mostly in IT, a little bit in financials, but mostly in IT. The flip side of that in sectors is consumer staples and health care. Flip side in the countries is emerging markets. That's why we've got Colin coming up a little bit later. Then in FX, actually it isn't the biggest overweight. It was a couple of weeks ago. The Norwegian kroner is currently the biggest overweight, but the dollar is still very heavily owned, primarily against the euro. That's where the big underweight is. So, that's the kind of starting point. The question now is, are those positions justified? What might change institutional investor positioning in these assets, which obviously are very favourable for the US. So, when we talk about US fundamentals - here's Marija's chart here, US real earnings. This is a long-term chart, to be fair. It's been true for a long time, to be fair, Marija, that US exceptionalism is obviously a newer thing. There really is only one place to go if you want real earnings growth. That's the US. The earnings story, the micro growth story has been superb. The macro story has been almost as good. So, the chart on the right here just looks at revisions to '24 GDP forecasts. Now, the US was already expected to grow faster in '24, but it's been revised up and up and up so far this year. I have actually updated that chart, you'll notice it's starting to flatline and that could well be the peak. Let me just explain why that might be the case. So, this is a little bit more detail on the consensus growth outlook for the US. Rather than looking at the annual forecast, this looks at by quarter, and I've looked at where the consensus was in January to where it is in May. Basically what happened was that economists revised up their near-term forecasts, but not the second half of the year, and then interestingly - and the chart on the right here looks at two different things. It's the evolution of the economist consensus, that's the forecast, against the nowcast. Now the nowcast is - those of you that came to our conference, I want to say about eight years ago, we had Lucrezia Reichlin speak about nowcasting. All it's doing is taking the current data as you see it and crushing it into a current forecast for GDP. That basically captures the reality of where growth is relative to the forecast. You can see at the start of the year there was a big gap. So, the data came in hot in January and continued to come in hot, but then right at the end of the quarter we had a bit of a disappointment. Now, it's largely trade and inventories, but what it suggests was that Q1 wasn't anywhere near as strong as we thought it was going to be, say, in mid-March. Q2 might have gone the same way. Q2 was looking very similar, the dark blue line here, but then we had the April PC report, which was very disappointing. The US consumer, which so far had been incredibly strong, wasn't quite as strong as it looked. So, there's just tentative evidence here that US data isn't quite as good as revised up expectations. It's the first half of the year that was expected to be strong. That's what had driven the upward revision. It could actually get a lot worse. So, one of the measures, and I've got a co-author sitting in the front row here, David Turkington, of this paper here that I'm highlighting on the right. This was produced at the end of 2019, and it was a way of trying to predict recessions. At the time - the release was December '19 - it predicted a 70 per cent chance of a US recession in the coming year. Now, Dave promises us that he didn't know that COVID was coming, but there was something in this indicator which is based off the pattern and interaction of four very simple variables, the cleverness, or the smartness of this indicator is not in the indicators that it's used, it's in the construction. So, all it uses is the curve. Who hasn't got a recession model with a curve in it? Industrial production growth. Again, that's a cyclical indicator. Year over year change in payrolls, and the equity market performance. The indicators themselves are simple, but the interesting thing now is that while everyone else's forecasts of recession are collapsing, this is still at 90 per cent, and it's higher today than it was at the start of the year. When I think about the things we're going to tell you today, this could well be the one that's the most off consensus. There aren't many people out there right now still calling for a recession. So, thinking about the indicators that go into this, how might we actually get there? Well, there's a couple of ways to think about it, and I think probably just a note that capturing this kind of rollover in US growth expectations, economic surprises in the US, which have been very correlated actually with equity market returns, have begun to rollover now. So, the equity component of our recession index, while it's been super supportive, you've got to wonder how long it lasts with the macro data, disappointing as it is. The gap obviously is tech earnings, and I'll come on to that in a sec. What about the labour market? Well, look, we seem to swing around from payroll report to payroll report, but here's the interesting thing, or the challenge that we currently have is that, obviously, there's a shortage of labour in many economies still, labour hoarding is clearly a real thing. Firms are going to be reluctant to let workers go because of that. So, what you should be looking at is labour demand. Labour demand is job openings, and job openings, either through the Indeed data or the BLS data have declined significantly. They're not quite back to where they were pre-pandemic, at least in the US, but nevertheless the labour market is softening. Then, of course, manufacturing, the new orders component of the ISM metric is once again back at recession levels. So, recession is not expected, but you can make a case for it and there is just enough signs in the data. But what about behaviour? Are investors ready for this? Are they beginning to get worried about it? Here, I'm showing you some charts that we use a lot in the State Street Research Product. For those of you that haven't seen these - and by the way, actually, all the way through this presentation, if you get a hard copy of it afterwards, the links at the top will take you to the charts and insights, our website, and actually, can sign up for the website outside if you haven't. The way these charts work is we've got holdings on the vertical axis, flows on the horizontal axis. So, if you're top right, which is where we were in the IT flows at the end of May, that means that you're overweight and you're buying. It's a conviction trade because you're overweight and you're still buying aggressively. The thing that you need to worry about is if you're top left. So, top left is a big overweight where investors are beginning to sell, and because you're already overweight, it might mean the selling can persist and you can have significant price impact. Here's the story of two equity sectors and two unwinds that we've seen in the last quarter. Actually, we had a bit of a scare in tech. At the start of March, tech flows began to weaken quite significantly, and we know there's a big overweight there. We were watching that really closely to see whether it would continue, and of course, the earnings news was fantastic. Sure enough, by the end of May, investors had gone, actually, you know what? I was lightening up ahead of the results, but the results have yet again beat expectations, and so it's flown back in again to being a conviction trade. Look at consumer discretionary. The micro story in the US looks fine. The macro story, a little less so. So, consumer discretionary. US consumers are always surprising on the upside or has done for most of the year. That's beginning to change. So, US consumer discretionary flows are now quite weak. Investors are exiting the sector. They're taking the cue from the macro data, and they're still overweight. So, there is a risk there that's being picked up in investor behaviour. Just digging into the consumer a little bit more and thinking about what that might mean going forward. Again, using the Indeed data. By the way, we have price stats for online inflation, which is great. Of all the alternative data that we're looking at, the one that's coming anywhere near the price stats in the labour market space is Indeed, and so I bet many of you are already looking at it. Indeed, not only do they capture job openings, but they're also looking at the wages that are posted for the new job openings. Here's current wage growth, which is the blue line, and then there's the Indeed wage tracker. This is why the quit rate in the US, by the way, has gone down because you're not getting a pay rise when you move anymore. It's very clear there that wage growth, income growth is now falling in the US back to more normal levels, and of course, excess savings. Now there are lots of different ways you can calculate excess savings of US consumers, but it looks like they've now finally, after the revisions, they've now run out of their excess savings. Then the final bit is consumer confidence. Consumer confidence in the US, I think - in fact many of the surveys in the US, we have to take with a slight pinch of salt because they're now politicised, amazingly. If you look at - and this does happen, but the gap now is very stark. So, if you're a Republican, you think the economy's in the toilet. If you're a Democrat, you think the economy's doing a lot better. But even in the aggregate here, actually consumer confidence is still relatively weak. So, this economic factor on the macro side that we've been relying on, the strength of the US consumer, their resilience through all of this, does look like it's finally beginning to unravel. The reason why that's really important is that if the consumer does roll over, so does pricing power. If pricing power rolls over, then inflation is more normal. Now you're going to have a whole talk in a moment about what normal inflation looks like - well, after the break. So, I'm not going to go into the inflation side in too much detail. What I am going to look at though, is another unwind that we've been observing, and that unwind is in the US dollar. US dollar holdings have been very high for a long time, but we have had these pockets of unwinds - and guess what? We're in the middle of one right now. This is where we were on 6 May, which was just before the April Payrolls Report. The Payrolls Report, interestingly, they've marked the dollar turning points we've seen. So, at that point, dollar flows were in the 90th percentile. Very strong compared to the last five years. Dollar flows were in the 90th percentile. Really high conviction trade. By the time we get to the next Payroll Report actually, we're on the other side. We're in unwind territory. So, the puzzle with this is that actually going back through time, going back more than 20 years - this is what I'm doing on the chart on the right - we've only had seven occasions when we've had dollar holdings as high as that and dollar flows in the opposite direction. So, these unwinds are really quite rare, and as you can see with the mark on the chart, they tend to occur, particularly these two here, at dollar peaks and the change in the dollar trend. This is real money changing their opinion on the dollar. Then you're going to go, well, hang on, Michael, what's going on here? You're saying to me that this is rare. You've had three in the space of three years. I think what that's a reflection of is the fact that investors have hung on to a dollar long throughout this period, and it's because of this US exceptionalism theme. Therefore, the dollar is consistently prone to these unwind periods, and actually, you can see that. This does back test very well. It's got great hit rates, great IRs. Again, if you click on the link on the hard copy of this, it'll take you to the Signal Studio which is part of our Insights platform where you can back test this, so you can see for yourself that this is a good dollar signal. What's driving it fundamentally, of course, is changes in rate expectations, and that feeds through into the inflation outlook. This rather messy looking chart on the right, that's 20 day flows. You can see that the flows oscillate quite a lot, but they oscillate in line in general with changes in two-year US yield expectations. The flip side of this on the holding side, though, I think is reflected on the chart on the right. This is a much longer-term point, which is why the dollar will consistently, I think, be vulnerable to these little bouts of unwinds. The hedge ratio of foreign investors going into US assets has declined significantly. That's true in equities. It's particularly true in fixed income, and that's simply because the dollar is expensive to hedge. So, we're not seeing the regular dollar selling that we would normally capture, which is why our holdings indicators are showing that investors have been low on the dollar for more than three years, to varying degrees, but they're currently still very low on the dollar. So, whenever you get little episodes of doubt about the US economy, then the dollar is going to struggle because that position will unwind, and investors will just calibrate. The big question, though, is whether they would be willing to go underweight, and so far, they have not because it's too expensive. This is going on to a relative yield play and the importance of relative yields, of course, in FX. Now, in terms of reading the Fed. The talk you're going to see next will dive into one of these findings, which is that not only can we give you an interesting read on inflation, but we can give you a read on central bank sentiment, and in particular, where the central banks are appearing more hawkish or more dovish. Now this is going to be the next talk, so I'm not going to go into too much detail for now. All I will say for the moment is that the media's read on the Fed - which actually is more important than what the Fed says, which is interesting - the media's read on the Fed is still dovish. So, even though there was at some point for the dots today, there was some concern that we might get some dots showing a hike, the media's read on the Fed is still dovish, so we don't have to worry about that yet too much. The other risks, obviously - and again, we've got to talk that we'll dive into this in a lot of detail - is the political noise and the political risks around the dollar. The one thing we would just note on that so far is that while there's a lot of media focus on the election. So far, there isn't a significant amount of focus on any of the economic implications. The one that we're watching really closely - well, there's two actually. We should be watching fiscal more, but for the moment, the media focus on fiscal is quite low. Trade war is a real surprise because both sides in the US are talking about tariffs, but that hasn't picked up yet either. So far, the media analysis is that this is largely political noise, but you'll see Dan Drezner later talk a little bit about Fed independence, which again, that could be a big negative factor for the dollar and at some point fiscal. You can probably see this hopefully from wherever you're sitting, that little green dot there. Here I'm just comparing the US and UK fiscal positions. I'm not doing any cyclical adjustment here which would make it look even worse. The little green dot there is the IFS's attempt to cost out the UK mini budget, which we know what a disaster was for us here, and for the Conservative Party, obviously. But then look at what the US fiscal deficit did at the same time. The US did what the UK had promised and threatened to do, and yet treasuries were not disrupted in any way. Then the projections going forward, obviously, the US fiscal deficit, the fact that Jerome Powell can stand up and say it is unequivocal to say that the US fiscal position is unsustainable. The Fed governor is saying that that's unequivocal, and yet markets for the moment remain calm. So far, the fiscal side is not a narrative. It could become so, but it isn't yet. The other thing that we're watching - so far, I've talked to you about unwinds in the dollar and unwind in tech that didn't happen. An unwind in consumer discretionary which is ongoing which makes us a little bit doubtful about US exceptionalism. The one that we're watching really closely is institutional demand for treasuries. The bar chart on the left looks at different types of investors. Some of that uses our data, some of that uses public data. From what we can tell, the only set of investors where demand for treasuries is above average are the investors that we measure. So, institutional demand for treasuries, the long-term investment bid for treasuries has remained. The chart on the right is a time series of that, and you can see that it's falling quite quickly. It's not yet selling, so not yet panic, but definitely something to monitor going forward. We can't take that for granted, that institutional investors will continue to buy treasuries. Here's where I think our indicators are on the US exceptionalism question. I think on the macro side, the US has the fastest and most surprising macro growth. I don't think that's the case. I think we've definitely hit peak optimism there, and it also, I think guarantees, the fact that we've hit peak rates in the US. The level of US yields will still be attractive, and the US dollar will remain expensive to short. Tech will remain very attractive based on the earnings. I think we might see those unwinds ahead of earnings all the time now though, so that's something to watch for. I think the other thing, so far, investors are still just on balance buying treasuries. So, the US still somehow ends up being the safe haven. Now, that might relate to the fact that there isn't anywhere else to go.