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Speaker 1: Kyota, and welcome to this episode of Sheered Lunch. Today

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Speaker 1: we are posing the question on a lot of people's

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Speaker 1: minds right now, why should we bother investing locally when

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Speaker 1: all of the action and all the investment returns seem

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Speaker 1: to be going on in the United States. I'm Dan

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Speaker 1: Brounskill from Interest dot cot in ZID and I'm joined

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Speaker 1: to discuss this with Chris Deliver, head of Global and

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Speaker 1: multi asset Investments at Harbor Asset Management.

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Speaker 2: Investing involves risk you might lose the money you start with.

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Speaker 2: We recommend talking to a licensed financial advisor. We also

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Speaker 2: recommend reading product disclosure documents before deciding to invest. Everything

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Speaker 2: you're about to see and hear is current at the

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Speaker 2: time of recording.

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Speaker 1: Thank you for joining us.

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Speaker 3: Thanks jan Ah.

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Speaker 2: So.

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Speaker 1: I guess looking at the United States stock market, it

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Speaker 1: has gone up a lot, while our market in the

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Speaker 1: Australian market and lots of other markets around the world

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Speaker 1: have not gone up anything like so much. Is this sustainable?

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Speaker 1: What's going on? Help us understand?

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Speaker 3: So a question we get often is why is a

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Speaker 3: US market done so well? And why he has New

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Speaker 3: Zealand been left behind? And it's probably going to sound

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Speaker 3: quite predictable, but the answer is rarely around technology. So

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Speaker 3: we've seen a lot of capital expenditure in AI that

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Speaker 3: has driven a really large part of the gain for

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Speaker 3: the US stock market. In addition to that, there's also

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Speaker 3: been really strong economic growth in the US. If you

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Speaker 3: look back to the end of twenty twenty two, the

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Speaker 3: consensus was saying that we're going to get a recession

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Speaker 3: in the US in twenty twenty three. Just a few

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Speaker 3: days ago, there was a fund manager survey released and

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Speaker 3: not many people think there is going to be a recession.

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Speaker 3: So there's been a big change in the consensus over

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Speaker 3: the last eighteen months and that has really helped drive

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Speaker 3: sheer markets forward.

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Speaker 1: When you look around the world right now, I mean

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Speaker 1: there's a lot of negative sentiment economics New Zealand particularly.

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Speaker 1: Do you think the US stock market is doing unusually

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Speaker 1: well or other markets doing unusually badly? Talk to me

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Speaker 1: about that.

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Speaker 3: Yeah. So, although the US is the market that's had

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Speaker 3: most of the headlines so far this year, it's actually

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Speaker 3: the second largest country in the world that's actually done better.

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Speaker 3: So the second largest country in the index is actually Japan.

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Speaker 3: But actually so far this year, Japan has actually delivered

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Speaker 3: a higher return than the US stock market. But you

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Speaker 3: hear a lot about the US because it's the way

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Speaker 3: the US stock market has generated its performance that has

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Speaker 3: been quite odd. So up until last Friday, a third

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Speaker 3: of the returns were driven by one stock, and we

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Speaker 3: all know the name. It's in Video, probably the ultimate

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Speaker 3: AI play. Given every dollar that gets spent towards some

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Speaker 3: of it will find its way to buying in video GPUs.

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Speaker 1: This is because in Vidio not itself an AI company,

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Speaker 1: but makes the chips that power AI.

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Speaker 3: Yeah, they're the infrastructure play I suppose with regards to AI.

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Speaker 3: So they're benefiting from the capital expenditure that lots of

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Speaker 3: large companies in the US are doing right now. I

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Speaker 3: know that Mark Zuckerberg has said this in the past,

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Speaker 3: is they're investing in AI partly to protect their current

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Speaker 3: revenues and the money they're spending today. They don't expect

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Speaker 3: to see returns on that capital investment for at least

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Speaker 3: a few years from today. So there's been a lot

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Speaker 3: of investment in as I said, capital expenditure, which is

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Speaker 3: investing in supply. We've got to wait and see the

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Speaker 3: next few years whether the demand is as good as

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Speaker 3: everyone expects, and I think that is going to be

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Speaker 3: the interesting thing for AI. It's over the next few

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Speaker 3: years when we find out whether those use cases which

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Speaker 3: seem promising are actually going to translate into real revenues

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Speaker 3: and real margins for businesses. But certainly AI it's been

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Speaker 3: a real story. It has created real earnings. I think

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Speaker 3: that's important. So in Vidia's share price, yes, it's gone

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Speaker 3: through the roof, but their earnings have gone up multiples

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Speaker 3: of where they were expected to be. So consensus earnings

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Speaker 3: were way off a couple of years ago, and that

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Speaker 3: has since been upgraded. But the key thing we've got

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Speaker 3: to figure out is are these earnings going to be

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Speaker 3: sustainable for the future. And no one knows, not even

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Speaker 3: the leaders of these really large companies are able to

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Speaker 3: tell you exactly the use cases and exactly what the

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Speaker 3: demand be in the future.

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Speaker 1: A few weeks ago, we did an episode on the

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Speaker 1: weight loss drugs. That's another big trend like AI. How

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Speaker 1: much is that affecting stock market returns in the US

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Speaker 1: and elsewhere.

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Speaker 3: Yes, it has been a driver. The key plays here

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Speaker 3: have been Eli, Lilly and Novo Nordis as a theme

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Speaker 3: hasn't contributed anywhere near as much to return. So when

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Speaker 3: I look at Novo Nordisk and Eli Lilly together, they've

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Speaker 3: contributed about five percent of the return for the MSCI

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Speaker 3: World Index this year. That's pretty small when you consider

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Speaker 3: that Nvidia has alone generated five to six times the

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Speaker 3: contribution to return. But where the weight loss drugs are

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Speaker 3: really interesting is the impact that they're having on other companies,

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Speaker 3: and we're actually seeing it this side of the world.

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Speaker 3: So recently ResMed, for example, sold off because it was

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Speaker 3: deemed that these weight loss drugs are not just helping

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Speaker 3: people lose weight, it's how helping them sleep better and

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Speaker 3: treat their sleep at near as well. So the interesting

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Speaker 3: part we see on that is yes, the first order

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Speaker 3: effects on those companies, but the impact has actually spanned

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Speaker 3: far greater to companies listed locally here like Fisher and

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Speaker 3: pikeal Healthcare. I'd include in that as well, all the

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Speaker 3: way through to airlines because we're all going to be

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Speaker 3: slimmer and that's going to mean less jet fuel. So

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Speaker 3: I look forward to that.

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Speaker 1: I can't wait for them to see if they can

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Speaker 1: make the seeds even narrower.

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Speaker 3: Yeah, so how.

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Speaker 1: Much of if you look at how the US market

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Speaker 1: has gone up quite a lot more than New Zealand

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Speaker 1: or Australian market. How much of that is due to

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Speaker 1: AI or even in video alone.

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Speaker 3: So I think there's two key things to think about

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Speaker 3: with share markets. One is the sectoral composition. So you

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Speaker 3: know how much in tech, how much in consumer discretionary?

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Speaker 3: The Amazon is classified as a consumer discretionary company. In

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Speaker 3: most people's minds, it's it's probably tech because a lot

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Speaker 3: of their earnings come from Amazon Web services as opposed

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Speaker 3: to the marketplace. But that's how it's classified. So tech

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Speaker 3: kind of permeates every sector. But notwithstanding that, you look

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Speaker 3: at say the US compared to the New Zealand and

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Speaker 3: Australian market, and you've just got to look through the

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Speaker 3: top ten to see that it's a radically different beast

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Speaker 3: and that has been a massive headwind for our market.

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Speaker 3: But that brings me on to the second point. So

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Speaker 3: one is sectoral composition has something to do with it.

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Speaker 3: The second part is the economy. Now there's that old

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Speaker 3: saying the stock market is the economy or is not

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Speaker 3: the economy in New Zealand's case, so people in the

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Speaker 3: US tend to say, oh, the stock market is the

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Speaker 3: economy because there are a lot of listed companies over

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Speaker 3: there which are a world avest fight across the US

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Speaker 3: and capture America Inc. Quite well. They capture the innovation

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Speaker 3: and a lot of the things driving gd growth and

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Speaker 3: GDP growth in the US. In Australia it's quite similar, right.

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Speaker 3: You know, we've got big banks over there, We've got

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Speaker 3: we know that commodities is a large part of their economy.

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Speaker 3: When you look through their share markets you see that

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Speaker 3: quite well represented. Now that brings me to the New

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Speaker 3: Zealand economy. Look through the top ten names in our

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Speaker 3: market and it isn't the economy at all. You know,

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Speaker 3: for example, Fisher and Pikele Healthcare great key we name

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Speaker 3: given it that came out of Fisher and Pikele appliances,

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Speaker 3: which I'd say most people have got one of them

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Speaker 3: in their kitchen. But it's revenue really is generated all offshore.

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Speaker 3: So that's not a New Zealand Inc. Investment.

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Speaker 1: The New Zealand economy slows Fisher and pike wll barely.

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Speaker 3: Notices correct, But where it does have an impact is

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Speaker 3: around sentiment towards a market. So even though our stock

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Speaker 3: market isn't our economy. If there's bad headlines around New

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Speaker 3: Zealand and our economic growth and we have been slowing

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Speaker 3: quicker than particularly the US, it is another reason for

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Speaker 3: an investor to not come into our market. And we

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Speaker 3: have noticed over the past few years that we've had

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Speaker 3: less interest from Australian investors in our market, and that's

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Speaker 3: captured by statistics, and part of that is that the

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Speaker 3: banks have been doing quite well. Right, So when you

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Speaker 3: look at the Australian Index, if you're an Australian fund

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Speaker 3: manager and you don't like the banks, it's really inconvenient

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Speaker 3: because there's such a large part of the index. So

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Speaker 3: what a lot of Australian managers were doing through to

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Speaker 3: kind of twenty twenty was building some reasonably large positions

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Speaker 3: in New Zealand companies. But as it happened, you know,

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Speaker 3: the banks' actually done extremely well over the past few years,

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Speaker 3: so they haven't had as much reason to come into

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Speaker 3: New Zealand. In New Zealand since our market has underperformed

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Speaker 3: so substantially, there's no fomo there either. You know, they're

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Speaker 3: not missing out on anything. They look at the market

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Speaker 3: and go Actually it was greater was in in New Zealand,

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Speaker 3: so the Australian market has done better. So the economy

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Speaker 3: does matter here, but less so than the US and Australia.

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Speaker 1: Because if you look, there's a couple of companies in

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Speaker 1: the top five Meridian Energy, Spark New Zealand and New

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Speaker 1: Zealands INDECKS. Those are ones that are probably tied to

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Speaker 1: economic performance to a certain degree, or at least economic growth.

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Speaker 1: But as you say, Fisher and Pical Healthcare, Auckland Airport

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Speaker 1: not so much in fratil global investment business, so not

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Speaker 1: actually that tightly and that makes up forty three percent

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Speaker 1: of the index those five companies, so not super tightly

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Speaker 1: tied to New Zealand economy. But you say that the

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Speaker 1: downturn is turning people off anyway, people still not.

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Speaker 3: Yeah, that's right. And I think the other thing we've

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Speaker 3: got to take into account is a lot of our

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Speaker 3: companies were quite impacted by COVID, so you know, quite simply,

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Speaker 3: and this doesn't really hold over the short term, but

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Speaker 3: over the long term. Share markets tend to track earnings,

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Speaker 3: so if you've got earnings growth, that is a good

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Speaker 3: reason for your share market to go up, right, And

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Speaker 3: we just haven't had the earnings growth. In New Zealand,

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Speaker 3: we've had a lot of our larger companies impacted by

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Speaker 3: COVID and they've been finding their new equilibrium earnings level.

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Speaker 3: So look at for example, Fish and Pipel Healthcare. COVID

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Speaker 3: led to a lot of demand for their consumables, so

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Speaker 3: they had their earnings increase quite substantially. But as the

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Speaker 3: world normalize, what our analysts have been trying to figure

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Speaker 3: out is what is what is the new equilibrium equilibrium?

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Speaker 3: Why do I say these long words earnings for Fisher

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Speaker 3: and Parker Healthcare, you can say a rarely similar thing

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Speaker 3: for a two milk the dig or suitcase traveler just

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Speaker 3: completely dried up during COVID, So after COVID you're wondering

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Speaker 3: what sort of businesses business emerges are from this disruption.

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Speaker 3: Main Freight as well. If you look at Main Freight's

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Speaker 3: earnings chart, massive COVID earnings and now to us it

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Speaker 3: looks like it's got back to it's pre COVID earnings growth.

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Speaker 3: So you know you had that massive, massive increase back down.

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Speaker 3: These are big companies, they haven't impact on the index

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Speaker 3: and looks something I get asked often, and this has

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Speaker 3: been a recurring question over the past few years is

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Speaker 3: when is New Zealand going to catch up? And I

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Speaker 3: still can't answer it, not much used to anyone, But

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Speaker 3: what I will say is it does feel like we're

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Speaker 3: getting back to our baselime level of earnings. So we've

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Speaker 3: been quite bearish on New Zealand relative to global assets

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Speaker 3: over the past twenty four months especially. Our next move

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Speaker 3: might actually be to close some of that underweight to

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Speaker 3: New Zealand. And there's two reasons for that. One is

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Speaker 3: that valuations relative to global share markets are actually a

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Speaker 3: lot more attractive today than they were a couple of

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Speaker 3: years ago. And secondly, we feel like we've got a

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Speaker 3: lot more faith in what the earnings picture is are

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Speaker 3: going forward.

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Speaker 1: Yeah, because I think it's basically if you look pre

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Speaker 1: COVID to today, the index is almost flat. I mean,

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Speaker 1: depending on the day, it might be up one percent

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Speaker 1: or two percent. You think, surely that can't last.

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Speaker 3: Yeah, I mean, but I always tell people that, you know,

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Speaker 3: be careful with time frames because you know that's true.

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Speaker 3: So I think to the end of twenty nineteen to today,

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Speaker 3: we're pretty much flat and the US market's up like

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Speaker 3: seventy percent, So it's been a massive drain and you

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Speaker 3: look at it and go, what am I doing here?

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Speaker 3: Why am I being? And I think there's good reasons

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Speaker 3: though too, and just on the performance basis, So the

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Speaker 3: two decades to twenty twenty, we outperformed the US market

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Speaker 3: quite substantially. So from twenty ten to twenty twenty, the

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Speaker 3: indices were pretty much on par, but the US from

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Speaker 3: two thousand to twenty and ten was flat because we

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Speaker 3: had two crises, one to do with tech, the other

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Speaker 3: was obviously the global financial crisis. And that's a good

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Speaker 3: thing about New Zealand. We just our companies weren't impacted

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Speaker 3: as much. We hummed away and actually we delivered the

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Speaker 3: level of outperformance which is similar to what the US

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Speaker 3: has delivered relative to US over over the past four

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Speaker 3: years that we've just talked about.

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Speaker 1: So yeah, so that's why we talk about this whole

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Speaker 1: You've got to have a long term horizon and you've

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Speaker 1: got to be prepared for losses because I mean, some

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Speaker 1: of us are you know, younger investors who definitely haven't

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Speaker 1: been around for any ten year cycle a littleone multiple.

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Speaker 1: But it's interesting to hear that like this idea because

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Speaker 1: to me, three years of flat gains feels like my

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Speaker 1: investing lifetime. It's interesting to hear that there was a

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Speaker 1: time where there was ten years in the States.

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Speaker 3: But there can be some very very long winters. So

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Speaker 3: we're talking about Japan this year, right, because the Japanese

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Speaker 3: stock market has done really well. The problem with the

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Speaker 3: Japanese sheer market all time high is the high that

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Speaker 3: they hit this year was a relative to nineteen eighty nine. Okay,

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Speaker 3: all right, so it's thirty five years in other words,

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Speaker 3: of a zero nominal return. You know, we're not even

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Speaker 3: talking about talking about kind of really justable. Look, I'm

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Speaker 3: not going to draw that analogue to today in the US.

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Speaker 3: The valuations in Japan were just just absolutely unheard of

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Speaker 3: and they haven't really been tested since on a price

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Speaker 3: to earnings multiple basis. The only thing close was the

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Speaker 3: was the tech level in the US. But it's just

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Speaker 3: a really good example of conventional wisdom back then was

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Speaker 3: you know, Japan was the future and it didn't transpire.

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Speaker 3: Interesting with Japan today it does look like and a

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Speaker 3: key reason their market is rarely is one there's reforms

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Speaker 3: around shareholder returns. So you know, Japanese companies were quite

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Speaker 3: benevolent and you know, really took great care of their employees,

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Speaker 3: which is a good thing. But would enter we do

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Speaker 3: expenditure with the expectations of really low returns on capital.

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Speaker 1: So if Japan is being a little bit less benevolent,

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Speaker 1: is the reason the US economy and therefore it's share

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Speaker 1: market to a certain degree, is our performing because the

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Speaker 1: US is not so malevolent. Perhaps they're better capitalists, perhaps

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Speaker 1: more malevolent. You might even say.

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Speaker 3: There is some truth in that. If you look at

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Speaker 3: the share of a company's profit that goes to labor

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Speaker 3: versus what goes to the shareholders, and that is over

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Speaker 3: the past couple of decades in the US fallen, so

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Speaker 3: so a bigger share of the gains have gone to

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Speaker 3: capital over labor. More nearer term. What's quite interesting is

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Speaker 3: that some of the larger companies in the US, you'll

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Speaker 3: probably say they weren't great capitalists. And I'm talking specifically

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Speaker 3: about some of the large tech companies. So you're going

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Speaker 3: into the say two, they had a decade of just

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Speaker 3: rarely really check money. Easy to get around a way

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Speaker 3: with regards to raising capital, and money was cheap, right,

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Speaker 3: you know, we had intrastructs pretty much zero, and that

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Speaker 3: meant that actually there was a lot of fat in

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Speaker 3: those businesses, right, you know, think of Meta, think of

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Speaker 3: why it's called Meta because they were chucking so much

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Speaker 3: money into the metaverse and it wasn't exactly delivering any

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Speaker 3: shareholder returns. So actually part of the gains that you've

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Speaker 3: seen in the US share market, I think, particularly in

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Speaker 3: twenty twenty three in twenty twenty four, has actually them

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Speaker 3: been better capitalists. So I will use Meta as an

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Speaker 3: example again because they managed to gain deliver strong profits

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Speaker 3: while reducing their workforce.

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Speaker 1: So I feel like we've highlighted two main things that

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Speaker 1: explain the difference between the New Zealand Australian markets and

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Speaker 1: the Japanese and US markets, which is largely tech exposure

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Speaker 1: AI better economy performance. How would you split those two things?

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Speaker 3: You know?

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Speaker 1: The you know, is it is it fifty to fifty

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Speaker 1: or is it more tech driving the returns or is

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Speaker 1: it more the better economy? Do you have an idea

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Speaker 1: of which of those two things are having a bigger impact.

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Speaker 3: I guess it's definitely the composition of an index which

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Speaker 3: has the line's share of the impact in my view.

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Speaker 3: And the reason I say that is because we do

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Speaker 3: a lot of analysis where we adjust share markets to

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Speaker 3: have the same composition interest as the US and see

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Speaker 3: how much of returns it that actually explains. So it

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Speaker 3: does explain a really large portion. So for example, if

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Speaker 3: Europe had more in information technology, just the same information

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Speaker 3: technology companies they have today, their share market return would

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Speaker 3: be higher because their information's technology sector is actually done

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Speaker 3: quite well, but they just haven't had as much of

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Speaker 3: it as the US. So that definitely is the lines

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Speaker 3: share and so some of it sector. Some of it

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Speaker 3: comes down to style as well. So you know, growth

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Speaker 3: investing has done quite well for a number of years,

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Speaker 3: particularly though kind of over the past twelve to eighteen

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Speaker 3: months now when you look at a lot of the

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Speaker 3: companies within New Zealand, for example, you wouldn't call them

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Speaker 3: traditional growth.

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Speaker 1: So, Chris, when retail investors are thinking about their own

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Speaker 1: personal finance, what approach could they take to factor in

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Speaker 1: some of these things? What things should they be thinking about?

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Speaker 3: I guess yeah, So I think a key one is

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Speaker 3: just making sure that you haven't had risk creep in

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Speaker 3: your portfolio. So lots of things have gone up since

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Speaker 3: you've probably bought them, and what that means is that

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Speaker 3: actually the portfolio that you bought might be quite different

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Speaker 3: than the portfolio that you have today. For example, if

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Speaker 3: you you've gotten video in your portfolio, it has it

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Speaker 3: a guest say, it's probably a bigger weight today than

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Speaker 3: it was when you originally purchased it. So have a

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Speaker 3: look at your strategy and make sure that it reflects

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Speaker 3: your risk profile today as opposed to your risk profile

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Speaker 3: that markets have just given to you. That would be

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Speaker 3: my key tip. The other tip is something that people

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Speaker 3: ignore in portfolios is the impact of currency. So a

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Speaker 3: lot of people might just be invested in the US.

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Speaker 3: Is that hedged i e. Have you invested in a

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Speaker 3: product that hedges out the currency risks? So if the

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Speaker 3: New Zealand dollar depreciates or appreciates, it won't impact your

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Speaker 3: return or are you an unhedged investor? A lot of

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Speaker 3: people given especially if they're buying shares directly, they would

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Speaker 3: have a lot of unhedged stocks.

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Speaker 1: So if you think about the markets we've talked about today,

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Speaker 1: New Zealand maybe doing the worst of the Setustralia a

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Speaker 1: little bit better, US and Japan doing really great. What

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Speaker 1: should people be doing? But you know, is it good

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Speaker 1: to be spread across all those markets, or do you

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Speaker 1: want to focus on the ones that have done the worst?

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Speaker 1: How should people approach that?

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Speaker 3: Yes, so I definitely wouldn't although it's tempting to try

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Speaker 3: and catch the bottom and catching falling knives is really

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Speaker 3: really difficult and as you could imagine, pretty fraught. But

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Speaker 3: I think, as I demonstrated earlier, there are different time

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Speaker 3: periods where different markets outperform and underperform one another. And

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Speaker 3: I think the very I get a lot of information

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Speaker 3: by the questions that people ask me, And a really

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Speaker 3: common question is why do I even need to be

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Speaker 3: investing in New Zealand. Typically when you're asking that question,

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Speaker 3: it's because of performance, and typically that is the time

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Speaker 3: where actually maybe you should consider investing in New Zealand.

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Speaker 3: As I said, there's recent decades where the New Zealand

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Speaker 3: market has done really well a relative to the US

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Speaker 3: market and Australia in particular. So yeah, I think in

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Speaker 3: MIX and H market there are different drivers for each

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Speaker 3: And you know, today so much of the world index

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Speaker 3: is invested in the US, so you're getting really good

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Speaker 3: exposure to the US market.

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Speaker 1: Anyway, Harve has just done some interesting research looking at

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Speaker 1: basically portfolio allocation, and it seemed like from my reading

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Speaker 1: of the note, that you're essentially arguing that institutional investors

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Speaker 1: like you should not just be investing in different markets,

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Speaker 1: but actually investing in different kinds of assets, and that

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Speaker 1: the stock market might have law returns relative to potentially bonds,

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Speaker 1: and that you should actually invest in a slightly broader

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Speaker 1: range of assets. Can you talk just briefly and in

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Speaker 1: simple terms about what that research shows and why you're

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Speaker 1: thinking about maybe changing up the way you look at

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Speaker 1: your portfolios.

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Speaker 3: Yes. So, there aren't many relationships in finance that actually

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Speaker 3: stand the test of time, but one that does is

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Speaker 3: your starting valuation of when you invest in a market

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Speaker 3: and the return that you get over the next decade.

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Speaker 3: Because say you're buying a company with a price to

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Speaker 3: earnings ratio of twenty times. Essentially, what that is telling

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Speaker 3: you is for every one hundred dollars you put in

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Speaker 3: a company, they're going to kind of give you five

403
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Speaker 3: percent or five dollars back in earnings each year, right,

404
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Speaker 3: and if it's a growth company, they'll be able to

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Speaker 3: grow and deliver more returns to shareholders. Five percent not

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Speaker 3: a lot, not a lot, And when we look at

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Speaker 3: bond markets at the moment, and you know, bonds are boring.

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Speaker 3: You know a lot of people don't like to talk

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Speaker 3: about them.

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Speaker 1: How to buy them, Well, that.

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Speaker 3: Is a challenge and we can talk about that. But

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Speaker 3: bonds actually are quite interesting as a compliment to a

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Speaker 3: portfolio right now, and that's for a couple of reasons. One,

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Speaker 3: they're delivering a pretty healthy yield. So you get an

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Speaker 3: investment grade bond in New Zealand or investment grade bond fund,

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Speaker 3: it's probably going to have a yield of around six percent,

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Speaker 3: right and it just gives you that protection should we

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Speaker 3: get a growth shock. And lots of economists at the

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Speaker 3: moment are not for seeing a growth shock. But you

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Speaker 3: don't foresee a shock. That's what makes it a shock.

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Speaker 3: So it's good to have some insurance in portfolios. At

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Speaker 3: the moment. Bonds are harder to access. I think you're

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Speaker 3: right there. There's obviously ETFs around that can give clients exposure.

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Speaker 3: I think the other thing to take into account, and

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Speaker 3: we've talked about the US market a lot today, but

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Speaker 3: there is this kind of human fomo that goes on

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Speaker 3: when a market is going really well. But it's a

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Speaker 3: really good time is to look at their portfolios and

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Speaker 3: actually look through and say, how diversified am I?

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Speaker 1: Now?

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Speaker 3: If you're buying the S and P five hundred today,

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Speaker 3: it's twenty five percent in those mega cat tech names.

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Speaker 3: And we've just had a period where those megacat tech

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Speaker 3: names have driven the market up. When we manage our portfolios,

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Speaker 3: we do a lot of what if analysis. Some people

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Speaker 3: call it catastrophizing, but you look through and you say, Okay,

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Speaker 3: if this happens, how would our portfolio react. Quite an

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00:26:31,720 --> 00:26:35,800
Speaker 3: interesting scenario at the moment is thinking about going through

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00:26:35,840 --> 00:26:39,160
Speaker 3: the opposite of what we've just been through. Now, what if,

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00:26:39,480 --> 00:26:43,360
Speaker 3: how does your portfolio perform? We're over the next twelve months,

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00:26:43,400 --> 00:26:48,560
Speaker 3: the average stock does really well, but the market overall doesn't.

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00:26:49,240 --> 00:26:51,399
Speaker 3: And that can happen. We've actually seen it over the

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00:26:51,400 --> 00:26:53,760
Speaker 3: past few days. Some of the large tech names have

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00:26:53,800 --> 00:26:57,320
Speaker 3: had a massive breather. The markets kind of close pretty

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00:26:57,320 --> 00:27:01,520
Speaker 3: close to zero, but actually eighty of the marketers up.

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00:27:01,720 --> 00:27:05,920
Speaker 3: It's just that those larger names have really kind of

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00:27:06,000 --> 00:27:06,920
Speaker 3: dragged things down.

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Speaker 1: I think I read a stat even that the average

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00:27:10,160 --> 00:27:12,840
Speaker 1: S and P stock was something like ten percent behind

450
00:27:12,880 --> 00:27:15,720
Speaker 1: the index because so few of them had driven so

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00:27:15,800 --> 00:27:16,440
Speaker 1: much of the gain.

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00:27:16,960 --> 00:27:22,200
Speaker 3: Yeah, that's right, and so that that is the risk

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00:27:22,240 --> 00:27:26,760
Speaker 3: scenario here that if we do get a soft economic landing,

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00:27:27,240 --> 00:27:29,919
Speaker 3: people will feel a little bit more confident to go

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00:27:30,000 --> 00:27:32,080
Speaker 3: into some of the areas of the market that have

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00:27:32,160 --> 00:27:36,359
Speaker 3: been ignored so far. I think the other dynamic is

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00:27:36,680 --> 00:27:40,879
Speaker 3: that there has been money chasing this trend, and to

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00:27:40,960 --> 00:27:43,720
Speaker 3: buy something, you usually have to sell something, right, So,

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00:27:43,840 --> 00:27:48,679
Speaker 3: for example, a lot of software companies have been struggling

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00:27:49,040 --> 00:27:51,840
Speaker 3: over the past month or so, and a lot of

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00:27:51,840 --> 00:27:55,960
Speaker 3: the rationale that we hear behind that is they're essentially

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00:27:56,080 --> 00:27:59,040
Speaker 3: the collateral damage for when someone wants to go in

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00:27:59,480 --> 00:28:02,680
Speaker 3: and buy one of the buy one of the big

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00:28:02,720 --> 00:28:06,199
Speaker 3: tech names. And the other reason that investors tend to

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00:28:06,200 --> 00:28:10,120
Speaker 3: be releasing those names is they're worried about the impact

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00:28:10,240 --> 00:28:13,600
Speaker 3: that AI could have on some of their software sales.

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Speaker 1: Chris, thanks so much for coming on the show. We

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Speaker 1: loved having you. Thank for your insights, and big thanks

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Speaker 1: to everyone for tuning in. You can watch this on YouTube,

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00:28:20,800 --> 00:28:23,119
Speaker 1: or you can follow the podcast on Apple, Spotify or

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00:28:23,119 --> 00:28:25,960
Speaker 1: wherever else you get your podcasts. And please do leave

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Speaker 1: us a rating, as it really helps other people find

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Speaker 1: the show. Enjoy the rest of your week,