00:00 Speaker A

Let’s bring in our venu Krishna head of US equity strategy at Barclays. Venu, it is good to see you as always. Let let’s start there, Venu. No. Julie, of course, discussing geopolitics, the Israel-Iran war, it’s running red hot right now. I’m curious how Venu, are you thinking through that as a market strategist when clients are asking you, what are you telling them?

00:38 Venu Krishna

Well, I think the first point to note is that at least in the past few years, the market has tended to ignore a geopolitical risk in good part because it’s been very contained. So I think what the market is telling you right now is they do not expect this to escalate. That is where the risk lies for whatever reason if it goes out of hand. Uh, for example, if you know, uh, the the oil infrastructure gets targeted. Uh, so that can lead to a problem in terms of pushing up oil prices, which leads into inflation in the US. So there are some secondary and tertiary effects which can take place. But generally speaking, I think I would note that geopolitical risk has flared multiple times, not just uh, with Iran and Iraq. Sorry, uh, in Israel. It’s happened twice last year, but it was not um, the response from Iran has been faster this time. Uh, and the scale seems to be higher in terms of where we are right now. So I think it’s worth watching, but I would look at it more closely at oil and what it does and because that does have direct implications for not only global markets but US equity markets.

03:15 Speaker A

Right. Of course. I mean, there’s no shortage of risk right now, even if perhaps the acuity of the risks has receded to some extent. So you have this happening in Iran, you have tariffs still another deadline coming, the tax bill making its way through Congress. So overall, as you weigh the balance of these risks, are you advising clients to take some kind of defensive positions in case we see these sort of playing out in a negative way?

04:10 Venu Krishna

Yeah. So I would say one is that, you know, the market is pretty close to our price target. So recently we had increased our price target to 6,050 and we are almost in that level. So what that tells me is that in the near term, I think markets can be a little choppy for exactly some of the reasons you mentioned, you know, tariffs, the fiscal policy situation. And don’t forget that two Q earnings are going to be the first time when some of the tariff impact will be seen. So we have not seen that yet. It doesn’t mean it’s not going to happen, right? So, but that said, you know, we have been consistent from the beginning of the year in terms of what we like, which is financials first. Second is big tech. Big tech actually, in terms of what we really like and have had most consistently been favorable to for a long period of time, it’s big tech. And the third is healthcare, which is kind of defensive and yet it will also benefit from any pickup in M&A activity. In the case of financials, a steeper yield curve, a pushback of rate cuts, the relative valuations, uh and and everything else sort of again, leads us positive. Big tech, the biggest thing is it got derated quite significantly. Uh even today, they are trading about four handles less than where we started at the beginning of the year. So almost 14% lower. On the other hand, their earnings in Q1 were quite stellar, right? So they, they posted about 28% plus earnings growth year over year, while the expectation was closer to around 14, 15%, right? So they continue

07:13 Venu Krishna

to post very strong numbers. The AI story is picking up momentum and the focus has shifted back to growth now uh as compared to, let’s say, a week four to five weeks ago. So I think we are in a different spot, uh, but the new wrinkle now is geopolitical risk, which wasn’t important till recently, but over the last few days it has.