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The Muster- Tom Shallard: Craigs IP · The Muster on Hokonui

• 0:03
  Speaker 1: Tom Shallard of Craig's Investment Partners joins us in studio
• 0:07
  Speaker 1: once again. Good afternoon.
• 0:08
  Speaker 2: Good afternoon, Andy.
• 0:09
  Speaker 1: Once again, another very, very busy week across the country.
• 0:12
  Speaker 2: Plenty to talk about. It's been a busy old week.
• 0:14
  Speaker 1: It's been a busy old year. It has been. It
• 0:34
  Speaker 1: has been. Only two months to go. It's hard to believe.
• 0:37
  Speaker 2: Talking about work, you talk about dairy, the GDT last night. Yes, again,
• 0:41
  Speaker 2: another big positive.
• 0:42
  Speaker 1: Another strong auction, up 3%, and that's seven strong auctions
• 0:47
  Speaker 1: out of the last eight, and back to highs in March. So, yeah,
• 0:52
  Speaker 1: pretty good to see. That supports Fonterra's recent guidance around 9.75%.
• 0:58
  Speaker 2: That just seems to be the way these auctions go, though.
• 1:00
  Speaker 2: There's a lull in the middle of winter, as you'd expect,
• 1:03
  Speaker 2: and as you get into the season, it seems to
• 1:05
  Speaker 2: build up.
• 1:06
  Speaker 1: Yeah, it tends to match the supply and demand curve,
• 1:08
  Speaker 1: doesn't it?
• 1:08
  Speaker 2: Pretty much. Right, elections. It's the big buzzword this week. But,
• 1:14
  Speaker 2: I mean, markets and the likes... If it goes either way, which, well,
• 1:18
  Speaker 2: that's going to happen, that's a given, but it's a
• 1:21
  Speaker 2: matter of which way it goes. And I suppose there's
• 1:23
  Speaker 2: a bit of nervousness out there regarding not the sectors
• 1:27
  Speaker 2: or anything and everything.
• 1:29
  Speaker 1: Yeah, definitely. I mean, for markets, the question isn't necessarily
• 1:33
  Speaker 1: who wins the election or what coalition is formed. It's
• 1:36
  Speaker 1: just how quickly we get a workable government. I mean,
• 1:40
  Speaker 1: markets don't like uncertainty, whatever that may be. But in
• 1:44
  Speaker 1: this case, yeah, political uncertainty. So if Saturday doesn't give
• 1:47
  Speaker 1: us a clear answer, I mean, yeah, keep the kettle on.
• 1:51
  Speaker 1: We'll have to wait and see what materialises from negotiations
• 1:55
  Speaker 1: until we get a workable government, but that might well
• 1:58
  Speaker 1: happen on Saturday. Who knows? It looks tighter than the
• 2:01
  Speaker 1: Melbourne Cup. So, yeah, that will be interesting. I mean,
• 2:05
  Speaker 1: it's too close to call, so we really do just
• 2:07
  Speaker 1: have to wait and see.
• 2:11
  Speaker 2: Would you say there's a few nerves out there in
• 2:13
  Speaker 2: the market, considering it could be a four-way coalition?
• 2:16
  Speaker 1: Yeah, definitely. No, there absolutely is. And, yeah, from an
• 2:21
  Speaker 1: uncertainty point of view, markets just want to know, you know,
• 2:24
  Speaker 1: what would be tweaked at the margins if, you know,
• 2:28
  Speaker 1: a certain coalition got in and that sort of can
• 2:30
  Speaker 1: look like tax settings, you know, which are the topic
• 2:33
  Speaker 1: of the election, really.
• 2:35
  Speaker 2: The Reserve Bank last week said, They played it in
• 2:38
  Speaker 2: the V with a Kane Williamson straight bat, didn't they?
• 2:41
  Speaker 2: Surprising everybody with a hold.
• 2:43
  Speaker 1: Yeah, you said it better than I could have, Andy,
• 2:45
  Speaker 1: but I don't know if it was entirely, I mean,
• 2:48
  Speaker 1: it certainly surprised markets that a 25-point hike was actually
• 2:52
  Speaker 1: fully priced in. But, you know, a week out from
• 2:56
  Speaker 1: an election, does it really surprise you retrospectively? Who knows? But, yeah, look,
• 3:01
  Speaker 1: it was a close call. Three of seven members were
• 3:03
  Speaker 1: supporting a hike. So, yeah, it's definitely more of a
• 3:07
  Speaker 1: pause than the end of this tightening cycle. There's probably
• 3:11
  Speaker 1: a bigger global story there as well. You know, central
• 3:14
  Speaker 1: banks aren't the only ones tightening financial conditions. You just
• 3:18
  Speaker 1: have to look at the US bond market. It's doing
• 3:20
  Speaker 1: some of the work for them.
• 3:22
  Speaker 2: Is it a concern, though, that the board of the
• 3:24
  Speaker 2: Reserve Bank weren't on the same page, though, regarding a lift?
• 3:28
  Speaker 1: Not necessarily. You do tend to see.
• 3:33
  Speaker 1: Differing views and I guess that's how you've got seven
• 3:38
  Speaker 1: around the table and a consensus won't always be formed.
• 3:45
  Speaker 2: So interest rates, mortgages and everything as well, everybody can
• 3:48
  Speaker 2: just breathe for a little bit longer?
• 3:50
  Speaker 1: Yeah, but it certainly is trending a little bit upward
• 3:53
  Speaker 1: with increased energy costs and higher inflation.
• 3:58
  Speaker 2: Speaking of inflation, New Zealand business confidence is actually appearing
• 4:03
  Speaker 2: pretty robust despite everything at the moment. I mean, down
• 4:06
  Speaker 2: here in the south, it's a given. We're going ahead
• 4:08
  Speaker 2: in massive strides. The rest of the country, though, especially
• 4:11
  Speaker 2: up north, it's a different scenario. But businesses seem pretty positive.
• 4:15
  Speaker 1: Yeah, I mean, we've probably talked many times now about
• 4:18
  Speaker 1: what's happening in the rural economy. But across some of
• 4:21
  Speaker 1: the major centres, actually, businesses do seem remarkably resilient despite
• 4:28
  Speaker 1: Geopolitical uncertainty, higher fuel prices, higher business costs, higher wage bills.
• 4:33
  Speaker 1: So that is actually quite encouraging that business confidence is
• 4:36
  Speaker 1: holding up. I'd say a lot of people are looking
• 4:38
  Speaker 1: towards inflation as a bit of a watch point. Companies
• 4:43
  Speaker 1: that are expecting higher costs do tend to pass that
• 4:46
  Speaker 1: on to their consumers, which leads to price increases. So
• 4:53
  Speaker 1: energy is an important part of the story there. And yeah,
• 4:58
  Speaker 1: we really need to see some sort of resolution with
• 5:00
  Speaker 1: this energy crisis. And hopefully that will lead to a
• 5:05
  Speaker 1: drop in some of those longer dated interest rates.
• 5:09
  Speaker 2: This might seem like a silly question, but are we
• 5:11
  Speaker 2: still seeing remnants of the after effects of COVID? Or
• 5:15
  Speaker 2: is that null and void after six years now? That's
• 5:18
  Speaker 2: two political terms on, I suppose.
• 5:20
  Speaker 1: Well, we probably still haven't really emerged from the rut yet. of,
• 5:26
  Speaker 1: you know, quite a severe recession on the back of
• 5:29
  Speaker 1: COVID and that really steep rate hiking cycle we saw in,
• 5:34
  Speaker 1: you know, 2022 and 2023. So, yeah, it's called a
• 5:38
  Speaker 1: K-shaped economy. There's sectors, there's divergence. There's sectors doing really,
• 5:43
  Speaker 1: really well and there's the sectors that aren't. And that creates,
• 5:47
  Speaker 1: you know, people living in the same economy, two different
• 5:51
  Speaker 1: economic outcomes. And you can see that quite clearly. Yeah.
• 5:53
  Speaker 2: Right, speaking of elections, the US midterms and the old Trumpster,
• 5:58
  Speaker 2: Donald Trump, he could be, he might be about to
• 6:00
  Speaker 2: lose some of his power.
• 6:01
  Speaker 1: Yeah, yeah, it's another big event for markets. As you said,
• 6:06
  Speaker 1: you know, Democrats expected to win the House. Senate's looking
• 6:09
  Speaker 1: like a pretty close fight as well. Republicans currently control both. So, look,
• 6:14
  Speaker 1: any change to the control of Congress will make, yeah,
• 6:20
  Speaker 1: President Trump's a domestic agenda much harder to advance. He's
• 6:25
  Speaker 1: already made a few public comments about his ability to
• 6:28
  Speaker 1: veto anything that comes across his desk that isn't favourable for,
• 6:35
  Speaker 1: I guess, Republican interests. So, yeah, it's going to be very,
• 6:38
  Speaker 1: very interesting, and we'll see some of that information start
• 6:42
  Speaker 1: to flow through this afternoon.
• 6:44
  Speaker 2: You talk about being the domestic scene in America and
• 6:47
  Speaker 2: how it'll change. What about internationally? What about these tariffs?
• 6:51
  Speaker 2: Will we see any change there?
• 6:53
  Speaker 1: Not necessarily. He'll still have the ability under laws that
• 6:57
  Speaker 1: he's already, I guess, exploited. So it's all domestic? Yeah,
• 7:01
  Speaker 1: to advance his tariff and trade policies agendas. So probably
• 7:05
  Speaker 1: not going to see too much change there, I don't think, Andy.
• 7:08
  Speaker 2: But it's certainly going to be interesting times over the
• 7:10
  Speaker 2: next seven days. Craig's Investment Partners, you're opposite you, World,
• 7:13
  Speaker 2: but what is your physical address?
• 7:15
  Speaker 1: 1 Erick Street, Andy, and you can call me on
• 7:18
  Speaker 1: 03 209 0152.
• 7:20
  Speaker 2: Good on you, Tom. Enjoy the hour.
• 7:22
  Speaker 1: Thanks, Andy.
• 7:24
  Speaker 2: Tom Shallard of Craig's Investment Partners, based right here in Gore.
• 7:28
  Speaker 1: This is the must-up.
• 7:30
  Speaker 2: As a look at the notes, who have we got next?
• 7:33
  Speaker 2: Keely Buckingham of Dairy NZ. I may have won your heart's...