Valerio Baselli: Hello and welcome. I'm Valerio Baselli and today, I'm joined by Matt Peron. He is Director of Research at Janus Henderson Investors. Matt, hi, and thanks for being here.

Matt Peron: Thank you for having me, Valerio.

Baselli: So, China has offered its congratulations to United States President Elected, Joe Biden almost in a week after his victory, quite late if compared to other major countries. Chinese authorities seem very cautious at this stage. Is this something that surprises you or this is just a normal behaviour in a moment when relationships between the two countries are really tense and the outgoing Trump administration is still in power?

Peron: Yes, I think that's the key point there, Valerio. I think the balance that you mentioned is very important in this diplomatic, very tense diplomatic situation. They don't want to take up a situation where relationships are quite strain at the moment and make them worst. So, I think they are just taking a very cautious approach. I wouldn't read too much into that as being a negative signal for how they're going to work with the Biden administration. We think they will have on the most part some constructive discussions with the Biden administration as there is much for both administrations and countries to collaborate on.

Baselli: How the trade war between the US and China will evolve under Biden's administration in your view? And how it would affect the market in the future, especially the tech sector?

Peron: Yes, I think that the trade tensions that are being referenced will probably diminish some. I don't think they will completely go away, but I think they will be reduced. There will be lower tensions between the two countries. I think that's because the two countries really do need each other. I think both administrations – new administration in the case of the US understand that free trade benefits all for the most part. I think there were some lessons learned about China that they will take into account. So, I don't think we'll go back to a completely unfettered trade. But I think both administrations realise they need each other and there will be much more open and a much more constructive stance while working on some issues. But you mentioned the tech sector and I think that that's very important for both countries. And so, they will work something out knowing that the supply chain from an American standpoint will need to be diversified, so we don't – there will be less reliance on China. But they have much to fill in that gap, much to work on. They both have put green priorities and green energy and green technology at the top of their priority queue. So, I think both countries will see opportunity to collaborate hopefully in that dimension as well. So, there will be some puts and takes but I think much more positive than in the past administration.

Baselli: And as you know, US stocks rallied sharply after Biden was named the President Elected and were propelled even higher by promising news on effective coronavirus vaccine. But what about now? On one hand, we saw that the forecasted blue wave wasn't there and on the other hand, valuations look very high still. So, given this scenario what is your outlook for US equities?

Peron: Yeah, I think, the blue wave didn't happen as you mentioned. And in fact, I think that was probably the best outcome from a market standpoint for the markets to realise that, okay, with more gridlock in Washington there will probably be less policy uncertainty. So, the markets don't like uncertainty. So, with policy certainty, which is more down the middle, both extreme ends will probably be taken out will have a much more stable policy backdrop and the markets really like that. So, that was good. But coming to your point about the good news on the vaccine as well as a reasonable and market-positive election outcome, we are still constructive on equities for the longer term, and I'll make two points on that. The first is that looking at current valuations, yes, it looks high, but we now have more confidence in 2021 and 2022 earnings and the market is already looking to that and discounting that. We expect that earnings will probably exceed 2019's level, maybe even into 2021. So, the market is already there. So, based on that level and the level of interest rates, it's not so bad.

I think the second – the vaccine, as you mentioned is very important in that it improves confidence in that earnings level. So, taken together, the market got a really powerful double dose of, okay, 2021, we know what it looks like and we can start to price that in fully, and I think that's what happened.

Baselli: Matt, thanks a lot for your time.

Peron: Thank you, Valerio.

Baselli: For Morningstar, I'm Valerio Baselli. Thanks for watching.