Latest / ausbiz a.m / 15.09.26 with Andrew Wielandt, DP Wealth Advisory
Transcript
- Andrew: Good morning and welcome to your morning wrap from Ozbiz. It is Tuesday, September fifteenth, and we're expecting a negative start to the session. ASX futures down around point two percent. So obviously we did struggle yesterday to try and make any gains after a well, what was very negative week ⁓ last week, which we ended down around three percent. Now in a moment we'll preview the day ahead with Andrew Viler, but first though, ⁓ look at what happened on global markets overnight. Oil prices initially firmed to around 110%. AMW: you Andrew: Dollars a barrel, sending the US tenure yield above 5% before receding, equity markets slightly weaker as AI concerns weigh on chipmakers. Wall Street, ⁓ the SP down around half percent, the Nasdaq 0.8, the Dow also falling. And among those stocks taking the broader index down, NVIDIA, Sandisk, Micron leading those losses. Following talk from leading AI players about slowing the pace of development. AMW: you Okay. Andrew: of AI. We'll get to that in just a moment. Now among the commodities, Brent Crude did ease in the end to around one hundred and five a barrel, gold weaker at close to four thousand three hundred an ounce, Bitcoin jumping to seventy nine and a half thousand US, and the Aussie slightly weaker at seventy one point four US cents. All right, well joining us to get across the market moves. Andrew Violet from D P Wealth Advisory. Andrew, good morning. AMW: Good morning, Andrew. Andrew: So let's start with AI. Fascinating this talk, isn't it? ⁓ well not just fascinating, it's a bit bit alarming, quite frankly, when you have the ⁓ the heads of ⁓ major AI firms talking about the threat to humanity. ⁓ so it was always gonna be interesting, wasn't it, post that talk of how Wall Street was gonna react. AMW: And, yeah, you're quite right. I mean, there's multiple layers to this, and we've only got about four minutes to cover it, so I'll try my best not to ⁓ labour the point, but at a very high level, yes, certainly concerns relating to the safety of these models. And it does make you wonder what has actually occurred to bring all three of the major model advocates for the want of a better term together. You've got Elon Musk and Sam Altman hate each other. and ⁓ we're trying to sue each other into oblivion and now they're all singing from the same hymn page. So it does make you wonder as to what's actually occurred, ⁓ has some particular event occurred in the background that's got everyone concerned. The flip side to that of course is you've got the US president Donald Trump going, look, this is all really interesting, but we're gonna keep powering ahead. We're two to three years ahead of China at the moment. We can't let the Chinese catch up to us. You do what you need to do. but we're just gonna keep powering ahead and there's gonna be no regulation. So markets are going, ⁓ my goodness, what's going on here? But to your point in the intro relating to potential for pullback in spending in those frontier models, ⁓ obviously demand for chips would diminish in that case, but it's not only that Andrew, it's also that ripple effect through as well, know, that second and third order effects. So it could actually be quite pronounced from a market point of view. And as you said, some of those names, that came off overnight. ⁓ Part of that is concerned that potentially this is going to happen. But you and I have been following this AI thing since 2022. We could wake up next week and it's a whole different story again. There's many twists and turns in this. Andrew: I mean, it is interesting given obviously the absence of ⁓ government intervention as ⁓ President Trump has alluded to because ⁓ he's saying, Well, we're not gonna do it because China's not gonna do it. do you think these firms would self regulate? I mean, if they were to, I mean clearly they're gonna undermine their their business models essentially. They're going to you know, sacrifice ⁓ the you know, the money they're making at this point. AMW: Well, there's that. But just to your point about the Chinese, interestingly, the Chinese do have a higher degree of government regulation and intervention, in particular, as an example, around the use of deepfakes as an example. ⁓ So, dare I say, they seem to be taking a more interventionist view as opposed to sort of the US more free market. It is what it is, point of view. But to your point around these companies that on two fronts, on the equity space, Anthropics looking at listing. And so, you know, why would you sort of come out and say, hey, you know, we've got these amazing frontier models, but we're to be slowing them down. That's going to impact our earnings. Doesn't exactly sound great for an IPO, but equally so, Andrew, and we might talk about interest rates in a second, but the bond market, because one of the things that's going on at the moment, ⁓ and again, I'm sure many of you all, guests have been speaking about this, there is a trillion dollars, that's a T with 12 zeros, that's going to be spent this year by the hyperscalers and by 2030 it can be as high as four trillion dollars. They don't have that just laying around in a bank account. They have to go out and borrow. So again, you know, please lend us money, but we're going to put a handbrake on our business and you know, the world's going to end if you sort of enable our products. Otherwise things are good. Nothing to see here. Doesn't quite line up. Andrew: Not quite, no. Well you mentioned interest rates, obviously you've got the crucial Fed decision this week. ⁓ markets pricing, what around an eighty five percent chance they're gonna hike. ⁓ well that remains to be seen, doesn't it? Certainly Kevin Walsh not giving well hasn't given anything away, so markets sort of trying to work this out themselves. ⁓ you mentioned bonds. ⁓ mentioned there earlier too, the the ten year were above five percent. ⁓ look, I mean that's obviously a concern, but AMW: It's interesting, isn't it? You're quite right. US 10 year 5 % and cruising well beyond that for the 30 years. And you're right. And in an environment whereby you would expect that even simplistically here in Australia, people can get 5 % plus on turn deposits. Why would you take equity market risk? Andrew: Doesn't seem to be weighing on equities as such, does it? AMW: if you know you can get virtually a risk-free rate of return at 5%. That probably speaks to why, what have we been down? 18 of the last 25 trading sessions in Australia. But overseas people are going, well, that's all really interesting, but we're just going to keep on keeping on. And I think part of it, Andrew, is the fact that the market knows that, well, not knows, but has a strong suspicion, an 85 % suspicion that interest rates will go up this week. And they may be another one, if not two baked in. by year end, but certainly if it was to become four or five into early 2027, I think we'd be having a very different conversation. But you're right, Warsh is in a very difficult position. Certainly if the Fed doesn't act, then their credibility is out the window. But equally so, his boss, if I can use that term, has made it pretty clear when he replaced Jay Powell that he was looking for some other cut rates. And I think Warsh will use the, it's the market's fault. He'll put his hands in the air and go, wasn't me, boss, it was the market. But how long that washes for with Trump is a whole other story. But you're right, the market, in particular US markets, appears to be teflon at the moment, despite the fact that we've got rates at decade highs. Andrew: Andrew, let me put your ⁓ l ETF hat on. What are you seeing with inflows there, I guess, particularly with those those bond related ETFs? AMW: Yeah, well, a few things going on, Andrew. I mean, you the speed of results that came out last week from Stand and Pause that told us that ⁓ in Australia that we had from members, around 79 % of active managers failed to meet their benchmark. This is Australian equity managers. ⁓ Interestingly, though, that same conversation, ⁓ 70 % of active bond managers did manage to outperform the index over the last 12 months. So that's a real hat tip to all the active guys and girls in that bond space, which also speaks to the inflows that's going there at the moment. and sorry, the other thing, of course, we saw last month as we saw nearly $7 billion worth of inflows into ETFs in Australia. So now at around $376 billion is that market. The market is growing by that 25 % per annum over the last five years, below the global average though, Andrew, which is over 30%. but we're well and truly on track to crack $400 billion this year and certainly 500 billion, half a trillion is on the cards for 2027. But back to your point around inflows, yeah, certainly seeing a lot of money is moving into that fixed interest space, into that cash space. But given the performance of active managers, I'm probably more of a passive type of guy. You know me, Andrew, I'm the passive type of guy. And let's be the research would suggest that being passive makes sense long-term. a low cost call and then have some satellite exposure. But in this particular space, given the volatility interest rates, what's potentially happening with inflation, et cetera, the active guys and girls are doing a pretty good job. And that's where we're seeing those inflows as well. Andrew: Do know what you're seeing on in those ⁓ energy related ETFs, I guess, obviously with a focus on oil given what's going on in the Middle East at the moment, ⁓ with you know, clearly no sign of any breakthrough there, President Trump pretty much ⁓ saying it's it's not gonna happen until after the midterms, potentially next year, what ⁓ what are you seeing in that space at the moment? AMW: Yeah, there are some inflows remembering that there are a couple of ⁓ specific exposures. This podcast isn't for mentioning names, but there's a couple of specific exposures. Or again, there's more broader ⁓ GIC sector materials and materials resource sector ETFs that would also be capturing those as well in a given And given the general interest in that resource sector at the moment, we're certainly seeing inflows there. But to that broader energy space, I was listening to an interview from the US Energy Secretary this morning. And he was suggesting that there's still at least 10 million barrels of oil that passing through the Straits of Hormuz every day at the moment. And there's an expectation that that will continue to tick up over the next four to six weeks. That's before anything going on with that East-West pipeline, et cetera. it's a real, it's a very interesting one at the moment. He also pointed out to the fact that the US driving season has ended. That's usually a big driver, no pun intended relating to oil. But the flip side, of course, is we're then coming into that Northern Hemisphere winter. There are a lot of people using oil for heating. So there's probably only around a six to eight week window for them to really sort of get this sorted out before you might. really see that all price accelerate coming into calendar year end. Andrew: So Andrew, given all these headwinds we've just been speaking of and you know, as we beyond the Fed we look at locally to the RBA week after next, how how are you positioned then? Just how cautious or defensive are you? AMW: Yeah, I mean, as you know, Andrew, my favorite type of ice cream remains ⁓ vanilla. And my favorite cricket commentator was Richie Benno. So in other words, I'm beige. And part of being beige is having elevated levels of cash. Our models are probably three times the level of cash as to what they normally are. So we're certainly not out there actively selling things, but equally so. We've remained underweight US. We've remained underweight tech, we remain overweight cash. And part of that is for some of those risks that we've just identified. I'm not sure the RBA is gonna move on rates in September. I think that they'll move from Melbourne Cup. That'll be a nice present for us. ⁓ But again, coming back to the markets continuing to be under pressure and range bound at best, no great surprise. ⁓ You know, we saw a couple of those economic surveys come out from NAB and Westpac, I think it was, and both of the reads were negative and ⁓ businesses under pressure, the consumers under pressure, the budget certainly didn't instil a great deal of confidence relating to investors. So you stick all that in the melting pot and I think we're going to remain range bound and as a consequence, we, our firm, continue to be cautious. Andrew: Well despite all that negativity, Andrew, I hope you make the most of the week. Thanks for joining us from D P Wealth Advisory. AMW: Thanks, Adrian. Andrew: And that is your Osbiz morning wrap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening.