Nobody can know whether AI stocks deserve their valuations. The reason is we still need to understand how much AI will change the world, what the use case and productivity will be. The way to handle uncertainty is to ask how much of your portfolio you want linked to the AI theme, and within that theme where you are least prone to vulnerabilities — that's the inputs: semis, memory producers. Whoever wins the AI race will use those same inputs.

The AI-related theme is 50% of the S&P. You need to be comfortable with that number.

That is absolutely it. The ultimate question is how big the pie will be and how much companies find they can transform their own productivity and profitability. The consumer is a vulnerability if the story breaks because of the fabulous wealth effects in the US (S&P up double digits three years in a row). The fundamental question is what CEOs are saying about how this is transforming their business.

We started our outlook today on the premise the strait would reopen. 80% of the oil that comes out of the strait goes to Asia and China's domestic economy is weak — China will not allow Iran to sustain a closure. The deal looks constructed to create incentives for both sides to stick. We could see oil at $70 in the next couple of weeks. If oil keeps coming down, OPEC weakening further and Iran potentially selling on official markets, Gulf states will want to monetize their oil as fast as they can, bringing supply on and taking oil down — a huge tailwind.

The whole rotation we saw last year by sector and geography got halted on February 27th. The narrative shifted completely and is now unwinding, giving you that broadening — look at European stocks this morning.

Absolutely. The ECB did 25bps last week. Central banks are now on hold for the majors, Bank of Japan still needs to keep moving. There are still hikes priced in even this morning on this news, and I think they will come out, which will be good for fixed income.

This is a very different economy this time around.

You would hope lessons have been learned. We don't know what an Andy Burnham government will look like, but you can paint a positive picture where a new leader has better control of the party and talks a fiscally credible narrative. The market is focused on potential negatives, which is why we think there's an opportunity in gilts.

The uncertainty is already in gilts.

I still think Europe is undervalued. The perception is that Europe is structurally incapable of delivering corporate earnings growth, and I think that's wrong. We've had a horrible cycle with very restrictive policy, but I'm hearing a really different tone from Brussels and an urgency to get growth going. That's where there is too much pessimism still priced in.