Speaker 1: Kyota, and welcome to this episode of Sheered Lunch. Today
Speaker 1: we are posing the question on a lot of people's
Speaker 1: minds right now, why should we bother investing locally when
Speaker 1: all of the action and all the investment returns seem
Speaker 1: to be going on in the United States. I'm Dan
Speaker 1: Brounskill from Interest dot cot in ZID and I'm joined
Speaker 1: to discuss this with Chris Deliver, head of Global and
Speaker 1: multi asset Investments at Harbor Asset Management.
Speaker 2: Investing involves risk you might lose the money you start with.
Speaker 2: We recommend talking to a licensed financial advisor. We also
Speaker 2: recommend reading product disclosure documents before deciding to invest. Everything
Speaker 2: you're about to see and hear is current at the
Speaker 2: time of recording.
Speaker 1: Thank you for joining us.
Speaker 3: Thanks jan Ah.
Speaker 2: So.
Speaker 1: I guess looking at the United States stock market, it
Speaker 1: has gone up a lot, while our market in the
Speaker 1: Australian market and lots of other markets around the world
Speaker 1: have not gone up anything like so much. Is this sustainable?
Speaker 1: What's going on? Help us understand?
Speaker 3: So a question we get often is why is a
Speaker 3: US market done so well? And why he has New
Speaker 3: Zealand been left behind? And it's probably going to sound
Speaker 3: quite predictable, but the answer is rarely around technology. So
Speaker 3: we've seen a lot of capital expenditure in AI that
Speaker 3: has driven a really large part of the gain for
Speaker 3: the US stock market. In addition to that, there's also
Speaker 3: been really strong economic growth in the US. If you
Speaker 3: look back to the end of twenty twenty two, the
Speaker 3: consensus was saying that we're going to get a recession
Speaker 3: in the US in twenty twenty three. Just a few
Speaker 3: days ago, there was a fund manager survey released and
Speaker 3: not many people think there is going to be a recession.
Speaker 3: So there's been a big change in the consensus over
Speaker 3: the last eighteen months and that has really helped drive
Speaker 3: sheer markets forward.
Speaker 1: When you look around the world right now, I mean
Speaker 1: there's a lot of negative sentiment economics New Zealand particularly.
Speaker 1: Do you think the US stock market is doing unusually
Speaker 1: well or other markets doing unusually badly? Talk to me
Speaker 1: about that.
Speaker 3: Yeah. So, although the US is the market that's had
Speaker 3: most of the headlines so far this year, it's actually
Speaker 3: the second largest country in the world that's actually done better.
Speaker 3: So the second largest country in the index is actually Japan.
Speaker 3: But actually so far this year, Japan has actually delivered
Speaker 3: a higher return than the US stock market. But you
Speaker 3: hear a lot about the US because it's the way
Speaker 3: the US stock market has generated its performance that has
Speaker 3: been quite odd. So up until last Friday, a third
Speaker 3: of the returns were driven by one stock, and we
Speaker 3: all know the name. It's in Video, probably the ultimate
Speaker 3: AI play. Given every dollar that gets spent towards some
Speaker 3: of it will find its way to buying in video GPUs.
Speaker 1: This is because in Vidio not itself an AI company,
Speaker 1: but makes the chips that power AI.
Speaker 3: Yeah, they're the infrastructure play I suppose with regards to AI.
Speaker 3: So they're benefiting from the capital expenditure that lots of
Speaker 3: large companies in the US are doing right now. I
Speaker 3: know that Mark Zuckerberg has said this in the past,
Speaker 3: is they're investing in AI partly to protect their current
Speaker 3: revenues and the money they're spending today. They don't expect
Speaker 3: to see returns on that capital investment for at least
Speaker 3: a few years from today. So there's been a lot
Speaker 3: of investment in as I said, capital expenditure, which is
Speaker 3: investing in supply. We've got to wait and see the
Speaker 3: next few years whether the demand is as good as
Speaker 3: everyone expects, and I think that is going to be
Speaker 3: the interesting thing for AI. It's over the next few
Speaker 3: years when we find out whether those use cases which
Speaker 3: seem promising are actually going to translate into real revenues
Speaker 3: and real margins for businesses. But certainly AI it's been
Speaker 3: a real story. It has created real earnings. I think
Speaker 3: that's important. So in Vidia's share price, yes, it's gone
Speaker 3: through the roof, but their earnings have gone up multiples
Speaker 3: of where they were expected to be. So consensus earnings
Speaker 3: were way off a couple of years ago, and that
Speaker 3: has since been upgraded. But the key thing we've got
Speaker 3: to figure out is are these earnings going to be
Speaker 3: sustainable for the future. And no one knows, not even
Speaker 3: the leaders of these really large companies are able to
Speaker 3: tell you exactly the use cases and exactly what the
Speaker 3: demand be in the future.
Speaker 1: A few weeks ago, we did an episode on the
Speaker 1: weight loss drugs. That's another big trend like AI. How
Speaker 1: much is that affecting stock market returns in the US
Speaker 1: and elsewhere.
Speaker 3: Yes, it has been a driver. The key plays here
Speaker 3: have been Eli, Lilly and Novo Nordis as a theme
Speaker 3: hasn't contributed anywhere near as much to return. So when
Speaker 3: I look at Novo Nordisk and Eli Lilly together, they've
Speaker 3: contributed about five percent of the return for the MSCI
Speaker 3: World Index this year. That's pretty small when you consider
Speaker 3: that Nvidia has alone generated five to six times the
Speaker 3: contribution to return. But where the weight loss drugs are
Speaker 3: really interesting is the impact that they're having on other companies,
Speaker 3: and we're actually seeing it this side of the world.
Speaker 3: So recently ResMed, for example, sold off because it was
Speaker 3: deemed that these weight loss drugs are not just helping
Speaker 3: people lose weight, it's how helping them sleep better and
Speaker 3: treat their sleep at near as well. So the interesting
Speaker 3: part we see on that is yes, the first order
Speaker 3: effects on those companies, but the impact has actually spanned
Speaker 3: far greater to companies listed locally here like Fisher and
Speaker 3: pikeal Healthcare. I'd include in that as well, all the
Speaker 3: way through to airlines because we're all going to be
Speaker 3: slimmer and that's going to mean less jet fuel. So
Speaker 3: I look forward to that.
Speaker 1: I can't wait for them to see if they can
Speaker 1: make the seeds even narrower.
Speaker 3: Yeah, so how.
Speaker 1: Much of if you look at how the US market
Speaker 1: has gone up quite a lot more than New Zealand
Speaker 1: or Australian market. How much of that is due to
Speaker 1: AI or even in video alone.
Speaker 3: So I think there's two key things to think about
Speaker 3: with share markets. One is the sectoral composition. So you
Speaker 3: know how much in tech, how much in consumer discretionary?
Speaker 3: The Amazon is classified as a consumer discretionary company. In
Speaker 3: most people's minds, it's it's probably tech because a lot
Speaker 3: of their earnings come from Amazon Web services as opposed
Speaker 3: to the marketplace. But that's how it's classified. So tech
Speaker 3: kind of permeates every sector. But notwithstanding that, you look
Speaker 3: at say the US compared to the New Zealand and
Speaker 3: Australian market, and you've just got to look through the
Speaker 3: top ten to see that it's a radically different beast
Speaker 3: and that has been a massive headwind for our market.
Speaker 3: But that brings me on to the second point. So
Speaker 3: one is sectoral composition has something to do with it.
Speaker 3: The second part is the economy. Now there's that old
Speaker 3: saying the stock market is the economy or is not
Speaker 3: the economy in New Zealand's case, so people in the
Speaker 3: US tend to say, oh, the stock market is the
Speaker 3: economy because there are a lot of listed companies over
Speaker 3: there which are a world avest fight across the US
Speaker 3: and capture America Inc. Quite well. They capture the innovation
Speaker 3: and a lot of the things driving gd growth and
Speaker 3: GDP growth in the US. In Australia it's quite similar, right.
Speaker 3: You know, we've got big banks over there, We've got
Speaker 3: we know that commodities is a large part of their economy.
Speaker 3: When you look through their share markets you see that
Speaker 3: quite well represented. Now that brings me to the New
Speaker 3: Zealand economy. Look through the top ten names in our
Speaker 3: market and it isn't the economy at all. You know,
Speaker 3: for example, Fisher and Pikele Healthcare great key we name
Speaker 3: given it that came out of Fisher and Pikele appliances,
Speaker 3: which I'd say most people have got one of them
Speaker 3: in their kitchen. But it's revenue really is generated all offshore.
Speaker 3: So that's not a New Zealand Inc. Investment.
Speaker 1: The New Zealand economy slows Fisher and pike wll barely.
Speaker 3: Notices correct, But where it does have an impact is
Speaker 3: around sentiment towards a market. So even though our stock
Speaker 3: market isn't our economy. If there's bad headlines around New
Speaker 3: Zealand and our economic growth and we have been slowing
Speaker 3: quicker than particularly the US, it is another reason for
Speaker 3: an investor to not come into our market. And we
Speaker 3: have noticed over the past few years that we've had
Speaker 3: less interest from Australian investors in our market, and that's
Speaker 3: captured by statistics, and part of that is that the
Speaker 3: banks have been doing quite well. Right, So when you
Speaker 3: look at the Australian Index, if you're an Australian fund
Speaker 3: manager and you don't like the banks, it's really inconvenient
Speaker 3: because there's such a large part of the index. So
Speaker 3: what a lot of Australian managers were doing through to
Speaker 3: kind of twenty twenty was building some reasonably large positions
Speaker 3: in New Zealand companies. But as it happened, you know,
Speaker 3: the banks' actually done extremely well over the past few years,
Speaker 3: so they haven't had as much reason to come into
Speaker 3: New Zealand. In New Zealand since our market has underperformed
Speaker 3: so substantially, there's no fomo there either. You know, they're
Speaker 3: not missing out on anything. They look at the market
Speaker 3: and go Actually it was greater was in in New Zealand,
Speaker 3: so the Australian market has done better. So the economy
Speaker 3: does matter here, but less so than the US and Australia.
Speaker 1: Because if you look, there's a couple of companies in
Speaker 1: the top five Meridian Energy, Spark New Zealand and New
Speaker 1: Zealands INDECKS. Those are ones that are probably tied to
Speaker 1: economic performance to a certain degree, or at least economic growth.
Speaker 1: But as you say, Fisher and Pical Healthcare, Auckland Airport
Speaker 1: not so much in fratil global investment business, so not
Speaker 1: actually that tightly and that makes up forty three percent
Speaker 1: of the index those five companies, so not super tightly
Speaker 1: tied to New Zealand economy. But you say that the
Speaker 1: downturn is turning people off anyway, people still not.
Speaker 3: Yeah, that's right. And I think the other thing we've
Speaker 3: got to take into account is a lot of our
Speaker 3: companies were quite impacted by COVID, so you know, quite simply,
Speaker 3: and this doesn't really hold over the short term, but
Speaker 3: over the long term. Share markets tend to track earnings,
Speaker 3: so if you've got earnings growth, that is a good
Speaker 3: reason for your share market to go up, right, And
Speaker 3: we just haven't had the earnings growth. In New Zealand,
Speaker 3: we've had a lot of our larger companies impacted by
Speaker 3: COVID and they've been finding their new equilibrium earnings level.
Speaker 3: So look at for example, Fish and Pipel Healthcare. COVID
Speaker 3: led to a lot of demand for their consumables, so
Speaker 3: they had their earnings increase quite substantially. But as the
Speaker 3: world normalize, what our analysts have been trying to figure
Speaker 3: out is what is what is the new equilibrium equilibrium?
Speaker 3: Why do I say these long words earnings for Fisher
Speaker 3: and Parker Healthcare, you can say a rarely similar thing
Speaker 3: for a two milk the dig or suitcase traveler just
Speaker 3: completely dried up during COVID, So after COVID you're wondering
Speaker 3: what sort of businesses business emerges are from this disruption.
Speaker 3: Main Freight as well. If you look at Main Freight's
Speaker 3: earnings chart, massive COVID earnings and now to us it
Speaker 3: looks like it's got back to it's pre COVID earnings growth.
Speaker 3: So you know you had that massive, massive increase back down.
Speaker 3: These are big companies, they haven't impact on the index
Speaker 3: and looks something I get asked often, and this has
Speaker 3: been a recurring question over the past few years is
Speaker 3: when is New Zealand going to catch up? And I
Speaker 3: still can't answer it, not much used to anyone, But
Speaker 3: what I will say is it does feel like we're
Speaker 3: getting back to our baselime level of earnings. So we've
Speaker 3: been quite bearish on New Zealand relative to global assets
Speaker 3: over the past twenty four months especially. Our next move
Speaker 3: might actually be to close some of that underweight to
Speaker 3: New Zealand. And there's two reasons for that. One is
Speaker 3: that valuations relative to global share markets are actually a
Speaker 3: lot more attractive today than they were a couple of
Speaker 3: years ago. And secondly, we feel like we've got a
Speaker 3: lot more faith in what the earnings picture is are
Speaker 3: going forward.
Speaker 1: Yeah, because I think it's basically if you look pre
Speaker 1: COVID to today, the index is almost flat. I mean,
Speaker 1: depending on the day, it might be up one percent
Speaker 1: or two percent. You think, surely that can't last.
Speaker 3: Yeah, I mean, but I always tell people that, you know,
Speaker 3: be careful with time frames because you know that's true.
Speaker 3: So I think to the end of twenty nineteen to today,
Speaker 3: we're pretty much flat and the US market's up like
Speaker 3: seventy percent, So it's been a massive drain and you
Speaker 3: look at it and go, what am I doing here?
Speaker 3: Why am I being? And I think there's good reasons
Speaker 3: though too, and just on the performance basis, So the
Speaker 3: two decades to twenty twenty, we outperformed the US market
Speaker 3: quite substantially. So from twenty ten to twenty twenty, the
Speaker 3: indices were pretty much on par, but the US from
Speaker 3: two thousand to twenty and ten was flat because we
Speaker 3: had two crises, one to do with tech, the other
Speaker 3: was obviously the global financial crisis. And that's a good
Speaker 3: thing about New Zealand. We just our companies weren't impacted
Speaker 3: as much. We hummed away and actually we delivered the
Speaker 3: level of outperformance which is similar to what the US
Speaker 3: has delivered relative to US over over the past four
Speaker 3: years that we've just talked about.
Speaker 1: So yeah, so that's why we talk about this whole
Speaker 1: You've got to have a long term horizon and you've
Speaker 1: got to be prepared for losses because I mean, some
Speaker 1: of us are you know, younger investors who definitely haven't
Speaker 1: been around for any ten year cycle a littleone multiple.
Speaker 1: But it's interesting to hear that like this idea because
Speaker 1: to me, three years of flat gains feels like my
Speaker 1: investing lifetime. It's interesting to hear that there was a
Speaker 1: time where there was ten years in the States.
Speaker 3: But there can be some very very long winters. So
Speaker 3: we're talking about Japan this year, right, because the Japanese
Speaker 3: stock market has done really well. The problem with the
Speaker 3: Japanese sheer market all time high is the high that
Speaker 3: they hit this year was a relative to nineteen eighty nine. Okay,
Speaker 3: all right, so it's thirty five years in other words,
Speaker 3: of a zero nominal return. You know, we're not even
Speaker 3: talking about talking about kind of really justable. Look, I'm
Speaker 3: not going to draw that analogue to today in the US.
Speaker 3: The valuations in Japan were just just absolutely unheard of
Speaker 3: and they haven't really been tested since on a price
Speaker 3: to earnings multiple basis. The only thing close was the
Speaker 3: was the tech level in the US. But it's just
Speaker 3: a really good example of conventional wisdom back then was
Speaker 3: you know, Japan was the future and it didn't transpire.
Speaker 3: Interesting with Japan today it does look like and a
Speaker 3: key reason their market is rarely is one there's reforms
Speaker 3: around shareholder returns. So you know, Japanese companies were quite
Speaker 3: benevolent and you know, really took great care of their employees,
Speaker 3: which is a good thing. But would enter we do
Speaker 3: expenditure with the expectations of really low returns on capital.
Speaker 1: So if Japan is being a little bit less benevolent,
Speaker 1: is the reason the US economy and therefore it's share
Speaker 1: market to a certain degree, is our performing because the
Speaker 1: US is not so malevolent. Perhaps they're better capitalists, perhaps
Speaker 1: more malevolent. You might even say.
Speaker 3: There is some truth in that. If you look at
Speaker 3: the share of a company's profit that goes to labor
Speaker 3: versus what goes to the shareholders, and that is over
Speaker 3: the past couple of decades in the US fallen, so
Speaker 3: so a bigger share of the gains have gone to
Speaker 3: capital over labor. More nearer term. What's quite interesting is
Speaker 3: that some of the larger companies in the US, you'll
Speaker 3: probably say they weren't great capitalists. And I'm talking specifically
Speaker 3: about some of the large tech companies. So you're going
Speaker 3: into the say two, they had a decade of just
Speaker 3: rarely really check money. Easy to get around a way
Speaker 3: with regards to raising capital, and money was cheap, right,
Speaker 3: you know, we had intrastructs pretty much zero, and that
Speaker 3: meant that actually there was a lot of fat in
Speaker 3: those businesses, right, you know, think of Meta, think of
Speaker 3: why it's called Meta because they were chucking so much
Speaker 3: money into the metaverse and it wasn't exactly delivering any
Speaker 3: shareholder returns. So actually part of the gains that you've
Speaker 3: seen in the US share market, I think, particularly in
Speaker 3: twenty twenty three in twenty twenty four, has actually them
Speaker 3: been better capitalists. So I will use Meta as an
Speaker 3: example again because they managed to gain deliver strong profits
Speaker 3: while reducing their workforce.
Speaker 1: So I feel like we've highlighted two main things that
Speaker 1: explain the difference between the New Zealand Australian markets and
Speaker 1: the Japanese and US markets, which is largely tech exposure
Speaker 1: AI better economy performance. How would you split those two things?
Speaker 3: You know?
Speaker 1: The you know, is it is it fifty to fifty
Speaker 1: or is it more tech driving the returns or is
Speaker 1: it more the better economy? Do you have an idea
Speaker 1: of which of those two things are having a bigger impact.
Speaker 3: I guess it's definitely the composition of an index which
Speaker 3: has the line's share of the impact in my view.
Speaker 3: And the reason I say that is because we do
Speaker 3: a lot of analysis where we adjust share markets to
Speaker 3: have the same composition interest as the US and see
Speaker 3: how much of returns it that actually explains. So it
Speaker 3: does explain a really large portion. So for example, if
Speaker 3: Europe had more in information technology, just the same information
Speaker 3: technology companies they have today, their share market return would
Speaker 3: be higher because their information's technology sector is actually done
Speaker 3: quite well, but they just haven't had as much of
Speaker 3: it as the US. So that definitely is the lines
Speaker 3: share and so some of it sector. Some of it
Speaker 3: comes down to style as well. So you know, growth
Speaker 3: investing has done quite well for a number of years,
Speaker 3: particularly though kind of over the past twelve to eighteen
Speaker 3: months now when you look at a lot of the
Speaker 3: companies within New Zealand, for example, you wouldn't call them
Speaker 3: traditional growth.
Speaker 1: So, Chris, when retail investors are thinking about their own
Speaker 1: personal finance, what approach could they take to factor in
Speaker 1: some of these things? What things should they be thinking about?
Speaker 3: I guess yeah, So I think a key one is
Speaker 3: just making sure that you haven't had risk creep in
Speaker 3: your portfolio. So lots of things have gone up since
Speaker 3: you've probably bought them, and what that means is that
Speaker 3: actually the portfolio that you bought might be quite different
Speaker 3: than the portfolio that you have today. For example, if
Speaker 3: you you've gotten video in your portfolio, it has it
Speaker 3: a guest say, it's probably a bigger weight today than
Speaker 3: it was when you originally purchased it. So have a
Speaker 3: look at your strategy and make sure that it reflects
Speaker 3: your risk profile today as opposed to your risk profile
Speaker 3: that markets have just given to you. That would be
Speaker 3: my key tip. The other tip is something that people
Speaker 3: ignore in portfolios is the impact of currency. So a
Speaker 3: lot of people might just be invested in the US.
Speaker 3: Is that hedged i e. Have you invested in a
Speaker 3: product that hedges out the currency risks? So if the
Speaker 3: New Zealand dollar depreciates or appreciates, it won't impact your
Speaker 3: return or are you an unhedged investor? A lot of
Speaker 3: people given especially if they're buying shares directly, they would
Speaker 3: have a lot of unhedged stocks.
Speaker 1: So if you think about the markets we've talked about today,
Speaker 1: New Zealand maybe doing the worst of the Setustralia a
Speaker 1: little bit better, US and Japan doing really great. What
Speaker 1: should people be doing? But you know, is it good
Speaker 1: to be spread across all those markets, or do you
Speaker 1: want to focus on the ones that have done the worst?
Speaker 1: How should people approach that?
Speaker 3: Yes, so I definitely wouldn't although it's tempting to try
Speaker 3: and catch the bottom and catching falling knives is really
Speaker 3: really difficult and as you could imagine, pretty fraught. But
Speaker 3: I think, as I demonstrated earlier, there are different time
Speaker 3: periods where different markets outperform and underperform one another. And
Speaker 3: I think the very I get a lot of information
Speaker 3: by the questions that people ask me, And a really
Speaker 3: common question is why do I even need to be
Speaker 3: investing in New Zealand. Typically when you're asking that question,
Speaker 3: it's because of performance, and typically that is the time
Speaker 3: where actually maybe you should consider investing in New Zealand.
Speaker 3: As I said, there's recent decades where the New Zealand
Speaker 3: market has done really well a relative to the US
Speaker 3: market and Australia in particular. So yeah, I think in
Speaker 3: MIX and H market there are different drivers for each
Speaker 3: And you know, today so much of the world index
Speaker 3: is invested in the US, so you're getting really good
Speaker 3: exposure to the US market.
Speaker 1: Anyway, Harve has just done some interesting research looking at
Speaker 1: basically portfolio allocation, and it seemed like from my reading
Speaker 1: of the note, that you're essentially arguing that institutional investors
Speaker 1: like you should not just be investing in different markets,
Speaker 1: but actually investing in different kinds of assets, and that
Speaker 1: the stock market might have law returns relative to potentially bonds,
Speaker 1: and that you should actually invest in a slightly broader
Speaker 1: range of assets. Can you talk just briefly and in
Speaker 1: simple terms about what that research shows and why you're
Speaker 1: thinking about maybe changing up the way you look at
Speaker 1: your portfolios.
Speaker 3: Yes. So, there aren't many relationships in finance that actually
Speaker 3: stand the test of time, but one that does is
Speaker 3: your starting valuation of when you invest in a market
Speaker 3: and the return that you get over the next decade.
Speaker 3: Because say you're buying a company with a price to
Speaker 3: earnings ratio of twenty times. Essentially, what that is telling
Speaker 3: you is for every one hundred dollars you put in
Speaker 3: a company, they're going to kind of give you five
Speaker 3: percent or five dollars back in earnings each year, right,
Speaker 3: and if it's a growth company, they'll be able to
Speaker 3: grow and deliver more returns to shareholders. Five percent not
Speaker 3: a lot, not a lot, And when we look at
Speaker 3: bond markets at the moment, and you know, bonds are boring.
Speaker 3: You know a lot of people don't like to talk
Speaker 3: about them.
Speaker 1: How to buy them, Well, that.
Speaker 3: Is a challenge and we can talk about that. But
Speaker 3: bonds actually are quite interesting as a compliment to a
Speaker 3: portfolio right now, and that's for a couple of reasons. One,
Speaker 3: they're delivering a pretty healthy yield. So you get an
Speaker 3: investment grade bond in New Zealand or investment grade bond fund,
Speaker 3: it's probably going to have a yield of around six percent,
Speaker 3: right and it just gives you that protection should we
Speaker 3: get a growth shock. And lots of economists at the
Speaker 3: moment are not for seeing a growth shock. But you
Speaker 3: don't foresee a shock. That's what makes it a shock.
Speaker 3: So it's good to have some insurance in portfolios. At
Speaker 3: the moment. Bonds are harder to access. I think you're
Speaker 3: right there. There's obviously ETFs around that can give clients exposure.
Speaker 3: I think the other thing to take into account, and
Speaker 3: we've talked about the US market a lot today, but
Speaker 3: there is this kind of human fomo that goes on
Speaker 3: when a market is going really well. But it's a
Speaker 3: really good time is to look at their portfolios and
Speaker 3: actually look through and say, how diversified am I?
Speaker 1: Now?
Speaker 3: If you're buying the S and P five hundred today,
Speaker 3: it's twenty five percent in those mega cat tech names.
Speaker 3: And we've just had a period where those megacat tech
Speaker 3: names have driven the market up. When we manage our portfolios,
Speaker 3: we do a lot of what if analysis. Some people
Speaker 3: call it catastrophizing, but you look through and you say, Okay,
Speaker 3: if this happens, how would our portfolio react. Quite an
Speaker 3: interesting scenario at the moment is thinking about going through
Speaker 3: the opposite of what we've just been through. Now, what if,
Speaker 3: how does your portfolio perform? We're over the next twelve months,
Speaker 3: the average stock does really well, but the market overall doesn't.
Speaker 3: And that can happen. We've actually seen it over the
Speaker 3: past few days. Some of the large tech names have
Speaker 3: had a massive breather. The markets kind of close pretty
Speaker 3: close to zero, but actually eighty of the marketers up.
Speaker 3: It's just that those larger names have really kind of
Speaker 3: dragged things down.
Speaker 1: I think I read a stat even that the average
Speaker 1: S and P stock was something like ten percent behind
Speaker 1: the index because so few of them had driven so
Speaker 1: much of the gain.
Speaker 3: Yeah, that's right, and so that that is the risk
Speaker 3: scenario here that if we do get a soft economic landing,
Speaker 3: people will feel a little bit more confident to go
Speaker 3: into some of the areas of the market that have
Speaker 3: been ignored so far. I think the other dynamic is
Speaker 3: that there has been money chasing this trend, and to
Speaker 3: buy something, you usually have to sell something, right, So,
Speaker 3: for example, a lot of software companies have been struggling
Speaker 3: over the past month or so, and a lot of
Speaker 3: the rationale that we hear behind that is they're essentially
Speaker 3: the collateral damage for when someone wants to go in
Speaker 3: and buy one of the buy one of the big
Speaker 3: tech names. And the other reason that investors tend to
Speaker 3: be releasing those names is they're worried about the impact
Speaker 3: that AI could have on some of their software sales.
Speaker 1: Chris, thanks so much for coming on the show. We
Speaker 1: loved having you. Thank for your insights, and big thanks
Speaker 1: to everyone for tuning in. You can watch this on YouTube,
Speaker 1: or you can follow the podcast on Apple, Spotify or
Speaker 1: wherever else you get your podcasts. And please do leave
Speaker 1: us a rating, as it really helps other people find
Speaker 1: the show. Enjoy the rest of your week,