Latest / The SME Stream / Sam Dickie: Fisher Funds expert examines the risks impacting the equity markets

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Sam Dickie: Fisher Funds expert examines the risks impacting the equity markets · The SME Stream

• 0:00
  Speaker 1: Bryan Branch.
• 0:01
  Speaker 2: Can we go to Sam Dickey for a market update.
• 0:03
  Speaker 2: Equity markets a whisker off their all time highs, this
• 0:06
  Speaker 2: despite a few wobbles recently. So what about the risks?
• 0:09
  Speaker 2: Sam is with us now? Good evening, Good evening, Ryan.
• 0:13
  Speaker 2: We've talked a lot about the exciting sort of positive
• 0:16
  Speaker 2: catalyst for markets over the last few months. But what
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  Speaker 2: are the key risks investors should be focused on this year. Yes,
• 0:24
  Speaker 2: there's been so many perceived risky headlines so far. So
• 0:29
  Speaker 2: far this year is kind of like drinking from a
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  Speaker 2: fire hose. So we find it helpful to remember what
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  Speaker 2: really drive stock markets, and that's three things. So the
• 0:36
  Speaker 2: direction of economic and corporating is growth, the level of
• 0:39
  Speaker 2: interest rates, and the valuational price of stocks. So if
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  Speaker 2: we look at one key risk in each of those
• 0:43
  Speaker 2: buckets and ignore the rest of the noise, A key
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  Speaker 2: driver of growth in the US has been the massive
• 0:49
  Speaker 2: build out of AI infrastructure. So the rubber meets the
• 0:53
  Speaker 2: road this year on where the big tech companies can
• 0:55
  Speaker 2: make a return on the hundreds of billions of dollars
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  Speaker 2: they spend on AI and as is in the side, Ryan,
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  Speaker 2: Remember we were speaking back in October November about how
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  Speaker 2: bubbly things that God in Ailand. The good news there
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  Speaker 2: is there's been a healthy correction in the riskier names
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  Speaker 2: so Orackland call Weave, which were using tons of debt
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  Speaker 2: to fund that a built out there, down forty to
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  Speaker 2: fifty percent.
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  Speaker 1: Point there is. That's good news that investors are becoming
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  Speaker 1: more discerning. The second one is on the level of
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  Speaker 1: interest rates. Keep an eye on debt levels of particularly
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  Speaker 1: OECD countries like Japan and the US. So take Japan,
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  Speaker 1: for example, on the thirty year debt that the government borrows.
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  Speaker 1: Only five to six years ago, the government used to
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  Speaker 1: pay zero percent on that thirty year bonds. Government bonds
• 1:40
  Speaker 1: were at zero percent. Today it pays almost four percent,
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  Speaker 1: and the interest rate has been going up rapidly. So
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  Speaker 1: the point there is keep an eye on those longer
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  Speaker 1: dated interest rates for the US and Japan for signs
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  Speaker 1: of stress. And the final thing is markets have had
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  Speaker 1: a very strong run since April last year. Equity markets
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  Speaker 1: are up forty four percent eight months, which is astonishing,
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  Speaker 1: and the headline valuation is elevated at twenty two times
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  Speaker 1: simplistic price to earnings ratio. The good news there though,
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  Speaker 1: is that's reflective of just some of those really big
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  Speaker 1: top ten kick companies being fully valued, like Tesla trades
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  Speaker 1: on two hundred times p which is pretty ritzy. The
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  Speaker 1: good news is blue chip companies or quality companies that
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  Speaker 1: sit outside of that top ten were left behind, and
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  Speaker 1: twenty twenty five, in fact, some of those companies of
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  Speaker 1: the most out of favor in thirty years, So that
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  Speaker 1: bodes really well for focused, selective stop picking investors.
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  Speaker 2: What about picking particular markets like you know, Japan and Germany.
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  Speaker 2: There's a lot of talk about their stimulus that you know,
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  Speaker 2: pumping the cash and which often leads to the lift
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  Speaker 2: in markets. Is that something that we should pay close
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  Speaker 2: attention to or have we maybe missed the boat on
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  Speaker 2: that already? That's what's the story there.
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  Speaker 1: I think that's important. That's one of the key lessons.
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  Speaker 1: You and I spoke late late last year about what
• 3:02
  Speaker 1: were the key lessons of twenty twenty five. Well, the
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  Speaker 1: key lesson is it's possible to make money outside of
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  Speaker 1: the US, and for the third time in fifteen years,
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  Speaker 1: non US markets outperformed the US, Japan, as you mentioned, China, Brazil,
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  Speaker 1: emerging markets. There's some good places to make money. Japan
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  Speaker 1: has had a specific stock market sort of stimulus package
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  Speaker 1: going on. Apart from the fact they're trying to reflate
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  Speaker 1: their economy, they've also told all of the companies that
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  Speaker 1: are listed on their stock market that they must do
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  Speaker 1: shareholder fenny things. They must use some of the lazy
• 3:35
  Speaker 1: cash on their balance sheet, they must pay higher dividends,
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  Speaker 1: they must drive up return. So that's been really, really positive,
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  Speaker 1: and I think there's still more to run there, notwithstanding
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  Speaker 1: by the way that overriding risk of the price of
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  Speaker 1: money there. I mean, just keep an eye on those
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  Speaker 1: thirty year bonds. They moved very aggressively two days ago,
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  Speaker 1: So we just want to make sure that the Bank
• 3:54
  Speaker 1: of Japan doesn't lose control of its bond market.
• 3:58
  Speaker 2: Sam, if we were to have a Trump Liberation Day
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  Speaker 2: outburst again tomorrow, this is just a hypothetical, but throw
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  Speaker 2: it at you. Do you think the markets would react,
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  Speaker 2: wouldn't react as dramatically as they did last year. Like
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  Speaker 2: we kind of learned the lesson with him a little
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  Speaker 2: bit that that he you know, he goes crazy, he
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  Speaker 2: does the art of the deal thing, and then he
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  Speaker 2: pulls back and does a deal.
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  Speaker 1: Yeah, I think it's it's a spot like one of
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  Speaker 1: those diminishing marginal utility of the shock factor, right or
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  Speaker 1: the out of the deal it is. I mean when
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  Speaker 1: I talk about drinking from a fire hose to start
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  Speaker 1: the year, that was most of those headlines were related
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  Speaker 1: to Trump policies or tweets, should I say? And whether
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  Speaker 1: it be captain credit card rates in the US. You know,
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  Speaker 1: the Iran headlines have beenersuaded headlines, the Greenland headlines, and
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  Speaker 1: I think he piled on so much, and those policies
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  Speaker 1: came so thick and fast, and eventually the market did
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  Speaker 1: link a couple of days ago. But then of course
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  Speaker 1: he's already subsequently walked away from the Greenland threats to
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  Speaker 1: an extent. The market had a big bounce overnight. So
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  Speaker 1: I think you did right, Ryan. Is a diminishing marginal
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  Speaker 1: utility of the shop factor.
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  Speaker 2: What about the Iran That's the next one on the
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  Speaker 2: cab off the rank if we're to believe what's coming
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  Speaker 2: out of the White House. We spoke to Marco Rubio's
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  Speaker 2: former pres Sect today and he was saying, look, this
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  Speaker 2: is the one you want to watch. This is coming next.
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  Speaker 2: There's a troop build up or military build up in
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  Speaker 2: the Middle East from the United States. Is that as
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  Speaker 2: big a deal? Would it be as big a deal
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  Speaker 2: to markets as say, the Greenland threats have been.
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  Speaker 1: I think these geopolitical you know, flare ups are always
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  Speaker 1: concerning most not least, because there's a real human element.
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  Speaker 1: Then we shouldn't forget about that. But what history does
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  Speaker 1: tell us. You know, you can go back super long
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  Speaker 1: term over one hundred and five years. You know, we've
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  Speaker 1: had a couple of world wars, you know, a depression,
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  Speaker 1: numerous recessions, and still markets are up, you know, hundreds
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  Speaker 1: of fold you know. But then it even shorter term.
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  Speaker 1: You go back to Ukraine and even if you'd had
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  Speaker 1: tomorrow's newspaper yesterday wouldn't have made any money. People were
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  Speaker 1: convinced that, you know, gas prices would saw, energy prices
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  Speaker 1: would saw, grain prices would saw because you know, Ukraine's
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  Speaker 1: a weak bowl of Europe. The factors the day before
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  Speaker 1: Putin invaded was the highest price we saw for some
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  Speaker 1: of those gas prices, the oil price, and some of
• 6:28
  Speaker 1: those food prices. So it's really hard to trade. The
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  Speaker 1: point is it's really hard to trade around these geopolitical
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  Speaker 1: events and politics as well the US midterm elections coming up.
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  Speaker 1: That's the first point and the second point is, generally speaking,
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  Speaker 1: and I don't say this lightly, the market fades these things.
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  Speaker 1: They move on from these things fairly quickly. So I
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  Speaker 1: would put that in the camp of not ultra important
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  Speaker 1: for those three things the price of money or interest rates,
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  Speaker 1: the price of stocks, and the direction of you know,
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  Speaker 1: economic growth.
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  Speaker 2: Interesting. Thanks for letting me throw anything I can and
• 7:05
  Speaker 2: I want to hit you. Sam always appreciated the problem
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  Speaker 2: you're inside. Sam Dicky Pusher funds with us Tonight.
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