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US Stocks Are Expensive. You Should Still Buy Them · Merryn Talks Money

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  Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
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  Speaker 2: Welcome to Merrin Talks Money.
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  Speaker 1: The podcast so much people who know the markets explain
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  Speaker 1: the markets.
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  Speaker 2: I'm Merrin Sum's that web.
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  Speaker 1: This week, I'm joined by Natalia Lippikina, ahead of EMEA's
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  Speaker 1: equity strategy and an executive director at JP Morgan Private Bank.
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  Speaker 1: We're going to talk about her current outlook on the
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  Speaker 1: equity markets as a whole, her take on the Great
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  Speaker 1: rotation to the extent there is one, and what she
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  Speaker 1: see is happening to the dollar over the next few months,
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  Speaker 1: plus of course a little more.
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  Speaker 2: Natalie, Welcome to Merrin Talks Money.
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  Speaker 3: Thank you so much for having me.
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  Speaker 2: Good of you to join us today.
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  Speaker 1: Now, I think if we're going to talk about equity
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  Speaker 1: markets at all, we've got to start on the US,
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  Speaker 1: the biggest and the boldest of all of them.
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  Speaker 2: What is your outlook there?
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  Speaker 1: And we keep talking on this podcast about the great
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  Speaker 1: rotation and about how money is just definitely going to
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  Speaker 1: move out of America into other markets. Valuations in the
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  Speaker 1: US will come down, valuations elsewhere will go up, but
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  Speaker 1: it never seems to quite happen in the volume that
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  Speaker 1: we expect.
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  Speaker 3: We are actually quite still constructive on the US market.
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  Speaker 3: We like other markets like Europe, but we don't want
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  Speaker 3: to abandon the United States of America. And I think
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  Speaker 3: it's fascinating to see how quick the recovery has actually
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  Speaker 3: been since April lows. ASMP was down close to twenty
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  Speaker 3: percent at some point this year, and we're now making
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  Speaker 3: all time highs again. And I think the reason is
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  Speaker 3: because the markets and participants got more comfortable with AI story. Again.
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  Speaker 3: At the beginning of the year, there were loads of
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  Speaker 3: questions around AI, the deep seek and you know, all
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  Speaker 3: the money that has been invested into AI if that
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  Speaker 3: leads to any side of returns. Now, when you look
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  Speaker 3: into the earning season that just happened in the first quarter,
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  Speaker 3: we actually got the confirmation that AI trade is still ongoing.
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  Speaker 3: Companies continue to spend money despite the tariff uncertainty. And
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  Speaker 3: we're just one or two weeks before the earning season again,
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  Speaker 3: and we just think that the tech companies NAI companies
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  Speaker 3: will continue to do well. And remember US market is
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  Speaker 3: predominantly tach driven, so the outlook on tech is very important.
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  Speaker 1: Okay, so when you look at valuations, maybe I'm too
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  Speaker 1: valuation orientated, but When I look at the US, for example,
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  Speaker 1: we still have pretty much the most expensive valuations ever
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  Speaker 1: seen apart from two thousand, etc. And you look at
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  Speaker 1: any valuation method, doesn't matter what you look at, it's
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  Speaker 1: still close to historic highs. And every time you see
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  Speaker 1: valuations at this kind of level, you see returns in
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  Speaker 1: the following decade pretty week. So if that doesn't happen
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  Speaker 1: this time, it will be a bit of a historical anomaly.
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  Speaker 3: Right, I would say that we are quite comfortable with
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  Speaker 3: where the valuation can actually stay. Where in the camp
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  Speaker 3: that valiation can be between twenty twenty one times next
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  Speaker 3: twelve months price to earnings. And the reason for that
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  Speaker 3: is when you look into where tech is right now
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  Speaker 3: in terms of the waiting, in terms of the net income,
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  Speaker 3: it's so much better and so much more important that
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  Speaker 3: it has been in the last ten to fifteen years.
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  Speaker 3: The S and P market is predominantly driven by tech,
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  Speaker 3: and if you look underneath the sector, you basically have
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  Speaker 3: margins that are improving and you have the AI story. Now,
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  Speaker 3: I want to emphasize on AI story, because AI doesn't
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  Speaker 3: just equal tech. The penetration of AI doubled over the
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  Speaker 3: last year or so and what AI actually is. It
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  Speaker 3: means that some companies can become more efficient by efficient,
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  Speaker 3: meaning that their margin can actually be higher longer term,
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  Speaker 3: that all of that actually deserves a higher valuation. So
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  Speaker 3: if you look into the kapex intensity, those tech businesses
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  Speaker 3: are just less capex intense, their margins continue to grow,
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  Speaker 3: they continue to invest into AI. And this is the
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  Speaker 3: reason why. Which is comfortable with the multiple? Or where
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  Speaker 3: is this right now? Again fascinating to see valuation is
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  Speaker 3: back to twenty two times as we speak, despite the
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  Speaker 3: warriors around tariffs, despite the war, is about where earnings
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  Speaker 3: will be this year, and I think the fundamental reason
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  Speaker 3: for that is tech.
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  Speaker 1: Another one of the conversations that we have over and
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  Speaker 1: over and over is at what point do profit margins
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  Speaker 1: in the US revert to some kind of mean, because again,
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  Speaker 1: you have historically high profit margins and you might say, well,
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  Speaker 1: because of AI, because of that, but nonetheless, historically these
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  Speaker 1: things do tend to revert to a bit of a mean.
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  Speaker 1: And when you see things at this level, what happens
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  Speaker 1: is maybe there's a different type of competitional maybe there's
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  Speaker 1: a new series of regulations, et cetera, et cetera, something
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  Speaker 1: usually comes in to reduce margins when they hit this
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  Speaker 1: kind of big But you don't think that's going to
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  Speaker 1: happen this time.
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  Speaker 2: You see them continueing to.
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  Speaker 3: Well, I think it depends how quickly businesses adopt AI.
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  Speaker 3: Right now, you have less than ten percent of companies
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  Speaker 3: adopting AI. I think it's quite a low number compared
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  Speaker 3: to what benefits AI can actually bring to the business.
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  Speaker 2: Yeah.
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  Speaker 3: Now, if companies do embrace the AI adoption, that should
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  Speaker 3: lead to better margins overall. Now, if you're talking about
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  Speaker 3: more cyclical downturn, of course it can happen. Cyclical downturn
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  Speaker 3: can happen at any point in time, right, it may
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  Speaker 3: happen with terriffs. For example, we still don't know what
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  Speaker 3: teriffs will bring this year. Right, we're still in the
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  Speaker 3: way to see mode. For example, for this year, we
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  Speaker 3: are in the wider they expected range. We think that
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  Speaker 3: s and peak earnings can be between plus two to
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  Speaker 3: plus nine because tariff uncertainty is still here. But if
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  Speaker 3: we're talking about like structurally, we think that AI just
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  Speaker 3: can bring more efficiencies out of the companies.
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  Speaker 1: Okay, that's companies across the board. The AI companies themselves
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  Speaker 1: e actually the producers. We had someone on the other
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  Speaker 1: day who is just discussing AI models and saying, you know, basically,
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  Speaker 1: they're kind of all the same, and in the end,
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  Speaker 1: these companies are going to be the AI is going
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  Speaker 1: to be effectively like airlines. Lots of lots of companies
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  Speaker 1: bringing powers of capacs in and producing rather similar products
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  Speaker 1: and seeing their margins. You know, never never quite get
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  Speaker 1: where you think they're going to be.
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  Speaker 3: But also remember it's also the companies that adopt AI.
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  Speaker 3: I think, of course, the discussion is much much broader
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  Speaker 3: than just technology companies. Technology companies are just enablers of that,
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  Speaker 3: but I think the adoption will be actually across different sectors.
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  Speaker 1: So when we finally get the great productivity revolution we've
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  Speaker 1: been waiting for for decades, potentially yes, okay, not potentially yes,
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  Speaker 1: just yes, right.
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  Speaker 3: We'll see as we go, depending on how companies are
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  Speaker 3: adopting AI.
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  Speaker 1: Okay, So do you still think that in an ordinary
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  Speaker 1: person's portfolio, the US should be the kind of waiting
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  Speaker 1: that it has been for the last few years. So
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  Speaker 1: a lot of portfolios ordinary people are held with wealth
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  Speaker 1: managers in the UK or elsewhere, etc. Will have maybe
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  Speaker 1: fifty sixty close to seventy percent of their equity allocation
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  Speaker 1: in the US.
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  Speaker 2: Is that still appropriate?
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  Speaker 3: Do you think it's still appropriate to have a very
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  Speaker 3: high wasting to a S and P. But people should
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  Speaker 3: think about how much dollars they actually want to have
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  Speaker 3: in their portfolio because we're clearly seeing the move over
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  Speaker 3: the last decade or so, a lot of investors built
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  Speaker 3: very big overweights to the US market and the US dollar.
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  Speaker 3: Now we're in the camp that we think that dollar
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  Speaker 3: will continue to depreciate. For example, we have a target
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  Speaker 3: of one twenty by mid twenty twenty six on euro dollar.
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  Speaker 3: So that means that people start needs to start thinking, Okay,
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  Speaker 3: how do I actually diversify my US dollar portfolio? Now,
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  Speaker 3: it doesn't mean that you abandon the US. It just
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  Speaker 3: means that marginally you just start looking into our their geographies,
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  Speaker 3: for example Europe. And when you look into Europe, I think.
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  Speaker 1: So, can I interrupt you just sorry briefly that when
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  Speaker 1: you say marginally, what do you mean? Do you mean
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  Speaker 1: that you should take your waiting in the US down
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  Speaker 1: to forty percent? And how big a shift are we
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  Speaker 1: talking about?
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  Speaker 3: No, I think the shift to forty percent is quite
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  Speaker 3: substantial I'm talking about if you know investors have ninety
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  Speaker 3: percent exposure to the US, that is pretty substantial. Right
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  Speaker 3: If you look into MSCI World, somewhere between sixty to
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  Speaker 3: seventy percent makes sense to.
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  Speaker 2: US, okay, So just the what's what's in the index?
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  Speaker 3: Correct?
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  Speaker 1: So anyway, anyone who holds a global ETF is already
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  Speaker 1: where you would think they should.
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  Speaker 3: Be exactly because there are there are people out there
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  Speaker 3: who have very big exposures to two dollars and to
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  Speaker 3: US markets, and they should start rethinking how much they
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  Speaker 3: want to have. Sixty seventy percent looks good to.
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  Speaker 2: US, okay.
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  Speaker 1: And one of the one of the numbers that I
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  Speaker 1: keep watching is the number of the percentage of corporate
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  Speaker 1: equities in the US that are held by foreign investors.
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  Speaker 1: And it keeps creeping up and up and up and
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  Speaker 1: up and up. And it's now seventeen and a half,
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  Speaker 1: nearly eighteen percent. And that's up from more like sort
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  Speaker 1: of five six percent towards the end of the nineteen nineties.
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  Speaker 1: So you know, there's been a massive shift by non
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  Speaker 1: US investors into the US. But you are feel that
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  Speaker 1: people should be happy with.
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  Speaker 3: That, well, I think and This is what I mean
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  Speaker 3: by marginally reducing the exposures, because if you think about
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  Speaker 3: what was the reason for that, it's first of all,
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  Speaker 3: a very strong performance of the US equity market, but
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  Speaker 3: also very strong dollar. And when you know, US market
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  Speaker 3: continues to perform really well, but there are question marks
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  Speaker 3: around FX, and when other markets are also performing well.
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  Speaker 3: Back to European domestics story that is happening right now,
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  Speaker 3: which wasn't the case, you know, even five years ago.
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  Speaker 3: When there is an interesting story here in Europe, you know,
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  Speaker 3: investors just start thinking about how much they actually want
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  Speaker 3: to have in the US if there are alternative markets
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  Speaker 3: to that. This is one of the reasons. The second
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  Speaker 3: one is talking you know, in our outlook, one of
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  Speaker 3: the big themes was actually portfolio resilience. So traditionally people
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  Speaker 3: have sixty to forty in their portfolio. Maybe adding different
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  Speaker 3: asset classes, different sources of risk and return to your
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  Speaker 3: portfolio makes sense. Infrastructure, gold, hedge funds, So there is
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  Speaker 3: a lot to talk about that rather than just having
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  Speaker 3: you know, all exposure in the US equity market.
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  Speaker 1: Okay, well, let's go back to when I interrupted you
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  Speaker 1: five minutes ago, for which I apologize you were just
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  Speaker 1: starting to talk about European markets and saying that if
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  Speaker 1: you're moving a little out of the US, Europe would
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  Speaker 1: be one of the top places you would think would
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  Speaker 1: be reagionable to go.
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  Speaker 2: Is that right?
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  Speaker 3: That's correct, And it's interesting what is happening in Europe
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  Speaker 3: because historically, and would mean five ten years, the way
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  Speaker 3: everyone into Europe was around, well, there is a very
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  Speaker 3: good stimulus and strong stimulus in China, less by European
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  Speaker 3: equities because they're exposed to that market, or the US
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  Speaker 3: economy is growing and very strong. Europe has exposure to
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  Speaker 3: that market. That is changing. What is happening in Europe
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  Speaker 3: right now is you're basically seeing a very strong fiscal
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  Speaker 3: stimulus coming from the German market. And just to put
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  Speaker 3: some numbers into that, five hundred billion over the next
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  Speaker 3: twelve years, that is pretty substantial on the economy. That
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  Speaker 3: is roughly four trillion. You compare that to the COVID
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  Speaker 3: package back in the US in twenty twenty one, similar size,
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  Speaker 3: but in a much larger economy, so the impact was
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  Speaker 3: smaller and it was quite unprecedented. Not a lot of
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  Speaker 3: people were expecting, you know, something from the German economy,
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  Speaker 3: who is in general quite fiscally constrained, so that was
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  Speaker 3: surprise number one. And secondly, obviously the security spending that
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  Speaker 3: is coming out of European countries that is also quite unprecedented.
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  Speaker 3: So when you put two things together, you're seeing the
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  Speaker 3: growth in the European market that can potentially slightly narrow
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  Speaker 3: the gap with the US earnings growth. Now we don't
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  Speaker 3: think it's completely closest. We just think that the gap.
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  Speaker 1: Narrows, okay, And that means that it still makes sense
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  Speaker 1: for European markets have lower valuations overall than US markets
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  Speaker 1: because that growth differential remains.
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  Speaker 3: And it's not just growth differentiate, it's also the sector composition.
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  Speaker 3: When you look into the discounts, Europe in general traits
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  Speaker 3: at around twenty to thirty percent discounts to the US.
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  Speaker 3: Right now we're thirty percent. And the reason is because
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  Speaker 3: one of the reasons is because we just don't simply
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  Speaker 3: have enough tech. We have a lot of financials, we
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  Speaker 3: have a lot of industrials, whereas US market is all
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  Speaker 3: about tech. So naturally your sector composition is quite different,
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  Speaker 3: meaning that the evaluation is different as well. Now in
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  Speaker 3: terms of the growth, the growth is also quite different.
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  Speaker 3: But the growth is just the matter of the sector
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  Speaker 3: composition that you have. Our tech sector is much smaller
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  Speaker 3: than in the US, and therefore our growth is smaller
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  Speaker 3: as well. But when we look into twenty twenty six
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  Speaker 3: and twenty twenty seven, so the next two years, we
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  Speaker 3: actually think that the growth can be between mid to
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  Speaker 3: high single digit. Now this year is a bit more
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  Speaker 3: uncertain because of the tariffs, but next year, combination of
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  Speaker 3: German fiscal stimulus security spending in Europe can actually lead
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  Speaker 3: to a bit better than average growth in Europe.
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  Speaker 2: Okay.
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  Speaker 1: And when you look at Europe, which sectors are interesting
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  Speaker 1: and obviously there's a huge amount of money is going
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  Speaker 1: to be going into defense. And one of the things
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  Speaker 1: that we've talked about again quite a lot here, both
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  Speaker 1: in the US and across Europe, is this changing nature
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  Speaker 1: of what defense means. And we know when we talk
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  Speaker 1: in the UK about spending five percent of our GDP
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  Speaker 1: on defense, and no one knows where that money is
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  Speaker 1: going to come from, obviously, but let's say we somehow
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  Speaker 1: find that money. We know it's not actually going to
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  Speaker 1: go in to you know, tanks and guns. A lot
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  Speaker 1: of it is going to go into energy, security and infrastructure, etc.
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  Speaker 1: So that's that's that's a changing dynamic. Is that a
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  Speaker 1: sector that you find interesting in Europe?
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  Speaker 3: Well, like industrial sector, So industrial sector is exposed to
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  Speaker 3: a lot of different themes and structurally it is interesting.
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  Speaker 3: One of the big themes that industrials is actually exposed
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  Speaker 3: to is AI. So AI is a big topic. And
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  Speaker 3: it's not just tech companies that expose to do I,
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  Speaker 3: it's also the industrial companies. The second thing is you
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  Speaker 3: have the fiscal spending in Germany, so naturally the companies
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  Speaker 3: that are the most exposed to that will actually be industrials.
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  Speaker 3: And we think that the impact is likely to come
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  Speaker 3: I would say from next year rather than this year. Again,
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  Speaker 3: this year is more teriff specific, and then yes, defense
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  Speaker 3: spending is also increase in Europe. But overall, I would
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  Speaker 3: say when you look into the European story, the most
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  Speaker 3: interesting angle is actually the domestic companies because in the
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  Speaker 3: last decades or so, I would say, the focus has
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  Speaker 3: been on the multinational companies that have exposure to the US,
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  Speaker 3: have exposure to Asia, but less exposure to Europe. And
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  Speaker 3: now it's changing. People want to have domestically oriented companies
• 15:25
  Speaker 3: are the industrial sector, financial sector, construction utilities, because again
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  Speaker 3: the story is evolved here in the region rather than
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  Speaker 3: everyone else. And on top of that, you basically have
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  Speaker 3: if you're looking into the domestic oriented companies, you have
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  Speaker 3: more exposure domestically, but also less effects risk, which is
• 15:45
  Speaker 3: quite important because you know, when euro dollar continues to rise,
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  Speaker 3: that is not great for some of the exporters. And secondly,
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  Speaker 3: you have less terrif risk.
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  Speaker 1: What about the consumer orientated companies or even the luxury
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  Speaker 1: good companies.
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  Speaker 3: I think I think the expectations for those companies are quite
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  Speaker 3: weak as we speak. I think they need to deliver
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  Speaker 3: better than expected results in the coming couple of quarters
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  Speaker 3: and especially show that the US market continues to be strong.
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  Speaker 3: And then there is a bit of a relief in
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  Speaker 3: the Chinese market, which hasn't been the case for the
• 16:25
  Speaker 3: last couple of years. I think the valuation is attractive
• 16:29
  Speaker 3: for those markets, but there is a very kind of
• 16:32
  Speaker 3: a big divergence between the losers and the winners in
• 16:36
  Speaker 3: the space. But overall, right now, the market has a
• 16:40
  Speaker 3: bit of a downturn and needs better growth to kind
• 16:44
  Speaker 3: of to show investors that this sector remains to be
• 16:46
  Speaker 3: interesting long term.
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  Speaker 2: Do you look at the UK at full Natalie, are
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  Speaker 2: you very focused on Europe?
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  Speaker 3: I do. It's a cheap market, but it has been
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  Speaker 3: cheaped for a very long time. The challenge with the
• 16:58
  Speaker 3: UK is it just doesn't have the same fiscal stimulus
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  Speaker 3: as German economy, for example, has and as a result,
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  Speaker 3: you just don't have the same earnings growth as the
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  Speaker 3: European markets currently is experiencing. So there are interesting pockets
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  Speaker 3: in the markets in different sectors, like real estates, some
• 17:22
  Speaker 3: in oil and gas sector, but overall we just can't
• 17:26
  Speaker 3: find the driver for the UK markets to rerate.
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  Speaker 1: Talked about physical stimulus quite a lot, and obviously the
• 17:34
  Speaker 1: main reason that UK can't have fysical stimulusms because it's
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  Speaker 1: horrific levels of debt and deficit, so you know, we're
• 17:40
  Speaker 1: not really in a position to spend, and the UK
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  Speaker 1: has is particularly bad, but across Europe there's still an
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  Speaker 1: ongoing debt problem. There any any markets that concern you particularly.
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  Speaker 3: Not really, I would say this is just in general
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  Speaker 3: the theme as you highlighted the theme going into this year,
• 17:56
  Speaker 3: were highlighted this particular each you to investors and look,
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  Speaker 3: I think the reason why for example, Germany was able
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  Speaker 3: to do the fiscal stimulus was because they were very
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  Speaker 3: prudent for the last you know, decades or so when
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  Speaker 3: we look into the other countries, is just much much
• 18:14
  Speaker 3: more difficult to have a very similar fiscal spending. And frankly,
• 18:19
  Speaker 3: this is one of the reasons why when we talk
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  Speaker 3: to investors we highlight the power of you know, diversifying
• 18:27
  Speaker 3: beyond your sixty to forty portfolio, adding other asset classes
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  Speaker 3: that can do well if inflation picks up, for example,
• 18:35
  Speaker 3: alternatives for example, infrastructure, hatch funds, gold, so really diversifying
• 18:41
  Speaker 3: given the potential different scenarios that can unfold.
• 18:45
  Speaker 1: So when you say infrastructure, what do you mean From
• 18:47
  Speaker 1: a retail ordinary investors point of view?
• 18:50
  Speaker 3: It can be just as boring infrastructure as airports and roads,
• 18:55
  Speaker 3: or it can be digital infrastructure that is growing much faster,
• 18:59
  Speaker 3: for example data centers. But I would say this is
• 19:02
  Speaker 3: probably more a theme in the private markets rather than
• 19:05
  Speaker 3: public markets.
• 19:06
  Speaker 1: Okay, and gold in back at the late seventies early eighties,
• 19:11
  Speaker 1: it was considered perfectly normal, in fact even compulsory to
• 19:15
  Speaker 1: have at least five, six, seven, eight, nine, ten percent
• 19:18
  Speaker 1: of your portfolio in gold, and then suddenly over the
• 19:22
  Speaker 1: eighties nineties, as inflation disappeared as a risk, so did
• 19:25
  Speaker 1: the gold allocation. And now we're at a point where
• 19:28
  Speaker 1: almost no ordinary investors hold any gold at all. And
• 19:32
  Speaker 1: you what would you say, What would you say to them?
• 19:34
  Speaker 2: And why?
• 19:35
  Speaker 3: I would say that investors should definitely have exposure to gold.
• 19:39
  Speaker 3: Gold continues to be one of our highest conviction despite
• 19:43
  Speaker 3: the big rally. It's a different asset class. It provides
• 19:47
  Speaker 3: you with the diversification benefits, and it's also one of
• 19:51
  Speaker 3: the asset classes to look giving the dollar weakness. So
• 19:55
  Speaker 3: absolutely investors should look into dollar and investor.
• 20:00
  Speaker 1: And it's also I mean, it's your insurance against geopolitics,
• 20:03
  Speaker 1: isn't it correct?
• 20:05
  Speaker 3: I would say in general the geopolitics for US, geopolitics
• 20:09
  Speaker 3: tend to have a very short lived impact on market.
• 20:14
  Speaker 3: What matters to us usually is earnings. Earnings is the
• 20:18
  Speaker 3: most important factor when investing into markets, and as I
• 20:23
  Speaker 3: mentioned before this year, we may have a bit of
• 20:26
  Speaker 3: uncertainty given the tariff risk, but overall we're seeing a
• 20:30
  Speaker 3: very strong corporate backdrop at this point.
• 20:34
  Speaker 1: Okay, so you are only interested in geopolitics to the
• 20:37
  Speaker 1: extent that you can see exactly how it is that
• 20:40
  Speaker 1: they will affect earnings. It's not so much a sentiment thing.
• 20:42
  Speaker 3: View correct sentiment can be actually a short lift. It
• 20:46
  Speaker 3: was interesting to see the oil price move a couple
• 20:50
  Speaker 3: of weeks ago when oil was trading above eighty, but
• 20:53
  Speaker 3: now it's going back to sub seventy and it just
• 20:56
  Speaker 3: shows you that even though the sentiment was rising, but
• 21:00
  Speaker 3: overall we're not seeing a very big impact on geopolitics
• 21:04
  Speaker 3: right now.
• 21:05
  Speaker 1: But it's still from what you said earlier about the
• 21:07
  Speaker 1: UK market, I picked up that you feel people should
• 21:10
  Speaker 1: maybe still have some allocation to oil and gas.
• 21:12
  Speaker 3: It depends when you look into the equity markets. And
• 21:15
  Speaker 3: if you're buying the broader exposure, you will have the
• 21:18
  Speaker 3: exposure to oil and gas because it's part of the
• 21:20
  Speaker 3: intex it's just your exposure will be much smaller than
• 21:23
  Speaker 3: the rest of the sectors. Overall, this is not the
• 21:26
  Speaker 3: sector that we currently recommend.
• 21:28
  Speaker 1: Okay, and outside Europe and the US, any markets that
• 21:33
  Speaker 1: you look at that you find interesting, we.
• 21:36
  Speaker 3: Think that in emergent markets, India looks quite interesting.
• 21:40
  Speaker 2: In expensive, though expensive.
• 21:42
  Speaker 3: Expensive but justified when you look into the valuation. It
• 21:46
  Speaker 3: trades above its five year average on the PE multiple,
• 21:51
  Speaker 3: but we think it's justified because you have the economy
• 21:54
  Speaker 3: that is growing mid to high single digit. That translates
• 21:58
  Speaker 3: actually into the earnings. Earnings are growing nicely double digit.
• 22:02
  Speaker 3: Now it's very hard to find the economies and the
• 22:06
  Speaker 3: markets that are growing so much. And then you also
• 22:09
  Speaker 3: have a very interesting angle in my view, that is
• 22:12
  Speaker 3: supply chain diversification. You know, when everyone is talking about
• 22:17
  Speaker 3: tariffs and how tariffs can impact different companies, India actually
• 22:21
  Speaker 3: stands out as the beneficiary from all those discussions and
• 22:25
  Speaker 3: diversification of the supply chain and as well can be
• 22:28
  Speaker 3: a market for those who are thinking to diversify it
• 22:31
  Speaker 3: beyond the United States.
• 22:33
  Speaker 2: Okay, any other markets like that.
• 22:35
  Speaker 1: I mean, for example, we often talk about Vietnam, for example,
• 22:38
  Speaker 1: as being a similar kind of economy one will benefit
• 22:42
  Speaker 1: from this diversification of supply chain, etc.
• 22:45
  Speaker 3: We've been talking about Japan positively, but we recently closed
• 22:50
  Speaker 3: our positive call. We're still like it long term. We
• 22:54
  Speaker 3: still think that there are interesting reforms happening in the market,
• 22:57
  Speaker 3: but tactically we think we can rotate to the markets
• 23:00
  Speaker 3: like Europe or the United States. The valuation and what
• 23:05
  Speaker 3: changed there is that valuation based predominantly. Yes, it has
• 23:08
  Speaker 3: done well. Valuation is a bit higher than what we
• 23:12
  Speaker 3: would be comfortable with, so we've been recommending it for
• 23:16
  Speaker 3: solid time, and we just think that taking some profits
• 23:20
  Speaker 3: never hurts anyone and rotating somewhere else. But this was
• 23:24
  Speaker 3: mainly yes, the valuation call overalls. Structurally, we think it's
• 23:27
  Speaker 3: quite interesting what is happening there with regards to the reforms,
• 23:32
  Speaker 3: and you know the increase in the shareholder returns that
• 23:35
  Speaker 3: the Japanese companies are currently going through.
• 23:39
  Speaker 1: Okay, interesting, thank you. Now, when you talked about different
• 23:44
  Speaker 1: asset classes making up the forty in a portfolio and
• 23:47
  Speaker 1: moving away from this whole sixteen to forty equity bond mix,
• 23:50
  Speaker 1: and would you include cryptocurrencies and in particular Bitcoin in
• 23:53
  Speaker 1: that as one of the assets that maybe should make
• 23:56
  Speaker 1: up the insurance element of your portfolio side gold.
• 24:00
  Speaker 3: We don't cover it, so we can't talk about it.
• 24:04
  Speaker 2: At all.
• 24:05
  Speaker 1: Nope, Okay, I totally understand all your arguments about the US, etc.
• 24:11
  Speaker 1: But nonetheless, if people start investing now and that they
• 24:16
  Speaker 1: use the allegation that you suggested as we've been talking,
• 24:19
  Speaker 1: they will effectively be investing at all time highs and
• 24:23
  Speaker 1: very high valuations.
• 24:25
  Speaker 2: Is there an argument for saying maybe said this that
• 24:27
  Speaker 2: in cash for a while.
• 24:28
  Speaker 3: I think it's always very uncomfortable to look into the
• 24:32
  Speaker 3: market and just say it's at all time high, I'd
• 24:34
  Speaker 3: better stay in cash. The reality is staying in cash
• 24:38
  Speaker 3: is not great for your long term goals, because equity
• 24:42
  Speaker 3: market is the one that is giving you a very
• 24:45
  Speaker 3: high return over the long term. But it always comes
• 24:49
  Speaker 3: to us volatility. And I would just say that when
• 24:51
  Speaker 3: we do look into our analysis and we compare them
• 24:55
  Speaker 3: investing at all time highs versus not all time highs,
• 24:58
  Speaker 3: there is actually not a lot of the diference, which
• 25:01
  Speaker 3: is maybe a bit illogical. But the reality is when
• 25:04
  Speaker 3: the market makes all time highs, the new all time
• 25:07
  Speaker 3: highs usually follow because there is such a strong momentum
• 25:11
  Speaker 3: in the market. So investing all time house can be
• 25:14
  Speaker 3: quite difficult psychologically, but statistically looking into the numbers, there
• 25:19
  Speaker 3: are turns that you get actually painting your very similar
• 25:23
  Speaker 3: picture if you invest it in not all time has.
• 25:26
  Speaker 2: Except for the occasional all time high.
• 25:29
  Speaker 1: Every now and then there'll be an all time high
• 25:30
  Speaker 1: that isn't followed by another all time hi.
• 25:33
  Speaker 3: It's not long to have fullbacks in the market.
• 25:35
  Speaker 1: Yeah, but you just don't know when that's gonna be, right, Natalia,
• 25:39
  Speaker 1: one final question, if you could, I always ask everyone
• 25:43
  Speaker 1: at the end of the podcast what they are reading
• 25:45
  Speaker 1: at the moment.
• 25:45
  Speaker 2: Are you reading anything interesting at the moment?
• 25:48
  Speaker 3: Yes? Good, Well, I would say, Actually, I'm a big
• 25:52
  Speaker 3: reader of Bloomberg, so I'm not sure if I am
• 25:56
  Speaker 3: your typical guest. I just absolutely love reading what is
• 26:02
  Speaker 3: happening on Bloomberg day to day. This is my goal
• 26:05
  Speaker 3: to source.
• 26:06
  Speaker 2: Oh, thank you, we appreciate that. But no novel, no
• 26:09
  Speaker 2: interesting non fiction.
• 26:11
  Speaker 3: No only finance related.
• 26:14
  Speaker 2: I'm going to send you some summer reading tips nat earlier.
• 26:17
  Speaker 1: It makes me nervous. Thank you so much for joining us,
• 26:20
  Speaker 1: so we huguely appreciate it. That was absolutely fascinating.
• 26:24
  Speaker 3: Thank you so much.
• 26:35
  Speaker 1: Thanks for listening to this week's Marin Talks Money. If
• 26:37
  Speaker 1: you like us, share, rate, review, and subscribe wherever you
• 26:39
  Speaker 1: listen to podcasts, and keep sending questions or comments to
• 26:42
  Speaker 1: Merror Money at Bloomberg dot net. You can also follow
• 26:44
  Speaker 1: me and John on Twitter or x. I'm at marinas
• 26:47
  Speaker 1: w and John is John Underscore Stepic.
• 26:50
  Speaker 2: This episode was hosted.
• 26:51
  Speaker 1: By me Marry Zumzet web produced by Sersadi mos Anda
• 26:54
  Speaker 1: and tala Ahmadi Sound designed by Blake Maples, and the
• 26:57
  Speaker 1: special thanks of course to Natalia duced by some Asardi
• 27:01
  Speaker 1: Moses Andam and tala Ahmadi Sound designed by Blake Maples
• 27:04
  Speaker 1: and the special banks of
• 27:05
  Speaker 2: Course to Natalia