Latest / ausbiz a.m / 24.09.26 Angus Geddes, Fat Prophets
Transcript
- nadine: Good morning to you. It is the 24th of September. I'm Nadine Blaney from Ozbiz. I have a special guest standing by, as per usual, to walk us through what happened overnight. Give us some context as to what it means for you, Aussie investors out there listening to this AM podcast. Listen, it's quite a different story this morning than the past few mornings when I've been speaking with you. we had quite a Change in sentiment, there's no other way to put it through the overnight period. A lot of that can be traced back to what's happening in the Middle East. A lot of that can be obviously linked to the price of oil. So once again, above that 100 US dollar per barrel mark. And you know what that means for inflation. We've got talk about limiting exports of diesel in the United States. Calls for that are growing stronger. I spoke with a guest yesterday on osbiz.com today you. Clyde Russell, he's a commodities analyst from Thompson Reuters, who said it would just be the dumbest, stupidest thing that they could do. That seems to be the consensus. I won't go into all of the details as to why, but basically diesel producers have been running as hard as they can on the Gulf Coast states. And if they can't export it, which is a problem, even if they want to ship it to, say, California, ⁓ it's a it's a problem. So they would actually have to pull back. ⁓ because they don't have ways to ship or store it. Anyways, I don't want to get too far down that rabbit hole. ⁓ we've also had US bond yields rising. So the five-year now is above 5%. And the data in the US came in pretty hot. So the PMI was out last night, all of which feeds into these expectations for further interest rate hikes coming in the United States. Let's leave that there. I should say as well, we had equities come under pressure. And get to our guest, Angus Geddes, who's joining us from Fat Profits. Angus, ⁓ good morning to you. Look, I think that spiel might have put people off their cornflakes this morning. It doesn't sound so great. Angus: Good morning, Nadine. Well, look, I think there was good news and bad news ⁓ in terms of price action last night ⁓ in the financial markets. I mean clearly the bond market was very volatile and we saw a very sharp ratcheting higher of the US yield curve. the US tenure went above five percent. It actually hit five point one. So yeah, a lot of volatility. ⁓ in bonds, ⁓ which you know, where the yields continue to move in lockstep with oil prices. And obviously we had that ⁓ increase in ⁓ in Brink crew back above a hundred ⁓ and and markets are you know essentially extrapolating inflationary pressures to build and that's you know that's increased and dialed up expectations Of another rate hike from the Federal Reserve next month. But look, you know, the stock market itself actually I thought was quite resilient. ⁓ the SP 500 fell 0.74 ⁓ of percent ⁓ to 7700. Look, that could have been worse. ⁓ and of course, know, on the flip side, as we're seeing, still very strong, resilient. Data coming through on the US economy. And I think that points to a pretty strong ⁓ earnings season, which is going to get a w underway in several weeks' time in October. So the stock market handled it quite well, ⁓ but quite a lot of volatility coming through in the bond market. And there were expectations and hopes, I guess, around ⁓ an agreement potentially being reached or even, you know, talks being initiated between Iran and the US this week at the United Nations Assembly. ⁓ but clearly expectations around that happening this week have dialed back. nadine: Yeah, there's so much to consider when it comes to that gathering. We've got the tech bros at the state dinner with the US president. We've got our own Prime Minister, Anthony Albanizis, expected to speak this morning. I think sort of Mark Carney light saying that we need to prepare for some sort of a a new world order with the post war world order breaking down. We'll wait to hear what he has to say. ⁓ but just back to equity. So yeah, I take your point. It could have been worse. When you consider the moves in the bond market. And I think we have to consider as well, while the NASDAQ dropped about a percent, just over a percentage point, I mean it's still near all-time highs. I mean, this is pretty extraordinary rally that happened ⁓ this week so far. ⁓ and you bring up a good point that it all comes back to earnings, doesn't it? And if these earnings continue to hold up and the hyperscalers don't totally spook the market with their spend. Then what happens, Angus? Do stocks just continue to rise? Angus: Well look, Nadine, I think, you know, there are near term risks, you know, clearly and th these are geopolitical. ⁓ these are geopolitical. And clearly, you know, if oil were to surge, you know, to a hundred and ten, hundred and twenty a barrel, that's gonna drag ⁓ US bond yields higher. And at some point that's got away. But I guess, you know, in terms of valuation, you know, the S P five hundred's actually the cheapest it's been now. ⁓ for several years. I mean, the forward price earnings ratio is now back below 19. And ⁓ you know, a lot of the, you know, the hyperscalers and the mag 7 names ⁓ are are trading at fairly low historical multiples in context. And of course, you know, we're about to go into the September ⁓ earnings season where all these companies will start reporting their profits. And we've seen very, very solid growth coming through ⁓ in the last several quarters. So I think that trend continues. ⁓ you know, the US consumer is still proving to be very resilient. So, you know, when you look at that forward PE multiple, when you look at where earnings growth ⁓ is is going over the next quarter. You know, I think, you know, there is a there is a risk that we have a deeper correction, but, you know, my view is that it wouldn't be much more in the vicinity of sort of five to seven percent. and and that the you know the setup for financial markets ⁓ is looking pretty favorable into into year end. Of course, you know, i it is going to come down to geopolitical developments and whether an agreement can be reached. And you know I'm I'm I guess I'm a a bit of an optimist that at some point ⁓ a deal will be reached and there seems to be mounting pressure now ⁓ from from other countries for the US to wrap the the conflict up. And i and indeed, you know, I would have thought that, you know, heading into the midterm elections, ⁓ which get underway in November, that ⁓ that the White House would also be motivated. ⁓ but but clearly those annihilation comments from from DJT at the ⁓ United Nation address went down like a ⁓ lead balloon with the Iranians. nadine: ⁓ yeah, I wonder why. ⁓ I like that DJT. ⁓ so we've got President Xi Jinping setting down ⁓ today. So that will be interesting to your point. We'll also likely, hopefully, see an extension of the trade truce between China and the US. But let's bring it back home, shall we, Angus? ⁓ obviously today we'll have interest rate-sensitive sectors of the market in focus. Energy probably will outperform. We did see energy, the only really loved sector on Wall Street through the overnight period. ⁓ but back to my sort of throwaway interest rate sensitive comment. yeah, we've got jobs today, but most people have been telling me that's not really going to be influencing the RBA. It's all about inflation and we will see a hike next week. So how does that form your view of equity investing here locally? Angus: Well, I think, you know, in terms of the ⁓ sectors that we're sort of really focused on at the moment, ⁓ you know, th there there's there's decent sort of value there. I mean, we're really overweight resources. ⁓ it was the resources sector ⁓ that really delivered a lot of the ⁓ the earnings growth momentum in the last reporting season. So I think you know, I think that continues. Michelle Bullock, the RBA governor, was also quite vocal. ⁓ about the pain threshold as it relates to local unemployment. So I'm watching the unemployment numbers pretty carefully. You know, she implied that sort of four and a half, five percent unemployment in Australia would be a point that would be ⁓ influential on the RBA, possibly moving to a towards a more neutral stance. ⁓ in terms of rate hikes. Now I think, you know, we're definitely going to get a rate hike next week, but you know, unemployment is rising. ⁓ the unemployment number I think came in at around four and a half. And I'm expecting that number to tick up ⁓ over the next several quarters towards five. In fact, I think, you know, the first quarter of next year, if the rate hike goes through and the unemployment rate ⁓ does hit five percent, we could even potentially see the RBA on pause. ⁓ The other point to make is that we could see the ⁓ inflationary impact that's coming through from ⁓ from higher energy costs. Look, that could dissipate very quickly if an agreement was reached in the Middle East and the Strait would have fully reopened. I mean, you know, a lot of investors sort of tend to forget that the oil price plunged pretty quickly back into the 60s. ⁓ when that memorandum of understanding was first reached several months ago. So we could see a replay of that. So again, you know, for Australia, I think the setup is is going to come back to energy. You know, that seems to be one of the one of the principal drivers of ⁓ of inflation in the domestic economy. But we also need to be mindful of the fact that the economy is slowing. And you know I'm not convinced ⁓ ⁓ that that the RBA is going to put through ⁓ two more rate hikes ⁓ af after next week. nadine: ⁓ interesting. Okay. ⁓ so does that mean that sectors like property? I know Murvac was mentioned by one of our guests yesterday, or retail. you know, a couple of beaten down sectors becomes more interesting to you there at fat profits? Angus: Yeah, look, I think property is is getting a lot more interesting. I mean, you know, REIT's ⁓ real estate generally underperforms during a tightening cycle. But we have to look. Nadine, we have to look six, nine months down the track in terms of where things are going to be ⁓ next year, not not where they are today. So Yeah, I d I do think the real estate space is interesting. And ⁓ you know, commercial property ⁓ on balance hasn't hasn't been a a a a huge performer in recent years. So ⁓ if the RBA were to be cutting ⁓ or on hold, but certainly cutting by this time next year, then you'd expect, you know, commercial real estate to do a lot better. The housing market ⁓ is a different kettle of fish and ⁓ You know, I think that's gonna struggle for some time, ⁓ you know, given those profound changes that we saw in the budget earlier this year. nadine: Okay. ⁓ listen, Angus, thank you for sharing your thoughts with us this morning. I just looked at the clock and realized I better let you get back to your real job, so to speak. ⁓ it's been a pleasure speaking with you just for our viewers and listeners out there. Don't forget we do have jobs data coming at 11:30 today. We will also hear from Washington H. Sol Pats today, so getting a little bit of corporate news. We'll be keeping our ears out for what is said from the Prime Minister Anthony Albanese saying Australia must help build a new global order. We've got ASX futures down 99 points or about 1.1% to 8,711. Gold fell. Brent oil, as you know, was up by 4.4%. Ionore also fell just marginally, about 0.3%. To 9580 US a ton. And the Aussie dollar coming under a bit of pressure. It's at 70.41 US, aroundabout there, as we record this podcast. Angus Gettys, Fat Prophet, thank you. Have a good day. Thank you. Goodbye, and thanks to you for listening. We will catch up tomorrow once again. Angus: Thanks, Nadane. Bye for now.