Latest / Best of Business / Sam Dickie: Fisher Funds expert explains why equity markets are falling

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Sam Dickie: Fisher Funds expert explains why equity markets are falling · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk zed Be
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  Speaker 2: Right now. We have been telling you for weeks there
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  Speaker 2: are a couple of big risks to the economy. A
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  Speaker 2: couple of those roosters are coming home to roost. I
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  Speaker 2: think I've said that wrong.
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  Speaker 1: Now.
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  Speaker 2: The risks are policy uncertainty. We've also been talking about
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  Speaker 2: excess retail investor enthusiasm, so many more things. Now, where
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  Speaker 2: are we at and what does all of it mean
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  Speaker 2: for investors? Sam Dickiers with Fisher Fun Sam, good eating
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  Speaker 2: to you, good evening. Tell me equity markets have fallen
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  Speaker 2: what a handful of a percent in the last couple
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  Speaker 2: of weeks. What's going on? What's what are you putting
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  Speaker 2: it down to?
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  Speaker 3: Yeah, you're right, Ryan, So they have been under a
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  Speaker 3: bit of pressure, and it is because several of those
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  Speaker 3: risks you and I have been talking about playing out,
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  Speaker 3: rearing the head coming home to roost, as you said.
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  Speaker 3: So the exceptional policy uncertainty, so not just that will
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  Speaker 3: he warranty tariff noise, but uncertainty around how the DOGE
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  Speaker 3: or Department of Government Efficiency inspired federal government cost cutting
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  Speaker 3: could be a drag on the economy. There's the escalating
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  Speaker 3: US versus trying a computer chip bore, the extraordinary amount
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  Speaker 3: of capital that the largest tech companies in the world
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  Speaker 3: are spending right now with uncertain return on that capital.
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  Speaker 3: And finally, there's the animal spirits we've talked about, or
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  Speaker 3: irrational exuberance that had crept into the market since Trump's election.
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  Speaker 2: They seemed to take all the upside of Trump He's
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  Speaker 2: going to cut taxes, he's going to cut regulation, and
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  Speaker 2: ignore all the potential downside i e. The terwiffs. It's
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  Speaker 2: almost like the markets didn't really take him seriously that
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  Speaker 2: he would actually do it.
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  Speaker 3: That's right, I think, you know, memory muscle memory is powerful.
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  Speaker 3: So people remember last time that when he was elected,
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  Speaker 3: everyone was quite bearish. She He actually did a pretty
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  Speaker 3: good job, and equity markets were up sort of twenty
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  Speaker 3: one percent in the year following his election. However, the
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  Speaker 3: starting point SA, as you say, were very different. Last time.
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  Speaker 3: The market was much cheaper, expectations were very low, and
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  Speaker 3: he sort of climbed over that pretty low bar. This
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  Speaker 3: time around, expectations were super high, and as you say,
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  Speaker 3: all the upside was priceding without a lot of the risk,
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  Speaker 3: and those risks are kind of manifesting now we're right
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  Speaker 3: in the thick of it. So if you think about
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  Speaker 3: some of those risks, US policy uncertainty as near as
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  Speaker 3: high as it's ever been since we started measuring it
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  Speaker 3: sort of fifty years ago. According to business surveys in
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  Speaker 3: the US, US trade policy is the highest it's ever been.
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  Speaker 3: Oh sorry, trade policy uncertainty is the highest it's been
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  Speaker 3: in fifty years. So set another way, imagine sitting in
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  Speaker 3: a boardroom ryan in the US, Southeast Asia, or even
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  Speaker 3: Mexico or candidate and being asked to sign off on
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  Speaker 3: a huge capital project or a three year strategy document
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  Speaker 3: with this type of fifty year high uncertainty, and at
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  Speaker 3: the very least, I think it would give you pause.
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  Speaker 3: So when we think about the drag on the economy,
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  Speaker 3: is this actually manifesting? It really is. It's early days.
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  Speaker 3: So if you think of something like economic surprise, which
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  Speaker 3: tracks you know, every piece of key economic data in
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  Speaker 3: the US when it comes out, does it surprise people
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  Speaker 3: on the upside or downside? A couple of months ago
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  Speaker 3: that was surprising sharply positively. Now that's surprising sharply negatively negatively,
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  Speaker 3: so we might be seeing some of these risks actually
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  Speaker 3: start to manifest in a slow down in growth.
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  Speaker 2: Is this at this point having more of a shock
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  Speaker 2: to those indicators you're describing than COVID.
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  Speaker 3: No, the I think. I thank COVID was a one
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  Speaker 3: and one hundred year event and then you know, fifty
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  Speaker 3: percent of the world's economy came to a grinding holt.
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  Speaker 3: I think this is more mild, much more mild. It's
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  Speaker 3: just that, you know, running into this from us, say
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  Speaker 3: a month or two ago, expectations were very high, so
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  Speaker 3: we had you know, sentiment gauges, retail sentiment gages running hot.
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  Speaker 3: We had a lot of irrational exuberance in the market.
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  Speaker 3: As you say, all of the good news that Trump
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  Speaker 3: had talked about was price and none of the risks.
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  Speaker 3: So it's more about the starting point in terms of
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  Speaker 3: the actual drag on the economy versus COVID. That that's
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  Speaker 3: much much more mild.
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  Speaker 2: And what does it mean for investors then going forward?
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  Speaker 2: Do you I mean, if you're a business, let's take
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  Speaker 2: because investors are basing their decisions off what they think
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  Speaker 2: the businesses are going to do. Right, So if you're
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  Speaker 2: in business and you're not wanting to throw your money
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  Speaker 2: at this, or throw your money at that, or buy
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  Speaker 2: the new plant or hire the new person because it's uncertain.
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  Speaker 2: I mean, at some point, if uncertainty is constant, you
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  Speaker 2: get used to it and you invest anyway, don't you.
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  Speaker 3: I think that's right. I think people will. At the
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  Speaker 3: very least, this will be an excuse for people who
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  Speaker 3: were going to sign off on a marginal project to
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  Speaker 3: take a wait and see approach. However, I do think
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  Speaker 3: and by the way, it never does feel good as
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  Speaker 3: an investor when these risks are coming home to roost
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  Speaker 3: or plan out, as you said. But the good news
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  Speaker 3: is there is a lot less irrational exuberance than the
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  Speaker 3: market today than was it a month ago. So those
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  Speaker 3: sentiment engages that were read hot have gone to more normal.
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  Speaker 3: And I guess when you think about whether you're going
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  Speaker 3: to sign that check or not for that three year
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  Speaker 3: capital project, I do think of this uncertainties does start
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  Speaker 3: to drag on the economy too much, and it becomes
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  Speaker 3: very evident that to Trump himself, that he is intentionally
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  Speaker 3: hurting the US economy. I do think that a reasonable
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  Speaker 3: base case is that rationality will prevail and maybe some
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  Speaker 3: of these things will be reversed, and we saw that
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  Speaker 3: again last night when he buttoned off again on these
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  Speaker 3: tariffs and the stock market rally very sharply. So for now,
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  Speaker 3: the good news is that a lot of these risks
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  Speaker 3: we're talking about are coming home to roost. They have
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  Speaker 3: partially played out, and the sentiment has gone from red
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  Speaker 3: hot over at SKIS to sort of more normal.
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  Speaker 2: Sam. Thank you for the really interesting stuff. Sam Dickey
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  Speaker 2: Fisher funds with us tonight.
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