Latest / Best of Business / Stephanie Batchelor: Milford Asset Management expert on the significant drops in the US financial market

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Stephanie Batchelor: Milford Asset Management expert on the significant drops in the US financial market · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk SEDB. Follow
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  Speaker 2: Stephanie Batchelo Milford Asset Management with US Tonight's Steph.
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  Speaker 1: Hello, Hi Ryan.
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  Speaker 2: Now, there's been a big sell off in the US
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  Speaker 2: markets this week. Of course, we're getting close now to
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  Speaker 2: correction territory, which is ten percent off the peak. What's
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  Speaker 2: the latest tier?
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  Speaker 3: Yeah, So the US market, the S and P five
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  Speaker 3: hundred index is down nine point three percent from its peak,
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  Speaker 3: so it is very close to that ten percent mark,
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  Speaker 3: and it's really due to investor concern around US slowing
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  Speaker 3: in US economic growth. So as the Trump administration is
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  Speaker 3: settled in, they've they've announced a bunch of policies or
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  Speaker 3: potential policies that could dampen growth. These are things like
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  Speaker 3: trade tariffs and cuts to government spending. Over the weekend,
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  Speaker 3: Trump didn't rule out potential recessions. So we said there's
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  Speaker 3: going to be a period of transition with what they're doing,
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  Speaker 3: and that led to another almost three percent pullback on Monday.
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  Speaker 3: Then the overnight he actually reversed course of it. He
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  Speaker 3: downplayed that, saying he didn't foresee the US going into
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  Speaker 3: a recession and he thinks the country is going to boom,
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  Speaker 3: which did help to cushion a further fall that had
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  Speaker 3: started after he threatened more tariffs on Canada. So it's
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  Speaker 3: a little bit all over the place at the moment.
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  Speaker 2: It certainly is now the tech companies, the Magnificent Seven,
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  Speaker 2: which are Kream Della Cream of the tech companies, they
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  Speaker 2: have actually been hit harder than most than the broader market.
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  Speaker 2: Is this a sign that you are they leading the
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  Speaker 2: market here or is there tech specific things going on?
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  Speaker 3: Yeah, there are some tech specific things happening, So it's
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  Speaker 3: the concern is primarily around the amount that these companies
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  Speaker 3: are spending on things like artificial intelligence, and there are
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  Speaker 3: questions around whether they're actually going to be able to
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  Speaker 3: generate a sufficient return on that spend. So we had
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  Speaker 3: the emergence of deep Seek, which raised concerns on this
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  Speaker 3: front back at the end of JAM, and more recently
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  Speaker 3: there have been rumors around Microsoft postponing and canceling data
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  Speaker 3: center leases, so that's added to some of those concerns.
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  Speaker 3: And if you think about the very strong run that
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  Speaker 3: some of these companies have had, some of the valuations
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  Speaker 3: were elevated and they're also more sensitive to growth and momentum,
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  Speaker 3: so as you would expect, they have sold off more
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  Speaker 3: than the broader market. The Nasdaq is down about twelve
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  Speaker 3: and a half percent and the MAGS seven are down
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  Speaker 3: even more from the peak.
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  Speaker 2: It's interesting if you look at the Magnificent seven and
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  Speaker 2: you look at Meta, they're the only one so far
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  Speaker 2: this year who's actually managed to managed to get a
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  Speaker 2: positive return. What's with that?
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  Speaker 3: Yeah, So that one really comes down to the fact
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  Speaker 3: that Meta is viewed as having one of the most
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  Speaker 3: compelling early AI monetization opportunities. So if you think about
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  Speaker 3: how Meta actually makes money, it's through advertising, and it
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  Speaker 3: was already a leader in targeted advertising, and its investment
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  Speaker 3: in AI are really just helping to extend that lead.
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  Speaker 3: So they're helping advertisers create better ads, better target the
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  Speaker 3: right users, and then that in turn helps to improve
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  Speaker 3: user engagement. It keeps us all scrolling on those apps,
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  Speaker 3: and then it's able to better measure how well the
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  Speaker 3: ads are doing, which gives advertisers the confidence to keep
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  Speaker 3: coming back and using metas advertising platform. And you know,
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  Speaker 3: given I think it's around half the world's population uses
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  Speaker 3: a Meta app each month. It's got a huge base
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  Speaker 3: of customers to roll those initiatives out to, so it's
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  Speaker 3: starting in a pretty good spot.
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  Speaker 2: And we had a lot of change in the Nvidia
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  Speaker 2: stock over the fares of deep seek over in China.
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  Speaker 2: But now there's news that's come out that hit their stock.
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  Speaker 2: News out of Singapore.
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  Speaker 3: Yeah, so that was our last week. It sent the
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  Speaker 3: stock down eight percent on the day, and it was
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  Speaker 3: news that Singapore is investigating three people that are thought
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  Speaker 3: to be involved in smuggling in video chips. So the
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  Speaker 3: buyers appeared to be officially buying them from Singapore, but
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  Speaker 3: it looks like they might have actually ended up in China,
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  Speaker 3: which would have been in violation of US sanctions. And
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  Speaker 3: so the reason in Video stock fell so much is
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  Speaker 3: that Singapore accounted for almost twenty percent of in Video's
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  Speaker 3: revenue last year. So depending on what the investigation finds,
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  Speaker 3: there's a risk that a portion of those sales are
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  Speaker 3: illegal and would then fall away going forward. So for
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  Speaker 3: a stock that depends on constant upgrades and growing revenue,
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  Speaker 3: it's not a good outcome.
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  Speaker 2: Interesting, Stephanie, thank you, Stephanie Batcheler. Milforde said management.
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