US Rate Cut Re-Think, FTSE 100 Hits Record High & Bank Earnings Update

Hello and welcome back to the End of the Week podcast, and we've got in store for you today a bit of a, a global narrative that is really the main topic of choice, which is that of interest rates and interest rate cuts being pushed back. And that comes after US CPI came out earlier this week, and it comes on the coattails of the strong labor report we had the week prior. So we'll talk about that And then that will add a nice kind of sequence into talking about the FTSE 100, who, believe it or not, it's actually trading. If it can maintain where it is at the moment, it could possibly— don't jinx it— could possibly see a record high for the FTSE 100, which might seem—

on the FTSE.

Yeah. If you don't follow markets, you might be thinking, well, I thought I read the news and everyone tells us how terrible London is and the IPO market's dying and all these things. And here we go, the FTSE's ripping today. So we'll look to explain why exactly that is happening. Uh, and then we've had some of the first of the big earnings, and it's always the same, the big banks kick off earnings season. And so we'll look very top level to cover JP Morgan, who are actually down about 3%. According to this, ahead of the opening bell on Friday, a particular focus on their net interest income missing estimates. On the flip side, BlackRock are up 3%, so a good 6% swing in pre-market between the two, and they now have assets under management of $10.5 trillion. That's a T. That's right. Yeah, that, that I said trillion, not billion. Just to be crystal clear there. So we'll also look at some of those, those numbers as well. But before I begin the show, Piers, I, I did get spotted on Sunday. London Bridge.

Yeah.

There was a guy who was looking at me a little bit funny and I was like, okay, it's about to kick off here. I better, better, better hold on to my phone in my pocket. And then he kind of clocked me 2 or 3 times and then he stopped me and he said, sorry, do you do a podcast? And I was kind of like, in my head for 1 second, I thought of saying no.

Yeah. I don't want to respond to that. Yeah.

But he looked like a very sensible guy. So I said yes. And he said, yeah, he listens to this podcast every episode. And he said it helped him land his role. He currently has been working for a few years, I think he said, at Macquarie. And yes, ASG, right? Um, a Cambridge LSE grad. Yeah, yeah, he said that this made the difference. So yeah, Max Gunella, if you're listening to this episode, thanks for, uh, stopping me and saying hi. But it did get me thinking, which was, you know, it is quite strange when someone does actually give you feedback because you and I have these little, uh, Zoom chats Yeah, and it's just you and I talking.

It's basically a little bubble that we, we exist in.

Yeah, yeah, you do forget that, you know, the— I mean, obviously, with the purpose of what we're trying to do here is to educate and, and make it interesting. And, and, you know, that is one thing that Max said. He said it's actually, you know, hats off for trying to make it different from normal dry financial media. And so that's what we're shooting for. And, and yeah, one of the things I, I kind of looked at was, well, if it helped him, and I've had a few others at the spring weeks come up to me and say it's helped them, so it seems to work. And the, the main thing here is that the best way to, to help more people from our perspective is really on you, the listeners, to share it and to share it far and wide. The easiest way is probably just get like the share button on the podcast platform and then just drop it in WhatsApp, uh, to anyone that you think would benefit. If you're in a society, if you're in a wider kind of application group, because I know there's a few different ones, uh, just get it out there and, you know, let's, let's help each other.

Yeah, I mean, the more— yeah, exactly. I mean, the more— I guess the more listeners, the bigger this can become, then the more time and investment we can put into making it bigger and better, right?

So yeah, so yeah, call to arms there. You're right, I, I get a lot of, uh, questions over, you know, how much time should you spend on doing this sort of thing, um, you know, because we're, we, we create simulations, it's what we do, and we run that type of assessment and training. The podcast is kind of the bolt-on which really was a little bit of a, um, something that I just wanted to try during COVID Yeah. And it's just kind of manifested into what it is today. But yeah, if you want, if you find it useful and you want us to like ensure that the quality stays as high as we can possibly make it, then yeah, please do rate the podcast. If you've never done that before, even better, drop a review because the review is what really then powers the algorithms on these podcast platforms to spread it.

Uh, that's—

if I could ask one thing of you this weekend, or whenever you listen to this, uh, that's my request. So yeah, enough of the, uh, the plug. Let's, uh, let's dive straight in then and let's talk about the US CPI report, because that was, that was quite a big market mover if you're looking at the intraday. Yeah. Um, so yeah, talk me through it.

Yeah, well Um, it came in hot. I mean, again, so this is the third report of the year. So we had the March inflation figures announced. This was on Wednesday afternoon. Um, but the February and the January ones, they were also hot. What do we mean by hot? It's that they're higher than expected.

Yeah, I was going to say, I was going to ask you, what is your definition of hot? Because I saw lots of people saying hot and I looked at the numbers and I was like, Is that hot? That doesn't look hot to me.

I call it like tepid. Tepid.

It's more like oven ready rather than hot.

Yeah, but the point is it's not cold, right? It's not on the cold side of the fence. It's on the hot side of the fence just.

Yeah, I think it's a little bit, it's a little bit much to call it hot, but yeah.

Well, look, let's put some figures on this. Okay. So the headline year on year inflation was 3.5%. Okay, uh, and that was higher than expected, and it was, it was higher than the previous month. In February, it was 3.2, so it's gone up from 3.2 to 3.5. Um, and that's the wrong way because we need it to be coming down. Uh, and that, that's the highest figure we've had since August and September last year. So back end of last summer, it was at 3.7%. But the point, I guess, is, yeah, it's gone up now a couple of months in a row. But really, I guess, stepping, zooming out, the point is it's not going down. And we've been flat. This, this, I guess, inflation thing has been at best sideways for a year. And if you're looking shorter term, if you're looking at the 3-month averages, because looking at 1-month in isolation on its own, it's too short term to really draw any proper sort of conclusions about extrapolating this out for the rest of the year kind of thing, right? But if you often, your people will say, well, look, you need 3, kind of need 3 months of data to really draw any conclusions. Well, if you look at the 3-month averages now, then the 3-month average is going up. All of them are going up, the headline and the core. And so the point is the Fed are not getting what they need to start cutting rates. They need the inflation levels to drop, to carry on going down, and therefore drop below 3, head towards 2.5, head towards 2. And so that hasn't happened. And when you feed in all the other data points, as you mentioned, really strong job numbers announced at the back end of last week. We had some really hot, you know, amazing ISM manufacturing figures. Um, and, and so the labor market's still super strong and inflation's edging back up. And so, yeah, the probabilities of rate cuts, like June, now forget it. I mean, and you only go back a few weeks, right? And it was still June was a more probable than not that we'd get a rate cut. Well, forget June, forget July. It's now actually most probable there's no cut in July either. And so you're starting to think, well, okay, we're kind of deep into Q3 here then before we maybe get the first cut. And so people have really now said forget 3 cuts. And you're really looking at 2 cuts at best in 2024. That's the news. 2 cuts at best. And the way things are going, I mean, look at the data and the trends. You're not going to get any cuts at this, as far as it stands. I mean, genuine likelihood.

Yeah. So the market, as you said, is pricing in SEP at the moment. And obviously this, this This thing has been moving fast as far as expectations are concerned, so I wouldn't put too much into that at the moment. US strategists at Deutsche Bank and Bank of America, they've updated this week and they now predict the Fed will ease policy just once this year. So they're already down to one now. Um, and that is— the consensus is still two, some are starting to break away to one. Uh, and with the timing of that, they're looking at December. From Deutsche Bank's perspective.

Yeah, I think there's a certain amount of human psychology here because we've spent the last 12 months, or maybe not, yeah, maybe like not quite 12 months, that's certainly 6 months, right? We spent going, right, the Fed are going to cut, the Fed are going to cut, the Fed are going to cut. And as each month goes by, we're going, all right, maybe they're going to cut less. Oh no, they're going to cut even less. Oh no, they're probably going to cut even less now. Actually, I think it's because we thought they were going to cut before that we're now still— this confirmation bias is that we still think they're going to cut. If you remove all of your historical memory and just looked at the data, there's no cut in the data. Inflation's flat above 3%. Super tight labor market. Now, if you just looked at that with no historical bias, you'd put a higher probability on a hike than a cut. But was that baggage of us desperately wanting those cuts kind of is still weighing on people's mindset and therefore their analysis.

So So at the moment then, stocks, as I said, they, they did react at the time of the release. But if you look at the chart now, 2 days later, we've effectively reversed and we're completely flat prior. We're pretty much trading at prior the CPI numbers. However, what's the story in FX and in rates?

So you're right, the, the stock market reaction as of yet hasn't been particularly meaningful. That could be— I mean, if you look at that, that's if you're looking at an index level, right? And the thing about these S&P 500 indices, you know, the big tech stocks, they're very— they're the ones that are most immune to rates higher for longer because they're not borrowing any money. They've got just loads of cash, so they're more immune to that. But so actually, the big moves, I'd say the FX markets have really stolen the show here. In terms of the reactions we've seen. And this is a double whammy, right? Because whilst we're pushing out our timing on the when the Fed is going to cut, the timing is not being pushed out on, for example, when the ECB might cut. So now this is what we call interest rate differential, right? When you're thinking about interest rates in the US versus Europe, Now was thinking a summer cut in the ECB. And so the euro has devalued quite dramatically against the dollar, um, off the bat, you know, this week. And actually we're trading down at the lowest we've seen since kind of November. And, you know, generally you might expect to see a breakout. There's a really key level around 1.05, um, on euro-dollar. And if that's the 2023 low set in October And the way we're shaping up here, we might get a test of that and maybe even a break. And that could be pretty significant, a break of 1.05, because the euro's only really ever been down around— well, below 1.05 really once, and that was right in the middle of COVID So that this is very, very, you know, historically low levels. It's also— but this is dollar strength that's driving this versus that euro. It's the same for the pound. So the pound is devaluing against the dollar as well. Or to put a better way around, the dollar is appreciating. So the biggest reaction we can see here is dollar strength off the back of us pushing even further out the idea that the Fed might cut, um, this year. And so the pound versus the dollar's down, has broken below the 1.25 handle, uh, that's the first time we've been below there for like 6 months. Um, and so yeah, dollar strength is the kind of, um, big theme here.

So, so following this through then, and, and having talked a little bit about the pound there, so let's talk about the FTSE 100.

Yeah.

And tie in then, first of all, how does the FX side play into something like the FTSE?

Well, so you got to look at the composition of the, the index, right? And so when you look at the FTSE 100, it's, it's, it's a, it's full of mega sort of mega-cap international businesses that are miners, like the likes of like Anglo American, for example, Rio Tinto. You got the big energy, uh, firms like Royal Dutch Shell and BP, for example. And the thing about those companies, the products they mine get sold in dollars. And their revenues are generated globally, right? So if the pound is devaluing against the dollar and you're a UK domicile business basically selling your products in dollars, well then when you repatriate the dollar revenue, you're now getting more pounds because of the FX move. And so when the, when Sterling drops in value, this is like This is perfect for the FTSE 100 mega-cap global firms because their sterling revenues and sterling profits move higher as a result. So what you're seeing as this FX move happens, you're getting a big boost to the upside on the FTSE. And what's really significant for the FTSE 100, finally, finally, finally, finally, we're above 8,000. Um, and I don't want to jinx it. We did go above 8,000 very briefly on the 2nd of April, intraday. Didn't close above 8. It does look like now we are up above 8, and we are— we've had, uh, actually we haven't had a close above 8. Sorry, I thought we might have done yesterday, but we didn't. So yeah, we're hoping for a close above 8,000 in the FTSE 100 today, which would make it the highest close in the history of the index. And it's on an absolute tear. Just today you got these mega companies, they're flying. Like Glencore's up 5% today. You've got all the—

I was reading, I was reading about Glencore specifically as much as crude iron ore, base precious metals, everything. When we've talked about gold a lot rallying and a lot of those companies you mentioned, those miners are all involved in those businesses. Yeah, as is Glencore being one of the world's biggest commodity traders. But I was reading a snippet about zinc prices on a supply squeeze, and if you look at the zinc chart, right, you've got a bit of a hockey stick going on.

All right, so, and just add that to the list, right, of, yeah, of commodity market spikes that we've been seeing. So this is why the foot— and the thing about the FTSE 100 as an index, when you look at its composition, it's got huge portion of the, of the index is made up of these like miners. And when you, um, when you look at the actual stats, then the sector weightings within the FTSE 100— let me just get it here— the, the biggest ones, the biggest sector— well, actually the biggest sector is healthcare, which clocks in at 13.33. So your GSKs and your AstraZenecas are in this index, of course. Then it's energy, 12.75%. Then it is industrial goods and services, which is at 12%, and then banks are at 10.4%. The notable— well, so the FTSE has made a new all-time high, right? And it's above 8,000. But I mean, should we be getting excited about this? I mean, basically the FTSE in the year 1999 hit 7,000. In 1999, 25 years ago, it hit 7,000. Here we are 25 years later and now we're hitting 8,000. When you kind of compare that to the S&P over the last 25 years— so the S&P 25 years ago was trading at, let's be generous and round it up to 1,500. It's now trading above 5,000, right? So yes, the FTSE's new all-time highs here, but it's so far behind the big giant big brother S&P 500.

Yeah, I was just having a look. Um, and here's a, okay, a bit of a quiz for you. What was the, give me a couple, not all. What was the top 10 S&P market index weightings in 1999 then as a, as a comparison?

'99. What the sec, which, which were the biggest sectors?

Which biggest companies?

Our biggest companies. Uh, Microsoft.

Yeah. So Microsoft still number one.

Yeah. No other Mac, none of the Mac 7 other than Microsoft.

So to your point as well of the FTSE probably looks identical to a large extent. So this list looks completely different.

ExxonMobil.

Exxon were 6th.

What about the banks? Like probably J— JP. No banks. No banks.

You got to just think, think a little bit more old school. A little bit more Buffett.

Coca-Cola.

Coca-Cola's in there. Yeah, Coca-Cola's number 7.

Cisco?

Uh, no. Um, probably rising at that point. Give me one more. Okay, a big, uh, big brand name, American, in the '90s.

Nike?

No. More energy.

Go on.

GE. Ah, GE was second.

General Electric. Yeah.

And then you've got the likes of IBM.

Okay. Yeah. Yeah.

All those kinds of companies. So yeah, the point being is that, yeah, you're right. Now it's, it is, it's Alphabet, Google, Apple, Microsoft.

The best way to explain why the FTSE's lagged the S&P for the last 25 years is to look singularly at the technology sector weighting. So when you look at the S&P 500 today, 30% technology. If you look at the FTSE 100 today, and we just looked, I brought this list up just before we started this podcast. I literally couldn't believe it. I mean, I knew that the FTSE 100 didn't have much tech, but its sector weighting is less than 1%. So versus the S&P's 30, and that's what's gone up for the last couple of decades, technology.

And to connect then our show with Stephen's Deal Room, like when you have an Arm IPO and they're looking for where to list, why on earth would they list in London on that basis? It makes zero sense for them.

Yeah, absolutely. But look, let the FTSE bask in the glory of a new all-time high. And, and as I say, what, what a day, because like Royal Dutch Shell's up 2.3%, uh, BP, they're up 3%, Rio Tinto up 3%, Glencore up 4%, you've got Anglo American up 4%. It's, it's just phenomenal stuff. Um, and so yeah, sterling weakness off the back of a hawkish hot inflation print from the US coupled with commodity price spikes and nice favorable conditions for banks because the financial sector in the FTSE 100 is large. All that wrapped up. Finally, we got a perfect storm and hopefully we're going to get a close above 8,000. I say that literally as we've been talking, it's just dumped from 8,030 down to 8,005.

Oh, we've jinxed it.

We are. On the way south, people.

Just, just a final question before we move to a quick look at the earnings then. So if you were managing a portfolio of long equity, so i.e., equity stocks only, and you're buying in a sense of you're not looking to profit from markets going down, it's just you're buying, or the prospect of things appreciating in price. What's the, what's the kind of cyclical nature then and the geographic exposure where you would try and utilize this difference in behavior between how the FTSE is and how the S&P and then others might—

Yeah, if you want a nice— there's a word in investment that's an important one. It's called diversification. So you should always have a diversified portfolio. So yeah, there's no use. Well, I mean, you could have put, stuck all your money in Nvidia 12 months ago and now you'd have retired.

You're saying my Mag7 pension fund is not going to serve me well.

But I'm just saying that that's super high risk and when you're right, it's amazing. It's just that sometimes we're not always right. And so when you're not right, it's definitely not amazing and you are overexposed, right? So the theory is spread your risk. And so you can have different sort of exposures to hedge off, you know, risk. And so the FTSE 100 is always considered as a defensive play. It's a defensive index because it's full of these miners and these oil companies and these banks. And certainly the miners and the oil companies, big dividend payers, so that it's a great income based index. And so it's safe. And so that's a good reason to own it. Sure, it's not going to be fireworks. You're not going to generate rapid capital appreciation, but that's fine. You can then park some of your money somewhere else like the Nasdaq 100, for example, where right then you're saying, okay, I want a portion of my portfolio that is exposed to that rapid technology explosion. Um, and recognizing that that's high risk though, you know, if the Fed stay hawkish for much longer, then you might find the NASDAQs of this world get, you know, sharp, sharp correction lower. And that's where then you're really thankful that you've got some of your money parked in the FTSE, where that might go down as well, but at a much slower rate. And so yeah, the FTSE is always a great— it's a great global global exposure, you know, defensive index.

Cool, makes sense. All right then, so let's talk about some of these earnings. So the ones I want to talk about are JP, Citi, and, and BlackRock. So perhaps we could start with JP Morgan.

Yeah, and actually, just before we delve into the single stocks, I noticed something. I was looking at the S&P 500 chart and as we were just kind of saying, whilst it hasn't really gone down particularly since this hot inflation reading, the foot— the S&P hasn't made a new high now for like a couple of weeks, and actually it's kind of been sideways for a month now. Okay, so it seems to have flattened off on this uptrend it's been on. The last time we were sideways for a month was actually mid-December through to mid-January. So that's the, that's the one month before the earnings season starts. So what happened mid-December through to mid-January? The S&P is flat. We started to get Q1— sorry, Q4 earnings, and these earnings started to look really good, and the earnings then powered the next up leg on the index rally. So here we are again, the month in the lead-in to the earnings season. The S&P has been flat and now it's like, right, what are these earnings going to look like? And really that's going to now determine where this index goes over the next potentially few months. Um, because we need strong earnings to offset this hawkish headwind because of the higher inflation. So these, this earnings season is really, really key. I think for this overall index and where it goes for the rest of the year.

So, but given the robustness and resilience we're seeing on a macro level, should that translate into this earnings season being generally solid?

It should do. Yeah, it should. We should see good, a good earnings season. I guess what do these companies think about rates higher for longer and which companies are more sensitive to that? Because they're the ones that are going to really start to get a sweat on that the Fed aren't going to hike till the end of the year. And so higher for longer in the end might tip the balance. And so we're going to look for— fine, looking in the rearview mirror, these companies have probably performed well, but what's their read now on their forecast for the year ahead? And I think that's going to be quite key.

Okay, so that leads us in then to JP Morgan. What did they have to say about the future then?

Well, so I mean, you said JP Morgan share price is down 3%. It's really for that specific reason. Their numbers are actually great. It's just that they said looking ahead, they're basically— for a bank, remember, as a quick reminder, one of the key kind of metrics on their performance is something called their net interest income, which is overall how much money are they making from you know, lending their lending book. So they're lending money out and they're charging an interest rate, and that interest rate is now high because the Fed's interest rate is high. Um, but that money they're lending out, where are they getting it from? They're getting it from their depositors. So people who put their money in their bank account. And so the bank is paying the depositors a small interest rate. And then they're lending that money out at a much higher rate. And that difference, the differential there really determines their net interest income. And because interest rates have gone up, this is perfect for banks. They're able to exploit the gap between the lending and the savings rate. Okay. Um, at the moment, you, well, J, basically Jamie Dimon has been saying that we're, we're pretty much absolute peak. Conditions could not possibly be better for us as a bank with regards to our net interest income because interest rates have gone up super fast from the Fed, that is, and banks tend to be very slow at increasing the rates that they pay to their depositors. They're very quick at increasing the rates they pay to the people that they're lending to, but that, that, that gap can't last for long. And ultimately there's two headwinds in the future. That Jamie Dimon is saying is going to result in our net interest income dropping. And that's what he's basically saying. Last year in 2023, the bank made $90 billion in net interest income. This year he's forecasting $89 billion. So that is a drop. And he's saying that two reasons. Yes, the Fed are going to cut, maybe. I mean, it's so good for banks. The more the cut gets delayed, the better it is for banks, right? But Jamie Dimon's saying probably they're still going to cut anyway at some point. So that would then reduce the spread between the deposit rate and the lending rate. Bad news for banks. And then secondly, depositors are being a bit more savvy now. They understand and realize, hang on a minute, why is my bank paying me such a ridiculously low interest rate? In my deposit account. That's crazy. I'm going to take my money out and I'm going to find, I'm going to find an account or a whatever, uh, a money market scheme that I can put my money in and earn 5% rather than getting paid like 1% in my bank account. So you're seeing people starting to actually now get around to the personal admin, isn't it? Who's got time to mess about changing bank accounts? That's the problem. But I think the difference is so extreme now that people are going, hang on a minute, it's time to act. So that's why the share price is down. They're still forecasting a decline in net interest income this year compared to last year. So that was disappointing. Markets didn't want to hear that. Um, but outside of that, it's the rest of it's all amazing news. Um, And actually, if we look at— because all the banks have reported together, okay? So the banks, the big four of like JP Morgan, um, Citi, Wells Fargo, and Bank of America, all the big four US banks, they've all reported together. And what's quite interesting is actually, look, they've all had a good quarter from a net interest income point of view, except JP Morgan has smashed them all. I mean, their net interest income is up 34%. Year over year. Wells Fargo, 16.5% rise. Citi, 13% rise. Bank of America, only 8.5% rise. So JP Morgan have smashed them. Why? Well, actually, First Republic, because what these year-on-year comps, it's still like if you go one year back, JP Morgan hadn't bought First Republic yet. And so that's greatly increased their, their kind of deposit base in their loan book. And so actually that's one of the reasons why JP Morgan are getting this stellar growth rate. However, I would say even before First Republic, JP Morgan were starting to stretch out their lead anyway. It's just this First Republic thing has just really catapulted them Ahead. So look, their numbers are great. I mean, overall, their profits were up 6% with net income at $13.4 billion. You know, it's good news. And the longer the Fed waits to cut, basically, the better.

It feels like some sensible management forward guidance. Yeah, essentially.

Yeah, and Jamie Dimon, look, I've got a quote here. He said, many economic indicators continue to be favorable. However, looking ahead, we remain alert to a number of significant uncertain forces. Um, and he pointed to an unsettling global landscape and a large number of persistent inflationary pressures which may likely continue. That was his comment on the earnings call. Um, But he's been banging the drum of rates staying higher for longer for a long time. You could say that's kind of talking his book a little bit.

But yeah, I like, I like that CEO management. It's like your business is booming and thriving and then you just continually talk pessimistic.

Yeah.

Just to keep the street bar significantly placed on the low side. Of expectations. So it's all just, yeah, yeah, good management technique, I guess.

Well, he's been at the helm for, you know, it's coming up nearly, I think it's 18 years he's been CEO of JP Morgan. That it's like, it's like Alex Ferguson, right? I mean, they've got a succession problem, JP Morgan, and he's now, I think the word on the street is that he's gonna try and get to 20 years and then check out. So he's got a couple of years left. Who takes over? And that, that'll be the big risk for JP Morgan and JP Morgan's stock and share price. Not, not yet, but I'm just saying in the months ahead, people are going to start to look at that a little more closely and we'll start to really drill in and scrutinize who he's lining up to succeed him. And right. Are they any good?

Okay, so, so one thing we, we talked about here and at the beginning was you mentioned the consumer with spending, um, and we're here— I was talking about confidence in the global economy at the moment from a US consumer point of view. So credit cards— I saw at Citi, credit card drove— credit cards drove growth in its US personal banking division boosted by more spending as well as larger interest-generating balances on cards from partnerships. So do people like you on a macro level, do you look at some of these bank earnings not for the stock in itself, right? For signals to supplement then the traditional economic data sets like inflation and growth and ISM you mentioned and so on.

Yep, absolutely. It's a very good point. And, you know, ultimately What's the best measure of consumption? Well, it's, it's like right at the, the point where the money's changing hands, right? And so that's payments. And so the big payment services that these banks provide, the data they're sat on is, yeah, I mean, hugely valuable. And yeah, it's these kind of figures the way you step back and you go, wow, yeah, I mean, this consumer's still really confident. So they're spending healthy amounts and are happy to take on debt on their credit card even though interest rates are high, um, at the moment. It doesn't seem to be deterring them. And so yeah, that just feeds back into that problem with inflation, and it's just not coming down, and it may not come down. And so yeah, the further we go through the year, the less likely we're going to get any cuts at all.

Okay. So finally, BlackRock.

Yeah.

So a little bit of a different side of things here. So not, not a bank per se, but an asset manager. So what is it that, that draws your eye when you look at something like BlackRock?

Well, the headline of course is the AUM, the assets under management, hit a record high, $10.5 trillion. That's what grabs the headlines. It's not particularly, that's not a surprise in any way. Their assets under management. Well, what, how, what are they doing with this money? Well, they've invested it, a lot of it in stocks. And what stocks done? Well, they've gone up. So, okay, well, great. Their portfolio value's gone up. And so that's not particularly surprising, although it's notable and well done BlackRock, and obviously great for them in terms of revenues and profits. And so, yeah, I mean, good news for them, but it's really more a function of global markets and where they've gone. But underneath that, so there were other stuff. It was interesting to get a bit more info on this Bitcoin ETF actually, which they launched, remember, back at the start, back in January. So we've almost got a full quarter of stats here and we now know that the inflows— so we look at inflows as perhaps a better measure for an asset management firm rather than just straight out their assets under management because inflows is new money coming in. So their sales and distribution teams and their marketing engine are out there trying to attract new clients. Okay, so this is inflows. If net, you've got money flowing in, uh, with the Bitcoin ETF— or sorry, yeah, spot, um, exchange-traded fund, I should call it— that had that— it reached $10 billion in record time. So it's never had a product that's had $10 billion of inflows so quickly. And right now, as at the end of March, Um, they've got $18.7 billion, um, inflows into that Bitcoin exchange-traded fund. Um, but net overall, their total inflows, um, into ETFs for the quarter was $67 billion. So that's a bit more of an interesting measure as to how the, the business has been, um, performing. Um, they had an 11, and then outside of their sort of assets under management. What, what else are they doing to try and sort of diversify? And we always look at their technology side, and their technology revenues were up to $37 billion— sorry, were up $37 billion year on year to $377 billion. So that was also a very positive figure. So their share price is up Yeah, what, 3%? Um, so happy days for Larry Fink.

Okay, so to wrap it up then, um, we'll finish with a little, little test for you, and, uh, the people listening can play along. All right, so what I'm looking at here is that a supplement sheet that came out with their earnings, and it's like a graphical PowerPoint, and on there Um, is a, uh, kind of bar chart showing how diversified a business they have across clients, products, and geographies. So, okay, first question then. You talked about the AUM hitting $10.5 trillion.

Yeah.

What percentage of the AUM do you think is America's?

It's a good question. I'm gonna go, gonna go at least half, I'd probably say. I'm gonna go—

Be bold, be brave.

I'm gonna go 65%.

Correct answer is 68%. Oh, you're pretty good. I'm gonna give you 3 then because—

Okay.

Just to see whether there's consistency behind that incredibly close guesstimate. Okay, so why don't we go to product type? So again, looking at the AUM. Yeah. Equity. So what portion of the AUM is in equities?

Well, okay, that's interesting. There has been a switch out of equities as interest rates have gone up. And so people switching to like fixed income products, money market products, but you're still going to get the vast, I say the, it's definitely majority. I'm going to say, so in percentage terms again, I'm going to say, I'm going to go higher. 80%.

54%.

Ah, okay.

So equity 54%, fixed income 27%.

I wonder how much that's swung.

Yeah, I'm sure the last 6 months. All right, fine. Final one.

Yeah.

Um, so you talked a little bit there about ETFs. So in terms of client type, yeah, in a division of AUM between institutional, retail, and ETFs, What portion or percentage portion do you think is ETFs?

That's interesting. So what is ETFs? That's neither retail nor institutional. So I mean, interesting they split that out separately. I'm going to—

It's just a product, isn't it?

Yeah. All right. It's, I'd say majority. So I'm, again, I'm going to go Gonna go 60%.

36.

Ah, what? Miles off.

Institutional 55, retail 9%.

Ah, retail's only 9. Wow, that's, yeah, that's interesting.

Okay. ETF 36.

All right.

So, so maybe I should have ended.

Yeah, you should have ended that quiz after question 1. Yeah, we can, let's edit this out. We'll edit this bit out.

Exactly. Yeah. Oh, Piers, well done. You got that absolutely spot on.

Mashed it.

You're a genius. All right, cool. Well, that wraps it up. I wish everyone a lovely weekend. I know certainly here in London, it's— the sun is shining, the footsie's at record highs. I feel like the flip-flops and shorts are coming out. We might as well get the barbecue out. Let's go. Rule Britannia.

Let's do it.

So thanks for listening.

Have a great weekend.

Yeah, see you next week.