What it Takes to Build a Stagflation-proof Portfolio

0:00Small businesses are the pulse of every community. They bring people together, create opportunities, and drive growth. Chase for Business helps business owners like you with personalized guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more at chase.com slash business. Chase for Business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank, N.A., member FDIC. Copyright 2026, JPMorgan Chase and Company.

0:36If you're a business owner, you need a card that can keep up. With the Delta SkyMiles Reserve Business American Express card, everyday purchases transform into miles you can use towards future travel. So business as usual can lead to a well-deserved getaway. And for a limited time, card members can earn 200 ,000 bonus miles, the highest miles offered this year. Whether you're traveling for business or planning your next adventure, now's a great time to make every purchase go further. Apply today at www.delta.com slash podcast. Offer ends November 4th. Minimum spending requirements and terms apply.

1:15Bloomberg Audio Studios. Podcasts. Radio. News.

1:30Welcome to Merrin Talks Money, the podcast in which people who know the markets explain the markets. I am Merrin Somerset-Webb, and this week I am speaking with Duncan Lamont, head of strategic research at Schroders. I invited Duncan on, well, partly because he's been on before and he's very good, but also because he's got a new bit of research out on how one should invest in stagflationary periods. And as geopolitics is remarkably volatile at the moment, and there's nothing like volatile geopolitics give you stagflation, I thought we would have him on to talk about it. Let's talk about a variety of other things.

2:01We talk about the AI bubble, or maybe not bubble. We talk about UK equities, and we talk about some new research that he is doing that may have a fairly massive effect on the US market. Well, it's not that his research will have a massive effect on the UK market. It's something he is researching might have a massive effect on the UK market. You all know what I mean. Anyway, Duncan, welcome to Merrin Talks Money. Thank you so much for having me on. It's great to be here. Right. There is a lot going on. I've been on holiday for a few weeks and I come back and I find that everything's gone slightly nuts.

2:34There's this massive momentum moves in the market all over the place. I've been looking at the Cosby and worrying about all the retail investors in Korea who are getting margin calls. I've been looking at the Nikkei, which is now down quite a lot as well from its highs, although it's had a marvellous time, so we don't need to worry about that. I've been looking at the general shifts across the market. We're beginning to see small caps outperform in some places. We're beginning to see the big technology companies in the US underperform a little. The chip manufacturers in Korea are having a very torrid time.

3:09There's a lot going on. And that's before we even start on geopolitics, war, the yen moving all over the place, bond yields moving all over the place, missiles, drones moving all over the place. there's an awful lot going on. When we look at our portfolios these days, what should we be concentrating on and what should we be thinking about apart from sort of fear, basically? So I'm perhaps a little bit boring in the sense that I think that we can spend an awful lot of time trying to predict or forecast what's going to happen. And the chances of getting any of that right are actually quite low a lot of the time.

3:43So rather than trying to guess what might happen next. My general approach is to think about prepare, don't predict. So to think, how is your money invested and how might it perform if you were to go into different scenarios? And one of the ones that I think that we're hearing an awful lot from our clients this year is around the risk of stagflation. So growth being weak, inflation being high, partly based on what's been happening in the Middle East. And what might that mean for the portfolio? So I think it's a very good place to start when you're thinking about robust outcomes for your portfolio.

4:18Okay, so looking at the history of stagflationary events and seeing what happens when that happens. And while you look at our current environment, you say, well, might we have stagflation? I mean, certainly in the UK, we're very prone to inflation anyway, and we keep putting in place policy after policy after policy that embeds inflation further into our economy. But globally, we can suspect that it is possible that we might see bouts of stagflation because of rising oil prices and energy shortages, etc. Exactly. And I think most people's natural response would be to assume that this is a pretty terrible time for investing.

4:53That's the reaction I hear. People say, surely stagflation is awful for the stock market. And we looked at the data going back all the way to the 1920s, so about 100 years worth of data. And it is true that stagflation is a challenging time for the stock market. It is more challenging than pretty much any other outcome you can have. But it also isn't actually as bad as people might expect. It doesn't mean a kind of run for the hills, ditch stocks scenario. On average, actually, the stock market managed to roughly match inflation. It isn't terrible if it's a high inflation environment. And actually, more often than not, it still beats cash.

5:28So harder going, less conviction of high returns, but actually still not a terrible outcome for stock market investors. So a bit of reassurance, I think, there. Okay, and was that the case in the 70s? If you had equities at the beginning of the 1970s in the UK and you still had the same ones at the end of the 1970s, would you have beaten inflation? So I was looking at this more for the US because I had the data going all the way back to the 1920s. The unfortunate reality of these things is that you get a better, longer data set for the US. I love a good data set, but there's always a risk that the future is not going to be like the past and we have to have caveat, caveat, caveat.

6:04at. But what I did was I looked at any calendar years when inflation was above its 10-year average and growth was below its 10-year average. And then I looked at the performance of stocks, bonds, the 60-40 portfolio. I said, stocks normally manage to match inflation, beat cash. Bonds, tough. It's a tough environment. If your interest payments are fixed and inflation goes through the roof, that is clearly not a great outcome. But the traditional 60-40 portfolios are really interesting ones so it feels like pretty much every single year you read a ton of articles which say the death of the 6040 this portfolio which lots of people rely on is just a kind of base case balanced portfolio people saying it's time for it to die it's not going to work anymore and again the 6040 finds it challenging stagflation when i looked at the data but actually it has a better median outcome than either stocks and bonds in isolation and it actually outperforms cash more often than not too.

7:03So I think that, again, bonds, it's not great for bonds, but I don't think we should just rip up the whole investment playbook and actually the portfolios which have served investors pretty well. The 60-40 still has a place. You're not going to get as good diversification benefits, but it also doesn't mean that you should consign it to the dustbin either. But it's a matter of when we say the 60-40 and we're talking about a portfolio that has 40 % bonds and 60 % equities, both those things, bonds and equities, cover a vast universe of potential choices. Yes. So when we say in a stag-play-genery environment you can still have a 60-40 portfolio, that 40 % that you might have in the bond market, what are we talking about?

7:44So in the 40th there, I was initially just talking about long-dated government bonds. But you're absolutely right that there's a whole universe of things under each of these umbrellas. And that's where I think you can say, yes, your standard just, I don't know, So equities plus 60 % equities plus 40 % long dated bonds, it's okay. But you can do better in both of those. So in bonds, a pretty simple hack actually has been just to invest in shorter dated bonds. Shorter dated bonds, their prices are less sensitive to what happens to interest rates. So you've got a more steady source of return. And historically, just doing that one simple trick would actually have led to better risk adjusted returns.

8:21But when you say shorter, sorry, how short are you talking? So five-year bonds as opposed to 20-year bonds. Five-year bonds as opposed to 20. Yes, exactly. So people might normally have invested in very long-dated ones as a kind of risk hedging asset. But if you're going to something that's nearer to kind of five-year point, then actually, or even shorter than that, then prices are not going to move around as much. They're going to be less volatile. You'll have a greater certainty of what your return is going to be. And historically, your risk-adjusted returns have been better. I'm talking government bonds.

8:50The same applies in corporate bonds. If you're investing in a corporate bond portfolio, if you decide to invest in shorter dated ones, so again, something around the five-year point or even shorter, you can have greater confidence in what your returns are going to be than if you're investing in longer dated ones. That makes complete sense. But most ordinary investors, they won't be investing in individual bonds. They'll be investing in a bond fund, right? So it's hard for an individual investor to have any control over the duration of the bonds they hold, right? You say that, but actually there are plenty of funds out there which will invest in different maturity buckets.

9:27So you can have ones that focus more on shorter dated corporate bonds, for example. We manage portfolios like that at Schroeder's. So we have ones that are for different clients who are seeking different exposures, different outcomes they're looking for. Schroeder's managed short dated corporate bond funds. Lots of other competitors in the market will as well. You can probably invest in ETFs, which target different parts of the market as well. So I think you're right that people might just have invested in a, let's call it a corporate bond fund. But there is a lot more available out there than just those kind of vanilla ones.

9:58Okay. All right. So that takes care of our 40 % if we're worried about deflation. Let's look at the equity component, which I think most people find easier to manage somehow. What can you do inside your equity portfolio to only have the bits that will withstand this environment better? Yeah. So again, I had a look at the different styles and the different sectors. So styles looking at, say, value versus growth, small cap versus large cap, high quality versus low quality, and different sectors too. And some of these are intuitive, like more defensive sectors typically do well. So things like healthcare, utilities, consumer staples, the kind of things that you buy anyway, no matter what is happening.

10:38So it doesn't really matter what happens to growth, you're still going to be needing to buy some of these things. Energy equities. Again, it maybe seems obvious, but energy equities, because if energy prices are causing higher inflation, well, the company's profits are going to go up lots. It's maybe a little bit more interesting on the style point. So value tends to outperform growth. So value companies, so meaning companies which trade on cheaper valuation metrics, often unloved in some way, whereas your growth companies are maybe your exciting sexy tech companies that people think are going to grow their earnings super fast in future.

11:11the growth ones tend to struggle more relative to value partly i guess because maybe that growth doesn't come through demand is maybe weaker partly because sentiment turns against them and also partly because valuations tend to fall in this environment so even if you assume that there's going to be an ai super cycle and that's going to support the growth of the big tech companies there is still a risk to the valuations and that's what we've seen recently to be honest it's quite incredible if you look at companies like nvidia it's price earnings multiple today is the lowest it's been for a decade, which when you consider we're in the middle of an AI boom cycle, one of the companies that's at the very centre of that cycle, for it to be at a decade low in terms of price earnings multiple is pretty extraordinary.

11:54And it's the same if you look across Alphabet, Meta, Amazon, they're all trading actually at pretty low valuations compared with their 10-year history. So we're seeing a valuation impact already. Is there a suggestion from people that they believe that there's an earnings bubble here and therefore these earnings aren't sustainable and suddenly the growth in these earnings isn't sustainable. I think it suggests that there's scepticism there right now, yeah. So we're seeing a huge amount of capex. Actually, revenues are continuing to surprise to the upside. There are a lot of revenues coming through.

12:24Earnings growth forecasts are off the scale for some of these companies. But I guess the market is saying, we don't think that is going to be able to last longer. But you also find there's a transmission mechanism when interest rates go up. So when bond yields go up, stock market valuations tend to fall as well because of the way that analysts value these companies in a kind of discounted cash flow approach. So when you've seen interest rates going up, partly because inflation is higher, then you see that that starts to have an impact on the valuation of stocks. And if you're starting on a very high valuation, then there's greater risk of that coming unstuck.

12:57Why this gets really important is when you think about how most people are invested. So you look at the global stock market today, you've got about 70 % of the developed market in the US. You've got the five biggest US stocks have the same weight or bigger weight than the next five biggest countries in the global stock market all added together. You've got a huge bet on the US, a huge bet on technology. And actually, the bits of the market that might be expected to do well, well, if we're talking about value, if we're talking about energy equities, if we're talking about defensive sectors, they're not what you're really getting exposure to in the global market.

13:31I think people like to think, and it was once the case, that You invest in a portfolio of global stocks and you've got a nice diversified portfolio. It is rubbish today. It simply isn't happening. So if you want to get diversification, you have to work a lot harder. You have to look away from the US. But most of your money is sitting in the US on a one-way bet. So you've got to get out of that. You've got to move it into different sectors. If you're thinking about a stagflationary environment, you might want to move into more in the way of value stocks. you might want to move into the energy sector defensive.

14:07And then there's also, or there has been, I don't know if this turned up in your research, but a dynamic whereby small caps outperform large caps in stagflation re-environments. I didn't look at the small cap bit particularly when I was looking at this, but the other one that did do really well was quality. So quality companies are ones that have more stable balance sheets, more stable profit margins, profit growth, if consistency is what you're looking for, almost think about the companies that won't break. And I guess in an environment where everything's a little bit more uncertain and volatile, that stability that you get from quality actually becomes quite valuable.

14:44And quality companies have gone through one of the worst three-year drawdowns in terms of performance that they've ever had recently. So if you're thinking about things that might do well in stagflation, if it's also one that's performed pretty badly, so valuations have moved in its favor, kind of quality is a really interesting place to be looking. And there's loads of different funds out there which focus on quality or quality growth as a style as well.

15:13This is the Bloomberg Tech Minute brought to you by Chachi PT. I'm Carol Masser. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence.

15:51A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices, But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, must be willing to work extended hours and weekends as needed. One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time.

16:28That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com. Most meeting note takers get the easy words right and the important ones wrong. The client's name, the acronym. Whisper Flow Note Taker is built to get the hard words right. It takes notes on any meeting platform. Zoom, Google Me, Teams, even WhatsApp calls. keeps every meeting searchable, and connects to Claude or Chat GPTs. So you can ask, what did we agree to last Tuesday? Free to try on Mac and Windows at whisperflow.ai. That's W-I-S-P-R flow dot AI.

17:10When you look at the list of things that performed well in the US in the 70s and in the UK in the 70s the list is is often very non-equity it's land it's diamonds it's fine art it's gold it was antique furniture back in the day can't see that happening again but who knows who knows i mean it'd be lovely if it did did gold pop up in your studies so gold did um so gold is an interesting one its consistency of performance isn't necessarily great right but its average performance actually is very good. And you have to almost think, what does that mean? It means it's less reliable. And I guess we're seeing that a bit this year, but when it does perform well, it performs very well.

17:52So again, it is worth considering as part of your portfolio, but don't assume that it's guaranteed to go up in value because it has some years where actually it struggles quite a lot. It gold's good. Real assets, things like real estate are interesting. There's often an inflation linkage in real estate rental leases, which is great on the income side. But if you're highly levered real estate transaction, well, actually, if your cost of borrowing is going up, then that's a problem for you. So it's a bit selectivity, I think, there. It's about understanding the risks you're taking on, about understanding the risk of the tenants.

18:23I think maybe 20 years ago, people just used to think, I don't know, a fund manager would buy something, they would just lease it and forget it. Whereas I think you have to get much closer to the risk of the underlying tenant and the financial risk of the transaction these days to be able to know whether you're going to get the returns in this kind of environment. Okay. When we look at markets as a whole, and we've talked about how everyone is horribly overexposed to the US and horribly overexposed to technology, whether they want to be or not, that's just the default. Which markets geographically would people want to move into?

18:58And we used to say consistently, UK equities are the cheapest out there, buy them before somebody else does. And they're still inexpensive, pretty inexpensive across the board. And we know that because foreign investors keep trying to take them over. In fact, do keep taking them over and so does private equity. So they're still reasonably good value. But on the other hand, they're not as cheap as they were. And with the possibility of the FTSE hitting 11 ,000, suddenly it all seems like quite a big move quite quickly. Are you still thinking that the UK market is attractive? Yeah, I think on a relative valuation basis, the UK still is cheap.

19:32You're right, I guess you've got demand from foreign investors, demand from private equity, also buybacks is the other one. So share buybacks, the UK is now the share buyback capital of the world. So more UK companies are buying back their shares in bulk than the US, which would have been unheard of a few years ago. So there's a lot of demand there. We still haven't really got the retail investor demand side. Fund flows from retail investors are still not coming through. So that's something that I would love to see happen. I feel like we're a bit too downbeat on the UK stock market and the UK economy.

20:03You just have to open your social media for the amount of doom and gloom you read about it. I think we're the venture capital capital of Europe here in the UK. We're great at producing unicorns. We have lots of fantastic research institutions. We've got great listed companies that are actually really good at what they do. But we spend all our time telling ourselves how terrible we are. And that can be a bit self-fulfilling. So I'd just like to put the kind of great into Britain back a little bit. Well, lots of things are kind of terrible, to be fair. Actually, there's one thing that I do think is that, so you were talking about technology.

20:33One risk is stagflation. Another risk is, okay, you have got way more exposure to technology than you probably realize. It's not just how much you've got the tech sector, because Amazon, Tesla or consumer discretionary, Alphabet are actually in communication services. So there's a bunch of stuff which are not called IT, but which are tech companies, really. And that takes a number up higher. but then you've got things like stuff which people would have thought of as being nice defensive sectors which are actually to my mind starting to become more correlated with ai so utilities a lot of utilities are the picks and shovels of the ai trade because the energy needs are so great and if you look at the performance of some of the u.s utilities they're like meme stocks it's like we're talking hundreds of percent returns this is not boring just dividend plays even like real estate one of the biggest sectors of the REIT market is data centers.

21:23So there are more parts of the portfolio which people might have traditionally thought of would hedge AI risk or tech risk, which are actually now going to become more correlated. So the question then, if you are worried about an AI sell-off, where can you hide? I'm not convinced that just simple sectors will do it because it's getting it everywhere. I can make a good case for international diversification in terms of valuations, outlook, everybody being too downbeat about non-US companies. But do I think that international diversification will bail you out if there's an AI-driven sell-off? I'm sceptical.

21:56The biggest stocks in EM are all massive AI tech plays, so you're going to get hurt there. And then I spent a lot of time doing work, trying to think, are there any parts of the market that actually could hedge that risk? Again, prepare, don't predict. Not saying it will happen, but what might do well if it falls over? And one area that I found actually was value equities. And I looked back at data going all the way back to 1996 and I used semiconductors just as a proxy for AI stocks. I looked at all the quarters where semiconductors fell in value. And when they fell in value, the average fall was 12%.

22:28The average fall for value equities was zero, so flat. And maybe you're worried about big falls, not just any fall. So I looked at falls that were more than 5%. And then actually on average, you'd lose 15 % in semiconductors and one in value. So value won't always work, but it looks like it has a historical track record of doing well at the very precise time that many other parts of your portfolio might all start to fall over all at once. So I think there's a very strong case we can make for people thinking more about value as an investment strategy today. When you do these screens, how are you defining value?

23:05Ah, excellent question. So this gets to a problem, I think. So I think that one of the trends we've seen in recent years, like the last decade or so, has been the big move from active towards passive in terms of fund flows. Investors, partly because they're unhappy with the performance of their active managers, have been putting money into passive trackers. I worry significantly that If people allocate to passive value strategies as a way to hedge AI risk, we are going to see them very, very disappointed when you look to the future. And I'll tell you why. So let's look at some of the biggest value indices in the US.

23:46So MACI USA value. And it's top five stocks. You've got Alphabet, Meta, MACI USA value weighted. You've got Apple, Microsoft, Amazon. Enhanced value. You've got Micron, Cisco, Intel, Robert Russell. but then you've got Alphabet, Amazon, S &P value, Apple, Amazon, Tesla, S &P 500 value index, that's Tesla in its top five stocks. If you are seeking to hedge AI risk, This is not what you want. These are not going to deliver. And that's why I really, really worry that people, if you're going to do this, do it properly. And to do it properly means, in my mind, doing it actively. I think that it is a real risk that performance is going to disappoint in some of these strategies.

24:28if your primary reason for buying them is to hedge AI risk. It's the same stocks. It's not going to hedge that risk. It's the same stocks. Okay, interesting. So you need to go and find an actively managed value fund that doesn't have these names in it. But then you go and find one of those actively managed value funds might go back and say, well, look at that in the videos. The cheapest it's been in a decade. It's a value stock. Yeah, I was chatting to one of our head of value equities, Simon Adler, and he was saying that There's no hard and fast rules. They'll be looking at some software names.

25:01He's looking at stocks in single digit PE. So he's looking at ones that are even cheaper. But there's no reason to say that some of these software tech names could not go on their radar if they fell to valuations, which they thought were appealing enough. And actually, the other interesting point he made was in past years, value used to often be quite, you know, very big sector tilts. It was a sector play as much as it was a stock play. Whereas he says nowadays he is finding stocks in many more sectors than he can remember. So he's able to build actually a much more diversified by sector portfolio than would have been the case in the past.

25:33So lots of great opportunities. Narratives take a long time to change. So if you go and talk to most people in the street, they're going to tell you that what I think is performing best. It's going to be AI stocks, tech stocks, American stocks. That's what the general narrative is. Except, actually, I did some work recently and it was like UK value stocks have outperformed the S &P 500 over the last three or five years. I don't think many people believe that because it's not what the narrative is. It's not what the consensus would be. So I think that even though value has started performing much better, I don't think that sentiment has necessarily filtered through to many investors.

26:08No, entirely fair. I don't think it has either. and it's the same as obviously gold has had a pretty nasty time over the last few months but you know it's still outperformed pretty much everything over the last decade and i don't think that's something that is on most people's radar either their view of what is outperforming and what is not is sort of quite fit with reality yeah another thing that i hear from people is the point you made about the footsie 11 000 kind of oh markets are near an all-time highs the first thing you're taught is buy low sell high market all-time high that sounds scary does that mean i should sell and what i did again this was us data again apologies but it's just because i had the longest data series but i looked at data going back to the 1920s and they looked at well what was your return over the next 12 months in inflation adjusted terms if you invested when the market was an all-time high or if you invested at any other time it was just a test should you be worried about this and it might surprise people to learn that no your returns were actually better if you invest when the market's at an all-time high than if you invest at any other time.

27:10Your returns over what kind of time period? Over what kind of time period? So that was on a 12-month basis. On a two-year basis, a three-year basis, there's basically no difference. The reason why it happened is actually, think about what happens to the stock market over time. It goes up or it's gone up, which means it's actually hitting all-time highs all the time. So it's actually over 30 % of the time the market's at an all-time high. So we like to write headlines about some of these round numbers that markets make, it's not unusual. It is perfectly normal market behavior. And almost just to hammer that home, I did a little scenario which said, let's say you freak out when the market's at an all-time high and you move into cash.

27:48And then whenever it's not an all-time high, you go back into the stock market. You might just do it for one month. Depends how long the market's at an all-time high for. You might be out of the market for six months. But you're in cash and then you go back in again. And again, using data over the last hundred years, compare those two portfolios. one which stays invested throughout and one which decides to get scared by all-time highs. The one that gets scared by all-time highs would have destroyed more than 90 % of the wealth. So if your listeners are sitting here thinking, I'm a bit nervous about the market being an all-time high, there are reasons you might want to be nervous.

28:22Please, please, please do not start thinking you need to sell your stocks just because they're an all-time high. Historically, it would have been hugely damaging to your wealth if you were to have done that. All right, but that's across the market. So you can do a lot of useful things yourself at the moment. You can stay in the market, but you can move your portfolio around to diversify it and defend it better against the things that might happen. Yeah, exactly. So to make it simple, I'd be stay invested, diversify outside the US, and then bolster your AI exposure with some value exposure just to manage some of that risk.

28:58But absolutely stay invested. Yeah. Okay, fascinating, fascinating. And I think that's incredibly useful advice. So, listen, let me ask you one more thing. Have you been on your holidays yet, Duncan? I have. I went to Croatia. Oh, nice. And what did you read while you were there? It was called Judas 62. It's a spy series on the Box 88 with the series. The reason is I spend a lot of my time actually sitting, thinking about markets, reading about markets. And I am just a sucker for fiction, for pure escapism. I want to switch off. So I'm very much into just trying to read spy novels, sci-fi novels, things like that that just take me away from the day job and allow me to relax.

29:44Yeah, no, quite right. And in the day job, have you got anything sitting on your desk on the investment or economic side that you feel that we should be reading? So I've got two pieces of work that are in the works, not yet out, but which I think you will find, your readers will find interesting. One is looking at whether corporate bonds are expensive, but everybody who does this uses data, which goes back to the mid 90s, just because that's simply when lots of the data is available. But I've instead looked at data going back 100 years. And actually, you find that credit spreads were more expensive than where they are right now for several decades after the Second World War.

30:25And then I look at what were the reasons behind that and how many of those could repeat today. So almost to challenge people that when they're saying spreads are really expensive, is it possible that they could stay where they are for an extended period rather than go up to some 20 year average? So that's interesting. And there's another one I'm looking at, which is around one of the biggest props for the U.S. stock market is basically the U.S. pension system. So every single month, thousands, millions of people through their 401ks and their other pension saving vehicles put money into the US stock market, irrespective of valuations, anything else that's going on.

31:01It's a steady bid, something we'd love to have in the UK, obviously, to kind of support our market. But in the US, it's been a massive help for it. and what I'm looking at is well if we genuinely have an AI boom and that disrupts the labour market and leads to unlike past tech revolutions which impacted lower earners, well this might start to impact people who are in accountants, lawyers, financial services people and actually well what would the risk be to that buying support that we have for the US stock market if we were suddenly to find that the people who are backing it every single month no longer have a job.

31:38Again, it's not predicting it, but it's almost kind of saying, let's map this out, how this could go over the next decade. And what are the risks if suddenly you find that all of that steady pension fund buying kind of starts to dribble away a little. So the corporate bond one and that one are both being worked on still. Yeah, we've been wondering about that here because stock markets are all about flows, right? We can talk about valuations until the cows come home, but in the end, where's the money going? That's the bit that matters. And going back to your point on the UK, we've been wondering if longer term, the UK market will benefit hugely from the shift of everyone towards defined contribution via auto-enrollment and that amount of money that continues to flow into the, not all of it, obviously, but some of it into the UK market, how that will work.

32:21And then looking across to the US as people begin to retire, how that would work with the flows. But this is a really fascinating and slightly scary new overlay, as you said, people with high incomes losing their jobs and no longer contributing to 401ks could make the most enormous difference. Suddenly, instead of constant inflows, you get no inflows and possibly outflows as people withdraw early. I'm looking forward to this one, Duncan. Okay, thank you very much. I hope you like it. I don't know if I'm going to like it. I might find it interesting. Will I like it? These are different things. To be honest, that is one of my main reservations with it.

32:58It's not the most positive article but I think it's and what I'm trying to do is think beyond the first level and even maybe the second level impacts of AI it's not just about what does it mean for jobs it's well what might that mean further to like the rest of the chain um and we know that kind of similar with taxes the higher earners are the ones who disproportionately pay like smaller in number but greater in terms of the dollar value of the taxes or the pound value same here smaller in number but actually much greater in terms of the impact on the flows that go in here. Okay, all absolutely fascinating.

33:32Duncan, thank you very, very much for all those interesting ideas and tips, by the way. Much appreciated. Fantastic. Thank you very much.

33:46Thanks for listening to this week's Merrin Talks Money. If you like our show, rate, review and subscribe wherever you listen to your podcasts. and keep sending your questions or comments to meronmoneyatbloomberg.net. You can also follow me and John on Twitter or X. I'm at MeronSW and John is John underscore Steppik. This episode was hosted by me, Meron Somerset Webb. It was produced by Samasadi and Moses and I'm sound designed by Blake Mapples. And special thanks, of course, to Duncan Lamont.

34:17If you're a business owner, you need a card that can keep up. With the Delta SkyMiles Reserve Business American Express card, everyday purchases transform into miles you can use towards future travel. So business as usual can lead to a well-deserved getaway. And for a limited time, card members can earn 200 ,000 bonus miles, the highest miles offered this year. Whether you're traveling for business or planning your next adventure, now's a great time to make every purchase go further. Apply today at www.delta.com slash podcast. Offer ends November 4th. Minimum spending requirements and terms apply.

34:53The world of business is constantly evolving and Comcast Business keeps you totally in step with secure AI-backed networking in more than 100 countries. They're powering over 90 % of the Fortune 500 and millions of small businesses. That's a lot of muscle. And behind it all, thousands of experts answering your call at 2 a.m. like it's 2 p.m. One partner powering how business gets done for companies around the globe. When you add it all up, no one does business like Comcast Business. Most meeting note takers get the easy words right and the important ones wrong. The client's name, the acronym, Whisperflow NoteTaker is built to get the hard words right.

35:33It takes notes on any meeting platform, Zoom, Google Meet, Teams, even WhatsApp calls, keeps every meeting searchable and connects to Claude or Chat GPT so you can ask, What did we agree to last Tuesday? Free to try on Mac and Windows at Whisperflow.ai. That's W-I-S-P-R-flow.ai.