1 00:00:00,080 --> 00:00:02,560 Speaker 1: Thomas Ties, our guest head of a pack I shares 2 00:00:02,600 --> 00:00:05,760 Speaker 1: investment strategy at black Rock. So some of the issues, 3 00:00:06,120 --> 00:00:09,520 Speaker 1: the driving issues in this election, Thomas, have been inflation. 4 00:00:09,640 --> 00:00:14,480 Speaker 1: We know that gas prices, also abortion, and government spending, 5 00:00:14,560 --> 00:00:17,239 Speaker 1: And maybe we can start with government spending. The federal 6 00:00:17,280 --> 00:00:20,720 Speaker 1: budget deficit as a percentage of GDP is actually down 7 00:00:20,840 --> 00:00:24,160 Speaker 1: ten percentage points. Yet the Republicans are saying that a 8 00:00:24,239 --> 00:00:27,479 Speaker 1: vote for the Democrats is a is a massive government 9 00:00:27,600 --> 00:00:31,400 Speaker 1: spending vote. As Matt Winkler points out in his opinion 10 00:00:31,440 --> 00:00:34,879 Speaker 1: piece on the Bloomberg Terminal, the deficit is actually down 11 00:00:34,960 --> 00:00:37,720 Speaker 1: to just five point four percent of GDP from more 12 00:00:37,720 --> 00:00:43,239 Speaker 1: than fifteen percent under Trump. Our voters buying the Republican line. 13 00:00:44,360 --> 00:00:47,600 Speaker 1: Good morning. I mean that's some pretty heavy stuff very 14 00:00:47,640 --> 00:00:50,159 Speaker 1: early on today. But you know, I think, you know, 15 00:00:50,159 --> 00:00:51,960 Speaker 1: when you look at what's going on with the midst 16 00:00:52,000 --> 00:00:55,280 Speaker 1: of elections at the moment, it does seem like, uh, 17 00:00:55,600 --> 00:01:01,560 Speaker 1: we will get a Republican Senate and House. Uh you 18 00:01:01,600 --> 00:01:04,480 Speaker 1: know what that means for for the markets at the moment. 19 00:01:04,720 --> 00:01:07,759 Speaker 1: You know, generally it tends to impact certain sectors much more, 20 00:01:07,840 --> 00:01:11,319 Speaker 1: which are healthcare and energy. But I think the I 21 00:01:11,360 --> 00:01:13,560 Speaker 1: think the The interesting at the moment is, you know, 22 00:01:13,600 --> 00:01:16,760 Speaker 1: how little up until probably today last night, how little 23 00:01:16,760 --> 00:01:19,360 Speaker 1: the market has actually been paying attention to to the 24 00:01:19,400 --> 00:01:21,800 Speaker 1: mid terms, because I mean, if you recall four years ago, 25 00:01:21,880 --> 00:01:24,399 Speaker 1: it's all anyone was talking about. But given uh, the 26 00:01:24,440 --> 00:01:29,280 Speaker 1: inflationary environment and and the probabilities of moving into recession. Um, 27 00:01:29,360 --> 00:01:31,720 Speaker 1: you know, that's kind of what's really been driving the 28 00:01:31,760 --> 00:01:33,760 Speaker 1: agenda at the moment. And then we have their earning season, 29 00:01:33,840 --> 00:01:35,920 Speaker 1: we have what's happening in China, so I think that's 30 00:01:35,920 --> 00:01:37,960 Speaker 1: taken a little bit more of a of a back seat. 31 00:01:38,000 --> 00:01:39,720 Speaker 1: But when you look at you know, what the Fed 32 00:01:39,760 --> 00:01:42,960 Speaker 1: have been doing, and Biden has obviously run on infrastructure 33 00:01:43,000 --> 00:01:47,280 Speaker 1: spending in previous campaigns. Um, you know, I think that's 34 00:01:47,319 --> 00:01:51,280 Speaker 1: kind of the Uh, that's kind of the matter at 35 00:01:51,280 --> 00:01:53,400 Speaker 1: hand at the moment. What will the actual FED do 36 00:01:53,600 --> 00:01:57,320 Speaker 1: versus the actual the actual government. Do you think that 37 00:01:57,360 --> 00:02:01,320 Speaker 1: the FED and what's tax the manatory policy has been 38 00:02:01,360 --> 00:02:06,520 Speaker 1: complimented by fiscal policy because there are contradictions, Um, they 39 00:02:06,520 --> 00:02:09,000 Speaker 1: are a little bit, yes, But it seemed to me 40 00:02:09,240 --> 00:02:13,080 Speaker 1: at the time that you know, because because the FED 41 00:02:13,600 --> 00:02:17,519 Speaker 1: we're essentially hamstrung, that the that the fiscal policy would 42 00:02:17,560 --> 00:02:20,280 Speaker 1: actually pick up. So um, that's that that's kind of 43 00:02:20,280 --> 00:02:24,080 Speaker 1: where we've we've seen these big inflows into infrastructure spending, 44 00:02:24,600 --> 00:02:28,600 Speaker 1: infrastructure sectors and stocks, um. And it hasn't just been 45 00:02:28,600 --> 00:02:31,240 Speaker 1: in the US, right, We've seen that in Europe and 46 00:02:31,320 --> 00:02:34,080 Speaker 1: China as well. Um. But I think, you know, in 47 00:02:34,160 --> 00:02:36,760 Speaker 1: terms of how that impacts the market, it's still really 48 00:02:36,800 --> 00:02:41,120 Speaker 1: more about monetary policy versus fiscal We've had a big 49 00:02:41,200 --> 00:02:43,919 Speaker 1: drop in the dollar here over three days, one eight 50 00:02:43,919 --> 00:02:46,560 Speaker 1: percent down on on Friday and then four tens of 51 00:02:46,639 --> 00:02:49,760 Speaker 1: percents past couple of days. It's pretty significant. What does 52 00:02:49,800 --> 00:02:54,000 Speaker 1: it mean. It means that the long positioning in US 53 00:02:54,080 --> 00:02:56,959 Speaker 1: dollar was was very very consensus. And you know, we've 54 00:02:56,960 --> 00:02:59,000 Speaker 1: been kind of saying this throughout the year, but you know, 55 00:02:59,520 --> 00:03:02,680 Speaker 1: at the moment in regards to how the market is working, 56 00:03:02,680 --> 00:03:05,680 Speaker 1: and everything starts with the inflation and then predictions for 57 00:03:05,680 --> 00:03:07,880 Speaker 1: for the FED, and then how that impacts US dollar 58 00:03:07,919 --> 00:03:10,720 Speaker 1: and then that really impacts everything else. So um, you know, 59 00:03:10,760 --> 00:03:12,920 Speaker 1: I think it's more just a case of stretch positioning 60 00:03:13,000 --> 00:03:15,760 Speaker 1: rather than than investors changing their mind on a strengthening 61 00:03:15,840 --> 00:03:19,440 Speaker 1: US dollar. So Thomas, looking at what happened today with FDx. 62 00:03:19,960 --> 00:03:24,120 Speaker 1: Did it surprise you, um, well the other stirs. I 63 00:03:24,320 --> 00:03:26,680 Speaker 1: don't really know, because to be completely honest, I don't 64 00:03:26,720 --> 00:03:29,280 Speaker 1: cover a crypto UM. And one of the reasons for 65 00:03:29,400 --> 00:03:32,360 Speaker 1: that is that generally are our bigger investors are not 66 00:03:32,560 --> 00:03:35,960 Speaker 1: really that interested in it. Um. You know what. I 67 00:03:36,000 --> 00:03:38,360 Speaker 1: what I think, what I'm kind of more looking at 68 00:03:38,400 --> 00:03:39,960 Speaker 1: is whether there was any spill over to the rest 69 00:03:40,000 --> 00:03:42,640 Speaker 1: of the market. Doesn't seem like it uh to me, 70 00:03:42,760 --> 00:03:45,240 Speaker 1: So you know, I don't think it's really that much 71 00:03:45,280 --> 00:03:48,240 Speaker 1: of a of a of an of an interest for 72 00:03:48,240 --> 00:03:51,280 Speaker 1: for most of our investors here. What makes it interesting 73 00:03:51,400 --> 00:03:54,120 Speaker 1: is that potential spill over that you mentioned. Uh. And 74 00:03:54,320 --> 00:03:56,560 Speaker 1: it's kind of like when you go back to bear 75 00:03:56,680 --> 00:03:59,720 Speaker 1: Stearns when it was snapped up for a pittance, really 76 00:03:59,800 --> 00:04:03,800 Speaker 1: because basically, when people want their money and you don't 77 00:04:03,840 --> 00:04:05,960 Speaker 1: have it, um, you know, I mean, you're in a 78 00:04:06,080 --> 00:04:09,360 Speaker 1: very difficult position. But as you say, market held up 79 00:04:09,360 --> 00:04:13,560 Speaker 1: pretty well today, uh nonetheless, but it does it kind 80 00:04:13,600 --> 00:04:19,880 Speaker 1: of scream out that more regulation is needed in that sphere. UM. Again, 81 00:04:19,960 --> 00:04:21,680 Speaker 1: I don't have to be honest, I don't really know 82 00:04:21,720 --> 00:04:24,039 Speaker 1: because I don't cover crypto. Is the is the is 83 00:04:24,080 --> 00:04:26,360 Speaker 1: the honest answer. So in terms of but I mean, 84 00:04:26,400 --> 00:04:29,479 Speaker 1: surely you would be concerned if you know, if the 85 00:04:29,520 --> 00:04:32,200 Speaker 1: dominoes start to fall, it can have an impact on 86 00:04:32,640 --> 00:04:35,719 Speaker 1: what you do cover. Yes, I mean in terms of 87 00:04:35,720 --> 00:04:38,640 Speaker 1: the spill over again for us, like most of our 88 00:04:38,680 --> 00:04:41,840 Speaker 1: investors don't actually hold or look at crypto, so I 89 00:04:42,160 --> 00:04:43,560 Speaker 1: I do think it's more of a sort of a 90 00:04:43,640 --> 00:04:47,080 Speaker 1: retail impact there in regards to you know, investors trying 91 00:04:47,120 --> 00:04:48,720 Speaker 1: to get their money out or whatever it is. I 92 00:04:48,760 --> 00:04:52,039 Speaker 1: don't see that asset classes as really large enough to 93 00:04:52,160 --> 00:04:54,280 Speaker 1: cause I mean obviously you don't really know, but to 94 00:04:54,279 --> 00:04:57,000 Speaker 1: to cause a spill over into broader equities of fixed 95 00:04:57,000 --> 00:04:59,560 Speaker 1: in cub Thomas, Let's haven't looked then, what's been going 96 00:04:59,560 --> 00:05:01,080 Speaker 1: on with the Home Hong market, because it does seem 97 00:05:01,080 --> 00:05:04,280 Speaker 1: as that we've got the volume surging last week, we've 98 00:05:04,279 --> 00:05:08,400 Speaker 1: got a southbound on the connect system. Really the moment 99 00:05:08,440 --> 00:05:12,080 Speaker 1: I've been seeing the influence into Hong Kong since September, 100 00:05:12,560 --> 00:05:15,400 Speaker 1: has the Hong Kong market, which looked like a screaming 101 00:05:15,440 --> 00:05:18,919 Speaker 1: vibe evaluations turned the corner any of you, um, I 102 00:05:18,920 --> 00:05:21,359 Speaker 1: would say yes, But I also thought that in March. 103 00:05:21,520 --> 00:05:24,880 Speaker 1: So in terms of in terms of valuations. I mean, 104 00:05:24,920 --> 00:05:28,839 Speaker 1: there is clearly the valuation story there for Hong Kong stocks, 105 00:05:28,839 --> 00:05:31,279 Speaker 1: for China stocks as well. Um, you know, what I 106 00:05:31,320 --> 00:05:33,720 Speaker 1: think is has been happening over the last couple of weeks, 107 00:05:33,760 --> 00:05:37,040 Speaker 1: particularly for the offshore China tech stocks, is more of 108 00:05:37,080 --> 00:05:40,960 Speaker 1: a short covering situation rather than investors going going along. 109 00:05:41,040 --> 00:05:43,600 Speaker 1: I mean, we haven't had any particularly great news over 110 00:05:43,600 --> 00:05:45,840 Speaker 1: the last couple of weeks, but it just seems like 111 00:05:46,240 --> 00:05:49,760 Speaker 1: investors want to cover those cover those shorts, particularly going 112 00:05:49,800 --> 00:05:53,520 Speaker 1: into into the end of the year. So the valuation story, yes, 113 00:05:53,680 --> 00:05:56,080 Speaker 1: I think it is definitely relevant, but I don't think 114 00:05:56,080 --> 00:05:58,680 Speaker 1: this is long term investors looking to to go to 115 00:05:58,720 --> 00:06:02,120 Speaker 1: get back into China this point. There's two big overhangs 116 00:06:02,160 --> 00:06:05,320 Speaker 1: for investors here. I would think one is is China 117 00:06:05,440 --> 00:06:08,800 Speaker 1: reopening at some point getting past the COVID zero policy. 118 00:06:09,160 --> 00:06:11,720 Speaker 1: And the other, because Hong Kong is so rate sensitive, 119 00:06:12,279 --> 00:06:15,320 Speaker 1: some sort of turn in the FED. Um which one 120 00:06:15,360 --> 00:06:19,320 Speaker 1: happens first, and do we need both? That's a that 121 00:06:19,400 --> 00:06:21,120 Speaker 1: is a very good question, you know. I think if 122 00:06:21,120 --> 00:06:24,120 Speaker 1: you look at the the China reopening, you know that's 123 00:06:24,200 --> 00:06:27,039 Speaker 1: that's that's what foreign investors are focused on. But we 124 00:06:27,080 --> 00:06:29,680 Speaker 1: also need to remember that you know, you're looking at 125 00:06:29,680 --> 00:06:33,960 Speaker 1: the world's most populous country. That is that reopening, even 126 00:06:34,640 --> 00:06:36,919 Speaker 1: even when it is announced, is going to take a 127 00:06:37,040 --> 00:06:40,440 Speaker 1: very long time to implement, right, So I think you you, 128 00:06:40,720 --> 00:06:43,000 Speaker 1: I think that will cause a short term rally, But again, 129 00:06:43,040 --> 00:06:46,040 Speaker 1: I don't think that's really uh, that's really going to 130 00:06:46,120 --> 00:06:49,120 Speaker 1: be a case of longer term investors moving into back 131 00:06:49,160 --> 00:06:52,720 Speaker 1: in just because we get we get an announcement on reopening. 132 00:06:52,920 --> 00:06:56,000 Speaker 1: I think if you look at off short or Hong 133 00:06:56,040 --> 00:06:57,560 Speaker 1: Kong stocks at the moment, it is more of a 134 00:06:57,680 --> 00:07:01,960 Speaker 1: rates rates story, as you mentioned, so um with rates 135 00:07:02,000 --> 00:07:03,760 Speaker 1: you know, coming off a little bit, us all coming 136 00:07:03,800 --> 00:07:05,679 Speaker 1: off a little bit. We're seeing that kind of risks 137 00:07:05,800 --> 00:07:08,280 Speaker 1: risk sentiment coming back into the market, and it does 138 00:07:08,320 --> 00:07:10,200 Speaker 1: seem to me like it is a little bit of 139 00:07:10,240 --> 00:07:13,880 Speaker 1: a fomo rally that's happening at the moment, because if 140 00:07:13,880 --> 00:07:16,080 Speaker 1: you look at positioning throughout the year, it's become more 141 00:07:16,120 --> 00:07:18,760 Speaker 1: and more defensive. And if you start to see a rally, 142 00:07:18,800 --> 00:07:20,680 Speaker 1: you know, if you're if you're an investor going into 143 00:07:21,160 --> 00:07:23,320 Speaker 1: your end, that's not a particularly great thing, right because 144 00:07:23,320 --> 00:07:25,840 Speaker 1: you've already kind of underperformed the market, and now you 145 00:07:25,880 --> 00:07:28,600 Speaker 1: need to to start to chase some of these moves 146 00:07:28,680 --> 00:07:30,800 Speaker 1: very quickly intense seconds. How much of a recession has 147 00:07:30,840 --> 00:07:36,760 Speaker 1: been priced in? I think it's around at the moment. Thomas, 148 00:07:36,920 --> 00:07:38,800 Speaker 1: thank you so much for joining someone stool the head 149 00:07:38,880 --> 00:07:41,800 Speaker 1: of a pack. Shap I shared the investment strategy at 150 00:07:42,000 --> 00:07:42,520 Speaker 1: black Rock