Viewpoints with Burkhard Varnholt - A global markets podcast (Ep. 39)
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Hi, everyone. Dan Cassidy here. Welcome back to the Viewpoints podcast series on the UBS Market Moves podcast channel with my colleague Burkhard Varnholt. Burkhard, once again, it's amazing in just a week's time, much has changed around the world.

So as always, a lot to cover.

Though I also want to spend some time today catching up with you on your personal adventure, which you took on just this week. It sounds quite fascinating and inspirational. So do look forward to chatting a bit about that. Though, why don't we start, Burkhard, with your thoughts on markets, oil and geopolitics? Of course, a lot to cover on those fronts. Well, sure. And thank you. Great to be here, Ben. Always a pleasure. Well, I think a couple of things stand out here for investors. First, and

Really, as we discussed last week already, investors shouldn't overreact to geopolitics, especially in the Middle East. The second that this week clearly showed is that the oil market, at least, is really about physical supply and demand. And clearly, the U.S.'s attacks on Iran, they lowered the objective risk of a blockade of the street of Hormuz. And third, do bear in mind that more than 80 percent of the crude and LNG passing through Hormuz

travels to Asia. So Asia really benefits more than any other region in the world. And what's more, by conceding that China shall now be free to buy Iranian oil again, President Trump is diffusing the Taiwan tension simultaneously, first by putting the U.S. military might on global display.

Second, by granting an important concession towards China and Iran, indeed, by far the biggest buyer of Persian oil exports. So no surprise, Asian markets from Seoul to Shanghai, from Nepal to Sydney are really leading the global risk-gone rally.

And fourth, the faltering dollar has fast-tracked Asian-US dollar bond issuance to the highest weekly volume in more than five years. More than $10 billion of bonds were already issued in Asia just this week. To put this into perspective, it once again, I think, vindicates our long-held view that the global bull is still roaring, but its leadership is changing. While Europe remains ahead for the year,

Asia's rebound in stocks, currencies and credit since the lows of April is just as impressive. Well, Burkhard, thank you for that assessment of recent global market movement. Now, on the back of this, I'm curious, what do you think investors should expect from Wall Street from here? Look, I strongly believe the bull market on Wall Street, which started during October 2022, remains alive and kicking. From

From its inception, it's been charged by semiconductors and IT. And Nvidia yesterday just hit a new record high of $3.77 trillion in market cap. That's impressive, considering that its CEO, Jen Suang, said last month the $50 billion China market is effectively closed to the U.S. industry. It's also impressive that the industry is still earning a 39% profit margin, which is really driven by the...

hallmark of the U.S. tech and semiconductor industry, which is continuous innovation. And while Jerome Powell is unlikely to go to pressure from President Trump, the soft dollar is easing financial conditions in the U.S. anyways. So productivity, earnings growth, incomes, and inflation are probably, in our view, proving temporary.

We think that the Roaring 20 scenario still has strong legs to run. Well, Burkhard, thank you for sharing with us that outlook. And speaking about strong legs, as I alluded to a bit earlier, I have to ask you about a

personal adventure of yours. Your latest UBS Viewpoints letter talks about your recent ultra-cycling tour across the Swiss Alps, and just one day, it even draws conclusions about the world of investing. So, all quite fascinating. Can you share with us some takeaways? Well,

Oh, sure, Dan. You know, these ultra-cycling tours are my favorite personal pleasure and holiday, if you will. So last Sunday, I crossed six Swiss mountain passes, 22,000 feet of altitude, 250 kilometers in distance. I burnt 8,000 calories and wetted 10 liters of water.

When everything was said and done, I rested my legs and reflected upon Switzerland's amazing beauty and how it rose from rags to riches. You know, it's an unlikely story that also happens to include the roots and the rise of our bank, UBS. So here are some of my thoughts while cycling up and down these beautiful mountains.

Switzerland, until the 19th century, was the poorhouse of Europe. Its steep mountains are hard to farm or track. Its four different languages caused Babylonian confusion at times. Many of its best and brightest, at some point, even 10% of the entire Swiss population emigrated abroad. A lot of that starting to life can sometimes take a happy turn.

because adversity fuels innovation. And such innovation is also the telling story of Switzerland. So rather than taking a no for a no, they conquered the Alps by building the greatest tunnel density of the world. They constructed these iconic serpentine roads, six of which are cycled up and down last Sunday. And to pay for this, they created banks and insurance businesses.

This is where the story of UBS and other Swiss banks begins. And they grew global, they merged over time and created the world's leading wealth manager, UBS.

What's more, the steep alps pushed Swiss farmers to shift from crop to dairy. This led to Switzerland's love for milk and chocolate, of which they consume more per capita than any other country. From the dairy industry emerged Switzerland's Nestle, the world's biggest food company today. The banks went on to fund industrialization.

trains opened Switzerland to tourism, especially from Victorian England. The pharmaceuticals, watch, silk and textile industry were only made possible by these bold investments into unparalleled roads, bridges and tunnels. So the long and short of it is that Swiss were forced to innovate because of the Alps' formidable adversity.

Today, they still count the highest number of patents per capita in the world. That's how adversity, innovation, luck, and good governance led to the world's strongest currency and Europe's best performing stock market. It measures in euros or dollars or swissies. And that's

Wow. Well, Burkhard, certainly a pleasure to hear about that rich history and how it ties into your adventures. It sounds like it was an amazing day, and I hope you also took enough time to relax and recover. And for whatever it's worth, I do look forward to exchanging more such podcasts.

personal reflections from the ground with you. Though on that note, Burkhard, thank you for spending some time with our listeners, our clients on this week's episode, and I do look forward to our next conversation. Well, absolutely. It's always a pleasure, Dan. Thank you very much, and speak again sometime soon. Thank you for today. Enjoy the rest of the day.

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