1 00:00:05,880 --> 00:00:08,119 Speaker 1: Welcome to Fear and Greed Q and A, where we 2 00:00:08,200 --> 00:00:11,799 Speaker 1: ask and answer questions about business, investing, economics, politics and more. 3 00:00:11,880 --> 00:00:15,920 Speaker 1: I'm Sean Almer. A spike in anti US sentiment has 4 00:00:15,960 --> 00:00:19,079 Speaker 1: seen Wall Street, bonds and the US dollar all take 5 00:00:19,120 --> 00:00:22,200 Speaker 1: a hit from recent days. What's it mean for investors? 6 00:00:22,200 --> 00:00:24,680 Speaker 1: How do they play it? This is general information only. 7 00:00:24,720 --> 00:00:28,080 Speaker 1: You should always seek advice tailored to your circumstances before 8 00:00:28,080 --> 00:00:31,880 Speaker 1: making any investment decisions. Jimmy Dale is NAB Trades Director 9 00:00:32,000 --> 00:00:35,120 Speaker 1: SMSF and Investor Behavior GEMMA. Welcome to Fear and Greed. 10 00:00:35,560 --> 00:00:38,440 Speaker 2: Thank you for having me, So tell me about. 11 00:00:38,040 --> 00:00:41,280 Speaker 1: This anti US trade? What's going on there? 12 00:00:42,159 --> 00:00:46,320 Speaker 2: I think? So let's be clear. So we've had the 13 00:00:46,360 --> 00:00:51,080 Speaker 2: threats against Greenland and the market. The US market was 14 00:00:51,320 --> 00:00:54,640 Speaker 2: closed on the Monday for Martin Luther King's birthday, so 15 00:00:54,680 --> 00:00:57,400 Speaker 2: we had a pretty dramatic response when the market reopened. 16 00:00:57,440 --> 00:01:01,400 Speaker 2: This is equity specifically, where the Nasdaq was off nearly 17 00:01:01,400 --> 00:01:03,279 Speaker 2: two and a half percent, the S and P five 18 00:01:03,360 --> 00:01:06,360 Speaker 2: hundred bers of two percent like it looked quite dramatic, 19 00:01:06,440 --> 00:01:09,640 Speaker 2: but it's worth noting the market was closed for a 20 00:01:09,720 --> 00:01:12,520 Speaker 2: more extended period than usual over the weekend and so 21 00:01:12,560 --> 00:01:15,400 Speaker 2: you tend to see these sort of fairly dramatic jumps 22 00:01:15,440 --> 00:01:17,880 Speaker 2: when you have that sort of extended period for people 23 00:01:17,920 --> 00:01:21,760 Speaker 2: to think about what it might mean. At the same time, 24 00:01:22,160 --> 00:01:26,600 Speaker 2: we have had some interesting moves in the bond market, 25 00:01:26,720 --> 00:01:28,840 Speaker 2: some of that came out of Japan, actually not so 26 00:01:28,920 --> 00:01:30,880 Speaker 2: much the US, and we've had some weakness in the 27 00:01:30,959 --> 00:01:34,440 Speaker 2: US dollar. On the other side of that, we are 28 00:01:34,560 --> 00:01:39,120 Speaker 2: just seeing this just extraordinary rally in gold continue. And 29 00:01:39,200 --> 00:01:42,080 Speaker 2: that's the one where people are going. This is a 30 00:01:42,240 --> 00:01:47,360 Speaker 2: significant shift globally in terms of where investors are looking. 31 00:01:47,920 --> 00:01:51,080 Speaker 2: They're looking more for safe havens. They're not quite so 32 00:01:51,280 --> 00:01:56,400 Speaker 2: comfortable being exposed to risk assets or to you know, 33 00:01:56,480 --> 00:01:58,840 Speaker 2: the elephant in the room, which was the US for 34 00:01:58,960 --> 00:02:01,200 Speaker 2: so long, and so there has been this kind of 35 00:02:01,320 --> 00:02:04,040 Speaker 2: concern and then we'll talk about crypto if you like, 36 00:02:04,280 --> 00:02:06,200 Speaker 2: but there has been this concern that people are looking 37 00:02:06,200 --> 00:02:08,400 Speaker 2: for a safe have in Gold is up seventy five 38 00:02:08,440 --> 00:02:11,359 Speaker 2: percent year on year, which is astonishing. It's a funny 39 00:02:11,360 --> 00:02:14,760 Speaker 2: safe haven when it jumps that much, right, it doesn't 40 00:02:14,760 --> 00:02:17,640 Speaker 2: feel very safe. That's usually the wild stuff doing that 41 00:02:17,760 --> 00:02:20,040 Speaker 2: kind of thing. And then equity is taking a bit 42 00:02:20,040 --> 00:02:22,440 Speaker 2: of a hit and it's sort of folding into this 43 00:02:22,600 --> 00:02:25,880 Speaker 2: broader story. Maybe we're moving away from the US, and 44 00:02:25,919 --> 00:02:27,960 Speaker 2: then you've got Mark Carney coming out and saying dramatic 45 00:02:28,000 --> 00:02:28,640 Speaker 2: things while we're there. 46 00:02:29,320 --> 00:02:32,080 Speaker 1: Okay, So Mark Canney, the former was head of the 47 00:02:32,160 --> 00:02:35,280 Speaker 1: Central Bank in Canada now the Prime Minister of Canada. 48 00:02:35,320 --> 00:02:37,280 Speaker 1: He basically came out and said this new world order 49 00:02:37,320 --> 00:02:40,320 Speaker 1: going on. But it wasn't just referring to a new 50 00:02:40,360 --> 00:02:43,839 Speaker 1: world order in terms of geopolitics. He was also kind 51 00:02:43,880 --> 00:02:48,160 Speaker 1: of in terms of financial markets. Is it realistic to 52 00:02:48,240 --> 00:02:52,960 Speaker 1: think that the US well could lose its status as 53 00:02:53,000 --> 00:02:57,640 Speaker 1: the only kind of major economic powerhouse or are we 54 00:02:57,720 --> 00:03:00,080 Speaker 1: overstating it if we start thinking that way? 55 00:03:00,240 --> 00:03:02,680 Speaker 2: So this is the question, right, and I think if 56 00:03:02,720 --> 00:03:06,799 Speaker 2: I look at the thinking from our market's team, it's 57 00:03:07,040 --> 00:03:10,000 Speaker 2: very much you don't want to jump too early on 58 00:03:10,080 --> 00:03:13,079 Speaker 2: this one, right. It's a very traumatic statement that we're 59 00:03:13,080 --> 00:03:18,840 Speaker 2: going to see a dramatic reshaping of the global economy, 60 00:03:19,080 --> 00:03:22,720 Speaker 2: but more specifically markets, right, because yes, the US is 61 00:03:22,760 --> 00:03:26,160 Speaker 2: an enormous economic power, but they've dominated with the US dollar. 62 00:03:26,280 --> 00:03:30,440 Speaker 2: That's where that sort of safety element in US Treasury is. 63 00:03:30,480 --> 00:03:33,280 Speaker 2: That safety element has felt very comfortable for many people 64 00:03:33,960 --> 00:03:39,240 Speaker 2: and for markets more broadly. Their view, our view more 65 00:03:39,240 --> 00:03:41,360 Speaker 2: broadly is that you don't want to get on that 66 00:03:41,440 --> 00:03:47,680 Speaker 2: too early. Have some caution, partly because what's the alternative? Right, Like, 67 00:03:47,840 --> 00:03:51,760 Speaker 2: we have not seen any obvious alternative apart from gold 68 00:03:51,800 --> 00:03:57,120 Speaker 2: which stands out from Marloway, any obvious alternative of markets 69 00:03:57,160 --> 00:04:01,080 Speaker 2: shifting away from the US to something that seems like 70 00:04:01,160 --> 00:04:05,360 Speaker 2: an obvious replacement. So their concern is like, you can 71 00:04:05,360 --> 00:04:06,920 Speaker 2: cut off your nose to spite your face with this 72 00:04:07,000 --> 00:04:08,880 Speaker 2: kind of stuff, we can go do you know what? 73 00:04:09,120 --> 00:04:11,920 Speaker 2: It all looks a little bit nerve wracking. There's enormous deficits, 74 00:04:11,960 --> 00:04:14,360 Speaker 2: there's certainly some geopolitical risk. There's a whole lot of 75 00:04:14,360 --> 00:04:17,320 Speaker 2: concerns in the US. Let's go somewhere else. But what 76 00:04:17,360 --> 00:04:18,640 Speaker 2: does that look like right now? 77 00:04:19,400 --> 00:04:22,560 Speaker 1: So if we get to some so let's not try 78 00:04:22,600 --> 00:04:25,760 Speaker 1: and pick equity markets. What about currency markets? Though? The 79 00:04:25,880 --> 00:04:29,480 Speaker 1: US dollar the green bank being the pre eminent currency, 80 00:04:29,520 --> 00:04:32,040 Speaker 1: no doubt, and most of us here in Australia care 81 00:04:32,080 --> 00:04:35,640 Speaker 1: about the Aussie dollar US dollar exchange rate. Where do 82 00:04:35,640 --> 00:04:36,400 Speaker 1: you think that's going. 83 00:04:37,640 --> 00:04:41,640 Speaker 2: So our guys have been calling for a softening or 84 00:04:41,640 --> 00:04:44,600 Speaker 2: a weakening of the US dollar for a long time, 85 00:04:45,040 --> 00:04:49,120 Speaker 2: and realistically the Aussies traded in a pretty tight range 86 00:04:49,560 --> 00:04:53,480 Speaker 2: for more than twelve months. Yeah, we just haven't seen 87 00:04:53,680 --> 00:04:59,000 Speaker 2: that weakening come through as dramatically as we expected. Let's 88 00:04:59,040 --> 00:05:02,600 Speaker 2: put it that way. It doesn't change the longer term 89 00:05:02,680 --> 00:05:06,839 Speaker 2: view that the US dollar has been too strong for 90 00:05:06,920 --> 00:05:11,119 Speaker 2: the sort of macro backdrop. But currency markets are always 91 00:05:11,160 --> 00:05:14,800 Speaker 2: difficult to COVID suggest that's the case. Who you look 92 00:05:14,839 --> 00:05:17,320 Speaker 2: at our forecasts and there has been this expectation that 93 00:05:17,360 --> 00:05:19,560 Speaker 2: you would see this weakening in the US dollar and 94 00:05:19,600 --> 00:05:23,159 Speaker 2: therefore strengthen the Aussie against it, and just it's not 95 00:05:23,240 --> 00:05:24,040 Speaker 2: quite there yet. 96 00:05:23,960 --> 00:05:26,680 Speaker 1: Right, jimm hat down from nab train, you brought up 97 00:05:26,720 --> 00:05:29,160 Speaker 1: cryptos I wasn't going to, but you did earlier on 98 00:05:29,440 --> 00:05:32,400 Speaker 1: So what happens to bitcoin, ether, et cetera. 99 00:05:32,839 --> 00:05:36,680 Speaker 2: Ah, such a tricky question, right, I mention it because 100 00:05:36,800 --> 00:05:40,320 Speaker 2: this is it's the risk asset, right or the risk 101 00:05:40,360 --> 00:05:43,680 Speaker 2: asset class. And there was the view that it would 102 00:05:43,680 --> 00:05:46,320 Speaker 2: be the digital safe haven, right we where every one 103 00:05:46,400 --> 00:05:48,720 Speaker 2: goes when things go to pieces, and we've seen quite 104 00:05:48,760 --> 00:05:51,000 Speaker 2: the opposite. Right. Gold has continued to rally and we've 105 00:05:51,000 --> 00:05:53,839 Speaker 2: sent a thirty percent sell off from its peak in crypto, 106 00:05:54,240 --> 00:05:58,400 Speaker 2: so it has not in any way held up as 107 00:05:58,600 --> 00:06:02,400 Speaker 2: this sort of more secure were alternative, and to some 108 00:06:02,400 --> 00:06:04,599 Speaker 2: people that is meaningful, right, it was supposed to be 109 00:06:04,640 --> 00:06:07,440 Speaker 2: the alternative, and that hasn't played out. Again, maybe that's 110 00:06:07,480 --> 00:06:09,680 Speaker 2: a short term view and longer term things will change, 111 00:06:09,680 --> 00:06:12,359 Speaker 2: but for the time being, it's not living up to 112 00:06:12,400 --> 00:06:13,520 Speaker 2: its promise in that space. 113 00:06:14,120 --> 00:06:16,279 Speaker 1: And I want to get to portfolio construction in a moment, 114 00:06:16,360 --> 00:06:18,840 Speaker 1: but just let's just mention bonds. I mean, we had 115 00:06:18,880 --> 00:06:21,280 Speaker 1: a twenty four hour period there where currencies where the 116 00:06:21,360 --> 00:06:24,520 Speaker 1: US dollars sold off, equities was sold off, bonds were 117 00:06:24,560 --> 00:06:29,360 Speaker 1: sold off. Equities and bonds theoretically go in opposite directions, 118 00:06:29,720 --> 00:06:32,799 Speaker 1: but what do you do when US bond yields rse? 119 00:06:32,839 --> 00:06:35,320 Speaker 1: So obviously if you sell off bonds, the price gets lower, 120 00:06:35,320 --> 00:06:37,760 Speaker 1: the return gets higher, the eyal gets higher. What do 121 00:06:37,800 --> 00:06:38,279 Speaker 1: you do then? 122 00:06:38,960 --> 00:06:41,839 Speaker 2: Yeah, this has been a difficult question for a long time. 123 00:06:42,080 --> 00:06:44,400 Speaker 2: I mean, I'm old enough to have been there during 124 00:06:44,440 --> 00:06:49,440 Speaker 2: the GFC when we saw that happened to all those 125 00:06:49,480 --> 00:06:51,880 Speaker 2: times that your bonds were supposed to protect you while 126 00:06:51,880 --> 00:06:54,560 Speaker 2: your equidies were going to pieces, and it just hasn't happened. 127 00:06:54,600 --> 00:06:57,679 Speaker 2: So the correlation between bonds and equities, which was supposed 128 00:06:57,720 --> 00:07:00,600 Speaker 2: to be in verse, as you point out, just has 129 00:07:01,080 --> 00:07:04,040 Speaker 2: not perhaps held in times of difficulty anywhere near as 130 00:07:04,040 --> 00:07:08,000 Speaker 2: strongly as you would have liked to believe. And this 131 00:07:08,200 --> 00:07:12,720 Speaker 2: was just another example. I think investors are learning that 132 00:07:12,960 --> 00:07:15,640 Speaker 2: diversification has a lot of names. It's not just three 133 00:07:15,680 --> 00:07:18,120 Speaker 2: asset classes, right, you need to think about it far 134 00:07:18,160 --> 00:07:19,120 Speaker 2: more broadly than that. 135 00:07:19,840 --> 00:07:23,360 Speaker 1: Okay, so let's bring it to the investor listening to 136 00:07:23,400 --> 00:07:27,600 Speaker 1: the show this morning. Number one, don't panic, I presume 137 00:07:27,920 --> 00:07:31,680 Speaker 1: Number two though, how should a person and we're all for, 138 00:07:31,760 --> 00:07:34,320 Speaker 1: you know, long term strategies and so keeping that all 139 00:07:34,360 --> 00:07:36,840 Speaker 1: in play, but should a person start thinking a little 140 00:07:36,840 --> 00:07:41,400 Speaker 1: differently about the world and where they're allocating capital, where 141 00:07:41,400 --> 00:07:44,560 Speaker 1: they're allocating their money on the back of what's been 142 00:07:44,600 --> 00:07:46,720 Speaker 1: going on probably since Liberation Day tarifs. 143 00:07:47,440 --> 00:07:50,920 Speaker 2: Yes, Liberation Day. Goodness, it's like the review mirror now, 144 00:07:50,960 --> 00:07:52,840 Speaker 2: although we've got some new ones, so that's atys. 145 00:07:52,560 --> 00:07:56,240 Speaker 1: Exciting Liberation Day plus yes. 146 00:07:56,600 --> 00:08:02,280 Speaker 2: Worth noting equity markets have rallied so strongly since Liberation 147 00:08:02,480 --> 00:08:05,400 Speaker 2: Day it's like they never happened, And in fact, I 148 00:08:05,400 --> 00:08:08,280 Speaker 2: think for many investors they were catalysts to buy. In 149 00:08:08,320 --> 00:08:10,760 Speaker 2: many case, our investors love buying in a sell off, right, 150 00:08:10,760 --> 00:08:12,600 Speaker 2: they love it, So we tend to see really really 151 00:08:12,680 --> 00:08:15,120 Speaker 2: large spikes and buying during a cell off, and they've 152 00:08:15,160 --> 00:08:18,880 Speaker 2: done extraordinarily well out of that. I think the comment 153 00:08:19,280 --> 00:08:22,040 Speaker 2: that I would make is we're probably coming back. You 154 00:08:22,040 --> 00:08:26,320 Speaker 2: can look at the geopolitical risk that has been heightened 155 00:08:26,400 --> 00:08:30,480 Speaker 2: and potentially accelerated over the last twelve months with Trumpet. 156 00:08:30,480 --> 00:08:35,840 Speaker 2: Then we did have many series of dramatic changes geopolitically 157 00:08:35,920 --> 00:08:39,720 Speaker 2: over the last five years COVID, Ukraine, Russia, so on, 158 00:08:39,800 --> 00:08:42,200 Speaker 2: So there's been a lot going on geopolitically. We talk 159 00:08:42,240 --> 00:08:44,880 Speaker 2: about geopolitical risk all the time. There is this potential 160 00:08:44,920 --> 00:08:47,640 Speaker 2: for a new world order from a sort of economic 161 00:08:47,760 --> 00:08:51,280 Speaker 2: and markets perspective. But what we were talking about two 162 00:08:51,360 --> 00:08:55,200 Speaker 2: months ago was are you holding assets that are massively 163 00:08:55,280 --> 00:08:58,960 Speaker 2: overvalued and are you hugely concentrated in a small number 164 00:08:59,040 --> 00:09:00,480 Speaker 2: of things that would be in. 165 00:09:00,400 --> 00:09:01,240 Speaker 1: A bubble like that? 166 00:09:01,320 --> 00:09:03,640 Speaker 2: Actually was what we were talking about, and it's probably 167 00:09:03,679 --> 00:09:06,640 Speaker 2: still the primary issue for most investors. And what I 168 00:09:06,720 --> 00:09:09,360 Speaker 2: mean by that if you weren't thinking about this three 169 00:09:09,400 --> 00:09:11,599 Speaker 2: months ago, because you were coming into the end of 170 00:09:11,640 --> 00:09:16,040 Speaker 2: the year, and wanting to go on holidays. The dominance 171 00:09:16,080 --> 00:09:19,760 Speaker 2: of the mags even in US equity markets, and then 172 00:09:19,800 --> 00:09:23,480 Speaker 2: the dominance of US equity markets in global equity markets. 173 00:09:23,520 --> 00:09:27,160 Speaker 2: If you hold just a world portfolio or a global equities portfolio, 174 00:09:27,480 --> 00:09:30,480 Speaker 2: it was something like seventy percent exposure to the US. 175 00:09:30,800 --> 00:09:35,400 Speaker 2: You have forty percent exposure to ten companies, ten that 176 00:09:35,480 --> 00:09:38,040 Speaker 2: are all in a single sector and are all throwing 177 00:09:38,080 --> 00:09:42,880 Speaker 2: extraordinary amounts of money at AI hoping or believing strongly 178 00:09:42,920 --> 00:09:46,160 Speaker 2: obviously given the size of the capital expenditure, that you're 179 00:09:46,200 --> 00:09:51,760 Speaker 2: going to get this incredible shift in everything we do. Frankly, 180 00:09:52,280 --> 00:09:54,040 Speaker 2: but there was a big question where the people were 181 00:09:54,040 --> 00:09:56,120 Speaker 2: paying far too much for that, and whether there was 182 00:09:56,160 --> 00:10:00,160 Speaker 2: any meaningful possibility of monetizing some of this investment in 183 00:10:00,160 --> 00:10:03,040 Speaker 2: the near term. And that's probably the question that people 184 00:10:03,080 --> 00:10:05,000 Speaker 2: need to go back and ask themselves. Am I too 185 00:10:05,040 --> 00:10:07,840 Speaker 2: heavily exposed to this? I've done very nicely out of it. 186 00:10:07,840 --> 00:10:11,480 Speaker 2: It's been amazing, but it's probably still a really, really 187 00:10:11,520 --> 00:10:15,000 Speaker 2: size of chunk of my portfolio, unless I've been very 188 00:10:15,040 --> 00:10:18,200 Speaker 2: thoughtful about allocating to other things. If you just by ets, 189 00:10:18,320 --> 00:10:21,160 Speaker 2: it's probably a much larger proportion of your portfolio than 190 00:10:21,200 --> 00:10:23,640 Speaker 2: you think, And is that really what I want to 191 00:10:23,720 --> 00:10:25,679 Speaker 2: expose myself to, and do I maybe want to shift 192 00:10:25,720 --> 00:10:26,840 Speaker 2: a little bit somewhere else? 193 00:10:27,840 --> 00:10:35,840 Speaker 1: And in terms of non equity asset classes, things like bonds, currencies, alternatives, 194 00:10:36,600 --> 00:10:40,559 Speaker 1: let's worry about bonds equities generally. Do you want to 195 00:10:40,559 --> 00:10:42,840 Speaker 1: be overweight underweight equities at the moment? 196 00:10:43,800 --> 00:10:46,120 Speaker 2: Again, that does come back to this question I asked 197 00:10:46,200 --> 00:10:48,640 Speaker 2: right at the beginning, which is what's the alternative? I mean, 198 00:10:48,679 --> 00:10:51,320 Speaker 2: bond markets have not been a fabulous place to have 199 00:10:51,400 --> 00:10:54,720 Speaker 2: your cash for quite some time, and we keep waiting 200 00:10:54,800 --> 00:10:59,480 Speaker 2: for them to deliver meaningful performance. When I look at 201 00:10:59,480 --> 00:11:03,440 Speaker 2: what our investors do, they hold what they consider to 202 00:11:03,480 --> 00:11:07,080 Speaker 2: be fixed income, usually in the form of sort of 203 00:11:07,280 --> 00:11:10,679 Speaker 2: cash type investments with a reasonable yield, and they're not 204 00:11:10,760 --> 00:11:12,880 Speaker 2: chasing bonds anymore and haven't done for a long time. 205 00:11:12,960 --> 00:11:15,920 Speaker 2: I find that quite interesting. It obviously started in a 206 00:11:16,240 --> 00:11:19,160 Speaker 2: low yield environment, got worse during COVID when rates went 207 00:11:19,200 --> 00:11:21,559 Speaker 2: to zero, but they haven't shifted back. They quite have 208 00:11:21,679 --> 00:11:24,199 Speaker 2: it to hold like a term deposit or something very 209 00:11:24,240 --> 00:11:28,200 Speaker 2: secure with a yield of four percent, rather than chasing 210 00:11:28,440 --> 00:11:30,400 Speaker 2: five but increasing the risk profile. 211 00:11:31,000 --> 00:11:33,640 Speaker 1: Fantastic Jimmy, thanks for talking to Fear and Greed. Thank 212 00:11:33,679 --> 00:11:36,800 Speaker 1: you for having me as Jimmy Dale, Naber Trader's Director 213 00:11:36,920 --> 00:11:41,080 Speaker 1: SMSF and Investor Behavior, and a reminder always seek professional 214 00:11:41,080 --> 00:11:43,760 Speaker 1: advice before making any investment decisions. I'm Sean Almer and 215 00:11:43,800 --> 00:11:46,120 Speaker 1: this is fear and Greed Q and a