WEBVTT

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The two main issues really are how long
is this going to last and what does it

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mean for oil markets.

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We collect a lot of information from
media that look at sentiment toward

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macroeconomic fundamentals like inflation
growth and sentiment toward whether the

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economy is growing or we may be heading
into a recession.

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And over the weekend,
we did detect a moderate increase in the

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amount of attention toward inflation in
our proprietary indicators.

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We also can look at a lot of open source
intelligence and that field is really

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blossomed especially since the Ukraine
war.

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And in the last 24 hours,
there are a couple themes that have

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really risen in importance and they I
think help explain the market movements

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that we've seen at this very early stage.

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And we do have to caution that this is a
very early stage.

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The two things that have really shot up
in attention and virality spreading

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throughout the information ecosystem are
when President Trump said this may take 4

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weeks,
that went like wildfire to the

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information system.

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And the second are the shipping
disruptions and the it's the Strait of

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Hormuz and the closure of LNG terminals
and what not in Qatar and maybe some

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other places.

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At PGM Quant,
we construct a lot of proprietary

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indicators based on natural language
processing of various media sources.

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We look at the uncertainty that people
are expressing toward the economy.

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We look at their sentiments about whether
we're going to have a recession.

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We look at the attention toward inflation,
toward unemployment,

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toward economic growth.

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And as of today, which is Monday morning,
we did see a moderate increase in the

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attention toward inflation.

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We're not seeing very much increase in
fears of recession.

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We're not seeing a huge increase in
uncertainty about the overall economy

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either.

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And this to me is consistent with the
jumping off point where we were last

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Friday.

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The global economy was basically OK.

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We saw very good growth in emerging
markets.

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China was really beginning to pull its
weight,

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even some of the laggards in Europe.

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We're doing better,
but inflation has been kind of sticky.

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And so I think that the shock that we're
seeing from oil is exacerbating the

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situation that we were at last Friday.

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Now the market reaction has been pretty
textbook so far.

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Equities are down,
but modestly in most places.

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The dollar is stronger.

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These are the classic responses that we
typically see in this type of a shock.

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One of the things that's going to be
interesting is looking at the regional

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impact on equity markets.

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I do think that the oil importers are
likely to suffer.

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A lot of these are going to be in East
Asia.

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They are the Japan's, the Koreas,
the Chinas, the Indias.

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Now, there are some mitigating factors.

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China,
in particular has a lot of oil inventory

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stockpiled.

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A lot of countries have been kind of
building up in anticipation of some sort

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of problem.

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But even that is going to run dry if the
conflict is prolonged and if the straits

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are closed for a long time.

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So overall,
clearly these are the countries that are

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going to have the hardest time,
but it's really going to depend upon how

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long this thing lasts.