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. I'm just going to round it out here and just go through a couple of quick points outside of the US. Firstly, and this is something that Alberto is going to touch on a little later, is that interestingly, the European inflation trend right now looks to us to be a bit more robust actually than the US, which is interesting given the ECB have just cut rates, but I think will very much play into this narrative that that there might not be many more cuts for the ECB to come. In fact, actually, quite a lot of the difference between inflation rates in Europe and the US are methodological. So, Eurostat, because they're Eurostat, they decide to calculate an HICP, harmonised index of consumer prices. They calculated one for the US, just because they can. The annual inflation rates are the same. So, these differences between Europe and the US maybe are a little exaggerated. Let's look at the Indeed data on, it's job openings, but let's think of this as labour demand. Actually, the Indeed data suggests that the German and French labour markets, as measured by job openings, are actually stronger relative to February 2020 than the US, UK, or Canada. UK, by the way, is the weakest and reinforced by the numbers this morning. Although, interestingly, wage growth in the UK is also the stickiest. What does that mean for currency positioning? Here's my favourite chart again on holdings and flows. So, holdings on the vertical axis, flows on the horizontal. Again, May 6, dollar very high conviction, super strong flows, very high holdings. What was that against? It was mainly against the euro, a little bit sterling. Let me just fast forward to today, and you'll notice that sterling has changed quite a bit there. That's obviously the reduction in UK rate cut expectations. So, the sterling position is still neutral. The yen investors don't know what to do with the yen. They're neutral now. They'd been long much of last year waiting for the Bank of Japan to intervene, I think, or for the Bank of Japan to tighten rather, which will come, but right now, investors remain neutral. The euro remains entrenched as an underweight, and I think this is really important to think about the reaction to this political shock that we've just had in France is that investors are already underweight in the euro. So, that might limit the euro's downside, even though there will be some political risk around it, but sterling has had quite a reassessment. I think where it leaves us interestingly for the moment, so if we can't rule out US exceptionalism, what are you left with as a strategy? You're left with the strategy, which I think has been most people's default FX strategy for most of this year, which is carry. We have a measure that combines volatility and turbulence. Again, Dave, I'm going to give you credit for that with Mark Kritzman. It captures whether the pattern and level of volatility in G10 currencies is unusual or not. It's currently below, it's in the bottom decile of past readings. When it's this low, there is only one strategy to follow which is carry. Again, you can see the performance of carry in the low turbulence regime versus the high. I think Mark Kritzman told us that about 20 years ago. That remains true and it remains true right now. The important thing here, this is G10 carry, not emerging markets, but G10 carry. Of all the different styles that we look at on the Insights platform, carry is still the place to be. So, here's the irony of our market's too complacent. Actually, yes, they probably are. Yes, US exceptional is unravelling, but carry is still the place to be. The next question is, well, hang on, surely that means that positioning and carry is really extended? Interestingly enough, if we look at either our data or levered position on the currency futures market, actually - and particularly, for real money, we don't capture a crowd in carry yet. There's a new indicator that our colleagues at State Street Associates are producing that's going to actually formulate and capture flows and holdings by currency strategy or currency factor. Dave, when is that coming out? This was trialled at the conference in Boston a week ago. It'll be on Insights in a couple of months. I've got a sneak preview here. So, this is what it says right now, is that the factor flows show that investors are buying carry both in EM, and in G10 actually, but the holdings in both cases from real money, are not crowded. So, there is still room for carry to outperform. It doesn't look that crowded from our data. Now, Carlin, do you want to come up and talk a little bit about emerging markets in detail? I put a Turkish slide in my presentation, and I realised at that point we needed an EM expert here to talk about EM. So, Carlin.

Oh, I get the flicker, thank you.

There you go. You get the flicker.

Thank you. So, EM, carry, what's not to love? I mean, you have high interest rates, low volatility. It's as Mike has just shown, positioning is relatively light, and if you look at the pattern of investor behaviour over the course of the last 20 days, among the top four inflows, we have Turkey and India and even Mexico in there, despite all the political risks that's going on. So, what's this all about? Is it purely because the carry is so attractive that this is just sucking people back in again? Possibly. Even in South Africa, we had five days of outflows around the time of the election, and then the last three days have seen three days of inflows. It looks as if a great deal between the ANC and the liberal leaning Democratic Alliance is already being priced into the market. Great. We're all heading for this wonderful, glorious future. But are we? Am I not sounding a little bit like Dr Pangloss here and getting far too optimistic, because actually there are huge idiosyncratic risks, not just in FX, but also in fixed income. In fixed income, over the course of March and April, we saw everything being correlated together. So EM bonds and treasuries were all correlating at the same rate. We saw huge outflows as there was fear that the US was about to talk about hiking rates or something like that, something dreadful. But then of course, you had the last FOMC meeting. Everything calmed down, markets began to uncorrelate, and you started to see, as you can see here in the dark blue line, really big inflows into EM local currency. This is pretty broad across all EM regions, and of course, why not? Why wouldn't you? Again, you have high real interest rates. You have relatively cheap EM local currency bonds. You have high real interest rates that are coming down. The disinflation story hasn't changed at all. It's almost as if that blip that we had was a blip, that the normal thing that we should be expecting this year is huge inflows, as you get sprayed compression, local currency bond yields are the best. Yay! However, like I said, there are huge idiosyncratic risks that are abounding, and if you put them all together, here's where the problems arise. Take South Africa for example. Okay, so you've got this potential political deal. On Friday, the Parliament meets for the first time since the election. They've got to elect a president. There's all this expectation that they're going to have a deal between the ANC and the DA. But the DA wants an exclusive deal with the ANC. They're going to push forward a liberal agenda. If the ANC does that, they know they will be obliterated in five years' time. You have populists coming up from nowhere. Zuma's come back to steal 50 per cent of the vote. I think if they go towards the DA route, then this will be a real problem for them. Why else would they be talking about wanting a unity government? They have to have a populist side of it, because if you think about the problems in South Africa, the energy blackouts, the shortages, the droughts that have been happening, the cost of living crisis that they're experiencing. All of this leading to the frustration that has led to Zuma, despite all his background, doing so well in the election. They have to address these issues or face wipe out at the next election. I don't think it's a done deal at all, so expect something really nasty to be said, I imagine between now and Friday, or something of a surprise that's not being priced in. Then take for example, Turkey. Where's the flicker gone? This is like my seven year old son. He hides it under the sofa. So, look at real money holdings of the Turkish lira and you can see this is what they've done. This is the Turkish lira. This is real money. So, this is really conservative pension funds, and they're doing the equivalent of driving 100 miles an hour on the top of a cliff in a Lamborghini with a dodgy axle. This is the Turkish lira we're talking about here. Things could change on a dime, and it's very interesting that you see how extended this position is in the Turkish lira. Well, just since the beginning of April, I've started to notice that real money are beginning to sell their Turkish lira holdings. It's been happening since the inflation print out that we had. Now, remember, before the March surprise hike, inflation was coming in month on month at a worrying level. This was causing real concern. So, you started to see the lira depreciate and they had to come in and intervene with a 500 basis point hike. April's inflation read was again up near the 4 per cent. Really uncomfortable, and yes, we'll get some headline disinflation as base effects happen over the summer, but unless they tackle that monthly inflation rate, then you're going to start to see the same kind of questions begin to raise. Are the central bank really competent or not? Since that inflation read that we've had at the start of this month, investors have begun to sell again. So, if we get another inflation bad print, who knows. This could be the catalyst for that to go in completely the opposite direction. Then there's Mexico, of course, we just had the election. It's all looking a little bit scary. We've had a real big clear out over the next few months. Who knows? Maybe investors may be tempted back in by the fact that US exceptionalism stories are also Mexico exceptional stories. Growth is good in the US. Therefore, it must be good in Mexico. Carry is still great at 11 plus percentage points. So, what's not to love again? Mexico, however, again, wait until September. There's this really weird thing in Mexico with the politics. The handover is very odd in that Sheinbaum takes power beginning of October. The new Senate takes power at the beginning of September. So, for one month, AMLO is still in charge with a supermajority, and he has made it his job to get whatever legislative agenda done in that period, and let us not mistake he's going to be the grey cardinal in charge of the agenda from now on going forward. So, that little month in September, he's going to push all sorts through. Not just about, we're talking here not just the pension reforms that you're talking about or changing the judiciary, but all sorts of stuff. Who knows what he's got in his mind, but he's going to make it his legacy to push it all through in September. So, come September, you can imagine, can't you? Complacency over summer. Everything's happy. Let's go back to Mexico. Whoops. Suddenly, that comes about. Of course, you have China. I mean, I could go on, actually, I could spend probably the next 50 minutes talking about the various different idiosyncratic risks that are here in EM. The point is that put together, all of these risks mean that there's a lot of problems out there in EM. This is probably the most challenging year from a politics perspective that EM has faced in quite a while, simply because you've got so much going on, so many changes that are happening that it could all come to be really, really messy, indeed. Of course, like I said, I'll just finish on a little bit about China because, of course, China were expecting it to recover and rebound. Now, investors have been a little bit sceptical about this. If we look at holdings of Asian equities, they're super, super, super negative, but where we have got good news priced in sometimes is in the FX market where you get really big swings in holdings in a lot of EM Asian currencies, and we've seen exactly the same thing now. So, what's good for EM, good for high beta currencies like the Korean won and everything else, it's all trading off the idea that China is doing okay, or Chile and copper and all these other things. But of course, China - I mean, far be it from me to cast aspersions on Chinese data. However, you look at things like inflation, which you can kind of vaguely rely on, the country is stagnating. That's the real clear message. Nothing has really changed. This year, they're targeting nominal GDP of 8 per cent, so 5 per cent real GDP growth, 3 per cent inflation. They've got to get that from last year's 5 per cent effectively nominal GDP growth. They're expecting a reflation, and yet we haven't had any policies really come out to change that. Unless you do, unless you get a really big stimulus package coming through, then we're just simply not going to get that kind of stuff. So, there's a lot of potential disappointment, I think, to be priced in also with China. Their companies aren't profitable. Look at Chinese earnings. They're dreadful. Look at profitability of Chinese companies. They simply aren't making money, or they are making money, or they're only existing because the Chinese government is just throwing a whole load of stuff its way. That's the way that they're going to deal with things, is that the government is taking control. That to me doesn't instil a lot of confidence. Like I said, put all of these things together. Although the holdings are not overweight, I think there are some places, like the Turkish lira where they certainly are. In other places, no bad news is priced in at all. They're either neutral or like with this, this is really scary. This is the scariest probably chart of the lot, but there are other examples where I think there's a lot there to get really, really nervous about.

Just to reinforce that point. At our Boston event a week ago, we had three strategists pitch three different trade ideas, which actually were recorded as a podcast, our Street Signals, which again, there's a link behind that little box on the top. The most popular trade was the long Turkish trade. If we'd said that a year ago, people would have laughed. Just the very fact that myself, a developed market cross-asset strategist, I've got two charts on Turkey in my deck. That tells you all you need to know about the consensus risk. That's obviously why I needed Carlin to come up here as well, because you can see there's an incredible amount of detail on emerging markets, that you really do need to know. You can't be a tourist. So, just to kind of close it out. What do our indicators show? Our indicators show that this risk on rally against a very difficult political and economic outlook, it is stretched. Particularly in public markets, but there's private money there relative to support it. In terms of the stories that we're telling ourselves that kind of keep volatility low and the good news coming. We think the US growth narrative is running out of steam quite quickly, and that means that we don't need to worry about Fed rate hikes. So, the dollar may be vulnerable because there is an overweight there. US tech, maybe not yet because the earnings hasn't rolled over. That still leaves you in carry, but with carry, oh boy, do you need to be careful, and actually developed market carry is fine. I mean, we're back in Kiwi Swiss. I mean, that's kind of what we're looking at again. But in emerging markets where there is even more attractive carry, what we've learned is you have to be incredibly careful, and as Tony said right at the start, you have to really watch the political risk significantly. So, together, we've done a very nice job of getting ready for our next speaker. Carlin and I are going to be around all day. Please come and grab us for questions then. Now, let me introduce - it's not Alberto. The Elizabeth Line failed, ladies and gentlemen, I'm sorry to say. We do, however, have - and this is the time for stories. Carlin and I have been talking about what we think the market narrative is. What we're about to get is a measurement of what the market narrative actually is. Professor Ronnie Sadka, he's a professor at Boston College, Carroll School of Management, where he's a senior associate dean for the faculty. His research focuses on data-driven investment ideas, and for that, seen him serve on the advisory board of the NASDAQ. He's, of course, also a partner at State Street Associates and a co-founder of MKT. As a co-founder of MKT, that's where all the data comes from, and that's going to range from emojis all the way out to reading what Lagarde just said yesterday. So, without further ado, please welcome Ronnie Sadka.