Latest / Best of Business / Sam Trethewey: Milford Asset Management Portfolio Manager on the positive response to CPI data

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Sam Trethewey: Milford Asset Management Portfolio Manager on the positive response to CPI data · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk ZB. Follow
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  Speaker 2: It's time to catch up with Sam Trathui, portfolio manager
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  Speaker 2: at Milford Asset Management.
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  Speaker 3: Good evening, sir, Good evening, Jack.
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  Speaker 2: So what did we learn today about the outlook for inflation?
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  Speaker 3: Look, I think numbers printers today were very positive and
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  Speaker 3: that there was plenty of details across the release showing
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  Speaker 3: that inflation pressures are reducing. So probably the three point
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  Speaker 3: three percent headline rate of inflation was what was what
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  Speaker 3: everyone wanted to see. It was down on four percent
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  Speaker 3: from last quarter, below what most economists and importantly the
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  Speaker 3: RBS ed we're looking for or expecting. And I think
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  Speaker 3: it also highlights that the demand in the economy's weakening,
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  Speaker 3: pressures of tightness that were previously there, and the likes
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  Speaker 3: of labor market are well and truly back to more
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  Speaker 3: normal or pre pandemic levels. And you could say, look
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  Speaker 3: that everyone who has been involved in business or watching
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  Speaker 3: the economy for some time now well have nine things
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  Speaker 3: were weak. But this is really reassuring confirmation, particularly for
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  Speaker 3: the RB and zaid that inflation, which has really been
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  Speaker 3: keeping interstracts high is now under control.
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  Speaker 2: Yeah, so let's think about their position. Last week they
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  Speaker 2: softened this dance compared to six weeks earlier, so I
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  Speaker 2: even caught it a bit of a flip flop. They
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  Speaker 2: said they expected inflation could return back to that one
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  Speaker 2: to three target band over the second half of this year.
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  Speaker 2: How do you think today's data will affect that view?
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  Speaker 3: I think the IV and z Adrian or he'll be
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  Speaker 3: very relieved and I think we're shit reassured. And last
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  Speaker 3: week they were talking for the first time of emerging
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  Speaker 3: downside with economic activity after previously, as you said, being
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  Speaker 3: much more concerned about how difficult it would be getting
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  Speaker 3: to get us our inflation under control. And that was
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  Speaker 3: as recently as May. So I think they'll be able
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  Speaker 3: to confortably now stand behind that message from last week
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  Speaker 3: and say, look, we are heading back into that target band.
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  Speaker 3: The inflation job is nearly there. The real question now
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  Speaker 3: for them, one that I think most economists will be
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  Speaker 3: trying to answer, is when will be official cashertier cuts
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  Speaker 3: and how quickly and how many cuts will be made. Clearly,
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  Speaker 3: for most of us, the mortgage that's very very important.
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  Speaker 3: So financial markets, we have seen expectations for one, if
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  Speaker 3: not two cuts priced into markets this year. It means
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  Speaker 3: that every meeting meeting of the rbn Z for the
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  Speaker 3: rest of the year, of which there are three, will
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  Speaker 3: be treated as a live meeting where they could make
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  Speaker 3: that change.
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  Speaker 2: Yeah, and finally, Sam, we've seen a rally for the
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  Speaker 2: inded X since that change in tone from the rb
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  Speaker 2: n Z. How did the sheer market react today? Did
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  Speaker 2: did the rally continue?
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  Speaker 3: The rally continues today, so the market was up again.
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  Speaker 3: And look, there definitely has been that big turnaround of
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  Speaker 3: performance since that RBZ is meeting last week, so a
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  Speaker 3: four percent, well over four percent since then, which is
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  Speaker 3: a real turnaround, and performance of the injects more broadly,
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  Speaker 3: over since it's over the over this month compared to
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  Speaker 3: in recent times has been a real stark under perform
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  Speaker 3: versus other global markets. So what we are seeing is
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  Speaker 3: some enthusiasm towards the prospect of rate cuts and some
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  Speaker 3: of the bigger underperformers in the market, the likes of
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  Speaker 3: Enryn and Healthcare and Fittured building rally quite hard on
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  Speaker 3: the news. So broadly the interet exit, theres a market
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  Speaker 3: with the high degree of sensitivity turns rates because of
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  Speaker 3: the high dividend paying nature of our stocks. But the key,
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  Speaker 3: the key risk to all this is that coming up
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  Speaker 3: in August we do get earnings financial results from any
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  Speaker 3: of our companies, and I wouldn't expect any fireworks there
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  Speaker 3: Jack the management teams. The earnings are likely still be
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  Speaker 3: pretty tough. If interest rate cuts do come, the transmission
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  Speaker 3: through to our economy activity will take time so well
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  Speaker 3: into twenty twenty five, and that's when a big improvement
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  Speaker 3: in earnings could start to come through, which is what
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  Speaker 3: you really need to drive markets higher.
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  Speaker 2: Love you work, Thanks so much, Sam, sam Tratui from
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  Speaker 2: Milford Asset Management.
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