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Speaker 1: Andrew dickens more than halfway through the year. It's been

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Speaker 1: a pretty extraordinary year for the market so far, huge

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Speaker 1: market uncertainty, the rise and rise of AI and all

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Speaker 1: sorts of stuff, the ongoing recession. So anyway, let's talk

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Speaker 1: about what investors should have learned and what we might

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Speaker 1: see in the second half. And I'm joined now by

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Speaker 1: Sam Dickey from Fisher Funds.

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Speaker 2: Hello Sam, Andrew, Good evening.

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Speaker 1: So how normal abnormal? Has this year been.

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Speaker 2: Quite abnormal? I would say so, the biggest pickup in

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Speaker 2: volatility and the sharpest correction in equity since the depths

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Speaker 2: of COVID, and for that brief period after Donald's Liberation Day,

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Speaker 2: sentiment and equity markets was at its lowest EBB for

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Speaker 2: quarter of a century. And when you think about the

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Speaker 2: three big drivers of the game, so growth, inflation, and

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Speaker 2: interest rates, it's been a fair bit of abnormality there too.

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Speaker 2: So inflation has continued to behave well and it's slowed

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Speaker 2: from sort of four and a half percent globally to

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Speaker 2: three and a half. But interest rates have not played ball.

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Speaker 2: So it's very very rare for US medium and long

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Speaker 2: term interest rates to be higher now than they were

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Speaker 2: at the start of the central bank rate cutting cycle.

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Speaker 2: And that's partly due to fears that whatever tariffs are

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Speaker 2: eventually implementable drive up inflation. It's partly because of Trump

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Speaker 2: meddling with the independence of the Federal Reserve independence and

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Speaker 2: trying to face them to cut rates early, and partly

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Speaker 2: because people trust the US a little less. And the

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Speaker 2: other thing is, despite this once in a generation trade war,

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Speaker 2: the US bombing three nuclear sites in Iran resulting in

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Speaker 2: a twenty percent spike in oil prices, and all those

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Speaker 2: other abnormal events, equity markets have smasher all Tom Highs again.

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Speaker 1: Meanwhile, of course, the chair of the United States Federal Reserved,

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Speaker 1: Jerome Powell, has made a decision today to hold US

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Speaker 1: interest rates. So he's still concerned about inflation, isn't he

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Speaker 1: and the effect of the tariffs.

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Speaker 2: Yeah, that's right. And he's not buckling to the political

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Speaker 2: pressure that Trump is putting on him. I think Trump's

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Speaker 2: called him a loser and his to make another mistake.

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Speaker 2: I think he might have even called him stupid at

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Speaker 2: some stage, which is quite ironic actually. So, yeah, he

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Speaker 2: hasn't buckled depression. And that's that's critical because the independence

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Speaker 2: of a Central Bank from politics is absolutely critical to

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Speaker 2: the credibility of a nation. And the very fact that

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Speaker 2: Trump is meddling and there is a probability that Jerome

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Speaker 2: Power would buckle to that pressure is one of the

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Speaker 2: reasons why we see interest rates in the US sort

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Speaker 2: of abnormally high at this point in the cutting cycle.

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Speaker 2: And it's one of the reasons why I've seen such

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Speaker 2: a weak US dollar.

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Speaker 1: And meanwhile, the nacid prices and equity prices. I know,

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Speaker 1: I know some people have made a fortune enugh rocket

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Speaker 1: there because business continues. They got some contracts, so some

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Speaker 1: of our equities are soaring, others are sinking. It's all

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Speaker 1: over the shop, that's right.

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Speaker 2: And you mentioned AI at the start, and that that

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Speaker 2: big trade got a bit over its skis a bit

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Speaker 2: bubbly late last year, turned from boom to bus for

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Speaker 2: a while. You might remember we talked about it in

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Speaker 2: this program. This draw that broke the camel's back back

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Speaker 2: and Nary February was that that Chinese company Deep Seek

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Speaker 2: could allegedly build an AI model a fraction of the

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Speaker 2: cost of the US big tech guys, and in the

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Speaker 2: AI trade got a real kicking during the trade spat

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Speaker 2: with China. Now that dust is cleared, the deep seat

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Speaker 2: claims were a little misleading, and corporates around the world

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Speaker 2: world have really started clamoring for things like AI agents,

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Speaker 2: which is a use case for all this investment in

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Speaker 2: AI to answer calls or automotive simple processes. And the

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Speaker 2: AI bubble is fully formed again. And actually Microsoft, speaking

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Speaker 2: of equities, are doing well. Andrew reported earnings a few

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Speaker 2: hours ago and absolutely knocked it out of the park.

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Speaker 2: So their data center business is Your now a huge business,

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Speaker 2: sort of one hundred billion dollar business, and growth is

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Speaker 2: actually accelerating, so it's now growing forty percent as companies

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Speaker 2: around the world rushed to implement AI and influence their

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Speaker 2: AI models on is your okay?

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Speaker 1: So why didn't interesting first half? So what can we

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Speaker 1: expect in the second half or is it expect the unexpected?

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Speaker 2: Well, that's exactly what I would say, so that we

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Speaker 2: need to get used to this abnormality we seem to

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Speaker 2: have once in multi decade events every couple of years.

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Speaker 2: And I do think part of that is the global

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Speaker 2: economy is still finding its feet after the savage shock

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Speaker 2: of COVID, believe it or not. Part of that is

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Speaker 2: the pace of technological change, especially with AI set to

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Speaker 2: disrupt businesses around the world. Part of that is probably

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Speaker 2: the political environment. But the lesson we did learn the

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Speaker 2: first half and before we got to the second half,

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Speaker 2: is don't sweat the macro too much. More often than not,

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Speaker 2: i'd say you've probably got a better seventy five percent

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Speaker 2: hit rate on this is when extraordinary macro events happen,

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Speaker 2: the market overreacts and it's a great buying opportunity for

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Speaker 2: long term investors. As for the second half, it shouldn't

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Speaker 2: be ignored that sentiment has turned from that super bearish

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Speaker 2: sentiment we talked about back in April to now showing

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Speaker 2: signs of a ration and exuberance. And when you consider

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Speaker 2: in the second half, we have to navigate, among other things,

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Speaker 2: final clarity on Trump's tariff outcomes for the globe on

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Speaker 2: August first, assume he doesn't give another grace period, and

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Speaker 2: economists think that could still drag US or global growth

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Speaker 2: by anywhere from one to three percent. You shouldn't lose

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Speaker 2: sight of the fact that the water is certainly slotted

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Speaker 2: to the bullish end of the bathtub.

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Speaker 1: WHOA, what a lovely turn of phrase. And on that

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Speaker 1: wonderful piece of English. We're going to leave you, Sam

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Speaker 1: Dicky from Fisher Funds, and thank you for your time.

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