Weekend Reading #358

This is the three-hundredth-and-fifty-seventh weekly edition of our newsletter, Weekend Reading, sent out on Saturday 4th April 2026.

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What we're thinking.

As the war rumbles on, most people are trying to predict what will happen next. What happens if we told you it doesn't matter for markets? What markets are telling us is that they want to move past the war. Recall that coming into this, markets had already been weak for months. And we have had a decent selloff. What we are noticing is there are parts of this market which are trading exceptionally. Some stocks in the memory and photonic silicon space in particular are trading back up at or near all time or pre-war highs. So are some in Brazil and China. This tells us that the market is perfectly rational. Is it possible that the market begins to look past the war? Well, yes because that is what markets do. They climb a wall of worry. As we are always at pains to point out, markets detest uncertainty. And the past weeks have seen a lot thrown at us. But the market is in the process of getting its head around things and already it is reflecting what it believes will unfold. There are opportunities on the long side for those who look for them ALREADY. So, in response to the question of what happens next in the market, who knows. But remember the market will price in future outcomes before anyone can blink. It is after all, the consciousness of all its participants. It doesn't have to make sense to everyone. It just is.

What we're reading.

After a long break I returned to my old friend, Gabriel Allon, protagonist of Daniel Silva's spy series. Allon, now retired finds himself in the middle of yet another problem in the art world. The title of this one is A Death in Cornwall. His cover job as one of the world's most accomplished restorers of old master paintings provided him with a ready understanding of the intricacies of how to place a stolen World War two era Picasso. Highly entertaining as always and thoroughly recommend. DC

I remember when ETFs started to gain traction and the active vs passive debate was in full force more than a decade ago that the whole argument was about whether active managers could track and outperform an index better than the index itself. Obviously, it was a loaded question – the average is always the average, and the skew of where managers lie naturally leads to a few outperforming the many, hence the argument that active management is pointless and that the whole world should just go to ETFs and be passive. Fast forward to this past month and we’re picking up snippets from the likes of GS that ETFs clocked in at 37% of notional equity market volume for the month of March, with more than US$9tn printing on the tape in response to the swings in the market. Does that mean active management is dead? Quite to the contrary, ETFs in all their nuance (from sectors to countries to themes to the inverse versions so that long-only managers can go short by being long…) have become almost a sector in their own right – a very useful tool not just for risk management but for expressing outright macro views. Always amazing how the market always evolves – passive can’t manage itself, so create a bunch of passive instruments and the active managers start piecing them together in new and creative ways.
 
Speaking of the creative, a couple of years ago I heard on a Zoom call with some analysts in Taiwan that the rubbish trucks that came around to pick up the trash played a classical music jingle when they approached. It turns out that the garbage truck company has now been asked to switch the track from that particular rendition of Fur Elise to something else. Will be interesting to see what they next put onto the garbage trucks. EL