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Welcome to the economic impact. Once again, a lot of news and a lot of new variables in the in the economic environment. Stéfane, can you tell us a bit more about what's going on?

I just want to come back to what you said last month that the US debt default was unlikely, and you were absolutely right on that. But with this uncertainty having lifted, the central banks are back in action, and we saw the Bank of Canada - surprising markets early in June with a another rate hike after a pause of roughly 4-5 months, right. So Denis, best guess - is that they won't be alone hiking rates in the next few months. So expect the central banks to continue to you know bring interest rates a little bit higher. I don't think - The increases might be modest Denis, but there's more in store and more importantly, rate cuts are not going to happen this year, which the market was actually pricing just a few weeks ago, right?

Yeah, it's a totally new environment with what the Bank of Canada just did a few days ago, but at the same time the economy is going quite well in Canada if you compare it to the US and it's maybe one of the reasons why the Bank rate hikes.

Yeah, you can justify it like that to me and clearly I won't dismiss the data. The data is the data - it's up 3% growth in Canada actually outperforming the US after a mediocre performance of previous quarter. But still it was an unexpected rebound. Consumer spending was super strong - 6% and that was on the back of a significant depletion of the savings rate. So, the savings rate is suddenly back to its pre-COVID level. So this is how consumers were able to support the economy depleting their savings rate and at the same time the inflation keeps going up, but it depends how you look at it.

Yeah, you're right. But yeah, of course. But one thing is sure, if you deplete your savings rate to spend more, obviously prices are not going to come down. Then what we're realizing on both sides of the border is that the price level for core inflation, those are the level of prices is still well above it's 2% trend on both sides of the border, particularly in the US, but you could argue the same thing from a Canadian perspective, so clearly the Bank of Canada was frustrated by this resilience on the inflation front and it's a global phenomenon.

Yeah. And there is new variable that is hitting the market that we're not expecting is that, you know, residential sales are popping up.

Yeah, well, historically when you raise interest rates, residential sales go down. But they've been surprised by the surge in recent months, the upturn and home prices are no longer falling and they thought they were going to follow a little bit more. So, it's putting more pressure on inflation. But Denis, there is not much the Bank of Canada can do at this point in time because this is essentially driven by surging population growth. This year again, Denis, we're looking at you know adding 1,000,000 people to the economy. You know, unless supply increases dramatically, you're going to have upward pressure on prices, hence the Bank of Canada's, decision that we need to hike a little bit more and see what happens thereafter.

The man is there, but I don't think the construction is there. This is the interesting thing, interesting part of where we are in the economy right now. Builders are kind of scared about the future interest rates and then they're just slowing down, you know the, what we call the "Mise en chantier",

You know, housing stats are just not there. You're absolutely right, Denis. But just to give you a sense of how bad it is, the first quarter was the 4th consecutive quarter where we had a double-digit decline in residential investment or home construction. That's the worst performance since 1995. So the man is super strong, but supply is just not there. So you know we need to do a better job of matching supply and demand and until that's done, well the Bank of Canada is in tightening mode.

Yeah. And then also price increase, inflation increase and then in a spiral, you know, going up. But at the same time, we have the stock market that is saying that the economy is going well.

Well, what's just surprising right now is with the debt ceiling uncertainty having lifted, the stock market saying, well, the world has gone whole, the economy's going to do well and the stock market's actually up 6%, 7% since the debacle of some U.S. banks back in March. So it's a surprising increase in equity markets,

But it's very concentrated.

Diffusion is bad, Denis, you're right and it's all in IT or communication services, anything that's associated with artificial intelligence, AI is benefiting from a very substantial increase in PE expansion.

That's why we need to be careful about the economy. If we just look at, you know, the stock market because that doesn't represent the real economy.

Don't be fooled. Yeah, you're absolutely right. Diffusion is not good. And just maybe to come back on when we started working together and at the end of the 1990s. There was a time back then where people were saying that the TMT sector is insensitive to higher interest rates, so anything related to a technology will do well in the higher interest rates environment. And back then, the valuations surged to levels that had never been seen before. Right now, all we can say is that we're back to valuations at 36 times forward earnings or 38 times, something we had not seen since interest rates were at 0% during COVID. So clearly this multiple expansion despite the rise in interest rates needs to be watched carefully.

Yeah, the price earning on those stocks is high, but the revenue is not there. It's not following.

It's interesting to see that the valuation is rising. So the IT sector now accounts for roughly 33% of the valuation.

If you go back then 2000, what was the comparison?

44 percent, 44%

We're not that far.

We're at 32. Yeah. So there's still some upside if you want to bring back the 1990s. So I can't say that speculation can't go higher, but you're absolutely right, Denis. As this valuation share, the valuation is rising, the share of earnings that is generated by this sector is actually declining. Other sectors actually doing better in terms of earnings generation than the IT sector. So this is something that needs to be watched carefully. There was a time back then and they're saying this sector, the new technology will be deployed very quickly in the economy. I don't dismiss that the deployment will happen, Denis and will help productivity down the road. I'm just not sure that it can happen within 12 to 18 months and that higher interest rates won't hit the sector.

Yeah. But also on the flip side of that we're seeing that the global factory are not at the level that we should expect considering what we see in the in the stock market and then. You have a slide that reflect that,

Yeah. And that I think that's a cautionary tale because the impact of previous rate hikes is already starting to impact the more interest rate sensitive sectors. Manufacturing is actually in contraction right now. It's a global phenomenon by the way. It's US, it's Canada, it's Europe and it's even China. So clearly, if global activity slows because of higher interest rates, there's going to be less earnings going forward. So this is why we have to be careful with the multiple expansion purely driven on the assumption that AI will be quickly deployed in the economy, those valuations are not cheap, Denis. I think we have to be careful. Plus Denis, I want to come back on something you said last time with the debt ceiling story now behind us, the US government will be issuing a massive amount of government bonds in the second-half of this year. I think it's 1000 billion dollars. That's $1 trillion. Yeah, yeah. And I don't know for you, but I doubt that the market is fully pricing the overall impact.

I think we can't. I think they have a sense of - yes that volume will hit the market, but that dollar value will hit the market when they will issue. Then we will see the impact. And you know in the past I think we're kind of fooled by the Central Bank buying all the paper. Now, they are in the QT, they are not in the QE. Then they won't buy that paper. That means it's everybody, all the institutional - will have to buy it - the pension funds and the insurance companies this is a lot and that will have an impact and probably the yield curve will get steeper because of that.

And you mentioned QT, but with China slowing down, they're also going to be less aggressive in buying U.S. Treasuries given the complex geopolitical backdrop. So maybe that argues for more volatility because a 10-year treasury yield could rise again back above 4% in the coming months. So I think we have to be very careful on that front. So yeah, it's a complex environment and it gets a backdrop where the valuations are definitely not cheap for the stock market. So yeah, we have to be careful out there.

Thank you for being with us and we'll see you next month.

Hello, everyone, and thank you for joining us for this economic impact with our Chief Economist of National Bank, Stefane Marion. Thank you, Stefane, for joining us again this morning.

Thank you, Denis.

Well, you know since the last time there was a few news again in the in the economic environment - a lot of things happening. Some are a bit of the same, but others are different. And today, we will chat a little bit about economic news, but also variables and data that will help you probably understand a little bit more what's going on out there. But first let's see what happened since the last time about the return on the equity across the planet and also in the bond market that as far of so far what we can see is that all the, the, the return on those assets are in the positive sector, but the second quarter was kind of tough and can you explain that please, Stefane?

So, it is true that on the right-hand side of you know the red bars on that chart shows a positive return across the board for financial markets. But you're right to say that the second quarter is a little bit more difficult, a bit more volatile. Uncertainty versus, with respect to the geopolitical backdrop, the banking sector in the US, but note that it's encouraging to see that the Canadian index continues to play a defensive role. The S&P TSX is up almost 3% this quarter and that reflects the fact that it's more defensive index and particularly the gold sector has done relatively well given the current uncertainties. So year to date, positive performance, but it's a bit more complicated in Q2. I think that the second half of the year is going to be volatile. Again, a little bit more complicated, Denis, because we still must deal with the ramification of the interest rate cycle, which is probably coming to an end. But the impact of previous rate hikes has yet to be felt on the economy, both in Canada and the US.

Talking about interest rate, what do we see from the Fed and the Bank of Canada? So far, it seems that we've reached a plateau. What do you think?

I would say that when we look at it, Denis, I mean we've never seen a tightening cycle as impressive as what we've seen over the past year and both sides of the boarder. Good news is that the Fed is now talking about pausing and the Canada has done so since last January. And I think the argument for pausing now, I'm not talking about rate custody that's going to take a while to come, but in terms of pausing it can be justified on the fact that inflation is decelerating quite rapidly on both sides of the border, below 5% in the US. It's close to 4% in Canada. So central banks are justified to take a pause given the inflation backdrop.

Yeah, thank you for that. And you know, we're always looking at the bank sector. I think it's in the newspaper almost every day. How does it look so far? You know, a few weeks passed since the last, you know, impact economic, video that we did. What's happening here? Can you tell us more?

Well, there's still stress, on the regional banks in the US and one way to illustrate this, we had yet another failure at the start of the month with First Republic. So, we have 3 US regional banks that have failed so far this year and the assets that were associated with these failures are roughly $550 billion. Compare that with 2008, 2009, 2011 during the period of the great financial crisis. There were more than 400 bank failures in the US back then, Denis, but the assets that were impacted were at roughly $680 billion. It's just to say that we don't have as many failures this time around, but they've been bigger, so that is clearly a point of contention for the Fed and that's also part of the reason the Fed is saying “I need to pause,  I need to assess the impact on financial markets, on the banking sector of what I've done so far”. So again, these failures will mean that there will be more regulations coming on regional banks in US. More tightening and lending standards, less credit available the second-half this year and probably less economic growth. So again, things are not as bad as what they were back in March, but we are still now out of the woods with respect to the impact of these failures on credit availability for the US economy for the second-half this year.

Thank you, Stefane. That slide is kind of shocking when you compare you know those two periods and you see the numbers of failures versus you know the amount is. it's unbelievable. Another story that now is popping up you know and almost daily is the debt ceiling and once again you know almost every 10 years, we had you know that debt ceiling that is coming back and haunting, and you haunting us. How does it look? People are more concerned than they were in 2011. If you look at the CDS the cost of insuring against the default of the sovereign government, US sovereign government, you can see that you know the price of insuring against the default is much higher than it was in 2011 and that has undermined the US dollar. That is creating some uncertainty for markets. Denis, to be honest this chart looks quite impressive, but nonetheless. The probability associated with a default is at no more than 5%, so I don't think it should be a baseline scenario. This is something that is making markets nervous at this point in time, but I doubt very much I'm going to see a default. A potential D-rating is still possible later during the year, but default, although the fears are greater than they were 2008, and 2011. I think is quite low in terms of probability. So, we put in that 5% at this point in time.

Yeah. Anyway, we're okay. Joe Biden says this morning there will be no default and he must know he's the guy in charge of the country. Then hopefully he's right and and we'll see how it ends up. But usually it's always that you know five before midnight that things are approved and we're good for another 10 year then. We'll see. Back to Canada, I know the banking sector once again, you know a lot of questions around it. You know I think we have a few data to give you and to picture how the banking sector in Canada, sector in Canada looks like, deposit, the name of the game. Is there any change on deposit, Stefane?

Oh, listen, from a Canadian perspective and by the way, then you're absolutely right to say that for a president that's trying to be reelected, defaulting on your debt will be a total nightmare. So I agree with you that they'll find a solution. But in the meantime, in Canada, we haven't seen contagion. To the banking sector, we spoke about this last time, the Canadian environment is much different from the US. It's a system that is less available to outsiders, the payment system is more closed, there's no leakage from money market funds. And at the same time, Denis, what kind of benefits from that other countries are not benefiting from is this continued surge in the working age population, and this is an update and when you consider that 81% of the working age population has a relationship with a financial institution versus only 66% in the US, the population, the demographics will impact the deposit base. So, 81 percent of a rising population, working age, population big impact, Denis, and now I'm going to give you the number on population growth for the first four months of the year: 270, close to 280,000 individuals. So, 81% of that having a relationship with the financial institution is just putting a boost on the deposit base. So this is something that other countries do not benefit from. I understand that surging population growth is having an impact on the availability of absorption when it comes to the housing sector, but from a financial institution backdrop or perspective, this is a main positive to boost the deposit base that is unavailable in other countries. So again this is where demographics has a huge impact on the financial system in Canada.

Yes. And you're truly right and you can see that also when you compare the profits from Canadian bank versus the US bank and I think you have a, you know a bit of data on that and that can give you confidence. Also how strong is the banking sector in Canada?

Well, it's funny, Denis, because when you speak to investors internationally, say where are the Canadian banks finding their deposit base or where, how are they finding new clients? Well that has to do with the surge in population. And at the same time with this surge in population increase in deposit base also allows the economy to have a more, a healthier credit cycle than what we see elsewhere. And that obviously is having a big impact on earnings per share for the financial sector which is. Nearly tripled since 2006 in Canada and while US it's up 40%. So, you can see that this divergence between Canada and US in terms of EPS, it's not because Canadian banks are taking more risks, Denis. It's the net positive coming from this population surge that is increasing the demand for deposits. Lending conditions, household formation and obviously a stronger economy.

Well, thank you Stefane and thank you for those very interesting comments about the first the US economy and the Canadian banking sectors. I think it can give us you know kind of a comfort about what type of environment we are hopefully it's helping you try to take your decisions of investment. For the future. And once again, thank you for joining us for this economic imact. And we'll see you next time. Thank you, Stefane

Welcome everyone and thank you for joining us for this Economic Impact of March 30th, 2023. As usual, I have my distinguished guest Stéfane Marion with us this this morning, in fact today, talking about what happened in the last few weeks, in fact the last two weeks about the bank sector across the planet. Stéfane.

Yeah, not very pleasant. You know when you think about it, reminds us of 2008 and what you see on the first slide is quite telling. $320 billion of assets that have been pummeled in the sector with only one or two banks. Something, it's actually, you know, it was actually even worse than what we saw in 2008-2009. But I think the source of the problem was somewhat different, right, Denis?

Yeah, I know, it's totally different. You know, in 2008-2009, it was more about credit than anything else and it was widespread. This time around, it's more about the rate hikes that we saw in the summertime that now affects some of the business. Which are some banks that are very, very narrow businesses and a type of businesses that it's not widespread across the whole banking sector and the planet, totally different. We can compare this situation as what happened in late 80s-90s about the savings and loans, which was at the same time, you know, some savings and loans went bankrupt because of rate hikes at that time and for the same reason they have some unbalanced money, you know. An unbalanced way to hedge their own Treasury portfolio. Then same thing that happened you know two weeks ago with the SVB banks and the Signature banks.

Yeah, so asset liability management becomes an issue when you have an erosion of your deposit base and as you can see, for the first time since 1975 we see deposits in the US, at US commercial banks, declining on a year over year basis at the pace that is never been observed in the past. This is unprecedented. Part of that, Denis, however, people have to be careful in the interpretation. Never forget that despite this drop in the deposit base, the deposits are still 11% above the pre COVID trend. Why? Because don't forget that during COVID there was a significant increase in excess savings at the consumer level and also corporations that had a significant amount of profits, particularly in the IT sector that led to a big increase in the deposit base. So I think when you start interpreting what's happening at the deposit base, you have to think that something is coming back to normal. But you're absolutely right, Denis, when you say that rapid rate hikes make it more difficult for institutions that don't have proper risk management in order to manage their asset liability. That becomes an issue, right?

Yeah, this is why we need to be very careful about how we look at the data right now. Because I think it's this kind of normal that we see those deposits coming back to where they were pre pandemic. It's going to take some time, but it's going to take time. But also, at the same time because of the rate hikes you're going to see people moving from cash account to GIC's and then you're going to see a kind of erosion in the bank account deposit. Then let's be careful here, OK? Because I think people are watching it very, very carefully right now. But we need to see, you know, a bit of a story of where we're coming from versus where we can go so let's be careful here.

And for the moment, Denis, what's important as the Federal Reserve did not sit idle, they addressed the liquidity issues by providing new facilities for commercial banks to tap into if needed in order to do a better matching of their asset liabilities. And what you can see, that since the deployment of these facilities, you can see that the S&P 500 is actually up since March 8 since we had the problem of SVB. What is quite evident however, on this slide, Denis, is the banking sector in the US remains stressed and part of that reflects the fact that people are waiting probably more stringent regulations in the US in the

aftermath of the SVB fiasco, which will have an impact on the profitability of the banking sector, particularly in the US, right?

Yeah. But once again, more stringent rules. It's really for the regional banks, not for the D-CIB (Domestic Systemically Important Banks) or the G-CIB (Global Systemically Important Banks). Those banks are really, really well regulated right now and I can tell you - OSFI, the feds and all those regulators are really watching what's going on in all those banks day after day. Then no big concern on that front, but you know Trump decided to relax a little bit the rules for those regional banks when he was in power. Now I think obviously we will have to come back to where we were back then, no surprise there. But also, at the same time we had what happened with Credit Suisse, you know, which is totally another subject, totally another situation. This is not linked at all with regional banks, but it did affect the equity market at the same time and that's why we have some discrepancy between rate of return of those markets. You wanna talk a bit more about that?

Well, yeah. And what's important is that when people fear contagion to the banking sector, the global banking sector is impacted. Now if you see on the next slide, U.S. banks are still down more than 14% since March 8th. What's important on this slide, is you need to note the resiliency of Canadian banks. So we've seen some contagions, some people are worried about the overall banking sector, but the drawdown to Canadian banks is much smaller than what we saw elsewhere around the world, Denis, down only 6%. And I think part of that reflects the fact that unlike the US, we have not seen an erosion of the deposit base. It's actually still trending up in Canada. And I think that's a significant divergence of what you see in the US and in Europe, right, Denis?

Yeah, totally. And in Canada, we haven't seen anything. In fact, if there's anything the chart shows it, that we are seeing more and more deposit getting in the Canadian banks. Which is totally the opposite of what we're seeing somewhere else. Then I don't think we can expect any big movement in that front. Maybe cash account with GIC, as I said earlier, yes, for sure, but money is pouring in and then there's a good reason for that.

True. But before we drop the good reason, you do agree also at the same time that unlike the US, the Bank of Canada is a little bit more pragmatic. They stopped with the rate hikes, they're pausing at this point in time and I think the reason they're able to pause is because inflation is also coming down faster on this side of the border. That's important, Denis, right?

True. And it was a bit of a discussion around, you know, what the Bank of Canada decided. They were the first bank really to say that they're going to stop hiking rates and they want to see what's going on and rightly so, you know and when you see what they did and the comment that they had in the market, I think it cooled down quite a lot. What people can expect for Canadian banks and the Canadian economy and so on and so forth. Then you know for this time, I think they hiked fast, and pretty hard. But they were the first really to say, wow we're stopping, we're going to wait and see. And it was timely, it was perfect in fact.

I think so. And then when you hike rates aggressively that you might risk breaking stuff. So it's important to take a pause at some point to assess the situation. But at the end of the day, Denis is absolutely right. One of the key factors that underpins the growth in deposits in this country are demographic forces. Which are actually unprecedented in terms of population growth. In Canada, we're seeing 1,000,000 people added to the population last year, Denis, I mean the last summits that we've seen in the past

were about 600,000 people, so 1,000,000 people, to put things in perspective, in France population is going at 100,000 people a year, in the UK, 200,000 people a year. So Canada outperforms France and UK combined by a factor of three to one. That is really impressive, plus the fact that population is skewed towards the cohort age 25 to 54, which is a natural clientele - the client base for Canadian financial institutions. So under these circumstances, an erosion of the deposit base, when you have the best demographics in the OECD, is less likely when you compare that to other countries. So under these circumstances, we don't believe that we'll see the same erosion of the deposit base that's been observed elsewhere around the world.

Yeah, and you've been talking about the demography for a while now and I think now it's showing up again that is very important to look at really microeconomics data that can help you to understand what's going on and what can happen. And I think this one is, is very particular to the Canada and it explained quite a lot why we had so much, you know, a good economic environment for years and years and years and now with that crisis or simili crisis I would say, contained crisis in a very specific area. Once again, the demography will help quite a lot the banking center in Canada, but also the overall economy. So what do we do with all those events now? Where do you invest our money?

Well, Denis, you mentioned regional banks. And just put things in perspective again, there's 4,700 financial institutions in the US and you talked about the big ones, it might be maybe 12 of them. So the 4000 banks are likely to face more stringent regulations. There's going to be less credit available in the US economy in the coming months, which argues for maybe a less aggressive Federal Reserve. That's good news but also means a slower economy. So for the time being, Denis, let's see how the dust settles on all this. Let's be a little bit more defensive, have some cash, a little bit over benchmarks, but also fixed income. We've added fixed income. We're actually overweight fixed income for the first time in a very long time. And I think that's the prudent way to assess the situation. So again, I think we've avoided the worst so far, with the liquidity issue from the Fed. That's good news, but the economy is about to slow down. So let's be a little bit more defensive.

Are you still expecting the rates going down at the end of the year with the Bank of Canada?

Canada? Yes, modest rate cut, yes. US remains to be seen. Let's hope we get this inflation that decelerates a little bit faster in the coming weeks.

Thank you, Stéfane. Hope you enjoyed that. You know, a little bit of a background of what's going on, you know, in the overall the Canadian economy but also you know the worldwide economy. Very, very interesting comments, Stéfane, and hopefully it's going to be very useful for you. It was a pleasure for us to give you a bit of our insight. Thank you so much for listening and we'll see you next time.

Hello everyone and welcome to this February 20th Economic Impact video, which will actually be my last one as I will soon be a new retiree from National Bank. But do not worry, the production of these videos will continue with our star, our chief economist, Stéfane Marion. Hello Stéfane.

Hi Martin.

So, Stéfane, we've talked about it, but we are now seeing it, definite deceleration of inflation. As we had expected. What do you think?

Well, some people actually noticed that we see deceleration in inflation Martin, and we're at 6.4% down from 9%, so clearly going in the right direction, we've been claiming this for many months. However, some people thought it would be decelerating faster at this point in the cycle, which has yet to be confirmed. But notwithstanding the fact that central banks continue to say that they might continue to hike interest rates, the bond market doesn't believe it anymore, Martin.

No. And we're watching this very, very carefully, this famous fed fund versus 2 years, what's going on?

Well, the 2-year Treasury yield in the US and same thing in Canada, Martin, is below the overnight rate or the policy rate of the Central bank. So clearly what the market is saying right now, central banks have gone far enough. You could, you might expect even a pivot in the coming months and if we're lucky, perhaps a rate cut by the end of the year.

And what happens when we see this inversion?

It's market expectations. Never forget that the financial markets run on expectations. And once you see this inversion, which has happened last December, December 15th to be more precise, Martin. Historically, the stock market does well during the period where you see the inversion of the curve until the first rate cut. And historically there's a delay of seven months and over those 202 days to be more precise, the stock market tends to deliver positive returns around 8% Martin.

So, we did in about 60 days, what we usually do in about 200 days.

Well, that's the thing, let's not be too greedy at this point in time. What is quite peculiar in this rebound is that we've done it really, really quickly. So, people are expecting the Fed to pivot really quickly, and the Fed has yet to commit to that pivot. So, in my opinion, it is normal to see that the markets are becoming a little bit more nervous until you confirm that the Fed is changing its forecast, which it has yet to do.

And the market is anticipating what kind of earnings?

Positive and that's troubling because if you think you're going to get a significant deceleration of economic growth, you should be bracing yourself for negative profit growth. But at this point in the cycle, and the reason we did so well, is that the market saying we're going to get significant deceleration, but profits are going to remain positive on a year over year basis. However, Martin, we're seeing an erosion of profit margins on both sides of the border and that will be critical with respect to the reaction functions of corporations in the face of an erosion in their profit margins, which means Martin - what will they do on the hiring cycle? That's critical.

So, employment is the key, and we're already in stagnation for full time employment in the States.

Employment is always key in determining whether or not there's going to be a soft landing or recession. And yes, US job market has surprised with its resilience in recent months. But Martin, full-time employment has been stagnating for the past few months, so already you're seeing corporations being a little bit more nervous on the hiring pace. So. In Canada, we've stagnated. We've done really well over the past 2 months. But I do believe that we'll also be stagnating because we're starting to see an erosion in the profit margin. So, at the end of the day, that will determine the shape of the economic cycle.

And Stéfane, what's the relationship between the stock market and recessions?

The stock market is in asymmetric in terms of leading indicator for the economy or stock market. So basically, Martin, the stock market is very good at predicting the end of recession, but it never calls a recession. So, basically the stock market always calls a soft landing. And when they see the first rate cut, they say, hey, wait a minute, why are rates being cut, what's happening here? And then it gets a little bit more volatile. So, this time around, I think the volatile could come even faster just because of the geopolitical backdrop.

Yeah, we're actually in the first year anniversary of the war in Ukraine. So, lots of uncertainty there.

And the uncertainty comes, Martin, from the fact that if there is a very specific infrastructure that are destroyed in the coming weeks related to food production or energy production, you could see global inflation turn a corner and start accelerating again. So again, let's not be too greedy at this point in time. Let's play defense because we have yet to see what happens at the end of the month on the Ukraine-Russia conflict, which is still very important from a global perspective.

Excellent. So, in conclusion, we're remaining prudent. We're going to see the impact of higher rates in the coming months. And we've already priced a lot in the last two months. Lot of good news. Yeah.

Yeah, lots of good news

So, thank you very much, Stéfane. Thank you everybody for having been listening to us for the last couple of years. It was a pleasure to be doing this. We learned a lot in communication. And let's remember Doctor Weiss telling us in October 2020 that we would be back to normal in 2024. So, it's been a great ride. Thank you for listening and there will be more of these short videos. Do not worry. Thank you. Take care. Bye, bye.

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