Right.

And what I would say is that at that point, you know, first, we did recognize that the macro backdrop had become very fragile.

We had a war in the Middle East, AI disruption had started, and there was emerging stress in the private credit market.

When we took a step back, what we noticed was that U.S. nominal economic growth was meaningfully better than other developed economies.

Consumption was durable.

The labor market was slowing but not collapsing.

There was a growth impulse from the big, beautiful bill still working its way.

And so of all the things out there, what could happen that could spur a change in your views and make you more negative?

What would you say about that?

I think to some extent it's expected in the sense that, you know, we have noted the positioning was pretty extended, uh, in the markets coming in.

Uh, for example, systematic strategies had a very huge exposure to equities, uh, particularly tech.

Uh, inactive long only managers are scrambling to cover their underweights coming into the year.

They were expanding after the March, uh, sell-off.

And retail more recently was re-engaging quite aggressively.

So I think our view was, well, roughly a few weeks ago that positioning is getting extended, so you could, uh, you know, be ready for some hiccup.

Can you just talk a little bit about that and why you don't see healthcare or staples as the places to be right now?

How do you sort of view the trade at this point?

So I would say that this trend is not that surprising.

Something which we have noted on a consistent basis even last year is that if you look at inter-sector, intra-sector, within S&P, and even within big tech, which is essentially just six stocks, Correlations are hitting multi-decade lows.

In other words, returns dispersion is hitting multi-decade highs.

So what we have entered into even last year was a market very conducive or fertile ground for active management.

But last year, people struggled because it was still a very concentrated market.

This year, the trend has continued, but as we enter more of a returns dispersion market, people are trying to position figure out who the winners and losers are.

How would that market absorb potentially many tens of trillions of dollars in new supply from these AI companies coming public?

So you think there's value there, but maybe just sort of treading water for a bit.

Yeah, I mean, momentum has worked at varying points in time, but our point at this point is we are kind of neutral on it.

What we really like effectively is growth.

And even on quality, we have been effectively neutral.

So I think from a factor standpoint, I think what it shifts to is even when you talk about, for example, on the size.

You know, we are kind of neutral on large or small.

We were positive of large for a long period of time.

Can you sort of extrapolate a little bit about what you're worried about when it comes to the broader economy? Is it a slowdown or is it a possible recession?

In the meantime, should investors be selling out of some of those pockets if they're poised to decline or shorting them?

Well, you know, some of those areas we have always maintained a caution, for example, in small caps.

You've got to be very selective there.

So expressing that at the index level or at, you know, overall IDBM level is a little bit more tricky.

But I think, for example, financials, which are also likely to catch a downdraft if they turn a hawkish, we're actually quite positive because we feel their earnings are very strong, the revisions are good, they are likely to continue to benefit from pickup in corporate activity and capital markets activity.

So a whole bunch of factors make it exciting, or at least the right place to be in.

The other area, interestingly, is in big tech.

You think that will reverse in kind of the latter part of the year?

And that basically for you reflects the impact that tariffs will have on EPS, that sort of thing?

That's right, that's right.

So if I look at our numbers and one of the cool things we have done today is create a detailed grid for investors, because that's a call we have been fielding a lot, especially the last two weeks in terms of clients trying to understand various tariff scenarios and its dollar impact on S&P earnings.

So what we've done is laid out a whole framework country by country, and then assessing based on whatever numbers you want to plug in, what the impact is going to be.

So that's the second thing actually we did today.

And of course, the third thing is, we established a preliminary numbers for next year, for 2026.

And we think that's where things start getting normalized.

Right, so finally then, where does that leave you on valuations and what kind of multiple do you think is appropriate with all of the uncertainty and everything going on?

Are we at recession stock levels then? And if not, what is the right metric valuation multiple for the S&P 500?

Good question.

So I think we have significantly derated.

So if you look at the S&P aggregate multiple, it's come down about four handles.

The nearest sort of comparable example you can see of a significant derating was in 22, which was a big tech-led sell-off.

So I would say compared to that, we are about roughly three quarters of the way.

But in terms of recession, the probability has increased.

We knew what do we do with kind of the wait and see on these headlines in the markets hopes that we're going to get some kind of rollback or that the word negotiation when it comes from the White House means that the tariff rates are coming down, does it?