Episode 49: Pulling Global Markets Together with Laurence Balanco, CMT
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Welcome to Fill the Gap, the official podcast series of the CMT Association, hosted by David Lundgren and Tyler Wood. This monthly podcast will bring veteran market analysts and money managers into conversations that will explore the interviewee's investment philosophy, their process, and decision-making tools.

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Welcome to episode 49 of Fill the Gap, the official podcast of CMT Association. My name is Tyler Wood. I'm a CMT charterholder, and I'm joined, as always, by David Lundgren, CMT CFA, one of the best portfolio managers and research analysts on the street today. And my goodness, Dave, was that a meal of a conversation with our guest, Lawrence Belanco. How much fun was that? Yeah, for sure.

Incredible. I, you know, I, it's, it's like, I felt literally like we, cause I've known Lawrence for, since by, it turns out we just discovered in this, um, in, in our discussion that he joined CLSA in 2007 and that's the same year I joined Wellington. So, and that's pretty much about when we, when we met. So, um, yeah.

But what I always, always appreciated in my conversations with Lawrence over the years is just his broad array of knowledge of all the different markets and his really unique perspective on how he thinks about pulling all these different markets together. He was a very, back in the day, it's not so much today, but back in the day, he was a very heavy user of Elliott Wave. And as I've said time and again, I love Elliott Wave. I've read that book a million times just because it's just chock full of great people

you know market behavioral type insights but just keep me away from elliott wave because i'll lose money for sure but guys that can do it well can do it well and he's definitely one of them so i always enjoyed those conversations but over the years as i've kind of moved on from wellington and which this is my first time really speaking to him in in several years he's evolved this process he's really leaning on hank pruden which i think is awesome i think that's just such a great development you know so i don't know it's just another great conversation it felt like the old days

Absolutely. Not only was the process and tools segment of our interview really helpful in understanding that all Elliott was trying to do is understand that trend following is not going to take a straight line. You need some rules about whether or not you can have these overlapping higher highs or higher lows, and the violation of structure is a way of deciding when trend has been officially broken. I thought he delivered that super well.

But then there's about an hour and a half of conversation where we covered basically every market around the planet. And sitting here on March 6th of 2025, boy, there are a lot of things at inflection points. There are a lot of relationships that are changing. Leadership having the potential to bring on a different character. So I won't spoil the fun. Enjoy this conversation with Lawrence Belanco, CMT, Chief Technical Strategist for CLSA.

Welcome to Fill the Gap, the official podcast of the CMT Association. My name is Dave Lundgren, and along with my good friend Tyler Wood, who's a fellow CMT charterholder and the executive director of the CMT Association, we are joined today by Lawrence Blanco, also a CMT.

Lawrence is Chief Technical Analyst over at CLSA in Sydney, Australia. Now, I've known Lawrence since my Wellington days, and I always look forward to our discussion since his perspective was always so global in nature and across all asset classes, and he was one of the best

that I followed in terms of Elliott Wave. And in recent years, Lawrence has adopted his process to reflect more of the work of Hank Pruden, which is really quite interesting. And I'm really looking forward to having that discussion with him today. So without further ado, Lawrence, welcome to Fill the Gap. Great. Thanks for the invite. Looking forward to the conversation.

Yeah, for sure. It's great to see you. I've always enjoyed speaking with you just to hear your accent. Yeah, it's been a bit butchered, sort of starting in South Africa, traveling around the world, and now sitting in Australia. There's some phrases I can't get away from the South African accent, and I have to repeat myself three times, but that's part and parcel, right? Yeah, right. Well, if I didn't understand you, I'll ask you to repeat, but I think we'll be good. We'll just bring up the chart, right?

Yeah, that's a common language, right? So we have, I mean, there's just a ton happening to start the year here in 2025, not just in equities and within equities, but across asset classes, FX and the whole shebang. And I know you follow all of that stuff very closely. So it should be a really informative conversation for our listeners. But before we really dig into that, maybe...

Tell our listeners a little bit about yourself, how you got into technicals, a little bit of your journey as a technician through your career. Yeah, I mean, it's really sort of started, you know, went through school, got sort of interested in markets sort of late in high school. And then through my first few years of university, my father-in-law was invested in equity markets and sort of started to look around, had some savings and, you know, really just

Sort of brought the narrative stories that were going out at that time. It was obviously the TMT move. So basically finished school in 93 and was doing university in the mid 90s. So basically the start and mid part of that sort of tech cycle. So it was really just sort of those headline moves. It was a bull market at that time.

So once I finished my degree, I actually joined SockGen on the trading desk. So that was my first sort of lucky to get the role in the grad program at SockGen and started on the sales trading desk. And there was actually SockGen or Society General had a technician sitting in Hong Kong named Thomas Schroeder. I don't know if you ever came across his work. No.

and basically started following him. It's like never looked at technicals in your degree. You never touched that. I majored in economics and accounting, so never really looked at charts as far as one way to look at markets.

And then we basically got the EM crisis of '98 that then rolled into that acceleration phase in the tech bull market into the 2000 hearts. And having left university, you sort of come up with this theory on how you should value companies. You have the formula. This is what markets should trade at. This is the value. And basically, through '98,

through the 2000, it was literally swings up and down and nothing ever traded at what you calculated fair value at. You also had towards the end of that 2000 is like,

All the listings that were coming out and people just saying, follow me, don't worry about looking at fundamentals or charts. It's all about the tech craze that went on. And then markets rolled over. And basically, Thomas Schroeder at Asokgen called these turning points extremely well. His focus was really on RSR divergences and MACD divergences. Yeah.

So that was really that slowing momentum signal of a trend giving you that early warning signal, which really sort of resonated with the market turns and the volatility that we saw at the time. So having seen that, I did a bit of research myself, read a few books. The first book that I've got is the John Murphy's Visual Investor. So it's the smallest book out there. And I always recommend anybody that's

Wanting to start, just start with the basics and the easy. And I thought in that book, The Visual Investor, John Murphy touched on the basic concepts and some of the basic indicators, which sort of frames it quite well if you're just starting to

use technicals or trying to understand technicals, I thought. So I still recommend the book. He's got a revised version out there, a very basic book to go through. You can go through over the weekend. And so that was my first book. And then sort of finally got onto the CMT and ran through that course. And my sort of career developed through subgen at the time and

Came in portfolio manager, so then used, again, technicals. Being on the sell side, you sort of just write ideas or trying to pitch investment ideas. So you have a bit of the fundamental background of a stock or whatever, and then you have the technical overlay on that, sort of just trying to highlight it from different angles that the stars are aligning with these kind of things. But when you go to the buy side,

The way that you use technicals, I think, does evolve with managing money. So there's different pressures on being on the sell side that it's just idea generation. And once the idea is out, you sort of move on. On the buy side, once you've executed the deal, you're not watching it. You're married to it. You've got to look after it. And I suppose looking at a chart, too, you can always sort of jump at shadows, right?

that does this look like a reversal? How many data points do you want to follow the 60-minute charts? Anyway, on the bar side, I felt looking at weekly charts just took you away from some of the daily volatility. It also kept you-- because basically, staying on the trend for as long as you can is really where you make the money. Calling the inflection points is great, but lower hit rate, you are staying on that trend for as long as you can. Just taking a step back on time frame,

On the bar side, when I speak to a lot of the PMs, a lot of times I say, let's look at the weekly chart. It just takes away some of the noise that we may be seeing on the daily charts. Obviously, the hedge fund community, different story, different risk measurements where you can even go down to 60-minute charts become more relevant for them. It does. Okay.

vary through the time cycles that you work through. So yeah, that was my experience going from using technicals on the sell side to using it on the bar side. I landed up working in Dubai for an asset manager there. So again, sticking with the longer term weekly charts and a process incorporating, you know, the Dubai experience was quite interesting because it was more value orientated and

asset manager, which also you had to use different indicators. Most value fund managers that you sit in front of want to be buying things that are falling

Because that's where the value is created rather than buying things that are already trending. So I had to adopt the change there. And that's where Thomas Schroeder's work came back in vogue, looking at slowing downside momentum to try and highlight the inflection points. So one, trying to avoid the value trap where you're still in a strong momentum to the downside and look for those potential turning points there.

And yeah, did that in Dubai. And then Cilice was a broker that I used to speak to, dominated out of the Asian region. The fund that I worked for predominantly looked at emerging markets as well as Japan on the developed market side.

And their technician at the time, Chris Roberts, had resigned and he moved on to the hedge fund side and sort of got the opportunity to join CLSA back in 2007. And that's been my home since then, speaking to various clients. And as I mentioned to you and Tyler earlier on, it was, you know, my start of my career was

the end of a US dominant theme tech gain, and then you had the rotation into emerging markets. You had a decade of emerging markets performing that peaked in 2010. And the last 15 years, it's been, again, a tech and US dominant theme. So does it swing back to emerging markets at some stage? That's the sort of interesting question, particularly with the price action that we've seen year to date.

yeah i think that's um that's definitely much of what we want to talk about in this conversation in terms of how you're seeing things evolving because i think there's potential for a lot of change coming up and but before we really dive into your your views overall maybe you can touch a little bit on your process as it stands today so i my uh in our in our meetings in the past lawrence when we when you used to come visit at wellington we would

You would walk through your chart books and your perspective was definitely across asset classes and timeframes and things like that. But it was very heavily influenced by Elliott Wave, which is why I'm pretty bad at that form of analysis, to be honest. But I knew that it was for those that were good at it, they could add a lot of value. So that's why I always really appreciated our conversation. So I'm curious.

how that approach has evolved and if it's evolved at all, what was the catalyst for the change? Yeah, absolutely. And sort of my experience with Elliott Wave was quite an interesting one because it was at the time Rob Prechter's book was part of, I think it was level two to get through. And I literally started reading it and I put it in the dustbin, right? But it didn't make sense to me.

That was my first experience with it. I then picked it up again. And so having looked at it more from sort of a live market action, okay, I can sort of get the ideas. And then I sort of broke it down into three.

The very basics of it is a definition of a trend that wave two cannot retrace wave one. So therefore, you wouldn't have a higher high and a higher low. And wave three can't be the shortest and wave four can't retrace into wave one. So essentially, you just created the definition of a trend, not having overlapping highs or lows.

And that anything else in between is some kind of corrective phase, which in a book you've got 13 corrective phases, but you can have combinations of those corrective phases. And Chris Roberts, who was Cilice's technician, had focused a lot on edit waves. A lot of the clients were sort of used to that work.

And one of the benefits from Elliott Wave, particularly when you go to the sell side, everybody's looking for a prediction or an expectation or a price target, right? Or that had been my experience. So what do you think? How high can this trade? What's my risk levels? And that's why Elliott Wave provides

provided two of those things. It provided where the counts are wrong. So if you've got an overlapping move in a trend, it's like, okay, we've got to reassess here because you've got the overlap. This impulsive counts gets invalidated, right? So you mean like if you have a view on something, then you're not necessarily waiting for a price stop. You're waiting for a structural stop. So like if you think it's

heading to, say, 25 or whatever it is we're talking about, the swing low might be down at 17. But the structure that would support a move to 25 might be broken at 21. And so you'd be actually stopped out of that trade because of structure, not necessarily because of the level. Yes, correct. Correct. So if you're using a trading stop of a 200-day or a parabolic trade,

Stop level or just an ATR level in in the elite wave side. You'd use the price structure of the trend essentially. Yeah, yeah and then obviously again, we

Not that it's used or has strong evidence of great sort of forecasting. It gives you a potential upside target. You know, is it the same measured move? Wave three can't be the shortest. So therefore, if you've got the first move, you're looking for at least 100% or the equivalent size move and a potential Fibonacci extension to that. So you could always provide risk reward. Like this is my pivot point if I'm wrong, and this is the potential upside. And that's what sort of got me on to Fibonacci.

just getting more proficient in the Elite Wave count. As you spend more time sitting in front of clients, there are other clients that like that detailed analysis and happy to run with the Elite Wave side. But the more broader audiences like, actually, I don't know where you start these counts. This is very subjective. Can you backtest it? I guess

Over time, the processing power, even on Bloomberg, the backtesting function has improved significantly. There's more reliance on the statistical evidence of trends. As my time sitting in front of PMs of value growth orientated funds and just trying to communicate how you can use technicals in the process, because I think that's the important thing. It's a tool that investors can use in the process.

And it's really a discipline at the end of the day. So how can I sort of provide them with a framework to use that? So I still use Elliott Wave in, you know, the ideas of the impulsive moves being the strongest part of the trends. And that's probably the key. I don't know what you guys find, but I found that the term overbought, oversold is probably the most misleading term used because it's

If you look at the RSR, which a lot of people use as below 30, above 70, as overbought, oversold levels, the calculation is just average advance versus average decline. And then you go back to all the academic papers written over the past 50 years in finance about momentum persists for a lot longer than people expect. If I look at an RSR of 70 and buying that, that's typically the kickoff phase or the confirmation phase that a trend is developing rather than the place that you should be selling it.

So I try and avoid the terms overbought, oversold. And typically a 70 move, I'd look if that's in the structure of a wave three and then looking at any kind of pullbacks as an opportunity to be buying into that.

And one of the books that sort of evolved this process is Professor Hank Puddin, which I was fortunate enough to meet before his passing in Tokyo. I think it was 2014 that was the CMT Symposium in Tokyo. And it's definitely a book that sort of revolutionized sort of my thinking. He talked a lot about S-curves, which is sort of the adoption, particularly if you look at, let's say, smartphone purchases, it works in that S-shaped curve that, you know, people...

buy into it to get this acceleration phase. And then while the volumes still go up, the rate of change slows. And that always sort of came back to my first lessons in technicals from Thomas Schroeder, the RSI divergences or the momentum divergences, and that highlighting the inflection points.

In summary, Elliott Wave was a key component, but then it's involved more with the Hank Puddin work of that behavioral bias of S-shaped curves and working it back to the momentum calculations of a trend basically. I've incorporated strong trend,

Strong momentum, basically, you have to have a benefit of doubt to the upside. Or the reverse, if it trends down, strong momentum to the downside, you back the downtrend. And then at the inflection points is where you start to see momentum slow. And that's where you've got to manage risk is how I sort of highlight to the clients that I speak to. And that's where you want to either be taking profits or covering shorts, essentially. Yeah.

Yeah, I think, again, because there's so many inflections taking place, we'll probably see in our conversation, we'll probably hear the various inputs come to life as you're describing what you're thinking about markets for 25. But I'm curious, when you're meeting with different managers, portfolio managers on the buy side, some of them are growth, some of them are value-oriented. Yeah.

And then you might even have different asset classes that some are equity, some are fixed income, some are commodity, right? How do you change your toolkit when you speak to different PMs? Is it using the same tools differently or is it completely different tools for different PMs? So I think this is quite an important point. I'll try and sort of get this point across.

particularly for people that haven't looked at technicals before and sort of just trying to sort of scratch the surface is, you know, everybody has an

Or I've found that everybody has a slight bias in how they look at the investments, either from that sort of value side that they want to try and sort of be trading at the inflection points or on the way down, or the growth guys that, you know, sort of find the story, the narrative and the growth side of it. And that's typically a chart, you know, moving bottom left to top right. And that's how, if I very simplistically had to define, if I'm sitting in front of a value fund manager, I know the charts that he's focused on are more charts that are falling down.

and let's assume that he's a long-only manager, that are falling and he's trying to find the inflection point where he should start to build the position, assuming he likes it from a fundamental side. And the growth fund managers I'm sitting in front of, typically looking for a stock in a trend and just picking the spots to buy into that trend. And that's why I think we can share this sort of methodology or blueprint. It's a very basic schematic that I draw up. It's about having a trend

the momentum of that trend. You can just use a simple moving average to find the trend. Then I tend to use the RSR, but you can use stochastics or just simple rate of change, trying to measure the rate of change of that trend.

So when I sit in front of a client, I can highlight that, yes, this is a strong trending stock, or this is a stock potentially at an inflection point that it is a bottom fishing buy. And then obviously the reverse for a growth manager that, yes, the stock's in an uptrend, but upside momentum is slowing. So you should be a bit more patient waiting for a pullback within that. So that's my base methodology. And I overlay that on each asset class. If somebody wanted to talk about cryptocurrencies, I use that same framework.

Now, Asia is quite interesting because the China market, particularly the mainland market, which is dominated by retail investors, the best way it's been explained to me from a fund manager is that China tends to overreact in the near term, where typically Western markets underreact. And that's where those sort of trends are more sort of persistent and take longer to develop.

where China reacts sort of immediately. You get this very short-term spark, and then it rolls over quickly. So on the China angle, what we found is the DMARC indicators work extremely well. That's looking for inflection points, these accelerated moves, really to manage the risk, but also to...

buy on the way down and to sell into these sort of big sparks on the upside. So that's the only market that I'd say I gravitated looking more towards a mean reversion structure than for the trending structure.

Oh, interesting. So the context of how the market behaves informs which tools you're leaning on to confirm whether it's a healthy trend correction or signs of a more meaningful exhaustion and reversal, right? Yep, correct, yep. And that's probably, you know, through my university degree, one of the subjects you had to take in your commerce degree was psychological, either industrial psychology or psychology. And I took level one and just sort of, that's enough. I'm just sticking to the...

to the equations in economics and accounting and the like. But if I sort of look back now in how much more from a technical side, it's all a lot to do with sort of the behavioral side of it, probably would have stuck more to some of the psychological aspects and the behaviors that you see from markets now. So I think there's a lot of overlap. One, when you're looking at the charts,

It's a reflection of behavior at the end of the day. I think that that's an important part that's probably overlooked a bit. RAOUL PAL: Do you also incorporate intermarket forces or cross-asset relationships as context for using the more mechanical tools, or do you steer clear of that and the rule is the rule? CHRIS BANES: I think it creates a bit of color.

pet hates in a lot of conversations or what do you think about this correlation? A lot of the time, an investment thesis is started off with a correlation. From my experience, correlations do oscillate and you can get totally misled that

the bigger macro environment has actually changed. And the reason why that correlation had existed, let's say for three or five years, is actually changing now. And if you just looked at the chart in isolation, it would be suggesting that you're getting a change here, but you're reliant on the old correlation. So I try and respect the absolute chart setup. And if you've got a correlation that you can sort of add to the thesis, then great. But I wouldn't start

which it does seem a lot of the time the fundamental guys have more of a correlation starting point than respecting the current price. It's almost like the market's wrong and it's going to mean reverse, whereas you could have a change in the macro factors while that correlation is breaking down.

And that breakdown in the correlation is actually where you can make a significant return as it break down and you get a new correlation beginning. So probably the most recent example would be bond prices and equities from 2021 to basically 2023. So falling bond prices, rising yields, falling equities. And basically from mid-23, AR came along and

It didn't matter what bonds did. It was more that the rate of change of bonds that became an issue. So if bonds rose too quickly, then the equity market would correct. So the behavior and what the market focuses on always evolves. There are a lot of macroeconomists looking at an inverted yield curve from two and a half years ago and still waiting for that recession. Yeah.

Unfortunately, they're giving up on the call for recession right at the moment where the market seems to be focusing on the prospect of recession. You just can't win, right? The market is here to beat us up, all of us. It's the most pain, right? That's right. Lawrence, where do you want to dive in on markets here? We've got a lot to cover here for 2025, and I know you cover pretty much everything under the sun.

What do you think is a good jumping off point for this conversation? I think there's probably maybe just the first observation is really where the question on rest of world outperforming and is this sustainable or sustainable?

A lot of Bob Farrell and Frank Dexera have said before that you typically need to see a market correction before you actually see the real change in leadership. It's really just been since December that you've seen some of the outperformance from rest of world and share a screen or just a chart here. It's quite interesting if I go back to the Trump election victory on the 5th of November,

US market, Bitcoin all outperform. But if I look at year-to-date performance from the start of the year, Bitcoin is now in negative territory, the S&P is in negative territory. Interestingly, the tariff-related markets like Mexico, China, Europe, and even Canada

Canada's flat for the year, and it's outperforming the S&P. Mexico is positive. Emerging market's positive. China's up over 20% year to date. So the tariff-related markets haven't sold off. And it does seem to be that the market fear, as we said today, is coming more from a US growth fear and slowdown.

So that's quite interesting. Can the rest of the world sustain if the US does slow down? It's such a big market for a lot of providers or exporters, particularly from Asia, that a US slowdown is likely to have an impact on them too. So do we have a correction led by the US here, breaking below its 200-day, the rest of the world correct? But in that correction, the rest of the world falls less. And I think that's where the information will be

is that let's assume that the S&P downside momentum picks up with the break of the 200-day. And in that correction, rest of world falls, but it falls less. That's the sort of ingredients that you had in 2002, where the US still fell, but the rest of the world fell less. And then once the US started to stabilize and recover, the rest of the world sort of kicked off on a decade-long period of outperformance.

So that's the big question. And my short answer is, you know, I don't have the evidence that you have that major base in place. I'd be looking at the changing behavior of rest of the world falling less than the U.S. And the second point that I'd highlight, maybe just this is more short term orientated. If you look at the charts of MSNBC,

MSCI world ex-US relative to the US. You've been this distinct downtrend where rest of the world's underperformed, US has outperformed. But there have been these mean reversion phases. And I like to look at a relative ratio with a 200-day moving average on and a Bollinger Band, two standard deviations above or below that 200-day.

And over this period, we've seen mean reversion trades to trade two standard deviations above the 200-day. And where we are right now in the ratio is at the 200-day. And we basically have another 8% of relative outperformance of rest of world versus US just to trade to the top of that two standard deviation level. So I don't have any big reversal signs there.

On the longer term trend, but at least in the near term, I do think rest of the world can still outperform at least to that upper Bollinger Band. And then in the decline, if we see rest of the world fall less, we start to get a bit more evidence that this could be more meaningful then. So a couple of times you've mentioned the prospect. It sounds at least, it sounds like you're talking about the prospect for a decline in equities. So just to level set the conversation, is that kind of what you're looking for as we kind of get into the

the second quarter of 25 and then how that plays out into the latter part of 25?

So yeah, I mean looking at the setup there is definitely downside risk, you know Nvidia's closed below $113 today I think that's sort of quite a key level the February lows and it's sort of you know $190 as potential downside risk the socks has been underperforming the second half of last year So I think you've had these breakdowns already particularly from the tech side or the cyclical side of tech that is driving to the downside and

And I think I don't have any historic precedent where US falls that the rest of world can actually still trade up in absolute terms.

You just nailed my next question. So before I get there, though, because I tend to agree with you on that. But what I do want to know before we get to that is I totally really value the insight about seeing what markets, how they behave during bear markets, because that can oftentimes tilt

your perspective in terms of what will lead when the bear market's over, right? We see that happen a lot in bear market cycles. It kind of gives you the insight as to what will lead coming out of it. But before we get to all of that, my question for you is in your, because I know you have a deep appreciation for history as well, and you've studied a lot of cycles. You've been in the business for a while. When you think about the prospect for a decline in the market this year,

Are you thinking run of the mill bear market or are you thinking something more than that? And curious what your reason would be on either side. Yeah. So short answer is I would, you know, it's always painful, a bear market. So there's nothing sort of run of the bull. We all sort of suffer in it. But, you know, I do think it would be run of the mill. Why I sort of say that more so than a 40 to 50 percent decline is that if I look at the credit indicators, like credit spreads is, you

What I've typically seen before a far more significant decline is credit spreads have tended to widen as the S&P makes new highs. In the new highs that we made two weeks ago in the S&P, credit spreads were at their narrowest level since the October 2022 high in credit spreads. So to me, this is a best way to describe our clients. I think if you want to sort of give a fundamental sort of overlay, this is a P&L correction

growth slowdown versus a balance sheet problem being a credit event. Now, does that slowdown just be two quarters? Is it one quarter? That's hard to frame a time scale around it. But on the breakdown from the trading range that you had for the S&P from December, an S&P down towards the 5,100, 5,000 areas, quite a logical

target for a breakdown here into the second quarter. Could it get worse? Yes. But I don't think it's a COVID-type sell-off. I don't think it's a 2007, 2008. But that may be more of a grinding move like the 2001 to 2002 period where you made a 10% decline. You then had sort of a 7% rally. That sort of petered out. And it just takes a lot longer to work through. Yeah.

You mentioned 5,000. I know you have a lot of tools that you rely on to generate targets. I'm curious, what did you lean on to get to 5,000? Basically, the 5,100 area is roughly the measured move from that trading range that you had from December. Very simple price pattern trading range move measured down to get to that 5,000 area. Yeah. Okay.

When you look at the data as you see it today, how would you say the data is in terms of supporting the idea that you have enough evidence to place the bearish bet or are you still waiting for more evidence to come in? Well, I'll tell you where that the... Sitting on...

focus on rest of world, China has high momentum breakouts, Europe has high momentum breakouts. It's not as if I have a synchronized decline in markets. This does seem to be more of a rotational correction. Again, I would say this is

The setup here, if you want to talk about leaning to a bearish corrective phase, more like that 2001-2002 period, where if you remember, financials actually in the US performed well, industrials performed well, and they peaked eight months after tech peaked. We could be in this period where there's still parts of the market that can give you absolute returns, not only relative returns.

So I've used the comment of staying opportunistic.

still looking for those opportunities rather than having a Delta one view that everything falls together. So thinking of it more on a rotational basis, particularly because I have exposure to the rest of all markets, I focus on that where you actually seen and you should be giving benefit of the doubt that the high momentum breakout, despite the headlines and the tariff risks on the China side, you've had some significant breakouts. You look at the charts of Alibaba, if you look at the China internet ETF listed in the US,

It's hard to be bearish on that. But looking at the breakdown in the sucks, looking at the NASDAQ breaking below the lower boundary of the trading range that you had from December below its 200-day, momentum still confirming that lows, it does look like there's downside risk there. RAOUL PAL: Right. And to bring it back to your earlier point,

In that scenario, if the US market has some weakness coming into the second quarter or beyond, it's not a scenario where you envision these great breakouts that you're seeing, these big momentum surges, particularly in China, which I think I see as well. You think there's a mean reversion risk on that? Even though the charts look great, this may not be the best place to load the boat on China. Yeah, absolutely. I mean, ideally...

This corrective action and if you get followed through on the downside in the US on the China set up and the European set up you actually get pullbacks to to the breakouts that you saw other January or February so you get you get a chance to sort of relook at those markets on that pullback and again nothing that will go quite telling if

the market does buy the pullback to that breakout area, that there is belief by the action by markets that there are buyers or new buyers that have stepped in at that old resistance area. I think that will be very telling behavior. Then on the longevity of the breakouts and the re-rating that you've seen in rest of world basically,

So if there's a rotation away from the U.S., let's say we go through this corrective slash bear market environment and there's a rotation away from the U.S., what does that mean? Like, how do you try to piece that together fundamentally? What does that mean? Does it mean that there's just better growth elsewhere? Or is it more just a function that the tech sector has been leading for so long and the U.S. is basically tech, so maybe the U.S. market takes a breather because it is tech and everything else is tech?

As a shot at leadership? Yeah, I mean, I think the US market suffers from what they benefited most from is, at the very least, a digestion phase in tech, a digestion phase in the AI. The delta, if I think in that S-shaped curve again, is that the delta of the AI theme has slowed. So while it's still growing, it does look like you're at a slowing pace now.

And that's showing up, if you look at the chart of NVIDIA, you peaked in November last year. You tried to break out in January. You failed. And now you broke below the February low. So there's clearly sort of evidence of that slowing. You know, does it take the shape of just a 20% wide trading range? We have seen NVIDIA fall 50%, you know, since you bottomed.

At the COVID lows. So there can be these deeper, deeper setbacks. But even if it's just a trading range, you know, that's still relative underperformance. And the big weighting from tech within the U.S. market is the anchor rather than the tailwind that it's been for over a decade. Yeah. You know, I just think you mentioned AI and technology.

And, you know, it's obviously the technological theme that's really driving things today. And when you look back in history, we can point to other themes that have driven markets to extremes. And you look where NVIDIA went in terms of valuation, it was 45 times trailing earnings. And so just when you look at how in history, how those scenarios have unfolded and kind of like the air has come out of the bubble, this is kind of why I asked.

If you thought it was just a run of the mill bear market, which I agree with you is not comfortable, but nonetheless, it's a lot better. You know, 30 percent or 25 percent is a lot better than 50 percent. But when you when you do look at historical post bubble environments, assuming that 45 times sales is fair to say was a bubble for NVIDIA, they generally don't stop at 20 to 25 percent. They generally go down a lot more. And I'm curious if you if you have any thoughts on, you know, whether we should be thinking like that or not.

I've actually got this, an analog that's, you know, I have shared with clients and we'll run through because, you know, AI is, you know, a new technology, a new theme that's getting adopted. And I've compared it actually to Nova Nordisk. And why I've done that is, you know, Nova Nordisk come out with the GLP-1 drug. So also a new sort of thematic big markets. So I've actually overlay NVIDIA with Nova Nordisk.

Novodorus ran into margin pressures late last year. The stock fell 45% and has started to stabilize year-to-date. So I thought that was an interesting analog where, you know, GLP-1 drugs are still growing, but the margins at which they can sell the drugs has come under question. And that's pretty much been the conversation since the NVIDIA results two weeks ago, that, you know, is a sort of peak margins for NVIDIA. So I think that's where there's

That's a 45% decline that Nova Norda saw, but it's much less than the Cisco decline. If you think of Cisco built out the internet in 2000, it peaked, and a decade later,

Cisco was still below those 2,000 highs. But you've got other tech stocks that then benefited from that build out of the internet infrastructure. So is this peak that you're making in NVIDIA what Cisco was? Or is it a margin slowdown to what Novo Nordisk saw last year? I'm probably more focused on the Novo Nordisk correction and the digestion phase that we're getting through here. But to that point, David, is that

you're not buying NVIDIA on the pullback here. I think you start looking- RAOUL PAL: Either way, whether it's going down 30 percent or 60 or 70 percent, you're still not buying it here anyway. That's the point, right? That is the takeaway. Interesting. PETER NORVIG: Yeah, that peak and then the repair process, if you look at the Novant orders chart, using that as the analog,

for the past three months has found a level after falling 45%, and you've got a three-month consolidation. So yes, that's potentially a base. But Nvidia still has to get to that point that it starts to stabilize first and gives us an equilibrium in the price setup that it's found a level from a valuation perspective that the market new buyers are prepared to step right in. Right now, I think you're still getting

stay alongs, reducing it now and questioning the margin story there. That is where the downside risk is. There is no new buyers to halt the decline just yet. RAOUL PAL: A great technician used to say, before a stock can begin moving up, it has to stop going down, which I think is the very simplistic way of restating what you just delivered.

Yeah.

to some clients yesterday, and you sort of get that gulp, like, can it trade that low? Because you've just had this sort of repetitive buy the dips, and it keeps on trading high. It's like, how can it derate to that sort of stance? And that's why I think that there's still people trapped on the long side if this continues to derate that will land up selling the momentum as it picks up on the downside. Yeah, it's actually shocking,

When you look at the holdings of the sovereign wealth funds and how much they own of the Mag7, it's just...

It's incredible. And this is a stark reminder that passive investing can be great because if you're a passive investor in, say, like a large cap index, you'll never miss the next 10 bagger. You'll always own the next 10 bagger because the index will have to own it. It's basically momentum investing. That's the good side. The bad side is it's momentum investing without risk management. So like Cisco, as you point out, and hopefully Tyler will be able to put these charts in the show notes.

But Cisco, when it peaked, it went down 70%, 80%. And there was no risk management mechanism in the index. So it wrote it all the way down. Yep.

Absolutely. Yeah, that'll be the concern. So before we move to perhaps overseas and get some insights there, I'm curious, when you're watching capital kind of flowing away from, or at least seeming to flow away from, MAG7, tech semis, all these areas you've mentioned, are you, within the US, are you seeing anything perking up that's not defensive? From a thematic perspective, no.

There's two ETFs that I look at, which derated significantly from 21 through to 23 being the fintech ETF and the other one being robotic and automation. So Robo is the ticker.

Again, they're not going to go up in a corrective phase, but if you look at both of those charts, you had a meaningful derating of 50% through 21 and into 22. From 22 basically through to 24, you had what we'd call is the basing pattern, this whole process of stabilizing. Global FinTech broke out last year, and we have set up these higher lows from it. That's a space that I think on a longer-term basis,

that the weakness I would look at buying into it. The robotics and automation ETF is another one where we've consolidated for two to three years. Some of the key components of that have actually been consolidating for four years where

That's where I can see big re-ratings and potential new leadership emerge, looking more at a cyclical side rather than saying you should buy healthcare today because it's giving you relative outperformance. There's a trend there. That is true. Healthcare in the US, I'm sure with your work that you've done, that has come at one of the better parts of the market year to date in the US. That fits that trend.

defensive criteria. So yeah, if you're trying to look through that as far as a broader basket goes, I would look at the fintech theme as well as the robotics and automation. Yeah, interesting. Okay. Globally, you mentioned China. What about in my work, the Middle East ranks really quite well and has for quite a while. I'm

I think we should discuss specific regions and countries around the world, but I also think that a big contributing factor to what happens globally from a relative perspective will certainly be the dollar. And that's been taking it on the chin really considerably recently. And I'm curious, thinking about global equities, how does the dollar play in and tie those in for us?

I mean, so just to start with the dollar, there's a chart that I always share and even our strategist shares it. I mean, it's so distinct, the relationship between

the performance of emerging markets relative to developed markets with emerging market currencies. When emerging market currencies are strengthening, that typically works in lockstep with emerging market currencies, emerging market equity markets outperforming developed markets. Having this sharp reversal in the dollar, part of it is aided by China's obviously rebound, but typically, you see a weaker dollar being more beneficial for emerging markets. It's less of a driver for European markets,

having a stronger euro, but definitely from a broader emerging market asset class, a weaker dollar has supported a re-rating in developed markets. Now, the dollar index itself, I think we can fairly say that the breakout in December being above 106, 107, which was the top end of the trading range that you had from 22 to 24, has been a failed breakout with a sharp reversal this week. You're back in that range.

But interestingly, if you look at it on a longer-term basis, the dollar index had risen from 2011 or 2008, depending which index you look at, is you now have quite a distinct lower high relative to the September 2022 high.

And if we break below 100 on that dollar index, you get the first major pivot high, which would be 110, and a new low below the 100 area, confirming a change in a essentially decade-long uptrend in the dollar. And again, that can talk back to, David, being what we should be looking for is this potential re-rating in the rest of the world if we get that confirmed dollar reversal.

Yeah, it's really interesting because one of the conversations that I hear and you see in social media and you hear it on the news is that they're trying to justify staying in the U.S. because you can do so even though the Mag 7 may be really expensive and we're rotating away from that, but you can find value in the U.S. And I think that potentially could be the missed point, right, is that the value is not here in the U.S., it's globally outside of the U.S.,

And you might get the kicker on your global exposure. You might get the kicker of a tailwind of a strong currency, right? Yeah, correct. So that'll be the added benefit for investing offshore gain out of a US-dominated price. Yeah. Yeah. Yeah. Okay. So when you do look at... So first of all, before we do move on, on the dollar, so is it... Are you thinking... So I'm thinking...

If I hear you correctly, it's weaker markets in the US down at perhaps 5,000. Is that dovetailed with a weak dollar? Yeah, I mean, typically, again, this is why I sort of sidestep starting with the correlation. But typically, we see equity markets sell off with dollar strength.

But new administration, potentially different policies, are we seeing a bigger shift that is causing a change in the perception of dollar assets? Or even if you look at central bank buying more of gold than US Treasury, is there this bigger trend from, again, rest of world central banks

to look at gold as an alternative to holding US Treasury, and that shows up in the dollar move. That can stem from that Global South conversation after the Russian central bank assets and the weaponization of the dollar at the end of the day. Potentially, that trend is why we're getting a lower high and the dollar hasn't traded

and surged higher in this most recent selling on the US equity side. So I think the price action is sort of telling us that it's not as strong and we're not seeing that same flow as we typically see. So I think we can see an equity market correction even without that dollar sort of spark that we typically see. That's how it's playing out so far. The key level is still 100 on the dollar index to sort of reinforce a more significant reversal in the dollar.

We could just have a stable environment between 100 and 106. And I think, again, as long as the dollar is not accelerating higher, you know, rest of world assets can still work, basically, would be the message there. Right. And so looking globally, I mean, you mentioned China a couple of times. Do you have a favorite region outside of China?

outside of the US to consider? MARK BLYTH: Yeah, so one of the markets, a very small market, but an interesting market in Singapore. Obviously, within the region does have China tries, but straddles West and East in exposure. It's a market that hadn't done anything for four years since 2019. We got a breakout last year.

And this is sort of on a looking at a monthly chart, so just a longer term view. And it had also underperformed the region for over a decade where we've seen a breakout there. But it's interesting, the stocks that are really driving this, you know, come from that sort of fintech side of things. So C Limited, which is actually listed in the U.S.,

Grab, which is sort of the Southeast Asia Uber, is another side. And then you've got stocks like Semcorp Industries, which is sort of more an infrastructure play. These are stocks that we sort of highlighted for this year to be sort of meaningful gainers. And the price action, if you look at the charts, you've got bases in place in Grab and Sea Limited. And Semcorp Marine had a

Longer term uptrend consolidated for four years and we're breaking out of that. So that's one part. And then, you know, obviously just to sort of reiterate the points, it's the biggest surprise factor would be China having been in a trading range. You know, the lows that you made in China, you saw a 63% decline in the MSCI China index from the 2021 highs into the October 22 lows.

And most recently, we've broken above the highs that you made through '23, '24. So you have this 60% wide basing pattern or trading range in place now that can still support another 30% upside. If I look at the bigger picture setup, do I want to chase it where it is here today? China internet has also broken above those same highs going back to 2022.

I think pullbacks to that breakout era are worth looking at as an opportunity to add some exposure. And, you know, you can just simply look at the chart of Alibaba. It essentially reflects that same pattern that you got on the MSCI China Index or the China Internet ETF chart.

where you had derated significantly from 21 into October 22. And from October 22, basically up until January this year, had been range bound and the most recent breakout. So Alibaba back to the $117, $120 is the breakout point, which looks like an interesting reentry point.

Yeah, a great sentiment read on China was that I follow, I don't know, probably 600 or so ETFs, and I'm doing my weekend run, running the models and whatnot, and I get a bunch of these error symbols on a bunch of Chinese ETFs, and they had just gotten rid of all of, not all of them, but I'd say it was probably eight of the 11 China sector ETFs. They closed them. And they basically closed them right at the lows. Right.

It's perfect. Another sentiment god, right? Yeah. So here we go off to the races. Okay, so does that... That's like when stocks get kicked out of the Dow. Yeah. That's usually when they've bottomed. Yeah. And how about...

How about, let's say, in the emerging markets for a moment, what else are you seeing there? I know you mentioned Mexico, and I'm not sure if you said anything about Brazil, but I mentioned Middle East. What are you seeing there? Are you seeing life there as well? So Brazil, to me, is probably the most interesting one within the LATAM category.

Obviously, Argentina was the great performer last year. Chile is actually breaking out at the start of this year, again, changing government being the catalyst in both those markets. Brazil has been an interesting one because it's always been the China of Latin America, been a big underperformer for the past four years, and has essentially held in this 50% wide trading range since it peaked last year.

in 2021 after the COVID lows. You started the year at the bottom end of the range. We rallied to the midpoint. But I think from a longer-term side, that's an emerging market that I've put in front, like breaking out of that range. Brazil can become a leadership market going forward. So that's one I would single out in LATAM. If you're looking at a more immediate LATAM market, I think Chile's the current breakout

out in momentum play. And probably the other big markets in emerging market that gets a lot of attention is India. And I'd probably say it is a consensus bullish story just on the growth from a population on from an economic side. But it's been one of the worst performing emerging markets year to date. It's down 15%.

Prior to that, it was called the S&P of Asia because it tracked higher with the S&P and it was essentially bulletproof. This is the biggest correction. Again, it looks like it's an earning slowdown correction that you've seen here.

So the message here is to be patient on India, to relook at an entry point. I've only just started to see some slowing downside momentum for the correction that you've developed off the September highs. We're down over 15%. So that is a market that remains on the radar. And we're only just starting to see signs of the slowing downside momentum. So the price momentum divergence that

that I've mentioned earlier on. So I think you can-- if you're not involved in India, you can start or initiate a position and see if that turns into the basing profile that you want to see. But that's another market that gets a lot of attention. And it's also quite interesting that a lot of, particularly US-based asset managers, have an EMX China mandate now. India is the biggest component within that. So it is a market that's

If you're not involved in China, you have a fairly big exposure to India, and you have started the year on the bat foot. But right now, I do have signs of slowing downside momentum, so I think you can start a nibble away at that market at these levels.

Yeah, there was a couple of years run there where the Indian market just did incredibly well. And I think it's interesting if you overlay the Indian market with the rupee, it basically was a two-year window where the rupee did nothing. It just kind of stayed in a range, which is basically a massive bull market for an emerging market currency. And so that gave the stability and the backdrop for that market to absolutely rip. Tyler and I were over there a couple of years ago, and just the amount of money that was flowing in from the rupee

I guess the young investor asset, the young investor class over there was so powerful that it overwhelmed whatever outflows were coming from big institutions so much so that the market just kept going higher. But then, like right around the middle of 24, the rupee just started to really, really weaken. And that's pretty much right when

the Indian market peak. So I'm curious if you have a view on the rupee. I mean, do you require that to stabilize again in order for the Indian market to start to show some strength? Yeah, so I've got two things on that. I mean, you did break out from that two-year trading range, which basically gave you an upside target around the 88, which we're close to right now. So I think we now have

We're at the upper boundary of what will likely be a higher range for the rupee going forward. But to your point, David, yes, you need to see some stability. I've probably seen more stability in the Brazilian real right now. And that's why I think we've seen that rally off the bottom end of the range. But yeah, having some stability capped out at the 88 on the rupee, I think should help the slowing downside momentum signal that we're getting on Nifty or the India ETF in the US starting to slow.

One of the, I guess, before we move on to Europe, one of the things that's really changed with respect to emerging markets, and I was just in Qatar, in Doha, and you see it there. We saw it in Dubai. There's so much of a concerted effort to move away from

a resource-dependent economy, energy in particular, but they're really trying to build out a consumer-based healthcare tech ecosystem. So I'm curious if you've noticed any changes or shifts in the relationship between the performance of these emerging markets relative to commodities. Is it less linked compared to how it used to be?

I think particularly for Dubai, the property developers are still key drivers and then the banks that come through it. I think that diversifying factor away from the oil price essentially being the same chart as the UAE or even the Saudi index, it definitely has shifted away from that. I think a large portion of that has been driven by

the banks and then some of the property developers that have come through. The tech companies haven't really got big enough to be a driver for the index. So it's still, and this is the case for a lot of emerging markets, it's still very much a financials sort of driven indices. I would say only

China, with the China internet names, has a large portion of internet names, obviously, with Taiwan, with the semiconductor side. Japan's a bit more diversified, but in Japan, it's been banks again. So in a lot of the emerging markets, the best way to play the recovery is through the financials. And I think in the Middle East, it's those financials and the property names that have driven the index performance and taken it away from just the link with the oil price at the end of the day.

So definitely, it has matured in that as the economy has grown without just being an oil price proxy.

And there is a tendency from several of those governments to take infrastructure projects once they've reached completion and bring them to IPO. They want to create greater liquidity and more names, a deeper equity benchmark. So a lot of those are, they've already been proven profitable and they're government-backed infrastructure projects, which tend to.

be anti-correlated to the oil markets. RAOUL PAL: Yeah. And I normally got some income stream that's a rate, it's like a dividend yield too that they continue to diversify the investments from.

Another market that has kind of gone nowhere, at least from a relative perspective, is Europe as well. So that has a lot to do with it lacking a tech sector per se. So that's a large part of why it underperformed. But are you seeing other reasons to maybe warm up to the European markets as well?

Definitely from the, there's a bit of an overlay here, but the industrial, so banks interestingly led this recent rally that started in December in the European side. If you look at the European banks index, high momentum breakout of essentially having done nothing in 2024. But industrials, as a complex, as another sort of consolidation pattern that you saw throughout 2024, did nothing. We've broken out there.

You do have the overlay with the defensive stocks sitting within that industrial complex. So, you know, with the increase in spend on defense, that's been a key driver. But again, maybe a proxy to a China recovery is on the consumer side, particularly the luxury goods side.

Stocks which have broken out the earnings results have also started to improve having seen a slowdown for two years. So if you look at France's sort of that play on the luxury goods names, you've seen breakouts there.

So I think, you know, for me, those three sectors are sort of key focus points. And even in this current sort of risk off, you know, Europe also carries a large number of health care names. So like in the US, sort of this immediate relative outperformance of health care, you've seen that in Europe too. But as you're looking through this correction that we see now, I would still focus on the industrials, the luxury goods, as well as financials.

So something like the Louis Vuitton, the luxury goods play, you're referring to the breakout. Are you just talking about year-to-date performance? Like if I'm looking at this on a weekly chart, it looks like a countertrend rally in a pretty well-defined downtrend. Yeah, you should look to the leaders within luxury goods. If you look at Richemont,

That is broken out of the two-year trading range because you are right, if you look at the LVMH chart, you have had a bounce of the bottom end, but it is still within the range. It is still below the 2022 highs, but Richemont and Hermes have been the two big breakouts to the upside. Those are the two leadership stocks, the biggest weightings within that.

And then at the other side of the spectrum, you've got the names like Kirin, which had been big underperformers. So KER in France. And they started a base out and hook up. BOSS in Germany, you know, derated, started a base out and hook up. So, yeah, again, there's a bit of dispersion as you get in a number of sectors. But, yeah, the Richemont and the Hermes breakout, that's where the leadership has come from within that luxury goods space.

Perfect. Thank you. My wife will tell you I don't have great taste anyways, Lawrence. Either in stocks or in fashion. There's a few high-mag one around here that invest in atoms, apparently. What about, I think, in Europe, through various parts of Europe, there's also a big materials contingency. Are you seeing anything there? I know in the U.S. the materials are just terrible. In the...

the base metals, if you look at commodities, outside of copper, it's hard to find a good chart. So anything you see in there? Yeah, I think it is. So there's a bit of a story, I think, behind the commodity side. But I'll just deal with the charts first and then just share some feedback on the commodity side more broadly is

To me, aluminium is out of the base metals. If you look at aluminium, you know, you derate it from 22. You've got this big base and you're approaching the breakout era. So 2750 is the top end of this trading range. So that's out of the base metals, the closest to a potential breakout. Now, if you look at Alcoa or some of the listed aluminium names, they don't quite reflect what you see.

the underlying metal. And I'd say quite similar to the copper chart, you see next copper, we're trading in a range between $4 and $5. It doesn't look like we can test $5, but I'm really not seeing any leadership from material stocks if we look at the broader indices globally. Obviously, the only place where you've got pure trend and momentum is gold. I think

The gold ETF, both the junior and GDX's best performing subsector within the US year to date, up 17%. But even the gold equity charts don't look as constructive as gold itself, which is in that classic low momentum uptrend phase.

So, yeah, I would say materials as a broader basket, similar to energy, you're not really seeing any real leadership there. And I think this week's break below $70 for Brent is quite a meaningful break where we could see oil back at 51, which in a roundabout way can have a real sort of impact on inflation expectations. If you overlay Brent with the five-year, five-year forwards, a very close relationship there and a lower oil price can see that

five-year expectation inflation drop, which could help yields come back in the US. What's the...

What's the, I guess, interpretation of oil at 50? Is that just drill, baby, drill? Or is it economic growth is slowing? MARK BLYTH: So I think it's on two scores. Let's assume that we have flat growth. So we have a constant on the growth that it's-- MARK BLYTH: Command side is stable. MARK BLYTH: --2% to 3% that it's equal. I think the conversation how you get to 51-- and you already saw it this week with OPEC deciding to increase production.

Because if you have US increasing production, OPEC increasing production-- and while OPEC increases production, if OPEC set that floor still at $70, they lose market share to the US. So Saudis basically pump oil, they get market share back, but the price collapses to $50. We've seen it a few times. I think the last time we saw it was back 2014, '15, where the Saudis flooded the market, oil prices dropped significantly.

supply-demand dynamics of how oil gets down to 51, which the chart is suggesting the break of 70 is supply and this potential growth slowdown in the US is having that impact of a negative oil price. Yeah, there's, I guess, three more markets that we should probably touch on before we wrap up. I'm thinking the great 10-year Treasury,

And then maybe we can tie gold and Bitcoin together into the same conversation if you think there's a bow that can be tied there. I'm not forcing you on that. But so let's start with rates. What do you think on rates? And what does that do to the equity market? Yes. So I think I had a brief point on the relationship of equity markets and yields earlier on and sort of how it has evolved from being very strongly competitive.

so negatively correlated from 21 to 23, where higher rates, lower equity markets, where that relationship has really evolved that the equity market only reacts negatively to higher rates is if the rate of change increases at a sharp pace. I've simply drawn up and highlighted a model where I just simply use a 20-day rate of change on the 10-year yield. When that 20-day rate of change moves above a 10% threshold,

That's typically where we've seen the S&P correct, you know, 3% to 10%. So I've focused on or highlighted to clients is that the levels don't seem to be that relevant as they were 2001 to 2003, but it's the delta of yields that is more important. So that's the one point, just looking at it as a risk-on, risk-off barometer. The second point is,

September 2022 was a significant event. We broke above that generational downtrend that you can draw from the 1980 peaks. But it's quite interesting since that breakout, we've really sort of bashed our heads against that 5% area, which is the highs that you saw in 2006 and 2007. And it has become a cap.

And we basically now have seen for the last 12 months essentially a trading range for yields above 3.75% and below the 5% area. And it's quite interesting that that range is similar to the range that you had from 2004 to 2008, trading between 3.75% and 5%.

So yes, we've broken a generational downtrend, but we currently-- and I don't see any evidence of an imminent break out to the upside of this range. So 5% a cap. And if anything, with this fear of a US slowdown, there's the setup that where I think the yields can trade down to 3.75, particularly with this breakdown in oil and having an impact on inflation expectations.

Yeah, and rates trading down, oil trading down, dollar trading down, any message there? Or is it just--? It's interesting. I was going to say this earlier on, the growth slowdown, the oil breakdown seems to be the supply-demand dynamics in oil. Because we always used to talk about Dr. Copper being the metal with the economics degree, is that we're not seeing copper break below $4.

Copper may be caught up into the tariff wars. But if I try and line up what are the key messages about a highly likelihood of a major recession, should we be seeing copper breaking down? And maybe China started to stabilize, and you've got some support coming through there where you get the US slowing.

So, I think John Murphy's book, his first intermarket analysis book, used to talk about Germany being the counter cycle to the US. And then we had a synchronized world. So, when US was selling off Germany, it did well. Has China become the new Germany as a counter cyclical if US slows down?

you've actually got a recovery in China. Maybe this is only the story or the narrative that can run for 2025 and everything synchronizes again. Do you get the sense on the price action in China, the price action in commodities, let's say, holding in a range, the price action in US, definitely showing slowing upside momentums. Do we have this counterbalance? That keeps

Copper in the trading range not suggesting major recession, but you've got oil because of this supply potentially coming on from OPEC and the US at the same time having a bigger impact there. RAOUL PAL: Right. Last one, we already touched on the dollar, I guess, but pressing question is, is Bitcoin an asset class? DAVID ENRICH: I definitely think it's become adopted and considered an asset class now. If you asked me three years ago,

The questions I would get in meetings always came at the end, and that was the PA trade, what do you think of Bitcoin? But I think in meetings now, there is more of a consideration, maybe not as a direct investment into Bitcoin, but through all the proxies and listed equities in ways that you can play cryptocurrencies, not just Bitcoin at the end of the day. So I do think as an asset class, it's here and it does get bigger at the end of the day.

I have a great chart that I'd like to share, one just highlighting the maturing nature of Bitcoin. I think one of the best ways I can show this is everybody talks about the halving event. Some simple economics, you take supply, price should rise, and every halving event, the rate at which you can mine coins halves, and you can see the big bull markets that follow those halving events.

But the interesting thing since the first halving is the diminishing returns or the smaller gains that you make after each halving event. The way that I've looked at it is basically after each halving event, the bull cycle that follows is one third of the cycle before. So if I take that simple sort of maths on that, from the halving events in April 2024, the peak for this cycle should be around 130,000. If I look at...

Lawrence, you're getting at a point that a lot of brand new entrants to the markets aren't considering, which is that on a log chart, recent gains in Bitcoin are actually quite

pretty small compared to those early years. A big number like $100,000 per Bitcoin attracts a lot of headline attention, but the market behavior isn't driven by people who understand the math that the percentage move hasn't been as large. RAOUL PAL: Also, I think the other points about Bitcoin and to David's question about is it an asset class?

I think it is by the maturing nature of the returns. What's probably missing is it's still extremely volatile. And I don't know if we compare it versus gold, it has much more volatility than gold. So I think as the cycle continues to mature, the volatility

Would think does drop off in Bitcoin and you know one of the first ways that we can try and represent that is Through this slowing upside momentum. There's also one more point so I in fact would look at this Sell-off that you've had in Bitcoin back towards, you know 75,000 as another opportunity to buy looking for a move up to 130,000 and one of the

charts that I'll also try and share with you guys here is, I just want to dig it up so I don't sort of speak out of turn, is if I compare it, the price action from the lows that you made

in the previous halving event, which was basically back in April or March of 2020, you had the bull market phase. And then if you start, you started 2021 in a similar trading range to how Bitcoin started this year in that trading range between 90 and call it 110,000. In 2021, Bitcoin dropped 50% before recovering by the end of 2021 to set new highs.

Now, we obviously haven't fallen 50%, but the point is you broke down from a similar trading range. That downside target is basically 75,000. I would look for some, again, you want to see that stability develop around that 75,000 area to give you a platform to reenter, looking for an ultimate move to 130,000. That's the way that I'd be playing this cycle. But I think if you're talking about that halving event and the bullish nature of that cycle, you know,

Those halving events have always peaked 12 to 18 months after the halving event. So, you know, end of this year, $130,000 is what I think would be a potential peak in this cycle for Bitcoin. Fantastic. Well, I feel like we just had one of our meetings from our Wellington days, man. You just you're always on top of it. Great insights, always willing to share.

And, you know, Tyler, we'll make sure we get these charts included in the show notes because they're really, really instructive as always. So really appreciate it. No problem. Appreciate it, guys. Thanks for your time. Absolutely. Thank you so much, Lawrence. And we'll see you this fall in Dubai. How about that? Yeah, that would be great. Yeah, that would be fantastic. Cheers, guys. Thanks. See you soon. Thanks, Lawrence. Cheers, Nick.

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