Speaker 1: Kyonda, and welcome to Shared Lunch, brought to you by Chase's.
Speaker 2: I'm Helen Madison.
Speaker 1: Today we take a pulse check on the economy. I'll
Speaker 1: be speaking with Infametrics principal economist Brad Olsen.
Speaker 3: The worry now a little bit more is that households, businesses,
Speaker 3: and professional forecasters are all now thinking that there is
Speaker 3: a bit more inflation to come.
Speaker 2: So what does this mean for investors?
Speaker 3: It's only a temporary pause that we're seeing with these tariffs,
Speaker 3: and that some of the results could still be pretty damaging.
Speaker 2: What should you be looking out for?
Speaker 3: Everyone's trying to figure out what the sweet spot is
Speaker 3: and sort of how to balance what is a lot
Speaker 3: of uncertainty.
Speaker 2: And what should you ignore.
Speaker 3: It's been the sort of recognition from a lot of
Speaker 3: people that, hey, sometimes that the markets have been over
Speaker 3: correcting or a bit overly worried about things and then
Speaker 3: seem to come back the other way.
Speaker 1: Before we get started, here's some important information.
Speaker 4: Investing involves the risk you might lose the money you
Speaker 4: start with. We recommend talking to a licensed financial advisor.
Speaker 4: We also recommend eating product disclosure documents before deciding to invest.
Speaker 4: Everything you're about to see and here is current at
Speaker 4: the time of recording.
Speaker 2: Welcome Brad, great to see you again. It's been a while.
Speaker 3: It has been a while. In goodness, what a lot
Speaker 3: has happened in the economy in that intervening period. Seems
Speaker 3: like we've gone from the brink of World War III
Speaker 3: to ceasefires, to tariffs to everything else. I mean, it's
Speaker 3: been a pretty wild ride.
Speaker 2: It has.
Speaker 1: Let's start here at home and think about our economy
Speaker 1: and growth. It appears that we are sort of stepping
Speaker 1: up a little bit after all the kind of recession talk,
Speaker 1: et cetera, et cetera. However, it appears to me that
Speaker 1: the only real growth we're seeing is in the rural sector,
Speaker 1: with milk prices, with beef for burgers to the US,
Speaker 1: which is good for exports, and then that yellow gold butter.
Speaker 3: You're definitely right, I mean, the rural sector is definitely
Speaker 3: powering the early stages of the economic recovery. You look
Speaker 3: at the likes of the trade numbers we've got coming through,
Speaker 3: commodity prices all in a better place. I think it's
Speaker 3: true as well when you look across the world. That's
Speaker 3: also partly a supply story. From other providers. So you
Speaker 3: look at the likes of butter, milk, other dairy products,
Speaker 3: New Zealand productions actually up, which is unusual when prices
Speaker 3: are sort of at the levels that they are. But
Speaker 3: it's production out of the likes of Europe and the
Speaker 3: Americas that haven't been doing quite as well. New Zealand's
Speaker 3: able to provide everyone else wants to pay for it.
Speaker 3: We've been doing not too bad. You look at also
Speaker 3: the numbers though, so the milk payout that's come through
Speaker 3: has generated over nineteen billion of money that'll be going
Speaker 3: back into the primary sector. What's interesting is in the
Speaker 3: season just finished, you're talking something like four point five
Speaker 3: four point six billion dollars more than the season before.
Speaker 3: That's more money coming through than the entirety of the
Speaker 3: lower interest rates that households be paying this year. So
Speaker 3: the primary sector is definitely a very critical part at
Speaker 3: the start. The question is does it continue. Because you
Speaker 3: do start to see a few of those numbers that
Speaker 3: likes the latest couple of global dairy trade options, they've
Speaker 3: fallen back a touch and I think that does just
Speaker 3: suggest again things are all right for the minute, but
Speaker 3: a bit of a question going forward in terms of
Speaker 3: how strong it will be. Fonterra has also made it
Speaker 3: quite clear that they think there's effectively a bit of
Speaker 3: a downside risk. They've come out that said, you know,
Speaker 3: milk prices at ten bucks for the season ahead, but
Speaker 3: it could range anywhere between eleven and eight. That's a
Speaker 3: three dollar range, the biggest they've ever provided, and more
Speaker 3: on the downside than there is the upside. I guess
Speaker 3: that's almost the tone for the second half of this
Speaker 3: year is Yep, there's a recovery coming through, but it's
Speaker 3: a very cautious and slow one.
Speaker 1: Is it only the rural sector that are actually going
Speaker 1: leaps and bounds or are other do you see other
Speaker 1: sort of green shoots? Which is a bit of a
Speaker 1: hackneyed phrase at the moment, but I'll use it anyway.
Speaker 3: First three months of this year looked all right. You
Speaker 3: saw economic activity that expanded actually quite a bit apecent,
Speaker 3: you know, some of the biggest increase in quarterly growth
Speaker 3: that we've seen amongst a lot of our international partners.
Speaker 3: I think the challenges after that, once you start to
Speaker 3: get into April, you have the lights of the tariff
Speaker 3: slow down and everything else that's come through you've seen
Speaker 3: some of those indicators that have fallen back. At the
Speaker 3: start of this year, there were a few parts the
Speaker 3: likes of there was some better manufacturing numbers that were
Speaker 3: coming forward. You also saw better professional services activity, so
Speaker 3: you're getting you know, business services going a bit more again.
Speaker 3: Both of those look like they've fallen back of touch
Speaker 3: as we've moved through into the mid year period, manufacturing
Speaker 3: and services and disease falling back into sort of contractionary territory.
Speaker 3: So just that feeling of yes, there's a recovery, but
Speaker 3: it's a bit more stop start. It's a bit more
Speaker 3: slow to get going than we might have first expected.
Speaker 3: And I feel like a lot of people ask me
Speaker 3: these days, you know, economist said survived till twenty five
Speaker 3: and I sort of have to respond and say, look,
Speaker 3: we've got into the thirty first of December for that
Speaker 3: come true. But it is going to be a slow
Speaker 3: slog I think for this year.
Speaker 1: Yeah, it feels like one step forward to back to
Speaker 1: some degree. I mean, the cost of food seems to
Speaker 1: still keep rising, fuel keeps rising, and whether that's because
Speaker 1: of the conflicts and the like.
Speaker 2: Yeah, I mean, where are we at with inflation.
Speaker 3: Inflation's uncomfortable at the moment, and like probably more uncomfortable
Speaker 3: than we would have first been expecting some people in
Speaker 3: our forecasting that headline inflation might go through three percent
Speaker 3: towards the second half of this year. Now, that of course,
Speaker 3: would be the first time that it had breached that
Speaker 3: three percent high point of the highest that the Reserve
Speaker 3: Bank generally wants it to go. Now, yes, there's an
Speaker 3: expectation a short term, but there does just seem to
Speaker 3: be enough sort of remaining inflationary pressure to make us
Speaker 3: a little bit worried. And some people often ask, you know,
Speaker 3: how do you have this when you've got the economy
Speaker 3: that's in such a tough zone. You know, it's not
Speaker 3: really a conducive environment right to raise prices, but you're
Speaker 3: still seeing them. And I do wonder if we're starting
Speaker 3: to see almost a twenty twenties version of stagflation. Now
Speaker 3: that's a big word to use. I'm not saying we're
Speaker 3: going back to the nineteen seventies. It's a very different environment,
Speaker 3: but you do just get the feeling that there's a
Speaker 3: little bit more of that inflationary undercurrent sitting around food
Speaker 3: price inflation's now reaccelerated to four point four percent. What's
Speaker 3: interesting is that last time it got sort of to
Speaker 3: this high level, and I think you know now at
Speaker 3: the highest food price inflation since the end of twenty
Speaker 3: twenty three. The difference is at that point it was very,
Speaker 3: very broad based, lots of stuff increasing in price all
Speaker 3: the time, whereas now it's a bit more concentrated to
Speaker 3: a more limited set of items. But the big increases.
Speaker 3: You look at the likes of butter up sort of
Speaker 3: fifty sixty percent the last year, mints and beef prices
Speaker 3: higher again because those international prices. You look at the
Speaker 3: likes of coffee, chocolate, olive oil, all of those increasing
Speaker 3: all the But it's also it's not everything, but it's
Speaker 3: the stuff that you notice so so much more, and
Speaker 3: I think that's probably the difference. You've also got the
Speaker 3: likes of oil prices, yes, fluctuating quite a lot this year.
Speaker 3: But the real one, I think, and the kicker for
Speaker 3: households at the minute, is energy prices. You look at
Speaker 3: electricity and gas now rising at the fastest they've been
Speaker 3: going in over ten years, and again it's just that
Speaker 3: uncomfortable piece where from a household perspective. You've got food
Speaker 3: prices going up, you've got energy costs going up. And
Speaker 3: the worry now a little bit more, is that households, businesses,
Speaker 3: and prefertional forecasters all now thinking that there is a
Speaker 3: bit more inflation to come. Inflation expectations have increased, not
Speaker 3: massively again, not to red alert danger zones, but just
Speaker 3: to enough of a position where again the worry starts
Speaker 3: to creep in, sort of a bit of a pit
Speaker 3: in the bottom of your stomach around inflation sitting by,
Speaker 3: and I think that's why the reserve banks in this
Speaker 3: really challenging position where they're going the economy doesn't look great,
Speaker 3: and I worry again. You look back to where we've
Speaker 3: been a couple of years back, the likes of inflation
Speaker 3: when it started to get bad. It was at a
Speaker 3: time when we thought the economy wouldn't allow inflation to
Speaker 3: pass through, and we sort of almost conveniently at the time,
Speaker 3: ignored actual inflation starting to creep up again. Not fully
Speaker 3: back in the same position, but it seems a little
Speaker 3: bit too similar to completely ignore it.
Speaker 1: That's a good segue to the Reserve bank. By the
Speaker 1: time this episode goes to air. They will have actually
Speaker 1: the Reserve Bank will have actually announced.
Speaker 2: What the official cash rate is.
Speaker 1: Everybody's been hoping it would be another reduction, but it
Speaker 1: does feel like consensus is they will hold.
Speaker 3: What was your prediction, We're expecting a hold as well,
Speaker 3: to keep their official cash rate where it is at
Speaker 3: three point twenty five percent, but also expecting that there
Speaker 3: could be a further cut at some point later in
Speaker 3: the year. And I guess that's where again that nervousness
Speaker 3: creeps in that it's a little bit hard to justify
Speaker 3: moving right this moment. You know, there's still the clarification
Speaker 3: of what happens with the tariffs around the world, still
Speaker 3: a bit more data to come through when it comes
Speaker 3: to inflation and similar and so I think again that
Speaker 3: sort of question of where does the Reserve Bank go
Speaker 3: next is probably the bigger one, and they'll have a
Speaker 3: better opportunity in August to be able to explain not
Speaker 3: only the most recent decision, but also what that future
Speaker 3: pathway looks like, because that's what everyone's concentrated on. Is
Speaker 3: there a lot left to go? Are we close to
Speaker 3: the end? Have we already seen the end? Quite a
Speaker 3: lot of options going forward.
Speaker 1: Yeah, I suppose they're sending out letters at the moment.
Speaker 1: According to Trump's officials and to you know, lots of
Speaker 1: countries that actually probably have quite high tarifs, they do
Speaker 1: something quite quickly, So you're right, we probably might have
Speaker 1: to wait until that happens.
Speaker 3: And I mean you look at the market reaction as well.
Speaker 3: I mean, when the tariffs originally came through at the
Speaker 3: start of April like that, that was a bit of
Speaker 3: a mountdown on the markets. What's I think interesting is
Speaker 3: that even in recent times you've seen this sort of
Speaker 3: the markets actually continue to push higher on some economic news,
Speaker 3: but almost conveniently forgetting that there's it's only a temporary
Speaker 3: pause that we're seeing with these tariffs, and that some
Speaker 3: of the results could still be pretty damaging. I mean,
Speaker 3: recently we've seen an agreement with between the US and Vietnam.
Speaker 3: They came out and said, look, twenty percent tariff. Now
Speaker 3: that's lower than the forty six I think percent they
Speaker 3: started with. Twenty percent tariff on everything coming out of
Speaker 3: Vietnam is still quite a lot though, and into the
Speaker 3: US market becomes quite important because that's where a lot
Speaker 3: more manufacturing is based. Anything that transits through Vietnam sitting
Speaker 3: at forty percent tariffs and the US gets completely you know,
Speaker 3: free access into the market. Like that's still pretty bad
Speaker 3: for economic expectations going forward. So I'm a little bit
Speaker 3: worried again that people are sort of quite happily blase
Speaker 3: because it's been such a tough ride knowing what's coming next.
Speaker 3: But if that's any indication again economic growth globally will slow.
Speaker 3: If you're seeing those levels of teriffs. They might be
Speaker 3: better than what was announced in April, but they're not
Speaker 3: good for global economic growth.
Speaker 1: And that's even with China and I think the UK
Speaker 1: sort of negotiating, and we'll obviously see other negotiations in
Speaker 1: the next month or so. But yeah, it feels still
Speaker 1: somewhat bleak.
Speaker 2: Doesn't it.
Speaker 3: Yeah, very challenging, and I mean it's one of those
Speaker 3: things for New Zealand, of course, we rely on the
Speaker 3: global economic environment to trade. At the moment, I think
Speaker 3: we're actually probably not too badly placed. People were still
Speaker 3: buying our food stuff, so we're selling to consumers a
Speaker 3: lot more if we were selling sort of semi manufactured
Speaker 3: goods or sort of intermediate goods that went into the
Speaker 3: production process. If we were selling cars, you'd be in
Speaker 3: a very, very tough spot. And having been in Korea
Speaker 3: earlier this year, when again they are a lot more
Speaker 3: wedded to not only the US economy, but to some
Speaker 3: of that more manufactured stuff, they were definitely sort of
Speaker 3: feeling the pinch a whole lot quicker than we were now.
Speaker 1: Interest rates also always have a bearing on house prices,
Speaker 1: so the rate cuts.
Speaker 2: That we've had, we've had several I think it's two.
Speaker 1: Hundred and twenty five basis points over the last few months. However,
Speaker 1: it doesn't appear that the heat has come back into
Speaker 1: that housing market.
Speaker 3: No, not at all. And despite the fact that you
Speaker 3: know you've got some fairly attractive interest rates on offer,
Speaker 3: you just haven't seen that same level of buyer demand
Speaker 3: spark up to the same degree. At the same time,
Speaker 3: you've got a huge number of houses that are still
Speaker 3: on the market. I think there's a few elements that.
Speaker 3: One is the fact that there is literally half a
Speaker 3: year's worth of normal sales setting available on the market.
Speaker 3: Takes a while to clear that backlog. You've also got
Speaker 3: a lot of new builds that have only sort of
Speaker 3: recently been finished up, a lot of selling activity potential
Speaker 3: in the market, not as many buyers coming through. You've
Speaker 3: seen the likes of net migration pull back, so your
Speaker 3: population growth has slowed. But I think particularly again, it's
Speaker 3: interesting sort of when you look at some of the
Speaker 3: indicat after that tariff announcement in April, there did seem
Speaker 3: to be a real feeling amongst potential buyers that they
Speaker 3: actually weren't quite as keen to clamber in, you know,
Speaker 3: worries around the likes that interest rate they might be paying,
Speaker 3: and what it might be in the future, the risk
Speaker 3: of do I have a job or not? Will this
Speaker 3: completely upset the apple cart, probably more importantly for some
Speaker 3: people that probably had their potential deposit in their investments,
Speaker 3: all of a sudden they didn't have as much of
Speaker 3: a deposit as before. That means that there's still no
Speaker 3: real reason that prices are going to be bid up,
Speaker 3: and I think for a while then you'll start to
Speaker 3: we'll continue to see yes, probably some price rises, but
Speaker 3: very very muted as you go through the next couple
Speaker 3: of years. And that's probably not a bad place for
Speaker 3: New Zealand. What's interesting is it does now mean that
Speaker 3: people are increasingly going well, okay, housing market doesn't have
Speaker 3: a lot of immediate growth in it. Where am I
Speaker 3: making money now? And that seems to be the piece
Speaker 3: where people are casting around a lot more for not
Speaker 3: only money making options, but a wider variety of those options.
Speaker 1: That's a nice segue into the Cheesies Quarterly Index, which
Speaker 1: we have released this week. And definitely there is a
Speaker 1: correlation we've seen between interest rates and investor sentiment. We've
Speaker 1: got data for the last five years, which is, you know,
Speaker 1: it's a good metric, and it would appear that when
Speaker 1: rates have come down there is more immediacy in terms
Speaker 1: of investing.
Speaker 2: What would you.
Speaker 3: Say, I think there's a few elements to it. One
Speaker 3: is that generally, as your interest rates come lower, some
Speaker 3: of your sort of less risky options, you know, putting
Speaker 3: money into term deposits or similar just isn't nearly as
Speaker 3: attractive anymore. When it becomes a little bit harder to
Speaker 3: make those returns, you're having to sort of, you know,
Speaker 3: change around or think about adjusting your risk profile. I
Speaker 3: think it's also though, that as those interest rates come down,
Speaker 3: they do normally stimulate a bit more economic activity on
Speaker 3: the whole, both here and around the world. That generally
Speaker 3: means more economic activity, more selling for the businesses that
Speaker 3: you might be investing in, better returns, and similar over time.
Speaker 3: So it's sort of reassuring to see that. I think. Also, though,
Speaker 3: the big challenge in recent times has been that greater
Speaker 3: level of volatility that you've seen coming forward. There's been
Speaker 3: a lot of rebalancing, both from retail investors but also
Speaker 3: the big institutional guys. Everyone's trying to figure out what
Speaker 3: the sweet spot is and sort of how to balance
Speaker 3: what is a lot of uncertainty, and the best way
Speaker 3: for that seems to be less picking one deliberate strategy
Speaker 3: and going all in and more having that quite a
Speaker 3: bit more diversified option, which is reassuring to see because
Speaker 3: that seems to be the best method. But people are
Speaker 3: very much trying to sort of seek out those different opportunities.
Speaker 1: We're also seeing subset of investors which is growing actually
Speaker 1: looking to other emerging sectors, like we're talking AI, we're
Speaker 1: talking crypto, we're talking defense tech, we're talking autonomous vehicles,
Speaker 1: which it's quite exciting in some respects. Obviously, commercialization with
Speaker 1: these sort of new tech aspects are coming to the fore.
Speaker 3: I think also though, the availability of some of these
Speaker 3: options to investors is new, right, Like, there are some
Speaker 3: exciting opportunities there, but some of these again are a
Speaker 3: little bit more unproven. And look, if you want to
Speaker 3: take that big risk, you might get that big return, sure,
Speaker 3: but equally it might not come off to the same degree.
Speaker 3: I remember, even a couple of years ago, you started
Speaker 3: to see a few more businesses that have basically sold
Speaker 3: nothing at that point, and the evaluations continue to skyrock
Speaker 3: higher and higher on this expectation of better things to come,
Speaker 3: coupled with the fact that people are seeking those sort
Speaker 3: of higher returns because inflation has been high, economic pressures
Speaker 3: have come on. They are few people like say, not
Speaker 3: all of them, but that growing subset caen to find
Speaker 3: a different opportunity, and I guess hoping to be not
Speaker 3: necessarily the first, but in that sort of early wave
Speaker 3: of adopters and investors, because that's where you start to
Speaker 3: make some of those longer gains. Over time, you get
Speaker 3: an early you sort of ride that wave through. What
Speaker 3: will be interesting, I think is that at some point
Speaker 3: you will have some of these options that don't perform
Speaker 3: as well. That's just how the market works. It'll be
Speaker 3: interesting to see how people respond to that in terms
Speaker 3: of do they get a little bit burned and then
Speaker 3: immediately withdraw or do they go, look, actually, this is
Speaker 3: how the markets work. I'm going to be sort of
Speaker 3: happy to keep in it for that longer period of time.
Speaker 3: I think that people generally will stick around. They're often
Speaker 3: going to be younger investors who are have a bit
Speaker 3: more risk tolerance, willing to ride the wave for longer.
Speaker 3: I mean, it's something that also comes up a lot
Speaker 3: more in conversation. You know, people have been asking recently
Speaker 3: about the likes of AI, about gold, about carbon credits,
Speaker 3: about you know, crypto and similar. But also what's interesting
Speaker 3: I think is even some of the subsets of certain industries.
Speaker 3: You know, defenses are often a lot hotter and of
Speaker 3: greater interest these days. You know, questions around will actually
Speaker 3: how do you what are you looking for when it
Speaker 3: comes to defense assets? You know, it's not necessarily the
Speaker 3: usual will if consumers get to spend more than things
Speaker 3: will be better for defense as well. I think that
Speaker 3: the geopolitics is going to be a whole lot more challenging,
Speaker 3: so different drivers I think means that people are also
Speaker 3: seeking out a different sort of information than what they've
Speaker 3: had before.
Speaker 1: And I do see like even in the US they're
Speaker 1: thinking about being able to use your crypto assets as
Speaker 1: part of your for a house. Even in Germany they're
Speaker 1: looking at banks are looking at being able to transact
Speaker 1: in crypto. I mean, we're not there yet, but it
Speaker 1: does seem to be continuing to increase in demand.
Speaker 3: Absolutely not only increase in demand, but becoming more mainstream.
Speaker 3: You know, again, you go back sort of five, certainly
Speaker 3: ten years ago, and let's be quite honest, crypto was
Speaker 3: not mainstream. It was very much fringe. It was seen
Speaker 3: to be you know, different odd at some points. I
Speaker 3: still think, you know, for a lot of people that
Speaker 3: you've got to keep your wits about you in some
Speaker 3: of those areas because for sort of every sensible approach
Speaker 3: that's being taken in some areas to crypto, there's another
Speaker 3: fart coin that comes out every second day as well.
Speaker 3: Like the variety there makes it hard sometimes to sort
Speaker 3: of say crypto is this and be an all encompassing statement.
Speaker 3: There's a bit of variety in there, but it is
Speaker 3: becoming more mainstream. There's certainly more opportunity that starts to
Speaker 3: come through, and I guess also slightly challenging to say this,
Speaker 3: but I think it's real that you look around the world,
Speaker 3: less trust and government and similar means that people are
Speaker 3: again just wanting to hedge their bets a little bit
Speaker 3: more in terms of where they sort of park their
Speaker 3: money and their assets. And I think again, for a
Speaker 3: lot of people, it's not necessarily saying, look, I'm going
Speaker 3: all in on any one sect or whatever it happens
Speaker 3: to be, but I'm quite keen. As an investor these days,
Speaker 3: it seems on average to be a bit more exposed
Speaker 3: to a lot of things, and that sort of broad,
Speaker 3: diverse exposure does mean that you can pick up some
Speaker 3: of those gains when some of those newer asset classes
Speaker 3: start to emerge and provide you more potential. And I
Speaker 3: think this is where it's been interesting seeing people develop
Speaker 3: the last couple of years when there has been this
Speaker 3: sort of implicit conversation amongst New Zealanders around their risk tolerance,
Speaker 3: because it has been for you know, when term deposits
Speaker 3: were high, where you didn't have to think about risk tolerance.
Speaker 3: You parked your money in something that just gave you,
Speaker 3: you know, it just continued to provide at a high
Speaker 3: and high level. Now that you've got to be a
Speaker 3: bit more discerning, I think that's where the level of
Speaker 3: interest is coming back. I mean same in terms of
Speaker 3: the number or proportion of people on shares as I
Speaker 3: expect to are buying companies specifically, Again, a little bit
Speaker 3: more new wants there where people are going. Look, I've
Speaker 3: done a bit of research. I want to make sure
Speaker 3: that I understand my exposure a bit more. These are
Speaker 3: the areas I'm starting to push into. So again, I
Speaker 3: think we've got a more discerning, a sort of more
Speaker 3: more direct investor starting to come through.
Speaker 1: Rat Just thinking about the US economy, there were lots
Speaker 1: of predictions that with the tariff uncertainty and the like,
Speaker 1: that that economy would start to slow.
Speaker 2: We actually aren't.
Speaker 1: Seeing that, maybe because the tariff situation is on again,
Speaker 1: off again, but really it does seem that still a powerhouse.
Speaker 3: Yeah, the US economy seems a little bit unkillable on
Speaker 3: that front, I mean a bit serious. I mean, you're right,
Speaker 3: people were expecting economic activity to pull back, for inflation
Speaker 3: to spike a whole lot higher, for unemployment to start
Speaker 3: to increase. You just really haven't seen too many of
Speaker 3: those signs. I think underneath the surface is a little
Speaker 3: bit in the data that does suggest again more challenges.
Speaker 3: You look at the likes of some of the over
Speaker 3: revisions that keep coming through to employment numbers in the US,
Speaker 3: they do generally continue to be revised lower on this
Speaker 3: sort of second and third published. But again there's still
Speaker 3: enough in there, there's still enough jobs growth that's keeping
Speaker 3: the economic motor humming. I do wonder if part of
Speaker 3: it is a timing thing. You know, you have had
Speaker 3: in recent times, a whole lot of uncertainty. People have
Speaker 3: generally probably just tried to keep on moving forward, haven't
Speaker 3: known what way to sort of move in terms of
Speaker 3: investment or otherwise. So I do wonder if it might
Speaker 3: be sort of again you start to see those impacts
Speaker 3: a little bit later on. But again, even then, the
Speaker 3: economic motor in the US still seems solid enough for
Speaker 3: the moment with the I mean, the feed is still
Speaker 3: talking about sort of one to two rates cuts this
Speaker 3: year still as well, which is sort of the weird
Speaker 3: thing is that the economy looks robust enough, underlying conditions
Speaker 3: look a little bit weaker, which might allow you to
Speaker 3: cut interest rates a bit more, but you're certainly not
Speaker 3: going to get some of the larger cuts that some
Speaker 3: people I think hope for to try and stimulate even
Speaker 3: more activity, and that's probably the right spot for the
Speaker 3: US in general, but it also means that increasingly look
Speaker 3: earlier this year, when the tariffs were announced, people were saying,
Speaker 3: We're going to completely move away from the US. I'm
Speaker 3: just not going to park any money there. I mean,
Speaker 3: people have come flocking back pretty quickly because there's still
Speaker 3: good returns. They still look at other opportunities too. Europe
Speaker 3: still seems to be a bit more in interest than before,
Speaker 3: but certainly those US numbers look a little bit more solid.
Speaker 3: I guess the question will be as we continue through
Speaker 3: the year, do you see a bit more of a
Speaker 3: trend start to emerge on either direction, because I think
Speaker 3: that's almost part of the problem is that the US
Speaker 3: economy is a little bit direction list at the moment.
Speaker 3: You're not sure if it's about to trend down or
Speaker 3: trend up. It's just it's just moving forward at a
Speaker 3: solid pace without sort of any movement up or down.
Speaker 1: Yes, and markets are definitely hitting record highs and NAISDAK
Speaker 1: and the S and P five hundred, so it's I
Speaker 1: can see why investors, particularly on Cheesy's. We have about
Speaker 1: eighty percent of our trading as in US. That said,
Speaker 1: forty one percent is held here in New Zealand, so
Speaker 1: there's a bit of a difference there, but in terms
Speaker 1: of trading, that's definitely where people are still gravitating.
Speaker 3: Yeah, it's interesting as well, right with the volatility that's
Speaker 3: come through because I mean, you look at some of
Speaker 3: the days we've had this year, like wild wild times
Speaker 3: and watching what would you know previously have been a
Speaker 3: couple of weeks or months of movement happen, you know,
Speaker 3: within seconds or minutes. Has been quite hard to stomach sometimes,
Speaker 3: and even amongst that, actually it looks like people have
Speaker 3: been buying in a bit more. You know. I'm not
Speaker 3: going to say everyone buying the dip, but I think
Speaker 3: there's been the sort of recognition from a lot of
Speaker 3: people that, hey, sometimes that the markets have been I
Speaker 3: think maybe over correcting or a bit overly worried about
Speaker 3: things and then seem to come back the other way. Now,
Speaker 3: let's be real. I also worry a little bit that
Speaker 3: the markets sometimes undercook or don't forward cast as much
Speaker 3: of the challenging conditions and sort of take good expected
Speaker 3: economic news and sort of just run with it. But
Speaker 3: what was fascinating, I think is also in recent times,
Speaker 3: when you had conflict in the Middle East, we've been
Speaker 3: expecting likes of oil prices some of those other commodities
Speaker 3: to spike up sharply. There wasn't anything, in fact, in
Speaker 3: terms of actual market action. I think most of the
Speaker 3: US market numbers actually went higher despite some of those
Speaker 3: commodities starting to show pressure. Now I do wonder if
Speaker 3: everyone's become a little bit numb in a sense to
Speaker 3: just how many of these big geopolitical things come through.
Speaker 3: And people are now starting to look a little bit
Speaker 3: more at the numbers and going, Okay, yep, some people
Speaker 3: are expecting certain things, but until I actually start to
Speaker 3: see them that expectation move to reality. I'm going to
Speaker 3: look at what's actually right in front of me, what's
Speaker 3: actually being reported here and now, and move with that.
Speaker 3: And I think that's again, that's quite a different market
Speaker 3: than what we've seen previously. When you jumped at shadows,
Speaker 3: you jumped to any sort of little tibit of information.
Speaker 3: Now people seem to be not only holding back but
Speaker 3: going look when there is actual, real information. I'm going
Speaker 3: to work on that. I'm going to pile in a
Speaker 3: bit more, and I'm not going to react nearly as
Speaker 3: much to sort of just some of that that broader
Speaker 3: stuff in the expectation piece. That's a shift.
Speaker 1: Let's jump back to New Zealand and how businesses here
Speaker 1: are feeling. There's been a number of out in recent weeks.
Speaker 2: They were looking at a recovery. But what would you say,
Speaker 2: we're sentiment.
Speaker 3: Now Sentiments okay? And I guess I say okay, because
Speaker 3: depending on how you look at it, in some areas,
Speaker 3: the economy still looks weak forward expectations still don't look great,
Speaker 3: but confidence about what's sort of coming up next is
Speaker 3: still improving, if you will, And I think that's again
Speaker 3: probably indicative of where the economy is moving. It's improving
Speaker 3: slowly but surely, but it's sort of a sluggish one.
Speaker 3: People are still worried in different sectors about how they'll go.
Speaker 3: You know, you look at the likes of the construction
Speaker 3: sector again pretty tough in many respects, Retail a whole
Speaker 3: lot more, mixed, manufacturing a whole lot more, mixed, agricultural
Speaker 3: primary sector in a good spot, but I do think
Speaker 3: as well. Second half of this year, you do have
Speaker 3: people that are refixing onto those lone mortgage rates. Everyone's
Speaker 3: trying to act a little bit more limited in terms
Speaker 3: of their investment intentions and similar There seems to be
Speaker 3: this view of, look, yes, there might well be better
Speaker 3: things to come, but I'm going to be very careful
Speaker 3: with my money. As a business, I'm going to be
Speaker 3: careful with my hiring. And from a household perspective, everyone
Speaker 3: seems to be more careful with their cash too.
Speaker 1: Yeah, jobs, I would have thought they would be coming
Speaker 1: back a little bit by now, but the figures aren't
Speaker 1: really telling us that.
Speaker 3: Every time we get monthly job numbers, they seem to
Speaker 3: show a little bit of a slight tick up, but
Speaker 3: then that almost always gets revised again within the next
Speaker 3: couple of months. And the more interesting indicator in recent
Speaker 3: times has been the number of job ads that are
Speaker 3: out there, you know, the number of job opportunities that
Speaker 3: you can apply for in seasonally adjusted terms. They've basically
Speaker 3: been flat now for just about a year now. That's
Speaker 3: flat at sort of levels that we haven't seen since
Speaker 3: about twenty thirteen or so. So it's been a long time.
Speaker 3: The fact that they're flat is good relative to the
Speaker 3: idea that they could still be falling, but it also
Speaker 3: says that if they've been flat for nearly a year now,
Speaker 3: there's not really any real trend of them starting to
Speaker 3: pick up any sort of momentum. And you do just
Speaker 3: get this feeling again from businesses that they are in
Speaker 3: this sort of holding pattern where they would love to
Speaker 3: employ more people. They just can't see the sort of
Speaker 3: expectations for really strong things ahead enough for you to
Speaker 3: start to hire a whole bunch more. You're seeing that
Speaker 3: as well a lot more young people that are becoming unemployed.
Speaker 3: That's the group who are often losing their jobs, some
Speaker 3: of them heading for Australia and similar So some of
Speaker 3: those trends I think are fairly well established at this point.
Speaker 3: We also haven't seen any real trend that they are
Speaker 3: starting to improve any quicker than we might have expected.
Speaker 3: In fact, in most cases they're taking a whole lot longer.
Speaker 1: Now, Brad, is there anything positive that investors can look too?
Speaker 2: Where is there any silver linux in somewhere?
Speaker 3: As there seem to be some decent enough deals on
Speaker 3: in terms of the prices that you can get various
Speaker 3: stocks and options and similar for and again you know,
Speaker 3: where you've done a bit of homework, other options seem
Speaker 3: to be far over valued considering what they're delivering. But
Speaker 3: again that's very case by case. I guess what's interesting
Speaker 3: is that normally when we look at different sectors, is
Speaker 3: quite a general environment.
Speaker 4: Right.
Speaker 3: You look at retail and you go, well, all of
Speaker 3: retail's not doing that well. It's been interesting. In the
Speaker 3: New Zealand case, you see a few places where they
Speaker 3: put our announcement like, look, training conditions have been worse
Speaker 3: than we thought. We've seen, you know, poorer results than
Speaker 3: we've been expecting. But other areas sort of a little
Speaker 3: bit quietly but pretty confidently going like, hey, numbers are
Speaker 3: not bad at the moment. We're going all right, even
Speaker 3: within sometimes the same segment, which really does go to
Speaker 3: show that is a very discerning environment again, where it's
Speaker 3: not sort of just everything moving in one broad thrust.
Speaker 3: I do wonder as well if that means that people
Speaker 3: are taking more notice of businesses, strategies, who's on the board,
Speaker 3: what sort of movements they're making, and how quick because
Speaker 3: this does seem to be quite a dynamic environment. Now
Speaker 3: by that. I mean, it's shifting so quickly that I
Speaker 3: do wonder. You know, people seem to be a lot
Speaker 3: more interested in executives. You know, what are they doing,
Speaker 3: what's the board doing? Have they made changes quickly enough?
Speaker 3: Or have they sort of allowed things to just sort
Speaker 3: of languish and then all of a sudden, Oh, some
Speaker 3: big changes come through. They haven't reacted to I don't know,
Speaker 3: be it you know, government cutbacks. They haven't reacted to
Speaker 3: how the market's been shifting. So I do think that
Speaker 3: there's an interesting variation in the reports. Like I say, genuinely,
Speaker 3: some going look, it's pretty tough out there, and sometimes
Speaker 3: operators that you thought would have been a lot more
Speaker 3: solid or stable through a downturn. But equally some areas
Speaker 3: of the market where you go, geez, that's pretty impressive
Speaker 3: that you're still able to make some pretty good numbers happen.
Speaker 3: It's a bit more all what has this company going
Speaker 3: on below the surface? How are the board performing, how
Speaker 3: long have they been there, what are they up to?
Speaker 3: You know, are they agitating for change? What's the executive
Speaker 3: team doing? What's the strategy? And that I do wonder
Speaker 3: as well. I mean I don't think there's a good
Speaker 3: indicator here in New Zealand, but like how many people
Speaker 3: are showing up to the likes of agms and similar
Speaker 3: to try and make sure they either get their point
Speaker 3: across to management and the board, but also trying to
Speaker 3: gain a little bit more information of what are you
Speaker 3: taking us forward into because it is uncertain. You've got
Speaker 3: to be nimble, and I think people are sort of
Speaker 3: casing out boards and management a lot more than they
Speaker 3: did before.
Speaker 2: Is there anything investors should ignore if we end on that?
Speaker 3: I mean, some times it's very easy to doom scroll
Speaker 3: right in this environment like be it you know us
Speaker 3: sort of market changes and similar. I guess probably a
Speaker 3: need to keep your wits about you in terms of
Speaker 3: how current your information is. I remember when the likes
Speaker 3: of you saw a conflict in the Middle East recently.
Speaker 3: I was sometimes reading analysis that had come out that
Speaker 3: basically had missed the mark because it had come out
Speaker 3: too late. You know, by the time someone had published
Speaker 3: and been like, look there's a risk of the oil
Speaker 3: goes to one hundred and ten dollars a barrel. Oil
Speaker 3: had crashed back below seventy all of a sudden, and
Speaker 3: it was just so there is a real need to
Speaker 3: be very very current, or to at least be sort
Speaker 3: of aware of when stuff has been coming out, so
Speaker 3: that you make sure you've got the latest stuff. But also,
Speaker 3: like I say, not doom scrolling too much, because there's
Speaker 3: a lot out there that as an investor as a person,
Speaker 3: you just can't control, and so I think more trying
Speaker 3: to put some of that aside, looking for where there
Speaker 3: is actionable intelligence that you can actually base a bit
Speaker 3: more of a decision off that you might be able
Speaker 3: to do something with yourself. Having a bit of a
Speaker 3: clear headed strategy, working the information and then making the decision.
Speaker 3: That'll probably put you a lot better than sort of
Speaker 3: just blind reacting to every sort of market movement, because
Speaker 3: certainly the thing that I've experienced the last couple of months,
Speaker 3: people are coming forward with a lot more questions about
Speaker 3: that volatility. They're going, hey, this has moved massively. Should
Speaker 3: I be concerned? And normally the answer that question is
Speaker 3: if you were concerned, you should have been concerned before
Speaker 3: the big change came through. So if you've got a
Speaker 3: good strategy, if you know where you're going, I think
Speaker 3: that gives you a lot more confidence as an investor
Speaker 3: as to what you're thinking about for the future.
Speaker 1: Yeah, sometimes it pays to hold, doesn't it. But you
Speaker 1: don't want to put your head in the sand at
Speaker 1: the same time.
Speaker 3: That's the balance, right, You've got to have enough recent
Speaker 3: information to be able to make good judgment calls, not
Speaker 3: so much that you get bogged down put your head
Speaker 3: in the sand. Not so much either that you jump
Speaker 3: at every moving shadow. It's a very delicate balance.
Speaker 1: Well, Brad, we could talk forever as usual, but it's
Speaker 1: time to go. Thanks so much for coming into the studio.
Speaker 3: Thanks for having me. These are always great fun.
Speaker 1: And thanks to everyone for tuning in. You can watch
Speaker 1: your lunch on YouTube tube or find us on your
Speaker 1: favorite podcast app. Leave us a rating and tell us
Speaker 1: what you like to hear next. Matowa