Latest / Best of Business / Sam Dickie: Fisher Funds expert on the state of the market after a turbulent week

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Sam Dickie: Fisher Funds expert on the state of the market after a turbulent week · Best of Business

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  Speaker 1: You're listening to a podcast from News talks'b follow this
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  Speaker 1: and our wide range of podcasts now on iHeartRadio whatever
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  Speaker 1: duples out now after.
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  Speaker 2: The market turmoil of the past week, the question of courses,
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  Speaker 2: has the bubble burst or have we still got a
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  Speaker 2: little bit of a way to go here. Sam Dickey
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  Speaker 2: from Fisher Funds is with me. Now, Hey, Sam, Heather, Sam,
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  Speaker 2: am I right, but you were just warning about all
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  Speaker 2: this stuff the other day and then it's happened.
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  Speaker 3: I'm not sure about warning, but you and I were
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  Speaker 3: certainly talking about Heather.
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  Speaker 2: Yes, yeah, okay. So the specific risks that have led
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  Speaker 2: to the point that we're at, what are they?
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  Speaker 3: Yes, we're outside of the unlined of the giant Japanese
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  Speaker 3: carry trade, which in plain English means borrowing at near
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  Speaker 3: zero present in Japanese un and using that money to
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  Speaker 3: invest in risky assets around the world. Outside of that,
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  Speaker 3: there were two other things happening which caused a third
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  Speaker 3: to happen, so the US economic growth risk. The market
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  Speaker 3: was far too complacent about what investors call a soft
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  Speaker 3: economic landing. So despite the sharpest rate hike cycle bi
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  Speaker 3: central banks in forty years, the US economy was expected
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  Speaker 3: to sail through and that came unstuck. And then there
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  Speaker 3: was the AI hygh risk. And remember that one number
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  Speaker 3: to remember, ten trillion dollars. So we add up half
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  Speaker 3: a dozen of the AI darlings and their market capitalization
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  Speaker 3: or valuations had gone up by over ten trillion dollars
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  Speaker 3: in the last twenty months or so. But on the ground,
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  Speaker 3: the reality was, you know, you and I were not
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  Speaker 3: prepared to pay for that. There was no AI use
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  Speaker 3: case out there headed that really caught our fancy. So
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  Speaker 3: there was this huge yawning gap between the hype and
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  Speaker 3: the reality. So those two things caused the market. A
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  Speaker 3: third thing to happen that the market was being driven
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  Speaker 3: by a very few stocks, So that's a sort of
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  Speaker 3: unhealthily narrow rally. So that those were the four risks
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  Speaker 3: that kind of came unstuck all at once.
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  Speaker 2: I see that the JP Morgan analysts reckon that, especially
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  Speaker 2: with regards to the carry trade. We're only about halfway
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  Speaker 2: through that turmoil. What do you think, I mean, can
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  Speaker 2: you can you tell whether we're we're still seeing this
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  Speaker 2: happen or whether it's already done.
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  Speaker 3: There's a lot of thought gone on to that around
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  Speaker 3: the world. My thought with these things is, you know this,
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  Speaker 3: the seeds for this was sowed back in the nineteen
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  Speaker 3: eighties in Japan. I'm not saying they've been building for
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  Speaker 3: that long, but really that's where the seeds were. So
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  Speaker 3: when the bubble burst and we took sort of thirty
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  Speaker 3: years of anemic growth and anemic inflation, you know, driven
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  Speaker 3: by the scar tissue of the bursting of that bubble
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  Speaker 3: and a shrinking and aging population in Japan, and you know,
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  Speaker 3: the Japanese government and the boj is being desperate to
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  Speaker 3: manufacture inflation, and finally they got an opportunity to piggyback
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  Speaker 3: on a once in forty years spike in global inflation.
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  Speaker 3: But they were just kind of a day late and
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  Speaker 3: a dollar short. So I do think when these things
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  Speaker 3: have been building for months and months, if not years,
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  Speaker 3: they're not going to unwind and sort of forty eight hours,
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  Speaker 3: So I guess I agree with that long way of saying,
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  Speaker 3: I agree with the Japanese Joping mord analysts.
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  Speaker 2: Interesting, okay, So I mean, what do we take out
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  Speaker 2: of this if we're investors?
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  Speaker 3: Well, four days of the lifetime in markets, but quite
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  Speaker 3: a few things have changed in each of those three
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  Speaker 3: or four risks so on new its economic growth expectations.
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  Speaker 3: The good news is the markets expecting the Federal Reserve
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  Speaker 3: to you know, the cavalry to arrive. So the market
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  Speaker 3: was pricing two rate caps by the end of the
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  Speaker 3: year literally seven days ago, and now it's pricing five
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  Speaker 3: rate cuts and nothing happens in a vacuum. You know,
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  Speaker 3: New Zealand's now pricing another rate cut or two by
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  Speaker 3: the end of the year as well. And in equity markets,
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  Speaker 3: we've seen the frost blown out and economically sensitive stocks
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  Speaker 3: down a lot more. So that's good news. That's at
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  Speaker 3: least partially getting priced in on the AI bubble. You know,
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  Speaker 3: in the last week or so, we've seen the big
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  Speaker 3: tech companies come out with the results and they continue
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  Speaker 3: to weigh and then plow more money into AI hardware
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  Speaker 3: like in videos, computer chips. But the market's lost patients,
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  Speaker 3: they're not prepared to who allow them to continue plowing
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  Speaker 3: money into this I guess this AI experiment with no
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  Speaker 3: revenue at the other side. So the good news is
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  Speaker 3: the market is forcing these companies to become more prudent
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  Speaker 3: and drive an obvious return on invested capital, so that
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  Speaker 3: that yawning gap I talked about between kind of the
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  Speaker 3: hype and the capex that's going in there and the
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  Speaker 3: reality of the fact you and I are not prepared
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  Speaker 3: to pay for this yet. Here there is still there.
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  Speaker 3: But the good news is we've seen some of these
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  Speaker 3: AI darlings correct hard. So super micro Computer, which builds
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  Speaker 3: liquid cooling systems for these very hot and video chips,
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  Speaker 3: has down twenty five percent of last week. And on
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  Speaker 3: the unwind of the giant carry trade Japanese carry trade,
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  Speaker 3: the deputy governor of the boj almost came out and
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  Speaker 3: corrected as the governor, and they said they've heard the
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  Speaker 3: market's message loud and clear after the sharpest fall in
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  Speaker 3: the stock market's history, and they said they wouldn't raise
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  Speaker 3: interest rates anymore until the financial tum al has calmed down.
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  Speaker 3: So we've seen a stabilization there. So the good news
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  Speaker 3: is when the risk's on the front page of every
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  Speaker 3: newspaper around the world, or at least on the front
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  Speaker 3: page of the business section, we can rest asshuredage at
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  Speaker 3: least partially priced into assets and stock.
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  Speaker 2: Markets fascinating, really fascinating stuff at the moment.
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  Speaker 3: Nome yeah, very fast, I was going to say. One
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  Speaker 3: last thing is a really another good piece of good
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  Speaker 3: news is owning a portfolio of stocks and bonds and
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  Speaker 3: using the bonds and insurance is definitely working again after
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  Speaker 3: not working during the kind of inflation spike of twenty
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  Speaker 3: twenty two. So while equities fell sharply this week, your
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  Speaker 3: bond investments went up sharply as insurance. So that is good.
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  Speaker 2: Newsks smart Hey Sam, thank you very much, appreciate it.
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  Speaker 2: As always, we'll talk to you soon, Sam Dickey Fisher Funds.
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