1 00:00:10,460 --> 00:00:13,620 Speaker 1: Hello, and welcome to The Australian's Money Puzzle Podcast. I'm 2 00:00:13,660 --> 00:00:17,610 Speaker 1: James Kirby, the Wealth Editor at The Australian. Welcome aboard, everybody, 3 00:00:18,050 --> 00:00:21,290 Speaker 1: and welcome to the first in our short series of 4 00:00:21,550 --> 00:00:25,490 Speaker 1: special summer editions. The idea of this series is to 5 00:00:25,530 --> 00:00:30,530 Speaker 1: give you a perfect launching pad for your investment ambitions 6 00:00:30,590 --> 00:00:34,879 Speaker 1: in the year ahead. Now, over the coming episodes, we're 7 00:00:34,900 --> 00:00:37,960 Speaker 1: going to talk about shares. We're going to talk about property. 8 00:00:37,979 --> 00:00:44,370 Speaker 1: We're of investing in 2025. Today, we launch the series 9 00:00:44,690 --> 00:00:47,669 Speaker 1: with the first of a two-part episode on your shares 10 00:00:48,210 --> 00:00:51,970 Speaker 1: in 2025. We're going to talk today about share markets, 11 00:00:52,010 --> 00:00:55,500 Speaker 1: the actual outlook for the wider markets, the ASX, the 12 00:00:55,680 --> 00:00:58,760 Speaker 1: S & P, the NASDAQ. Next week, we'll talk about 13 00:00:58,840 --> 00:01:02,680 Speaker 1: individual shares. My guest today is Mark Jokum. He is 14 00:01:02,720 --> 00:01:07,190 Speaker 1: the investment strategist at GlobalX ETFs. How are you, Mark? 15 00:01:08,090 --> 00:01:10,170 Speaker 2: Doing really well, James. Thanks for having me on the show. 16 00:01:10,370 --> 00:01:11,370 Speaker 2: I always enjoy our chats. 17 00:01:11,730 --> 00:01:14,679 Speaker 1: Thanks for volunteering for this one. This is the hot seat, Mark. 18 00:01:15,180 --> 00:01:17,180 Speaker 1: This is the one where people will ring you and say, 19 00:01:17,260 --> 00:01:21,240 Speaker 1: you were on that show and you said such and 20 00:01:21,260 --> 00:01:23,470 Speaker 1: such was going to happen. So we put that proviso 21 00:01:23,530 --> 00:01:25,229 Speaker 1: out there that no one knows what's going to happen. 22 00:01:25,650 --> 00:01:28,890 Speaker 1: But let's take a look systematically. I think if we might, 23 00:01:28,950 --> 00:01:32,830 Speaker 1: we might start with the ASX. a pretty good year 24 00:01:33,090 --> 00:01:36,890 Speaker 1: for our market this year. We can always rely on 25 00:01:36,970 --> 00:01:39,819 Speaker 1: our dividend yield, which comes in at a little over 4%. 26 00:01:39,819 --> 00:01:44,400 Speaker 1: And that does make the ASX a more stable market. 27 00:01:44,440 --> 00:01:47,520 Speaker 1: But unfortunately, it seems to be a slower dollar market 28 00:01:47,560 --> 00:01:49,700 Speaker 1: in recent years, Mark. Is that a fair thing to say? 29 00:01:49,720 --> 00:01:53,160 Speaker 2: Yeah, I think that's quite fair to say, James. We've 30 00:01:53,180 --> 00:01:55,620 Speaker 2: seen the ASX perform well for the year. It's up 31 00:01:55,640 --> 00:01:58,790 Speaker 2: just over 16% year to date. But A lot of 32 00:01:58,830 --> 00:02:02,250 Speaker 2: that has come from the income side. In Australia, we 33 00:02:02,290 --> 00:02:05,130 Speaker 2: have been lucky to have a high dividend yield relative 34 00:02:05,230 --> 00:02:09,050 Speaker 2: to the broader developed markets. That being said, the dividend 35 00:02:09,070 --> 00:02:12,060 Speaker 2: yield has actually fallen to some of the lowest levels 36 00:02:12,070 --> 00:02:15,380 Speaker 2: we've seen in the last few years. So people familiar 37 00:02:15,400 --> 00:02:17,700 Speaker 2: with the 4% to 5% may have to get used 38 00:02:17,760 --> 00:02:20,559 Speaker 2: to maybe the 3% to 4% range. And if you 39 00:02:20,639 --> 00:02:23,399 Speaker 2: look in terms of what's really been driving the Australian 40 00:02:23,460 --> 00:02:26,760 Speaker 2: share market It hasn't been the earnings growth. It's been 41 00:02:26,820 --> 00:02:29,420 Speaker 2: the price that investors have been willing to pay for 42 00:02:29,480 --> 00:02:31,480 Speaker 2: some of these companies, the banks who have been on 43 00:02:31,520 --> 00:02:35,180 Speaker 2: an absolute tear this year. And given they've performed well, 44 00:02:35,220 --> 00:02:38,900 Speaker 2: they've got relatively high dividend yields. Next year, when we're 45 00:02:38,919 --> 00:02:42,520 Speaker 2: looking into 2025, earnings growth might be relatively muted and 46 00:02:42,560 --> 00:02:45,140 Speaker 2: we might see the multiple that people are willing to 47 00:02:45,200 --> 00:02:49,019 Speaker 2: pay for ASX stocks fall, which is why a lot 48 00:02:49,040 --> 00:02:51,919 Speaker 2: of consensus is predicting that the ASX will be relatively 49 00:02:52,040 --> 00:02:54,549 Speaker 2: flat over the next 12 months. But like you said, 50 00:02:54,690 --> 00:02:57,919 Speaker 2: that cushion or buffer of what investors and Aussies love 51 00:02:57,960 --> 00:03:01,000 Speaker 2: in income, particularly trusted forms of income, may see a 52 00:03:01,040 --> 00:03:03,400 Speaker 2: flight of capital come into the Australian market as well. 53 00:03:03,560 --> 00:03:07,160 Speaker 1: So looking at 2024, when we say at 16% or so, 54 00:03:07,940 --> 00:03:11,230 Speaker 1: there or thereabouts, 3% to 4% of that was dividends 55 00:03:11,790 --> 00:03:15,050 Speaker 1: and the rest was price growth. So if you say 56 00:03:15,130 --> 00:03:17,690 Speaker 1: that when people talk about next year being flat, if 57 00:03:17,690 --> 00:03:21,970 Speaker 1: 2025 was flat, that would mean that the ASX is 58 00:03:22,050 --> 00:03:24,250 Speaker 1: more or less where it is at the moment. on 59 00:03:24,290 --> 00:03:28,010 Speaker 1: the 8,000 mark, but we still get that 3% or 4% 60 00:03:28,010 --> 00:03:30,950 Speaker 1: dividend yield. So it's flat price-wise, but for us, there's 61 00:03:30,990 --> 00:03:33,679 Speaker 1: always the dividend yield. Do we pay too high a 62 00:03:33,720 --> 00:03:38,060 Speaker 1: price as a market for that 4% dividend yield? Or 63 00:03:38,200 --> 00:03:40,100 Speaker 1: as you say, it's even less than that now. 64 00:03:40,660 --> 00:03:43,040 Speaker 2: Yeah, sometimes some people might say that we're paying a 65 00:03:43,060 --> 00:03:44,680 Speaker 2: little bit high. I mean, if you look at some 66 00:03:44,720 --> 00:03:46,980 Speaker 2: of our Australian banks, they are some of the most 67 00:03:47,060 --> 00:03:50,950 Speaker 2: expensive banks in the world, trading at 19 times earnings. 68 00:03:51,610 --> 00:03:54,070 Speaker 2: And when you think about the equity risk premium or 69 00:03:54,110 --> 00:03:56,930 Speaker 2: how much willing to risk to invest in shares over bonds, 70 00:03:57,830 --> 00:03:59,500 Speaker 2: when you're looking at some of the risk-free rates or 71 00:03:59,510 --> 00:04:00,900 Speaker 2: some of the bond yield that some of these big 72 00:04:00,940 --> 00:04:04,060 Speaker 2: banks are paying, some may argue, why am I taking 73 00:04:04,120 --> 00:04:07,960 Speaker 2: such a higher risk for a lower return profile? Banks 74 00:04:07,980 --> 00:04:12,020 Speaker 2: themselves have been a fantastic source of dividends, fantastic source 75 00:04:12,040 --> 00:04:15,340 Speaker 2: of return. Funnily enough, James, most of the bank's returns 76 00:04:15,660 --> 00:04:18,460 Speaker 2: from a capital perspective, their price returns have actually been 77 00:04:18,640 --> 00:04:21,310 Speaker 2: negative over the past decade. with the exception of a 78 00:04:21,350 --> 00:04:24,930 Speaker 2: few like Macquarie and CBA. So with an environment that 79 00:04:24,950 --> 00:04:27,400 Speaker 2: we're heading in, lower interest rates, we might have a 80 00:04:27,460 --> 00:04:29,940 Speaker 2: bit of net interest margin pressures of some of the banks. 81 00:04:30,440 --> 00:04:33,260 Speaker 2: And these dividends have risen, but the payout ratios that 82 00:04:33,300 --> 00:04:36,900 Speaker 2: these banks are providing have also risen as well. So 83 00:04:37,230 --> 00:04:39,010 Speaker 2: for a lot of investors, they may think, well, how 84 00:04:39,050 --> 00:04:41,350 Speaker 2: sustainable are these dividends that are going to be paid 85 00:04:41,370 --> 00:04:43,909 Speaker 2: for the banks if you've had payout ratios rise from 86 00:04:43,930 --> 00:04:48,480 Speaker 2: around about 70% to closer to 80%? So overall, even 87 00:04:48,500 --> 00:04:52,080 Speaker 2: though bank earnings went backwards really in 2024, there could 88 00:04:52,100 --> 00:04:55,210 Speaker 2: be an expected rebound next year. That's why people have 89 00:04:55,290 --> 00:04:57,390 Speaker 2: bid up these banks a lot. So are we paying 90 00:04:57,410 --> 00:05:00,540 Speaker 2: too much? Potentially. But overall, there still is a lot of, 91 00:05:00,790 --> 00:05:03,390 Speaker 2: from an income perspective, a lot of attraction within the 92 00:05:03,450 --> 00:05:04,070 Speaker 2: Australian banks. 93 00:05:04,810 --> 00:05:08,479 Speaker 1: So the powers that be, the brains trust for want 94 00:05:08,500 --> 00:05:12,380 Speaker 1: of a better word, are saying that they don't think 95 00:05:12,480 --> 00:05:18,490 Speaker 1: Australian share markets will do much In 2025, they have 96 00:05:18,510 --> 00:05:20,770 Speaker 1: a variety of reasons for that. One of them is 97 00:05:20,910 --> 00:05:25,510 Speaker 1: pure mathematics that the earnings growth isn't there. And I 98 00:05:25,589 --> 00:05:29,570 Speaker 1: imagine there's also some skepticism that we could repeat what 99 00:05:29,620 --> 00:05:34,500 Speaker 1: we did in 2024. Now, here's the thing, Mark. The 100 00:05:34,839 --> 00:05:39,660 Speaker 1: market ASX performance, that terrific performance of 16% or so, 101 00:05:40,060 --> 00:05:43,820 Speaker 1: which is double what you might reasonably expect on an 102 00:05:43,880 --> 00:05:44,260 Speaker 1: average year. 103 00:05:44,680 --> 00:05:46,940 Speaker 2: Yeah. I mean, if you look at historically, since the 104 00:05:46,980 --> 00:05:50,420 Speaker 2: early 1900s, Australian share market has done around 9% or 10%. 105 00:05:50,420 --> 00:05:51,859 Speaker 2: So that is a little bit above average. 106 00:05:52,200 --> 00:05:54,980 Speaker 1: It's quite a bit above average. So all these people 107 00:05:55,020 --> 00:05:57,920 Speaker 1: who are telling us that the market won't do anything 108 00:05:57,980 --> 00:06:00,920 Speaker 1: in 2025 and could finish the year where it is now, 109 00:06:01,420 --> 00:06:06,680 Speaker 1: these same people all said, sell banks. And the banks 110 00:06:07,320 --> 00:06:10,300 Speaker 1: are up about 30%. They drove the whole market. They 111 00:06:10,320 --> 00:06:13,060 Speaker 1: turned the whole market. It's the reason we did the 16. 112 00:06:13,060 --> 00:06:15,120 Speaker 1: It's the key reason we did the 16. So should 113 00:06:15,140 --> 00:06:15,659 Speaker 1: we listen to them? 114 00:06:16,779 --> 00:06:18,480 Speaker 2: Well, I guess this is to your earlier point, James, 115 00:06:18,500 --> 00:06:21,659 Speaker 2: around the perils of forecasting. There always seems to be 116 00:06:21,720 --> 00:06:25,680 Speaker 2: some consistency that emerges with these forecasts. There's a tendency 117 00:06:25,740 --> 00:06:30,609 Speaker 2: for large institutions to cluster, particularly around what consensus they're 118 00:06:30,620 --> 00:06:34,930 Speaker 2: thinking or rounded figures. And there's generally either unfounded optimism 119 00:06:35,290 --> 00:06:36,870 Speaker 2: or pessimism within us. 120 00:06:37,450 --> 00:06:39,270 Speaker 1: But they feel comfortable. If they all say the same thing, 121 00:06:39,290 --> 00:06:41,890 Speaker 1: then nobody stands out as being particularly pessimistic. 122 00:06:42,440 --> 00:06:45,500 Speaker 2: Hopeless well yeah again the analogy is you know back 123 00:06:45,540 --> 00:06:48,920 Speaker 2: in the 1990s no one got fired for recommending ibm 124 00:06:49,000 --> 00:06:51,540 Speaker 2: so yeah there's this essence of job security as well 125 00:06:51,560 --> 00:06:54,760 Speaker 2: but i always am on the believer that short-term forecasts 126 00:06:54,779 --> 00:06:57,430 Speaker 2: have little relevance it's really about the long term but 127 00:06:57,460 --> 00:07:00,089 Speaker 2: also around the earnings growth so even though a lot 128 00:07:00,130 --> 00:07:02,150 Speaker 2: of the a lot of big banks have said to 129 00:07:02,190 --> 00:07:04,490 Speaker 2: sell on banks well it's proven that it's actually been 130 00:07:04,510 --> 00:07:06,630 Speaker 2: a bit of a bad strategy going into this year 131 00:07:07,089 --> 00:07:09,630 Speaker 2: It's really about how you want to position your portfolios, 132 00:07:09,670 --> 00:07:12,250 Speaker 2: whether you want to take certain sectoral bets or have 133 00:07:12,270 --> 00:07:15,470 Speaker 2: the overarching view of the entire market, which encompasses a 134 00:07:15,510 --> 00:07:18,880 Speaker 2: lot of different indices. And from the Australian market, banks 135 00:07:18,920 --> 00:07:22,300 Speaker 2: have absolutely smashed the lights out compared to the miners 136 00:07:22,340 --> 00:07:25,500 Speaker 2: and resources. There may be some sluggish growth coming out 137 00:07:25,520 --> 00:07:28,340 Speaker 2: of the Chinese demand, which could be a bit of 138 00:07:28,380 --> 00:07:30,360 Speaker 2: a headwind for some of these companies. But a lot 139 00:07:30,380 --> 00:07:32,900 Speaker 2: of people are thinking there could be mean reversion and 140 00:07:32,920 --> 00:07:34,920 Speaker 2: some of the miners and resources could draw back some 141 00:07:34,960 --> 00:07:38,400 Speaker 2: of our performance. So overall, it still is a reason 142 00:07:38,440 --> 00:07:41,260 Speaker 2: to be invested into shares, particularly in the Australian market. 143 00:07:41,640 --> 00:07:43,800 Speaker 2: But in terms of which sectors are going to dominate, 144 00:07:43,960 --> 00:07:46,660 Speaker 2: very hard to say leading into 2025. 145 00:07:46,660 --> 00:07:53,470 Speaker 1: Okay. Now, those forecasts, the consensus being that the market 146 00:07:53,490 --> 00:07:58,830 Speaker 1: does very little price-wise, is there much variation? Are there extremes? 147 00:07:58,930 --> 00:08:01,030 Speaker 1: Are there people saying the market's going to drop 20% 148 00:08:01,030 --> 00:08:03,290 Speaker 1: or lift 20%? Is there anyone saying that? 149 00:08:04,830 --> 00:08:08,080 Speaker 2: No one's incredibly bearish. I have seen some forecasts from 150 00:08:08,280 --> 00:08:10,980 Speaker 2: some of the big US investment banks that have forecasted 151 00:08:11,000 --> 00:08:13,880 Speaker 2: the price target to be around 7,900. So that does 152 00:08:13,920 --> 00:08:16,300 Speaker 2: imply a little bit of a fall of a few percent, 153 00:08:16,720 --> 00:08:18,840 Speaker 2: but there's no one who's been incredibly bullish either, which 154 00:08:18,880 --> 00:08:22,700 Speaker 2: is why some consensus has been around that 8,400, 8,500 target, 155 00:08:22,720 --> 00:08:25,900 Speaker 2: which as of recording today is relatively flat. A little 156 00:08:25,920 --> 00:08:27,960 Speaker 2: bit different to some of our US counterparts where we 157 00:08:28,000 --> 00:08:30,420 Speaker 2: have seen a little bit more dispersion in some of 158 00:08:30,440 --> 00:08:31,320 Speaker 2: the price targets too. 159 00:08:31,960 --> 00:08:35,469 Speaker 1: And looking inside the sectors then, I mean, our market 160 00:08:35,500 --> 00:08:37,750 Speaker 1: is very much banks. Is there a sense that banks 161 00:08:37,990 --> 00:08:43,130 Speaker 1: won't run in 2025? And miners, I mean, yes, there's 162 00:08:43,170 --> 00:08:45,270 Speaker 1: always issues around China, but I see iron ore again 163 00:08:45,350 --> 00:08:49,790 Speaker 1: cruising over the $ 100 a ton mark, signaling robust health, 164 00:08:49,809 --> 00:08:53,069 Speaker 1: you'd have to suggest, for our miners who are very 165 00:08:53,110 --> 00:08:56,189 Speaker 1: much iron ore miners and the big stocks even more so. 166 00:08:56,590 --> 00:09:00,090 Speaker 1: So is there any sort of sectoral forecast worth telling 167 00:09:00,150 --> 00:09:00,429 Speaker 1: us about? 168 00:09:01,940 --> 00:09:03,660 Speaker 2: Yeah, if you look at the underlying earnings of some 169 00:09:03,679 --> 00:09:05,680 Speaker 2: of the companies, it probably is a bit more upside 170 00:09:05,720 --> 00:09:08,090 Speaker 2: within some of the targets for some of the miners 171 00:09:08,110 --> 00:09:11,250 Speaker 2: versus the banks, which are expected to decline a little bit. 172 00:09:11,630 --> 00:09:14,329 Speaker 2: I think most of the analysts have sell side ratings 173 00:09:14,410 --> 00:09:16,720 Speaker 2: or either hold position on some of the banks versus 174 00:09:16,740 --> 00:09:18,500 Speaker 2: the miners where there is a bit more of a 175 00:09:18,559 --> 00:09:21,520 Speaker 2: buying or an overweight. But like you said, iron ore 176 00:09:21,559 --> 00:09:24,679 Speaker 2: prices are relatively subdued at the moment, around $ 100 a tonne. 177 00:09:25,790 --> 00:09:27,530 Speaker 2: And that's on the back of a lot of the, 178 00:09:27,750 --> 00:09:30,610 Speaker 2: it's really a story about China and what that demand 179 00:09:30,630 --> 00:09:33,250 Speaker 2: is going to do relative to the Australian economy. But 180 00:09:33,270 --> 00:09:35,260 Speaker 2: you've still got a diverse set of miners who are 181 00:09:35,300 --> 00:09:38,400 Speaker 2: operating in different areas outside of iron ore. Copper has 182 00:09:38,420 --> 00:09:42,840 Speaker 2: been incredibly popular in terms of its electrification and application 183 00:09:42,880 --> 00:09:46,240 Speaker 2: towards artificial intelligence. There may be a turnaround in the 184 00:09:46,300 --> 00:09:49,329 Speaker 2: lithium market leading into an election year where we've got 185 00:09:49,830 --> 00:09:53,089 Speaker 2: the opposition party who's a lot more bullish on sectors 186 00:09:53,110 --> 00:09:55,620 Speaker 2: like uranium that could play a part for uranium mining. 187 00:09:55,820 --> 00:09:57,730 Speaker 2: Australia's got about a third of the reserves when it 188 00:09:57,770 --> 00:10:01,120 Speaker 2: comes to uranium. So there's other sectors that people could 189 00:10:01,150 --> 00:10:04,140 Speaker 2: be looking at as well. So far this year, technology 190 00:10:04,179 --> 00:10:07,280 Speaker 2: has been one of the best performing underlying sectors year 191 00:10:07,300 --> 00:10:10,400 Speaker 2: to date, followed by financials, whereas some of the worst 192 00:10:10,420 --> 00:10:13,280 Speaker 2: performing sectors have actually been energy and materials so far. 193 00:10:13,890 --> 00:10:15,890 Speaker 2: So there could be a little bit of mean reversion, 194 00:10:16,110 --> 00:10:19,130 Speaker 2: but that's where it makes sense to own a broad market. 195 00:10:19,390 --> 00:10:22,230 Speaker 2: Or let's say you actually don't want to own the 196 00:10:22,270 --> 00:10:24,130 Speaker 2: banks or some of the miners, and you want to 197 00:10:24,170 --> 00:10:27,030 Speaker 2: play more on the industrials, the tech side, or really 198 00:10:27,100 --> 00:10:29,040 Speaker 2: the other half of the market, you could look at 199 00:10:29,080 --> 00:10:32,540 Speaker 2: funds that actually exclude both banks and miners for your 200 00:10:32,620 --> 00:10:35,199 Speaker 2: Aussie allocation. So various ways to play it based on 201 00:10:35,220 --> 00:10:36,699 Speaker 2: your sector positioning next year. 202 00:10:37,000 --> 00:10:39,720 Speaker 1: As an investment strategist, are you a believer in reversion 203 00:10:39,740 --> 00:10:42,400 Speaker 1: to the mean? Do you think that What did you say, 10% 204 00:10:42,400 --> 00:10:46,020 Speaker 1: every year on the Australian share market since 1900? Do 205 00:10:46,040 --> 00:10:48,260 Speaker 1: you think that's it? It's always 10%? 206 00:10:48,260 --> 00:10:50,780 Speaker 2: I am a believer in mean reversion, but not over 207 00:10:50,800 --> 00:10:53,099 Speaker 2: the short term, because things can run hot for a 208 00:10:53,140 --> 00:10:55,660 Speaker 2: long period of time. Like we've seen with the whole 209 00:10:55,700 --> 00:10:58,760 Speaker 2: idea of growth versus value, everyone is saying that value 210 00:10:58,860 --> 00:11:01,760 Speaker 2: stocks and the value factor has to eventually come back, 211 00:11:02,179 --> 00:11:05,460 Speaker 2: but they can go on wild rides of our performance 212 00:11:05,480 --> 00:11:07,640 Speaker 2: for a long period of time. So eventually there will 213 00:11:07,679 --> 00:11:10,390 Speaker 2: be reversion. But in terms of calling that, and I 214 00:11:10,410 --> 00:11:12,550 Speaker 2: think that's the tough thing with predictions, it's not only 215 00:11:12,570 --> 00:11:14,510 Speaker 2: do you have to get the call right on which 216 00:11:14,550 --> 00:11:16,550 Speaker 2: sector you want to be positioned in or which stock, 217 00:11:16,809 --> 00:11:18,650 Speaker 2: but you have to get the timing right around when 218 00:11:18,690 --> 00:11:21,189 Speaker 2: to buy and also the timing right of when to sell, 219 00:11:21,610 --> 00:11:24,130 Speaker 2: which is a trifecta or a very hard recipe for 220 00:11:24,170 --> 00:11:27,430 Speaker 2: investors to do. So to answer your question, I am 221 00:11:27,470 --> 00:11:29,700 Speaker 2: a believer in mean reversion, but when it will come, 222 00:11:30,250 --> 00:11:31,199 Speaker 2: no one really knows that. 223 00:11:31,660 --> 00:11:34,280 Speaker 1: I've had some deeply frustrated value investors on the show. 224 00:11:34,800 --> 00:11:36,740 Speaker 1: And they really thought their day had come in 2024. 225 00:11:36,740 --> 00:11:39,000 Speaker 1: They really thought it was all going to fall into place, 226 00:11:39,080 --> 00:11:42,809 Speaker 1: and it didn't. The outperformance in the market in 2024 227 00:11:42,809 --> 00:11:47,050 Speaker 1: was technology and finance. The earnings don't suggest that at all. 228 00:11:47,770 --> 00:11:50,410 Speaker 1: We take a break and look at an extreme version 229 00:11:50,429 --> 00:11:52,270 Speaker 1: of what we're seeing, which is the US market, which, 230 00:11:52,330 --> 00:11:54,980 Speaker 1: of course, is going to dictate the world share market, 231 00:11:55,080 --> 00:11:57,890 Speaker 1: and it's going to dictate our own ASX market in 2025, 232 00:11:57,880 --> 00:12:12,200 Speaker 1: back in a moment. Hello and welcome back to the 233 00:12:12,280 --> 00:12:15,560 Speaker 1: Australia's Money Puzzle podcast. I'm James Kirby. I'm talking to 234 00:12:15,640 --> 00:12:19,760 Speaker 1: Mark Jokum of GlobalX ETFs and we are talking about 235 00:12:19,960 --> 00:12:25,860 Speaker 1: what is going to happen in 2025 on the share markets. Now, Mark, 236 00:12:25,980 --> 00:12:29,480 Speaker 1: cast your mind back this time last year. People would 237 00:12:29,520 --> 00:12:31,750 Speaker 1: have been saying, well, that was a very good year 238 00:12:31,800 --> 00:12:34,040 Speaker 1: on the US market. You can't expect that all to 239 00:12:34,090 --> 00:12:40,740 Speaker 1: happen again. You can't expect subdued or modest ordinary earnings 240 00:12:40,800 --> 00:12:45,020 Speaker 1: growth and terrific price appreciation on the market. You can't 241 00:12:45,080 --> 00:12:47,800 Speaker 1: expect Donald Trump to win again, good God, and have 242 00:12:47,840 --> 00:12:50,540 Speaker 1: the whole Trump bump again. And of course, it all 243 00:12:50,559 --> 00:12:52,920 Speaker 1: came to pass. And just to top it off, you 244 00:12:52,950 --> 00:13:01,030 Speaker 1: had the whole thematic excitement around AIs to the point 245 00:13:01,070 --> 00:13:06,050 Speaker 1: that the world's biggest share is now NVIDIA. which was 246 00:13:06,110 --> 00:13:09,720 Speaker 1: virtually unknown, I would say, a year ago. So I 247 00:13:09,910 --> 00:13:12,300 Speaker 1: think that was a very good approach for listeners, Mark, 248 00:13:12,320 --> 00:13:13,980 Speaker 1: at what we did there and what you did at 249 00:13:14,020 --> 00:13:16,420 Speaker 1: the first segment of the show, where you give an idea. 250 00:13:16,980 --> 00:13:18,560 Speaker 1: We have to have something to hang our hat on. 251 00:13:18,940 --> 00:13:21,540 Speaker 1: And we're not saying we believe these forecasts. We're all 252 00:13:21,559 --> 00:13:23,870 Speaker 1: smart enough to know that forecasts are forecasts. Nobody knows 253 00:13:23,900 --> 00:13:28,250 Speaker 1: the future. However, let's at least know what they are. 254 00:13:28,330 --> 00:13:34,250 Speaker 1: So the consensus forecast for the ASX... was basically that 255 00:13:34,270 --> 00:13:36,360 Speaker 1: the share prices would go nowhere and the dividends would 256 00:13:36,400 --> 00:13:41,060 Speaker 1: come in and we might do 3% or 4% total return. Now, 257 00:13:41,140 --> 00:13:43,360 Speaker 1: that's not the situation in the U.S. Tell us about 258 00:13:44,100 --> 00:13:47,580 Speaker 1: what the U.S. markets are looking like, what the forecasts 259 00:13:47,640 --> 00:13:48,200 Speaker 1: are looking like. 260 00:13:48,800 --> 00:13:51,520 Speaker 2: Very interesting market. And like you said, James, not many 261 00:13:51,559 --> 00:13:54,820 Speaker 2: people would have expected the S & P 500, which is, 262 00:13:55,059 --> 00:13:57,250 Speaker 2: I guess, the benchmark that a lot of people refer 263 00:13:57,280 --> 00:14:00,109 Speaker 2: to for U.S. equities, to have done so well, closing 264 00:14:00,150 --> 00:14:02,730 Speaker 2: in on close to 3%. 30% for the year on 265 00:14:02,830 --> 00:14:05,209 Speaker 2: the back of a great year for 2023 that it 266 00:14:05,250 --> 00:14:09,089 Speaker 2: had before. And looking into 2025, we've actually seen a 267 00:14:09,350 --> 00:14:12,930 Speaker 2: lot more bullishness that continues within the US share market. 268 00:14:13,650 --> 00:14:15,610 Speaker 2: And I think one of the reasons for that is 269 00:14:15,770 --> 00:14:18,890 Speaker 2: the US share market is projected to drive most of 270 00:14:18,929 --> 00:14:22,290 Speaker 2: the earnings growth versus some of the other markets. In Australia, 271 00:14:22,340 --> 00:14:24,680 Speaker 2: you're relatively flat, maybe a few percent in terms of 272 00:14:24,780 --> 00:14:27,620 Speaker 2: earnings growth, but companies in S & P 500 are 273 00:14:27,740 --> 00:14:31,260 Speaker 2: expected to generate earnings growth of about 12%. So a 274 00:14:31,280 --> 00:14:34,710 Speaker 2: lot of price targets for the US market and S & 275 00:14:34,640 --> 00:14:38,790 Speaker 2: P 500 are hovering around 6,500, which implies about an 8% 276 00:14:38,790 --> 00:14:41,090 Speaker 2: upside from where we are now. But you'd have a 277 00:14:41,130 --> 00:14:43,990 Speaker 2: lot more divergence compared to the Australian market, where you 278 00:14:44,010 --> 00:14:48,229 Speaker 2: have seen some banks being as bearish as around 5,800, 279 00:14:48,210 --> 00:14:50,510 Speaker 2: so a little bit of a decline, whereas some banks 280 00:14:50,550 --> 00:14:54,090 Speaker 2: being as bullish as reaching around 7,000 points. And we've 281 00:14:54,110 --> 00:14:56,910 Speaker 2: just reached 6,000, which has been a record high. A 282 00:14:57,220 --> 00:15:00,030 Speaker 2: lot of people are confused record highs doesn't that mean 283 00:15:00,150 --> 00:15:03,880 Speaker 2: it's due for a pullback but the valuations are justified 284 00:15:04,200 --> 00:15:06,980 Speaker 2: because a lot of this has been supported by stronger 285 00:15:07,060 --> 00:15:10,000 Speaker 2: earnings growth from these underlying companies and you mentioned before 286 00:15:10,060 --> 00:15:12,720 Speaker 2: the likes of nvidia and apple funnily enough they are 287 00:15:12,760 --> 00:15:15,160 Speaker 2: playing a bit of a tag between who's the most 288 00:15:15,210 --> 00:15:17,470 Speaker 2: valuable company right now it's apple the next day it 289 00:15:17,510 --> 00:15:21,109 Speaker 2: changes So really, really big earnings growth from a lot 290 00:15:21,150 --> 00:15:23,380 Speaker 2: of these tech giants as well, driving a lot of 291 00:15:23,390 --> 00:15:24,680 Speaker 2: that U.S. share market return. 292 00:15:24,900 --> 00:15:26,820 Speaker 1: So even if it came to pass, and let's talk 293 00:15:26,880 --> 00:15:31,100 Speaker 1: about that consensus. This, folks, is a consensus estimate for 294 00:15:31,120 --> 00:15:35,620 Speaker 1: the price appreciation or the percentage increase that would occur 295 00:15:36,000 --> 00:15:39,990 Speaker 1: on U.S. markets as represented by the S & P 500. 296 00:15:39,990 --> 00:15:43,090 Speaker 1: And what the brokers are saying is that they're expecting 297 00:15:43,130 --> 00:15:46,330 Speaker 1: something in the order of 8% for that market. Now, 8% 298 00:15:46,330 --> 00:15:51,990 Speaker 1: is a perfectly reasonable solid, good return. However, a couple 299 00:15:52,010 --> 00:15:56,060 Speaker 1: of things. It would be less than a third of 300 00:15:56,100 --> 00:15:59,400 Speaker 1: the return this year they've enjoyed in the US. That's 301 00:15:59,520 --> 00:16:02,440 Speaker 1: one thing. The second thing is that the dividend yields 302 00:16:02,460 --> 00:16:06,040 Speaker 1: where we talked about in Australia, you always, for total return, 303 00:16:06,120 --> 00:16:08,660 Speaker 1: add on 3% to 4% for the dividends. You don't 304 00:16:08,750 --> 00:16:10,790 Speaker 1: add on much in the US at all. What would 305 00:16:10,810 --> 00:16:11,660 Speaker 1: you sensibly add on? 306 00:16:12,580 --> 00:16:14,840 Speaker 2: Usually 1% to 2% for the US. A lot of 307 00:16:14,860 --> 00:16:16,920 Speaker 2: the US companies reinvest in their growth. They spend a 308 00:16:16,940 --> 00:16:19,640 Speaker 2: lot on CapEx. Dividends and income is not a big 309 00:16:19,700 --> 00:16:22,940 Speaker 2: focus for US investors. That being said, there are ways 310 00:16:23,040 --> 00:16:25,860 Speaker 2: to get income from the US by focusing on high 311 00:16:25,900 --> 00:16:30,100 Speaker 2: dividend yielding sectors, whether it be industrials, telcos, and other sectors. 312 00:16:30,520 --> 00:16:32,700 Speaker 2: But if you look at the US index, predominant of 313 00:16:32,780 --> 00:16:34,120 Speaker 2: it is in communications and tech. 314 00:16:34,140 --> 00:16:36,060 Speaker 1: And their high dividend would be like 3% or 4%, 315 00:16:36,060 --> 00:16:40,080 Speaker 1: while our high dividend would be 4% and 5%. And 316 00:16:40,500 --> 00:16:43,160 Speaker 1: then you get franking on top of that, taking home 6% 317 00:16:43,160 --> 00:16:45,520 Speaker 1: or 7%. So there's no competition on that front, is 318 00:16:45,540 --> 00:16:45,940 Speaker 1: there really? 319 00:16:46,920 --> 00:16:49,250 Speaker 2: Exactly right. You get the added tax benefits of having 320 00:16:49,430 --> 00:16:52,450 Speaker 2: exposure to high dividends in Australia. But it's really important, James, 321 00:16:52,470 --> 00:16:54,890 Speaker 2: that a lot of investors apply a total return approach 322 00:16:54,910 --> 00:16:57,890 Speaker 2: to investing. You incorporate both the capital and the dividend side. 323 00:16:58,250 --> 00:17:00,670 Speaker 2: So whilst the Australian market can definitely provide income, and 324 00:17:00,690 --> 00:17:02,620 Speaker 2: maybe that's where a lot of investors who are income 325 00:17:02,650 --> 00:17:05,359 Speaker 2: orientated want to focus, there still is this huge market 326 00:17:05,380 --> 00:17:08,300 Speaker 2: being the US, which is expected to from an earnings perspective, 327 00:17:08,400 --> 00:17:10,880 Speaker 2: to grow close to double digits, you could be missing 328 00:17:10,920 --> 00:17:13,280 Speaker 2: out on that capital side if you only focus on income. 329 00:17:13,740 --> 00:17:16,270 Speaker 2: So we still have, I guess, from GlobalX's perspective, a 330 00:17:16,290 --> 00:17:18,490 Speaker 2: view that the US will continue to march on. They 331 00:17:18,550 --> 00:17:22,330 Speaker 2: continue to be in this mid-cycle expansionary phase. Considering that 332 00:17:22,369 --> 00:17:26,109 Speaker 2: we've seen this renewed optimism from the US election, there's 333 00:17:26,150 --> 00:17:27,649 Speaker 2: a bit of animal spirits in the air, a bit 334 00:17:27,670 --> 00:17:31,139 Speaker 2: of a risk-on sentiment. Some of the key appointments from 335 00:17:31,220 --> 00:17:33,960 Speaker 2: Trump seem to be very bullish for the market overall. 336 00:17:34,480 --> 00:17:37,000 Speaker 2: And US companies, they've got some of the biggest capitalist 337 00:17:37,040 --> 00:17:40,240 Speaker 2: machines in the world. So a lot of people might think, well, 338 00:17:40,420 --> 00:17:42,780 Speaker 2: I have to be involved in the mega cap tech 339 00:17:42,840 --> 00:17:45,560 Speaker 2: names to get those big returns because that's where a 340 00:17:45,600 --> 00:17:48,260 Speaker 2: lot of the returns have come. But funnily enough, the 341 00:17:48,300 --> 00:17:52,880 Speaker 2: contribution of these magnificent seven names, the likes of Nvidia, Apple, Microsoft, 342 00:17:53,340 --> 00:17:57,600 Speaker 2: has actually decreased in 2024. in 2023, they contributed close 343 00:17:57,619 --> 00:18:01,580 Speaker 2: to two thirds of the total markets gained. Whereas this year, James, 344 00:18:01,600 --> 00:18:04,920 Speaker 2: they've actually contributed around about half. Still a lot, don't 345 00:18:04,940 --> 00:18:07,020 Speaker 2: get me wrong, but you're starting to see a bit 346 00:18:07,060 --> 00:18:11,110 Speaker 2: more of a potentially broadening of them. Concentration is more 347 00:18:11,140 --> 00:18:13,669 Speaker 2: a feature than it is a bug of markets, because naturally, 348 00:18:13,710 --> 00:18:16,170 Speaker 2: there's only a handful of companies that drive the majority 349 00:18:16,330 --> 00:18:20,150 Speaker 2: of total shareholder returns. When you're seeing this broadening out 350 00:18:20,270 --> 00:18:22,250 Speaker 2: of the markets, we could see a bit more interest 351 00:18:22,290 --> 00:18:26,070 Speaker 2: in smaller companies in the US or other sectors, as 352 00:18:26,130 --> 00:18:29,810 Speaker 2: there seems to be this diversification of earnings and improved sentiment, 353 00:18:30,310 --> 00:18:33,690 Speaker 2: we may see new players come in to the leading 354 00:18:33,740 --> 00:18:36,080 Speaker 2: performers of the US market. If you look at some 355 00:18:36,100 --> 00:18:39,740 Speaker 2: of the leading companies in the US so far, Nvidia 356 00:18:39,780 --> 00:18:43,300 Speaker 2: and some other companies have been huge contributors, but there's 357 00:18:43,320 --> 00:18:45,040 Speaker 2: also other companies that have done exceptionally well. 358 00:18:45,140 --> 00:18:48,230 Speaker 1: Just tell us who they are, outside the Magnificent Seven, 359 00:18:48,270 --> 00:18:49,649 Speaker 1: outside the tech titans. 360 00:18:50,170 --> 00:18:53,429 Speaker 2: Yeah, so NVIDIA has been the biggest one. They are 361 00:18:53,490 --> 00:18:55,899 Speaker 2: up about 100% year to date. But then you've got 362 00:18:56,060 --> 00:18:59,420 Speaker 2: other companies like energy companies. There's a Texas-based company called 363 00:18:59,460 --> 00:19:03,980 Speaker 2: Vistra Corporation. They are up over 300% year to date. 364 00:19:04,420 --> 00:19:08,290 Speaker 2: You've got other companies such as Texas Pacific Land Corp 365 00:19:08,390 --> 00:19:11,070 Speaker 2: as well. They are also more involved in land and 366 00:19:11,109 --> 00:19:12,970 Speaker 2: resource management. They are up around 200% for the year. 367 00:19:14,780 --> 00:19:17,440 Speaker 2: So you are seeing this broadening. 368 00:19:17,640 --> 00:19:21,760 Speaker 1: What about the blue chips, the original Dow blue chips? 369 00:19:22,540 --> 00:19:23,720 Speaker 1: Have they come to the party yet? 370 00:19:24,420 --> 00:19:27,160 Speaker 2: Yeah, I mean, the Dow Jones is at what, around 371 00:19:27,180 --> 00:19:31,020 Speaker 2: about 44,000 at the moment, 45,000 at all time highs. 372 00:19:31,500 --> 00:19:34,330 Speaker 2: So you're still seeing strong support for U.S. equities. And 373 00:19:34,369 --> 00:19:36,730 Speaker 2: that's why I think it's important to remain invested. You 374 00:19:36,750 --> 00:19:38,909 Speaker 2: can be invested in the mega cap tech names or 375 00:19:38,950 --> 00:19:42,280 Speaker 2: the FANG names. But having exposure to the blue chips, 376 00:19:42,320 --> 00:19:44,899 Speaker 2: whether it's your Dow Jones, looking at smaller cap names, 377 00:19:44,980 --> 00:19:47,200 Speaker 2: looking a bit more of a broadening trade is important, 378 00:19:47,530 --> 00:19:53,419 Speaker 2: particularly because Trump is very pro-business. pro-deregulation, reducing corporate taxes. 379 00:19:53,680 --> 00:19:57,619 Speaker 2: We're in a disinflationary environment. He's also very supportive of 380 00:19:57,700 --> 00:20:00,679 Speaker 2: energy companies as well. You know, the mantra, drill, baby, drill. 381 00:20:01,400 --> 00:20:04,030 Speaker 1: And I suppose, Mark, the rational part of this is 382 00:20:04,290 --> 00:20:07,210 Speaker 1: you cut corporate taxes, you immediately lift corporate profits, you 383 00:20:07,250 --> 00:20:10,140 Speaker 1: immediately lift earnings. Share prices should go up. So this 384 00:20:10,200 --> 00:20:14,430 Speaker 1: is a real driver in the short term. But what 385 00:20:14,490 --> 00:20:19,050 Speaker 1: about the longer term? Like any government that gets elected 386 00:20:19,150 --> 00:20:24,210 Speaker 1: on promises and various policy changes, the honeymoon ends. We 387 00:20:24,250 --> 00:20:26,090 Speaker 1: don't know how it will end, but it will end. 388 00:20:27,050 --> 00:20:35,100 Speaker 1: And we have deeper concerns about tariffs with the U.S., 389 00:20:35,790 --> 00:20:38,850 Speaker 1: and how that would actually ultimately slow everything, including the US. 390 00:20:39,630 --> 00:20:41,970 Speaker 2: Yeah, I think you're totally right, James. And tariffs in 391 00:20:42,010 --> 00:20:45,470 Speaker 2: itself is in fact inflationary. When you think about the 392 00:20:45,630 --> 00:20:49,580 Speaker 2: impact to the underlying consumer, the underlying US companies, and 393 00:20:50,000 --> 00:20:53,359 Speaker 2: even though what we're seeing, particularly within global markets, is 394 00:20:53,920 --> 00:20:58,189 Speaker 2: economies are flexing their geopolitical power. And the US has 395 00:20:58,230 --> 00:21:01,230 Speaker 2: come out to say we want America first, tariffs on everything. 396 00:21:01,280 --> 00:21:04,180 Speaker 2: That in itself could create some pressures for some of 397 00:21:04,200 --> 00:21:06,960 Speaker 2: the underlying companies, given that their input costs may rise. 398 00:21:07,520 --> 00:21:09,659 Speaker 2: So yes, you may see more development coming out of 399 00:21:09,700 --> 00:21:11,939 Speaker 2: the US. But I think a lot of these measures, 400 00:21:12,119 --> 00:21:14,000 Speaker 2: which is the opposite of what we've been used to, 401 00:21:14,060 --> 00:21:18,480 Speaker 2: it's all been about free trade agreements, globalization, things are changing. 402 00:21:18,930 --> 00:21:22,469 Speaker 2: But the US is definitely still keen to power on. 403 00:21:22,550 --> 00:21:24,870 Speaker 2: And if you look at some of the key appointments 404 00:21:24,910 --> 00:21:27,149 Speaker 2: I was mentioning before that Trump has built out, there 405 00:21:27,190 --> 00:21:30,780 Speaker 2: does seem this idea of maturity coming in. They've got 406 00:21:30,880 --> 00:21:34,560 Speaker 2: Scott Besant, who's the Treasury Secretary, and he's come in 407 00:21:34,600 --> 00:21:38,850 Speaker 2: with this 3-3-3 policy. He wants 3% GDP growth. He 408 00:21:38,880 --> 00:21:41,869 Speaker 2: wants to reduce the budget deficit by 3%. And he 409 00:21:41,910 --> 00:21:45,250 Speaker 2: wants to increase the barrels of oil they're producing by 410 00:21:45,250 --> 00:21:48,850 Speaker 2: 3 million barrels a day. So you are getting this element, 411 00:21:48,910 --> 00:21:53,310 Speaker 2: even though there's less globalization and tariffs, The whole idea 412 00:21:53,330 --> 00:21:57,110 Speaker 2: of Trump 2.0 when he gets inaugurated in January may 413 00:21:57,210 --> 00:22:01,750 Speaker 2: create some uncertainty. These US companies with strong franchises are 414 00:22:01,770 --> 00:22:05,899 Speaker 2: going to continue to generate significant profits unless there is 415 00:22:06,060 --> 00:22:10,480 Speaker 2: regulatory intervention, trade wars. We'll need to monitor those risks closely. 416 00:22:10,500 --> 00:22:13,040 Speaker 2: It can be a challenge for growth if these tariffs materialize. 417 00:22:13,520 --> 00:22:16,899 Speaker 2: But overall, we are seeing some of the greatest capitalist 418 00:22:16,940 --> 00:22:19,580 Speaker 2: machines experiencing strong earnings growth in 2024 set to continue. 419 00:22:21,440 --> 00:22:23,500 Speaker 1: Into 2025 actually one thing i wanted to close this 420 00:22:23,540 --> 00:22:27,270 Speaker 1: segment off on is the theory that as it trickles 421 00:22:27,310 --> 00:22:32,250 Speaker 1: down through the u.s and the magnificent seven already fading 422 00:22:32,530 --> 00:22:38,800 Speaker 1: as a contributor to the overall market returns excellent market 423 00:22:38,859 --> 00:22:41,459 Speaker 1: returns are coming out of the u.s then there's the 424 00:22:41,480 --> 00:22:43,359 Speaker 1: theory that the hottest part of the market will be 425 00:22:43,380 --> 00:22:47,270 Speaker 1: small caps what do you think of that u.s market 426 00:22:47,290 --> 00:22:47,840 Speaker 1: small caps. 427 00:22:48,950 --> 00:22:52,580 Speaker 2: The thing about these large tech companies or these hyperscalers, 428 00:22:52,640 --> 00:22:56,800 Speaker 2: as they're known, they're expected to increase their capital expenditure 429 00:22:56,820 --> 00:23:01,080 Speaker 2: into 2025 to hundreds of billions of dollars. That significant 430 00:23:01,100 --> 00:23:04,040 Speaker 2: spending will benefit a wide variety of sectors, whether you're 431 00:23:04,060 --> 00:23:08,940 Speaker 2: looking at data centers, engineering and construction, nuclear and renewable power, 432 00:23:09,540 --> 00:23:12,020 Speaker 2: gas powered electricity. There's so many different sectors that could 433 00:23:12,060 --> 00:23:14,060 Speaker 2: benefit from it, which is why you're seeing a lot 434 00:23:14,080 --> 00:23:16,240 Speaker 2: more interest in this broadening out of the trade sector. 435 00:23:16,560 --> 00:23:18,280 Speaker 2: A lot of people are thinking, well, a lot of 436 00:23:18,320 --> 00:23:21,899 Speaker 2: these tech companies that are reporting, not only, James, do 437 00:23:21,940 --> 00:23:24,620 Speaker 2: you need to beat earnings expectations, but you almost need 438 00:23:24,660 --> 00:23:27,220 Speaker 2: to beat the beat, if that makes sense. And that's 439 00:23:27,240 --> 00:23:29,970 Speaker 2: why you'll see so much scrutiny on these big tech companies, 440 00:23:30,470 --> 00:23:32,010 Speaker 2: which is why a lot of people are saying there 441 00:23:32,050 --> 00:23:34,430 Speaker 2: has to be this broadening out of this trade, this 442 00:23:34,490 --> 00:23:38,430 Speaker 2: reversion of small companies, which is underperformed versus large cap companies. 443 00:23:38,869 --> 00:23:41,030 Speaker 2: And we do see quite a bit of growth happening 444 00:23:41,050 --> 00:23:43,750 Speaker 2: in some of these smaller companies. Relative to where they're 445 00:23:43,770 --> 00:23:46,070 Speaker 2: trading at the moment, because if you look at where 446 00:23:46,210 --> 00:23:48,590 Speaker 2: the S & P 500 is trading at, it may 447 00:23:48,630 --> 00:23:51,060 Speaker 2: look elevated. But as long as the earnings continue to 448 00:23:51,100 --> 00:23:53,820 Speaker 2: support it, that will justify the valuations. There's been a 449 00:23:53,840 --> 00:23:56,479 Speaker 2: bit of compression in the small companies area. So there 450 00:23:56,520 --> 00:23:58,600 Speaker 2: could be a bit of a rotation and we've started 451 00:23:58,619 --> 00:24:02,810 Speaker 2: to see more money flow into smaller companies or broader sectors. 452 00:24:02,850 --> 00:24:07,050 Speaker 1: That would be small company ETFs, small cap ETFs. 453 00:24:07,810 --> 00:24:11,469 Speaker 2: Yeah, small companies ETFs, you've got different companies that are 454 00:24:11,490 --> 00:24:14,649 Speaker 2: a bit more evenly distributed as well. But yeah, we 455 00:24:14,670 --> 00:24:17,550 Speaker 2: have seen more flow into some of these smaller companies, 456 00:24:17,590 --> 00:24:20,619 Speaker 2: whether it be both active or index-based strategies. And I 457 00:24:20,630 --> 00:24:22,880 Speaker 2: guess those are a little bit different to your broad 458 00:24:22,910 --> 00:24:25,340 Speaker 2: cap because you're not only holding the Magnificent Seven, but 459 00:24:25,359 --> 00:24:28,500 Speaker 2: you're holding hundreds, if not thousands of companies that have 460 00:24:28,720 --> 00:24:32,950 Speaker 2: different characteristics and exposures to the mega cap companies. If 461 00:24:32,970 --> 00:24:36,570 Speaker 2: you look at a small cap index, it's around about 20% financial, 462 00:24:36,730 --> 00:24:39,790 Speaker 2: maybe 15% industrial, whereas tech is only around about 10% 463 00:24:39,790 --> 00:24:44,410 Speaker 2: to 15%. Very different to your mega cap indices such 464 00:24:44,430 --> 00:24:47,159 Speaker 2: as the S & P 500 or the NASDAQ 100. 465 00:24:47,160 --> 00:24:49,600 Speaker 1: Okay, now we'll take a short break. And folks, we 466 00:24:49,619 --> 00:24:51,420 Speaker 1: will be back and we will take a quick look 467 00:24:51,460 --> 00:24:56,870 Speaker 1: at some other areas of the markets in 2025. We'll 468 00:24:56,880 --> 00:25:01,350 Speaker 1: take a look at the NASDAQ possibilities, emerging markets, and stocks. 469 00:25:02,200 --> 00:25:05,340 Speaker 1: quick glimpse at gold, which I would put in this 470 00:25:05,359 --> 00:25:21,490 Speaker 1: very tradable area. Okay, back in a moment. Hello, welcome 471 00:25:21,530 --> 00:25:24,429 Speaker 1: back to the Australian's Money Puzzle. James Kirby talking to 472 00:25:24,490 --> 00:25:28,690 Speaker 1: Mark Jogham of Global X ETFs. We're talking big picture 473 00:25:28,710 --> 00:25:32,980 Speaker 1: here today, folks. We really are. NASDAQ then. We would 474 00:25:33,060 --> 00:25:37,139 Speaker 1: traditionally expect NASDAQ to shoot out the lights, that if 475 00:25:37,180 --> 00:25:39,680 Speaker 1: the S & P was doing 8%, we might think 476 00:25:39,770 --> 00:25:42,350 Speaker 1: the NASDAQ is going to do 16% or something like that. 477 00:25:42,890 --> 00:25:44,810 Speaker 1: What are they talking about on the NASDAQ, Mark? 478 00:25:46,690 --> 00:25:48,970 Speaker 2: Yeah, we talked about the S & P 500 being 479 00:25:49,010 --> 00:25:51,530 Speaker 2: a key contributor, but the NASDAQ, which holds a lot 480 00:25:51,570 --> 00:25:54,110 Speaker 2: of these mega cap names that we were talking about before, 481 00:25:54,490 --> 00:25:57,070 Speaker 2: they've done exceptionally well to pull the NASDAQ to record 482 00:25:57,090 --> 00:26:00,830 Speaker 2: highs at about 2,100 points at the moment. where the 483 00:26:01,270 --> 00:26:04,490 Speaker 2: price targets are looking closer to $ 2, 300 leading into next year. 484 00:26:04,990 --> 00:26:07,169 Speaker 2: So that to me is saying that there's still potential 485 00:26:07,270 --> 00:26:09,629 Speaker 2: upside for the Nasdaq 100 to do a lot of 486 00:26:09,650 --> 00:26:12,990 Speaker 2: the heavy lifting. And that's because earnings growth, we talked 487 00:26:13,030 --> 00:26:14,820 Speaker 2: about it before with the S & P 500 to 488 00:26:14,840 --> 00:26:17,800 Speaker 2: do low double digits, the Nasdaq is looking at doing 489 00:26:17,840 --> 00:26:20,880 Speaker 2: closer to 18 or 19% next year from an earnings 490 00:26:20,920 --> 00:26:24,560 Speaker 2: growth perspective. For a lot of investors who want exposure 491 00:26:24,660 --> 00:26:28,050 Speaker 2: to US shares in particular, The NASDAQ has been this 492 00:26:28,290 --> 00:26:31,689 Speaker 2: market darling of being a great driver of share market returns. 493 00:26:31,710 --> 00:26:33,840 Speaker 1: So it did about 30% or so, which is an 494 00:26:33,880 --> 00:26:36,619 Speaker 1: amazing figure, except that we've seen it so often. But 495 00:26:36,640 --> 00:26:42,359 Speaker 1: it did 31% or so in 2024, the NASDAQ. And 496 00:26:42,380 --> 00:26:45,010 Speaker 1: we've ignored the dividend use here entirely. What are they 497 00:26:45,070 --> 00:26:49,830 Speaker 1: saying as a forecast, as a percentage growth for NASDAQ 498 00:26:49,890 --> 00:26:51,180 Speaker 1: in 2025? 499 00:26:51,180 --> 00:26:53,720 Speaker 2: So according to the consensus, you're looking at a target 500 00:26:53,740 --> 00:26:55,940 Speaker 2: of around 9% to 10% upside, which is a little 501 00:26:55,960 --> 00:26:57,270 Speaker 2: bit more than S & P 500. 502 00:26:57,270 --> 00:27:00,429 Speaker 1: And that's cool for NASDAQ people, isn't it? 503 00:27:01,230 --> 00:27:03,209 Speaker 2: I mean, the NASDAQ tends to be a little bit 504 00:27:03,230 --> 00:27:06,430 Speaker 2: more volatile than broad indices like the S & P 500. 505 00:27:06,430 --> 00:27:07,090 Speaker 1: So you may. 506 00:27:07,030 --> 00:27:10,510 Speaker 2: Experience perhaps wilder divergences like we saw in 2022, where 507 00:27:10,570 --> 00:27:13,530 Speaker 2: the NASDAQ fell a lot more than the S & 508 00:27:12,670 --> 00:27:16,300 Speaker 2: P 500. But overall, I think because a lot of 509 00:27:16,340 --> 00:27:18,679 Speaker 2: these companies continue to derive a lot of their revenue 510 00:27:18,820 --> 00:27:25,180 Speaker 2: from technology and how much these exposures are to NASDAQ-related indices, 511 00:27:25,840 --> 00:27:29,440 Speaker 2: you could see these hyperscalers and these tech companies continue 512 00:27:29,500 --> 00:27:33,520 Speaker 2: to do looking long-term despite concerns around the rich valuations 513 00:27:33,560 --> 00:27:36,320 Speaker 2: and the NASDAQ or the broader US market trading at 514 00:27:36,359 --> 00:27:40,399 Speaker 2: a pretty expensive premium. That doesn't necessarily mean a reason 515 00:27:40,680 --> 00:27:43,180 Speaker 2: not to be invested because, like we said, the business 516 00:27:43,200 --> 00:27:45,689 Speaker 2: cycle is still in expansion. You've got a pretty healthy 517 00:27:45,950 --> 00:27:49,169 Speaker 2: labor market. And a lot of these NASDAQ returns have 518 00:27:49,190 --> 00:27:53,560 Speaker 2: been driven from AI-related activities. And that can continue to drive. 519 00:27:53,720 --> 00:27:57,620 Speaker 2: We're seeing huge forecasts being expected for some of these 520 00:27:57,820 --> 00:28:01,700 Speaker 2: AI-related possibilities. And I think a lot of these companies 521 00:28:01,720 --> 00:28:06,530 Speaker 2: are beginning to monetize a lot of their services. Looking 522 00:28:06,619 --> 00:28:10,930 Speaker 2: at companies like OpenAI, who use the technology of ChatGPT, 523 00:28:11,410 --> 00:28:13,650 Speaker 2: they expected to finish 2024 with about $ 5 billion in revenue. 524 00:28:15,460 --> 00:28:18,120 Speaker 2: And that's expected to grow to $ 10 billion next year. 525 00:28:18,619 --> 00:28:22,240 Speaker 2: With clear momentum and expanding use cases, AI is going 526 00:28:22,260 --> 00:28:25,619 Speaker 2: to be a really compelling investment theme leading into 2025. 527 00:28:25,619 --> 00:28:28,850 Speaker 2: That is very compelling for companies involved in those industries, 528 00:28:28,880 --> 00:28:31,770 Speaker 2: which tend to be on the NASDAQ overall. So yes, 529 00:28:31,790 --> 00:28:33,910 Speaker 2: it could be another good year for the NASDAQ. Overall, 530 00:28:34,010 --> 00:28:36,090 Speaker 2: a lot of the growth is priced in because of 531 00:28:36,130 --> 00:28:38,370 Speaker 2: the projected earnings growth that a lot of these companies 532 00:28:38,430 --> 00:28:40,650 Speaker 2: are planning to do. It might just be more on 533 00:28:40,690 --> 00:28:43,680 Speaker 2: the top line, more from a revenue perspective. Whereas this 534 00:28:43,720 --> 00:28:45,720 Speaker 2: year has been from an earnings perspective. 535 00:28:45,740 --> 00:28:49,240 Speaker 1: Which is what the market really loves. All right. Very interesting. 536 00:28:49,280 --> 00:28:53,850 Speaker 1: So folks, I think the more risk in the market, 537 00:28:53,950 --> 00:28:59,190 Speaker 1: the less useful the forecast. I would be considerably more 538 00:29:00,570 --> 00:29:03,950 Speaker 1: persuaded by a forecast for the ASX, whatever that might be, 539 00:29:04,550 --> 00:29:08,360 Speaker 1: because you're working off certain known knowns, if you know 540 00:29:08,380 --> 00:29:11,680 Speaker 1: what I mean. And the risk element is subdued because 541 00:29:11,700 --> 00:29:15,280 Speaker 1: we have a lot of blue chips, police, banks, supermarkets, 542 00:29:15,360 --> 00:29:17,540 Speaker 1: and miners, where you can have a very good idea 543 00:29:17,560 --> 00:29:20,280 Speaker 1: of their business. In the US, you have a whole 544 00:29:20,420 --> 00:29:24,920 Speaker 1: elevated risk and risk-taking, which gives wonderful results. That also 545 00:29:24,980 --> 00:29:27,660 Speaker 1: means someone talking about NASDAQ doing 10% next year is 546 00:29:27,720 --> 00:29:31,390 Speaker 1: kind of like, in a way, at its most extreme, 547 00:29:31,470 --> 00:29:35,150 Speaker 1: utterly useless. I don't mean to... I'm sure you actually 548 00:29:35,170 --> 00:29:36,790 Speaker 1: agree with me, even though I don't know if you 549 00:29:36,810 --> 00:29:38,930 Speaker 1: agree with me, do you? I totally agree with you. 550 00:29:38,950 --> 00:29:40,780 Speaker 2: If you look at the average forecast, for the S & 551 00:29:40,500 --> 00:29:43,960 Speaker 2: P 500 in 2024, James, so we're recording this at 552 00:29:43,980 --> 00:29:46,750 Speaker 2: the end of 2024, the average forecast was 4,600. And 553 00:29:48,190 --> 00:29:50,310 Speaker 2: the upper range of that limit in terms of who 554 00:29:50,330 --> 00:29:51,570 Speaker 2: was the most bullish was 5,400. 555 00:29:51,550 --> 00:29:52,430 Speaker 1: And we've blown through 6,000 points. 556 00:29:55,130 --> 00:29:57,310 Speaker 2: So there was one research company in those forecasts that 557 00:29:57,330 --> 00:30:00,710 Speaker 2: had an error of around 77% because they were too bearish. 558 00:30:01,110 --> 00:30:04,060 Speaker 2: That shows there is an issue. While the price factor 559 00:30:04,190 --> 00:30:07,270 Speaker 2: was wrong, the earnings, funnily enough, was right. So a 560 00:30:07,280 --> 00:30:10,580 Speaker 2: lot of these people who were forecasting the earnings growth 561 00:30:10,780 --> 00:30:13,520 Speaker 2: were very accurate. But the reason it's so hard to 562 00:30:13,560 --> 00:30:15,600 Speaker 2: predict is you don't know what investors are willing to 563 00:30:15,660 --> 00:30:19,020 Speaker 2: pay for those earnings. And in 2024, the answer was 564 00:30:19,180 --> 00:30:20,860 Speaker 2: they are willing to pay for a lot for some 565 00:30:20,880 --> 00:30:23,720 Speaker 2: of these earnings growth. So, yes, with a word of caution, 566 00:30:23,780 --> 00:30:25,980 Speaker 2: take anything that I say or what the market consensus 567 00:30:26,040 --> 00:30:28,040 Speaker 2: is saying with a grain of salt, because there's a 568 00:30:28,060 --> 00:30:29,520 Speaker 2: lot of perils in forecasting. 569 00:30:29,640 --> 00:30:33,380 Speaker 1: Absolutely. As you say, people who are 70% out, which 570 00:30:33,570 --> 00:30:36,770 Speaker 1: is pretty bad. If we can quickly, two areas that 571 00:30:36,830 --> 00:30:39,870 Speaker 1: people who had ETFs and they were looking or people 572 00:30:39,890 --> 00:30:42,490 Speaker 1: who were trying to diversify their portfolio or listeners on 573 00:30:42,530 --> 00:30:46,090 Speaker 1: share markets who were using funds or ETFs to do 574 00:30:46,150 --> 00:30:48,950 Speaker 1: so would be looking to complete the picture. They might 575 00:30:48,970 --> 00:30:50,950 Speaker 1: look at emerging markets and they might look at gold. 576 00:30:51,560 --> 00:30:55,500 Speaker 1: On emerging markets, it would seem the election of Trump 577 00:30:55,580 --> 00:31:00,060 Speaker 1: and his talk about tariffs, a strengthening US dollar couldn't 578 00:31:00,120 --> 00:31:04,660 Speaker 1: possibly be good for emerging markets. Perhaps I'm wrong. What's 579 00:31:04,740 --> 00:31:06,110 Speaker 1: the story on that side of things? 580 00:31:07,530 --> 00:31:10,010 Speaker 2: No, James, your sentiment is correct in terms of a 581 00:31:10,050 --> 00:31:12,570 Speaker 2: lot of people thinking that the Trump trade is going 582 00:31:12,590 --> 00:31:15,730 Speaker 2: to be quite bearish for some emerging markets, given a 583 00:31:15,770 --> 00:31:20,310 Speaker 2: lot of the issues around tariffs, higher for longer interest rates. 584 00:31:20,970 --> 00:31:23,510 Speaker 2: a strong US dollar because a lot of emerging market 585 00:31:23,670 --> 00:31:26,450 Speaker 2: debt is denominated in US dollars. So a rising US 586 00:31:26,490 --> 00:31:30,310 Speaker 2: dollar is generally bad for them, tightening financial conditions. You're 587 00:31:30,330 --> 00:31:33,010 Speaker 2: not seeing too much out of China. And I think 588 00:31:33,090 --> 00:31:35,600 Speaker 2: on China, it is a pivotal player in the emerging 589 00:31:35,640 --> 00:31:40,760 Speaker 2: market story. It's grappling with modest stimulus efforts that seem 590 00:31:41,340 --> 00:31:44,460 Speaker 2: relatively insufficient to spur a bit of a meaningful recovery. 591 00:31:45,160 --> 00:31:47,800 Speaker 2: And considering we've seen this, like we saw during 2018 592 00:31:47,800 --> 00:31:53,610 Speaker 2: and 2019, China still is a very big global manufacturing powerhouse. 593 00:31:54,110 --> 00:31:57,800 Speaker 2: It dominates that sector estimate around 35 to 40%. So 594 00:31:57,820 --> 00:32:00,500 Speaker 2: it is quite crucial from a global supply chain. So 595 00:32:00,560 --> 00:32:03,040 Speaker 2: for investors, China is a bit of a mixed picture. 596 00:32:03,420 --> 00:32:07,460 Speaker 2: The outlook remains challenging. Corporate earnings might be weak and predictable. 597 00:32:08,130 --> 00:32:10,730 Speaker 2: Elsewhere in emerging markets, there might be some bright spots. 598 00:32:10,850 --> 00:32:14,870 Speaker 2: We've seen the likes of Taiwanese companies like Taiwan Semiconductors 599 00:32:15,190 --> 00:32:19,430 Speaker 2: keep playing in the technological revolution. But we found that 600 00:32:19,590 --> 00:32:22,300 Speaker 2: India has been a standout performer and one of the 601 00:32:22,340 --> 00:32:26,120 Speaker 2: fastest growing economies as well, bolstered by strong balance sheets, 602 00:32:26,220 --> 00:32:31,219 Speaker 2: fiscal maturity. And unlike China, India is driven from domestic revenue. 603 00:32:31,400 --> 00:32:33,140 Speaker 2: You might be able to insulate some of that risk 604 00:32:33,200 --> 00:32:36,830 Speaker 2: associated with global trade tensions, even though India is becoming 605 00:32:36,850 --> 00:32:38,510 Speaker 2: a part of the global environment. 606 00:32:39,090 --> 00:32:40,010 Speaker 1: It's a very. 607 00:32:39,870 --> 00:32:45,670 Speaker 2: Compelling growth story, powered from elevated profit margins, strong earnings expectations. 608 00:32:45,690 --> 00:32:48,910 Speaker 2: There's a big demographical shift as well. India has become 609 00:32:48,950 --> 00:32:53,310 Speaker 2: the world's largest population, overtaking China. In terms of the 610 00:32:53,430 --> 00:32:56,560 Speaker 2: Emerging Markets Index, India is likely to be a bigger player. 611 00:32:56,660 --> 00:32:59,780 Speaker 2: I still see some opportunities emerging within emerging markets. 612 00:33:00,160 --> 00:33:03,540 Speaker 1: They're country-based rather than the category. 613 00:33:03,580 --> 00:33:06,500 Speaker 2: Yeah, there might be a bit of country divergence overall. 614 00:33:06,620 --> 00:33:09,360 Speaker 2: A lot of the forecasts are expecting, even though there 615 00:33:09,380 --> 00:33:11,830 Speaker 2: might be stronger earnings growth with some of these companies, 616 00:33:12,350 --> 00:33:15,930 Speaker 2: and because they're trading at such heavy discounts relative to 617 00:33:16,110 --> 00:33:18,890 Speaker 2: where they valued, You might not see as much upward 618 00:33:18,910 --> 00:33:21,910 Speaker 2: growth in terms of the price predictions as the US market. 619 00:33:22,250 --> 00:33:25,070 Speaker 2: So we're also talking about single digits here. But from 620 00:33:25,210 --> 00:33:27,690 Speaker 2: a country perspective, yes, it could be that there might 621 00:33:27,730 --> 00:33:30,590 Speaker 2: be a divergence, that a lot more people are interested 622 00:33:30,630 --> 00:33:33,510 Speaker 2: in emerging markets like India. If you look at what's 623 00:33:33,530 --> 00:33:36,750 Speaker 2: happening with this AI strategic revolution and some of the 624 00:33:36,790 --> 00:33:40,050 Speaker 2: associated themes, semiconductors or the companies that are making some 625 00:33:40,070 --> 00:33:41,890 Speaker 2: of these chips is still going to be a key 626 00:33:42,670 --> 00:33:45,940 Speaker 2: component within next year's earnings. For people who are looking 627 00:33:45,960 --> 00:33:47,979 Speaker 2: for these types of companies, It doesn't mean that you 628 00:33:48,000 --> 00:33:50,560 Speaker 2: shouldn't look within emerging markets. It just might mean people 629 00:33:50,600 --> 00:33:52,900 Speaker 2: might be a little more tactical with how they allocate 630 00:33:52,980 --> 00:33:53,920 Speaker 2: towards emerging markets. 631 00:33:54,020 --> 00:33:56,810 Speaker 1: Okay, I hear what you're saying. I won't push any 632 00:33:56,850 --> 00:33:58,770 Speaker 1: harder because I don't think anyone could possibly give an 633 00:33:58,830 --> 00:34:02,670 Speaker 1: answer whether India is going to finally come through in 634 00:34:02,890 --> 00:34:06,250 Speaker 1: the way that many people have thought it could and would. 635 00:34:06,270 --> 00:34:10,770 Speaker 1: That's for every individual to make their own bet on. Okay, 636 00:34:10,790 --> 00:34:14,000 Speaker 1: before you go, one last thing, gold. Now, gold has 637 00:34:14,020 --> 00:34:17,040 Speaker 1: been good. and has been good for quite some time. 638 00:34:17,219 --> 00:34:20,910 Speaker 1: And you find that even the bulls and bears like 639 00:34:21,290 --> 00:34:25,210 Speaker 1: gold in this environment. Gold investors will always find compelling 640 00:34:25,250 --> 00:34:29,310 Speaker 1: reasons to buy gold under any conditions, including today's conditions. 641 00:34:30,330 --> 00:34:32,490 Speaker 1: I doubt there's a consensus as to what gold will 642 00:34:32,530 --> 00:34:33,460 Speaker 1: do in a year, is there? 643 00:34:34,739 --> 00:34:36,600 Speaker 2: I mean, a lot of people in the business are 644 00:34:36,820 --> 00:34:38,719 Speaker 2: making predictions of what the gold price is going to do. 645 00:34:38,800 --> 00:34:41,340 Speaker 2: And at the moment, James, the gold price is hovering 646 00:34:41,380 --> 00:34:45,420 Speaker 2: around about $ 2, 600, $ 2, 700 an ounce. I've seen some forecasts 647 00:34:45,460 --> 00:34:48,899 Speaker 2: from some leading banks who have very smart analysts, way 648 00:34:48,920 --> 00:34:51,000 Speaker 2: smarter than me, looking at, and they've got models of 649 00:34:51,060 --> 00:34:54,160 Speaker 2: how they have their price forecast, looking as high as 650 00:34:54,200 --> 00:34:57,580 Speaker 2: close to $ 3, 000 in terms of per ounce on a 651 00:34:57,640 --> 00:35:00,640 Speaker 2: US dollar basis. I think because of this, there's a 652 00:35:00,660 --> 00:35:03,740 Speaker 2: lot of tailwinds within the demand for the precious yellow metal. 653 00:35:04,360 --> 00:35:07,630 Speaker 2: If you are worried about raising geopolitical tension, gold is 654 00:35:07,690 --> 00:35:11,410 Speaker 2: naturally that safe haven. When Trump did initially come into power, 655 00:35:11,750 --> 00:35:13,330 Speaker 2: we did see a little bit of a sell-off in 656 00:35:13,370 --> 00:35:16,160 Speaker 2: gold It was a rising US dollar. People were a 657 00:35:16,160 --> 00:35:18,980 Speaker 2: little bit more confident. But there could be still some 658 00:35:19,300 --> 00:35:22,299 Speaker 2: ongoing geopolitical tensions. I know there's been a bit of 659 00:35:22,320 --> 00:35:26,000 Speaker 2: a ceasefire, at least promised within the Middle East. But 660 00:35:26,040 --> 00:35:28,799 Speaker 2: who knows around ongoing tensions that's going to happen. And 661 00:35:28,820 --> 00:35:31,680 Speaker 2: that bodes quite well with the gold price. In terms 662 00:35:31,719 --> 00:35:34,200 Speaker 2: of inflation being put back in the genie bottle, who 663 00:35:34,239 --> 00:35:37,770 Speaker 2: knows whether we may get a reflationary trade. Everyone is 664 00:35:37,810 --> 00:35:40,590 Speaker 2: talking about disinflation and we're getting close to that target 665 00:35:40,630 --> 00:35:43,910 Speaker 2: band where most economies want inflation to be. But if 666 00:35:43,930 --> 00:35:47,070 Speaker 2: there is a bit of inflationary surprise to the upside, 667 00:35:47,530 --> 00:35:53,020 Speaker 2: gold is a proven commodity to provide that hedge against inflation. 668 00:35:53,660 --> 00:35:57,080 Speaker 2: And Trump's policies may be inflationary. There could be more 669 00:35:57,120 --> 00:36:00,640 Speaker 2: from a fiscal deficit perspective. People worried about how much 670 00:36:00,780 --> 00:36:04,609 Speaker 2: debt is involved in the global economy. There still could 671 00:36:04,630 --> 00:36:07,330 Speaker 2: be a lot of tailwinds for gold. And if rates 672 00:36:07,430 --> 00:36:10,229 Speaker 2: do continue to fall and real yields continue to fall, 673 00:36:10,270 --> 00:36:13,140 Speaker 2: that also bodes well for the gold price. So overall, 674 00:36:13,320 --> 00:36:16,060 Speaker 2: plenty of tailwinds for the precious yellow metal. Very important 675 00:36:16,100 --> 00:36:20,340 Speaker 2: part of clients' investment portfolios, particularly as a defensive hedge, 676 00:36:20,760 --> 00:36:22,830 Speaker 2: because I always say that if gold is the worst 677 00:36:22,870 --> 00:36:25,489 Speaker 2: performing asset in your portfolio, it means the rest is 678 00:36:25,510 --> 00:36:25,790 Speaker 2: doing well. 679 00:36:25,850 --> 00:36:28,690 Speaker 1: It means it was a good year. Assuming you have 680 00:36:28,710 --> 00:36:29,930 Speaker 1: a diversified portfolio. 681 00:36:30,070 --> 00:36:32,770 Speaker 2: Exactly. This year has been different where gold has performed 682 00:36:32,810 --> 00:36:36,330 Speaker 2: exceptionally well in terms of relative returns to the broader market. 683 00:36:36,950 --> 00:36:39,930 Speaker 1: The point you're making is it performed very well. So 684 00:36:39,950 --> 00:36:43,410 Speaker 1: did everything else. It was coronated. which might be a 685 00:36:43,489 --> 00:36:44,469 Speaker 1: worry sometimes. 686 00:36:45,110 --> 00:36:47,810 Speaker 2: Normally, you have different correlations within gold and other asset 687 00:36:47,830 --> 00:36:50,339 Speaker 2: classes over the long term. But this year, there's been 688 00:36:50,380 --> 00:36:53,560 Speaker 2: different drivers. You've seen major demand from central banks. You've 689 00:36:53,580 --> 00:36:57,700 Speaker 2: seen flows coming back into ETS for gold. People are 690 00:36:57,719 --> 00:37:00,180 Speaker 2: wanting that as a safe haven. You're seeing strong demand 691 00:37:00,239 --> 00:37:04,020 Speaker 2: from emerging economies because gold also has that industrial application. 692 00:37:04,060 --> 00:37:06,799 Speaker 2: It's got the jewelry application as well. We've seen India's 693 00:37:06,840 --> 00:37:10,740 Speaker 2: stockpile leading into the celebratory season as well. But overall, 694 00:37:10,950 --> 00:37:13,469 Speaker 2: great diversified to have in your portfolio. Yes, it has 695 00:37:13,510 --> 00:37:15,569 Speaker 2: performed quite well, but it's not meant to be the 696 00:37:15,610 --> 00:37:18,730 Speaker 2: return driver. It's meant to be the defensive cushion you 697 00:37:18,770 --> 00:37:21,930 Speaker 2: have in your portfolio when everything else doesn't perform well. 698 00:37:22,430 --> 00:37:25,450 Speaker 1: Well, that was a terrific round the world with Mark 699 00:37:25,489 --> 00:37:30,480 Speaker 1: Jokum in 44 minutes, as it turned out. Terrific, Mark Jokum, 700 00:37:30,600 --> 00:37:34,180 Speaker 1: GlobalX ETFs Investment Strategist. Thanks very much for coming on 701 00:37:34,200 --> 00:37:34,560 Speaker 1: the show. 702 00:37:35,020 --> 00:37:35,779 Speaker 2: Thanks for having me, James. 703 00:37:36,910 --> 00:37:38,489 Speaker 1: Well, I look forward to having you again on the 704 00:37:38,530 --> 00:37:43,009 Speaker 1: show across 2035, where we will return to see how 705 00:37:43,050 --> 00:37:46,149 Speaker 1: some of these consensus predictions turned out over the year. 706 00:37:46,250 --> 00:37:49,490 Speaker 1: Thanks very much, everybody, for listening. Keep those emails rolling. 707 00:37:49,530 --> 00:37:55,359 Speaker 1: Love to have some correspondence from you. TheMoneyPuzzleAtTheAustralian.com.au. Today's show 708 00:37:55,410 --> 00:37:58,620 Speaker 1: was produced by Leah Samoglou. Talk to you soon. 709 00:38:10,170 --> 00:38:10,360 Speaker 2: Thank you.