Latest / Merryn Talks Money / The Case For Buying Emerging Markets, Bonds and Gold in 2023

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The Case For Buying Emerging Markets, Bonds and Gold in 2023 · Merryn Talks Money

0:00
Speaker 1: John. Hello, Hello, I have a question for you. What
0:04
Speaker 1: good are you to anybody? That's a good question. There's
0:08
Speaker 1: one that I've often asked myself, but I haven't usually
0:11
Speaker 1: as my wife I asked me that way, she would
0:13
Speaker 1: never say that. And now listen, I'm asking you because
0:16
Speaker 1: I was speaking to an academic and author of the
0:19
Speaker 1: other night who specializes in writing about and we'll talk
0:22
Speaker 1: about this more another time, a fantastic book I'm reading
0:24
Speaker 1: about the history of wealth management and financial advice, which
0:26
Speaker 1: I mean, it's so good. We will come to that
0:28
Speaker 1: another time. But she was asked. I was at an
0:30
Speaker 1: event where she was speaking, and she was asked what
0:35
Speaker 1: use financial journalists are and what financial journalists bring to
0:38
Speaker 1: the party, and she kind of said, well, nothing really,
0:42
Speaker 1: she said, you know, everything any stock they might write about,
0:45
Speaker 1: or any sector they might write about, by the time
0:47
Speaker 1: they get to it, you know, the stories in the market,
0:50
Speaker 1: it's in the price. There's nothing to be gained. Um,
0:54
Speaker 1: so you know, they're reduced to kind of vendor. As
0:56
Speaker 1: she said, I'm right, she said hocus pocus. So that's
1:01
Speaker 1: an interesting nnswer. Yeah, but you know, she has a
1:05
Speaker 1: point about some things. And I was thinking we'll hanging
1:07
Speaker 1: on it. Take what use Army and John? What do
1:10
Speaker 1: we bring? What are we for? You know, full existential
1:13
Speaker 1: crisis after after you know, ten minutes of watching this event.
1:17
Speaker 1: But do you know, I don't know what your answer is,
1:19
Speaker 1: But actually I think the financial journalist writing for the
1:23
Speaker 1: retail investor brings a huge amount to the party. I mean,
1:27
Speaker 1: I was thinking about the podcast that we're going to
1:30
Speaker 1: listen to after this. We talk a lot about how
1:32
Speaker 1: suddenly the UK is investable again. This is great. Everyone
1:35
Speaker 1: was invested in the UK. Now people are pouring in,
1:36
Speaker 1: pouring in, and there's no longer as cheap as it was. Now.
1:40
Speaker 1: Who was buying the UK last year and the and
1:43
Speaker 1: the year before, your readers and my readers, because for them,
1:48
Speaker 1: the UK was not uninvestable for them, They don't have
1:50
Speaker 1: all the sort of international political blah fussing about Brexit whatever.
1:54
Speaker 1: They just saw cheap because we told them stuff was cheap,
1:57
Speaker 1: so they were out there buying. Yeah, that's delivering value, right.
2:01
Speaker 1: I would agree entirely. Um, and I think I get
2:04
Speaker 1: I do get the point. I agree about the if
2:06
Speaker 1: it's in the press, it's in the price that that's
2:09
Speaker 1: generally true. That's one reason why you and I tend
2:12
Speaker 1: to take the contrarian view of things. It's true somebody
2:15
Speaker 1: did interrupt during this conversation and say, Mary normally writes
2:18
Speaker 1: about stuff that's going down, don't you marry Yes, but
2:22
Speaker 1: a good way. That's a voice point. Um no. But
2:27
Speaker 1: also to be fair, I think they on that point
2:30
Speaker 1: that i'd make um And I mean, in a way
2:33
Speaker 1: this is almost more the personal finance than the investment
2:35
Speaker 1: inside is it was partly yours, a campaigning by you
2:42
Speaker 1: actually very specifically, and if you select others that got
2:46
Speaker 1: their financial conductor thought it so financial Services Authority Awards
2:50
Speaker 1: then do the retail distribution review and basically put an
2:53
Speaker 1: end to the fact that financial advisors in this country
2:56
Speaker 1: with a freelance salesforce for like the fund management groups.
2:59
Speaker 1: I mean, when you back and that it's utterly insane
3:02
Speaker 1: that that was ever deemed acceptable. Fund my age was
3:06
Speaker 1: getting kicked bikes from the people whose funds they solved
3:09
Speaker 1: in order to you and them, I mean, why was
3:11
Speaker 1: that ever your mind? Years but I remember finding out
3:17
Speaker 1: about that for the first time, and that we know
3:19
Speaker 1: when I was very very young journalist and someone explaining
3:22
Speaker 1: this black like that can't be true. They could possibly
3:24
Speaker 1: be true, but it was. And also years of campaigning
3:27
Speaker 1: from the like use have brought down fees on funds
3:29
Speaker 1: and all that kind of thing. We've had a significant
3:31
Speaker 1: interest influence on the way that the fund management industry charges.
3:35
Speaker 1: But the main thing I was thinking about is that
3:38
Speaker 1: you know, when you write specifically for the retail investor,
3:40
Speaker 1: the retail investor, the ordinary person invests differently to the
3:44
Speaker 1: institutional investor, and if they don't, just because they don't
3:47
Speaker 1: understand that they can have a much longer time frame,
3:50
Speaker 1: they don't have to worry about liquidity in the same way.
3:52
Speaker 1: So I would take another one, another example, energy stock.
3:55
Speaker 1: For the last couple of years, we've been saying, look,
3:57
Speaker 1: you know, if they weren't buy them, the institutional sector
4:00
Speaker 1: won't buy energy stocks because he sgo cause whatever or
4:03
Speaker 1: because not forward thinking. What as I look at it, um,
4:05
Speaker 1: you can you can buy this cheap stuff that powers
4:08
Speaker 1: the world. Uh. And you know I do think that's
4:10
Speaker 1: the kind of thing that that adds value. Well, yeah, exactly,
4:13
Speaker 1: I mean that I think I take this person's point
4:18
Speaker 1: from the point of view that the kind of commodity
4:21
Speaker 1: news element of it, and the kind of group think
4:25
Speaker 1: element is, you know, not especially valuable. But I think
4:29
Speaker 1: that if you've got people who are trying to, if
4:31
Speaker 1: you like, for one of a better world champion the
4:34
Speaker 1: retail investor against the massive kind of set of institutions
4:38
Speaker 1: that largely want to funnel them into things that will
4:43
Speaker 1: make money for the institutions rather than for the individuals,
4:47
Speaker 1: then no, we you know, we do add value. We
4:50
Speaker 1: had value as much as anyone else does. I mean,
4:52
Speaker 1: what value did your average fund manager I had? I
4:54
Speaker 1: mean seriously, I mean I don't know. I mean like,
4:57
Speaker 1: if you look at I mean, you might as well
4:58
Speaker 1: ask what what value does any individual component of the
5:02
Speaker 1: financial industry? And I think most people will plunge in
5:06
Speaker 1: an existential crisis if you asked them. I see, what
5:08
Speaker 1: is the point of your job? I feel better now.
5:11
Speaker 1: I knew that if I asked you about this, you
5:13
Speaker 1: would validate me completely. Cognitive biases absolutely absolutely tell me
5:19
Speaker 1: what I want to hear. Um, now tell everyone else
5:21
Speaker 1: what they want to hear. Briefly before we go, you're
5:22
Speaker 1: writing about house prices again falling faster, falling faster than
5:26
Speaker 1: anyone imagined, but as fast as you thought they would,
5:29
Speaker 1: he adds value everyone. See there you go. If you've
5:32
Speaker 1: been listening to me, you'd have had the pint skilled
5:35
Speaker 1: off your other anything. Quite right. We had the Brick
5:38
Speaker 1: survey out right, which you and I both think is
5:40
Speaker 1: the most validable the House Press Service. Yeah, and it's
5:43
Speaker 1: it's surprisingly good government. It's just the opinion of the
5:47
Speaker 1: agents and somebody. But but it does you know, it's timely. Um,
5:52
Speaker 1: and they're certainly yeah, they're not. They're not feeling very
5:54
Speaker 1: happy a bout of things. And actually the Eden was
5:58
Speaker 1: worse than you know, the usual economists have expected. I mean,
6:03
Speaker 1: I think the thing that just want to emphasize about
6:05
Speaker 1: whose places this thing an there's I don't think he's
6:09
Speaker 1: like whose places can come down without causing the massive
6:11
Speaker 1: problem for the way that economy. And I also don't
6:14
Speaker 1: think the way the economy has to be in a
6:16
Speaker 1: massive state for whose places to come down? It really
6:19
Speaker 1: is just partly so it's mostly a function of interest
6:22
Speaker 1: rates not being at one and a half percent anymore,
6:25
Speaker 1: going up to somewhere of closely four and a half percent.
6:28
Speaker 1: That happens, whose places just half to come down? It's
6:32
Speaker 1: just it's just part of the Great normalization, the Great normalization.
6:36
Speaker 1: I was looking a wonderful chart today of the volume
6:40
Speaker 1: of negative yielding bonds around the world, and I haven't
6:43
Speaker 1: seen this chart. Is absolutely wonderful. It's basically zero zero,
6:45
Speaker 1: zero zeros forever and then suddenly it goes absolutely berserk
6:50
Speaker 1: stores to the sky the line, and then suddenly straight
6:53
Speaker 1: back down to Earth. We're basically at zero again. It's
6:55
Speaker 1: one of the most wonderful reversion to the mean graphs
6:58
Speaker 1: you've ever seen. What is the plankage of and was
7:00
Speaker 1: the last was the last hold out? Wasn't it? So
7:02
Speaker 1: the g GPS now at all largely kind of like
7:05
Speaker 1: positive yield in a game um and that was that
7:08
Speaker 1: was the that was the thing that brought it back.
7:11
Speaker 1: But it's it's it's one of the weirdest financial phenomenon
7:15
Speaker 1: that we've seen in the last ten years of a
7:18
Speaker 1: lot of weird financial phenomenon and hopefully we won't see
7:21
Speaker 1: it again, I mean ideally in our lifetimes, and I
7:25
Speaker 1: certainly think that's possible. Although french Band did point out
7:28
Speaker 1: to me a couple of days ago that he's still
7:30
Speaker 1: paying to have this deposit account still paying. It didn't
7:33
Speaker 1: shooast very nearly over. They still use fact season white
7:38
Speaker 1: seals into fans. We're all were doing this. There's there's
7:41
Speaker 1: a lot of yeah, yeah, we better. Welcome to Marion
7:55
Speaker 1: Talks Money, the podcast in which people who know the
7:57
Speaker 1: markets explain the markets. I'm there in some set well
8:00
Speaker 1: this week, I guess there's Luca Plini, who's the chief
8:02
Speaker 1: strategist to pick t A asset management. He's got a
8:05
Speaker 1: long history of being a strategist at various places, so
8:07
Speaker 1: we can simply accept before we start that Luca knows
8:09
Speaker 1: pretty much everything about everything. We started our conversation discussing
8:14
Speaker 1: the World Economic Forum taking place this weekend Davos, and
8:17
Speaker 1: I was telling Luca about everything I've been reading about
8:19
Speaker 1: last year's summuch, the comments made by attendees on what
8:22
Speaker 1: they're expecting in the year to come, and how most
8:24
Speaker 1: turned out. We're worried about all the wrong things, very
8:27
Speaker 1: few of them. For example, we're worried about the collapse
8:30
Speaker 1: of a great financial bubble. They just didn't see it coming.
8:33
Speaker 1: So given that it wasn't actually that hard to see coming,
8:36
Speaker 1: I started by asking Luca how that could be, you know,
8:43
Speaker 1: to be honest, maryn Last year was was abnormal in
8:48
Speaker 1: a number of respects, right because we had obviously a
8:50
Speaker 1: massive duo political shocks. We we had what I would
8:55
Speaker 1: I like to say, and I'm very unwelcome guest, it
8:57
Speaker 1: was inflation. You can also blame central back that you know,
9:01
Speaker 1: they didn't see it coming. So I think it was abnormal.
9:04
Speaker 1: But I think, you know, when you look at this year,
9:06
Speaker 1: it seems like there is a consensus and that was
9:09
Speaker 1: that it would be a recession and maybe they will
9:10
Speaker 1: be wrong again. So but I agree with you that
9:13
Speaker 1: looking back to you know, a year ago, where the
9:16
Speaker 1: expectation was, you know, market will be fine, central Bank
9:20
Speaker 1: would be very very slow. In I can rate it's
9:22
Speaker 1: inflationer we rise, but you know it's a one off. Well,
9:26
Speaker 1: a lot of things have changed. But you know, let's
9:29
Speaker 1: project ourselves and at the end, by at the end
9:31
Speaker 1: of this year the situation we actually look much much
9:34
Speaker 1: better than than everybody seems to expect now, so we
9:37
Speaker 1: will see. But yes, I think, look, last year was
9:40
Speaker 1: really abnormal and we and I think we a lot
9:42
Speaker 1: of people got wrong quite a few things. So I
9:46
Speaker 1: think it's we have to accept that. We just have
9:48
Speaker 1: to let that go, I'm not sure I'm prepared to
9:50
Speaker 1: do that that easily, and that you know, these are
9:52
Speaker 1: the people who run our world right now. You and
9:55
Speaker 1: I know we we we used to think we knew
9:57
Speaker 1: that in a few briend a lot of money you
9:59
Speaker 1: get inflashed, and that inflation pretty much always comes from
10:02
Speaker 1: money printing from lest fiscal policy. Add in an oil
10:05
Speaker 1: price spike, exceptera last year, and a bit of war.
10:08
Speaker 1: It amazes me that we can look back and people
10:10
Speaker 1: would have thought that we would not have an inflation problem.
10:12
Speaker 1: In the same way it amazes me that we can
10:14
Speaker 1: we can look back and think that people really believed
10:17
Speaker 1: at the beginning of last year that central banks had
10:19
Speaker 1: the ability to control inflation in individual countries when the
10:23
Speaker 1: inflation was coming from a more global orientation. And it
10:27
Speaker 1: also amazes me that we can look at where valuations
10:31
Speaker 1: were at the peak of this bubble and say, well,
10:34
Speaker 1: we don't really have to worry about a collapsing bubble.
10:37
Speaker 1: But but I think you know, the real issue that
10:40
Speaker 1: we have here is that you know, on our own models,
10:43
Speaker 1: we saw inflation going up a lot, but you know,
10:45
Speaker 1: the last thirty years we have seen only very low inflation,
10:48
Speaker 1: and it's difficult to go against your the history, the
10:51
Speaker 1: lot of the last three decades. Obviously, looking back, it
10:54
Speaker 1: was obvious right as you said, too much money, supply constraints.
11:00
Speaker 1: People are told with a lot of money to spend.
11:02
Speaker 1: During during COVID, there was kind of an almost a
11:05
Speaker 1: perfect mix of things that would push inflation higher. But
11:10
Speaker 1: when you have three decades of four decades where the
11:12
Speaker 1: main world was low inflation, it's difficult to change that.
11:16
Speaker 1: This is one of the lessons I think of last
11:18
Speaker 1: year that you know, things may change. There are some
11:23
Speaker 1: historical patterns, but they may change. But at the end
11:26
Speaker 1: of the day, basic economics hasn't changed. As you said,
11:29
Speaker 1: if you print money and for a long time, at
11:32
Speaker 1: the end you're going to get inflation. This is actually
11:35
Speaker 1: the really the big lessons that we that we go
11:38
Speaker 1: from from two thousand and twenty two. It's amazing, isn't
11:41
Speaker 1: it That lesson needs to be learned over and over
11:44
Speaker 1: again every generation. We have to relearn that this is
11:48
Speaker 1: how money works. Yes, and look, the only good thing
11:52
Speaker 1: about this rising inflation is that everybody now understands that
11:56
Speaker 1: inflation is never a solution, is always a problem. Do
12:00
Speaker 1: you remember when a few years ago the debate was
12:02
Speaker 1: we need more inflation, because you know, if you have
12:04
Speaker 1: more inflation, if we reduce the depth to GDP ratio,
12:08
Speaker 1: it doesn't work like this. Inflation is attacks is a
12:12
Speaker 1: very by the way, is not it's not progressive, and
12:15
Speaker 1: it's attacks on the consumer, but those attacks on on investors.
12:19
Speaker 1: And I think we we finally realized that inflation is
12:23
Speaker 1: really never a solution. And and and and last year, if
12:26
Speaker 1: you look at the you know, if you look at
12:28
Speaker 1: bounds equity, almost all as a classes went down. Why
12:31
Speaker 1: because inflation went up. Is as simple as that. I
12:33
Speaker 1: think the last few decades we got into this kind
12:36
Speaker 1: of mindset that we need more inflation. With more inflation,
12:39
Speaker 1: actually inflation and one or two percent is fine. Inflation
12:42
Speaker 1: attend is not fine. But then a dream world. Look
12:45
Speaker 1: what people really want? What I'm assuming that central bankers
12:48
Speaker 1: and politicians wanted inflation four or five percent? Well I did.
12:52
Speaker 1: Look at the end of the day, I'm not that
12:54
Speaker 1: excited about this debate about it. Should the inflation target
12:58
Speaker 1: be for percent instead of two? What really matters is
13:02
Speaker 1: the volatidity of inflation. So if you know, marrying that
13:05
Speaker 1: inflation is going to be four percent for the next
13:07
Speaker 1: ten years, and you are one sure the central bank
13:10
Speaker 1: and deliver on that. It doesn't matter if it's for
13:13
Speaker 1: two or one percent. It doesn't matter because everybody will
13:16
Speaker 1: adjust their expectations. The problem is when you go in
13:19
Speaker 1: you have a target of two, inflation goes to ten
13:21
Speaker 1: or the other way around. So I think that by
13:24
Speaker 1: the way, changing or moving the goal post now, given
13:28
Speaker 1: the central banks have done a huge mistake, would be
13:31
Speaker 1: an horrendous mistake. Honestly, I think this debate on on
13:35
Speaker 1: inflation target I think is not particularly helpful. Let's try
13:39
Speaker 1: to to get inflation down to two percent and then
13:42
Speaker 1: if it's three percent in a way it doesn't matter.
13:45
Speaker 1: But really moving the goal posts when we just or
13:50
Speaker 1: central memberedis horrendous call, and inflation I think would be
13:53
Speaker 1: really really an helpful. Yeah. I suspect that it's volatility
13:56
Speaker 1: that we're going to get. And maybe the big mistake
13:58
Speaker 1: that we've made for the last couple of day case
14:00
Speaker 1: and are still making now, is to think that it
14:02
Speaker 1: is actually possible for central banks to control inflation. And
14:05
Speaker 1: that's the mistake that we as in a way as
14:07
Speaker 1: an industry were making this that we give too much
14:11
Speaker 1: I think importance to what central banks are doing. Do
14:14
Speaker 1: you remember marrying the time where they were really boring
14:17
Speaker 1: and very if you paid attention to them. Now they're
14:19
Speaker 1: basically like the biggest players. So everybody's obsessed what the
14:24
Speaker 1: central banks are doing. You have to read every single statement,
14:27
Speaker 1: the commas what, And I think they're also not helpful.
14:30
Speaker 1: At the end of the day, the economy obviously needs
14:33
Speaker 1: central banks, but central banks shouldn't be the one basically
14:38
Speaker 1: playing the music all the time. I think it's not
14:40
Speaker 1: it's again, it's not healthy, it's not helpful. But that's
14:43
Speaker 1: actually has been the story of the last basically the
14:45
Speaker 1: last decade or the last two decades. It's important to remember,
14:49
Speaker 1: someone was pointing out the other day, I'm putant to
14:50
Speaker 1: remember that central banks weren't actually originally set up to
14:53
Speaker 1: control inflation, but to burrow money for governments. That's true.
14:57
Speaker 1: Some of the involved in this completely different which there
15:00
Speaker 1: are absolutely useless at whereas you know, they're quite good
15:02
Speaker 1: at raising money for governments and really really useless at
15:05
Speaker 1: controlling inflation. So we've got it slightly the wrong way around, right,
15:08
Speaker 1: So let's talk a little bit about what you might
15:11
Speaker 1: have been expecting coming into this year. I mean, as
15:13
Speaker 1: we came into this year, there was something of a
15:15
Speaker 1: consensus building right that you know, you shouldn't touch China
15:18
Speaker 1: with a barge pole, entirely uninvestable. That you know, Europe
15:22
Speaker 1: is moving into recession, the UK is moving into recession.
15:24
Speaker 1: Everyone's moving into recession. Then reflation is going to slow
15:28
Speaker 1: very quickly as a result, etcetera, etcetera. The general consensus
15:31
Speaker 1: coming in. But already that consensus seems to be slightly
15:35
Speaker 1: breaking up in that there sort of very dramatic and
15:37
Speaker 1: sudden reopening of China clearly must produce a big bump
15:41
Speaker 1: of global demand that perhaps will will totally derail the
15:44
Speaker 1: recession story. Um and of course markets that most people
15:48
Speaker 1: at the end of twenty twenty two, when I looked
15:50
Speaker 1: at the expectations of the year ed most everyone was going, well, well,
15:52
Speaker 1: you know, now the bubbles started bursting, it's kind of
15:54
Speaker 1: going to keep going. There's some way to go here.
15:56
Speaker 1: And of course we've had a rather good start to
15:58
Speaker 1: the years, so already all the expectations for this year
16:01
Speaker 1: are beginning to turn out to be not quite right.
16:03
Speaker 1: Brackets again, Yeah, I mean, it's it's interesting that when
16:07
Speaker 1: you look at the performance of portfolio fifty percent equities
16:11
Speaker 1: fifty percent bonds in US dollars, last year has been
16:15
Speaker 1: the worst basically in in a century. You know, we're
16:18
Speaker 1: talking about minus seventeen percent. Again, we're talking about a
16:21
Speaker 1: fifty percent equities fift government months portfolio orrendous here. This
16:26
Speaker 1: year is one of the best. Okay, we just that
16:29
Speaker 1: two weeks and a half, but the start of that
16:31
Speaker 1: has been incredibly good. Positive. You see actually what brokers
16:35
Speaker 1: are doing that everybody is revising up. They're kind of
16:39
Speaker 1: GDP forecast for this year. Everybody seems to be getting
16:42
Speaker 1: much more positive about Europe. Europe has outperformed massively US
16:46
Speaker 1: talks in the last three months in dollar terms. But
16:49
Speaker 1: you know, to be honest, what has really changed, and
16:52
Speaker 1: I think that's that's important, is the inflation outlook. You know,
16:56
Speaker 1: just a few months ago, the idea was inflation with
16:58
Speaker 1: forb for very it is slowly what we see is
17:02
Speaker 1: significant decline in inflation across across the globe, even in Europe.
17:07
Speaker 1: And this has changed really everything, right because now there's
17:09
Speaker 1: an expectation of rate cuts, the expectation of the consumer
17:14
Speaker 1: across the group, we feel better and so they will
17:16
Speaker 1: spend more. But I think it's amazing, especially where the
17:21
Speaker 1: the What has changed in terms of the expectations around Europe?
17:25
Speaker 1: As you mentioned, everybody was expecting a deep recession in Europe.
17:28
Speaker 1: Then we say, well, it's gonna be mine. Now most
17:31
Speaker 1: actually economies expect no recession in Europe, even in the UK,
17:34
Speaker 1: where you know wearing the situation is not great. But
17:37
Speaker 1: the number seems to suggest the economy is is more
17:40
Speaker 1: resident than we thought. And this is if if it
17:43
Speaker 1: happens the most widely anticipated recession in a living memory.
17:48
Speaker 1: Everybody was expecting a recession, me too, But the number
17:52
Speaker 1: seems to suggest that there is some underlying kind of
17:55
Speaker 1: resilience that I think is surprising. So what is that resilience?
18:00
Speaker 1: What what has gone right? I think the conventional kind
18:03
Speaker 1: of wisdom is that there is so much money that
18:06
Speaker 1: in bank accounts, and so much money that's been saved
18:08
Speaker 1: during the pandemic that is there to be spent. I'm
18:12
Speaker 1: not buying that argument, because if you're really worried about everything,
18:16
Speaker 1: you just save more. You don't be saved. I think
18:19
Speaker 1: what has changed, really, I think is that the outrut
18:22
Speaker 1: for inflation as significant and improved. You see that actually
18:25
Speaker 1: in consumer service as well. And there is also another
18:28
Speaker 1: element that has changed is obviously China. You mentioned that before. China,
18:33
Speaker 1: I mean in the last three months as standing incredibly
18:36
Speaker 1: well is almost fifty right. Obviously that comes from a
18:40
Speaker 1: long period of underperformance. But the fact that the Chinese economy,
18:44
Speaker 1: which let's not forget is the second big in the world,
18:47
Speaker 1: is basically reopening, well, that's that's a massive boost to everything,
18:51
Speaker 1: right to the global economy, to commodities as well. So
18:55
Speaker 1: I think there isn't again China reopening boost to growth,
19:00
Speaker 1: the commodity prices fully, you know, inflation down, so both
19:04
Speaker 1: to um to consumption in developed world. There are a
19:07
Speaker 1: lot of things that are going right, but I would
19:09
Speaker 1: say you have to mention one is the declining commodity price,
19:12
Speaker 1: especially Europe. It's amazing how for example, natural grass prices
19:17
Speaker 1: are below the level of a February of last years.
19:20
Speaker 1: So when Russian Bay, Ukraine, and that's maybe one lessons
19:24
Speaker 1: that for all of us is that the economy is
19:27
Speaker 1: economies consumer can adjust pretty well. You know, Germany is
19:32
Speaker 1: a fantastic example. You know, GDP and industry production a up.
19:36
Speaker 1: You have a year, but the imports of gas is down.
19:39
Speaker 1: So I think we have to give also europe and
19:42
Speaker 1: credits sometimes and I think this is actually one of
19:45
Speaker 1: the positive surprises of last year. I would say, but
19:49
Speaker 1: we might see commodity prices across the board, not necessarily
19:52
Speaker 1: natural gas, but commodities in general beginning to rise toplic
19:55
Speaker 1: at once that they already are they already are as
19:58
Speaker 1: China opens properly. I mean as as it's regularly pointed
20:02
Speaker 1: out at the moment, China has been looked down for
20:04
Speaker 1: so long. But the in various different ways that the
20:07
Speaker 1: consumption impulse from the population has got to be absolutely huge.
20:11
Speaker 1: And we also in our own economies the massive boosting
20:14
Speaker 1: demand as we were released from all these the Bonker's lockdowns,
20:17
Speaker 1: and that was only after a few months here and
20:19
Speaker 1: a few months there and a few months here. China,
20:21
Speaker 1: we're talking close to three years now, people coming out
20:24
Speaker 1: to spend. That's got to be a consumption enhanced demand
20:28
Speaker 1: impulse great than anything we've seen elsewhere. Yeah, But but
20:31
Speaker 1: the year. The point though, is that the consumption boom
20:33
Speaker 1: that we're going to see in China we're going to
20:35
Speaker 1: see would be basically focused on services. So tourism for
20:39
Speaker 1: example is a good example. So the demand for commodity,
20:42
Speaker 1: you know that, you know when you look at copper
20:45
Speaker 1: or iron or China consumed roughly fift of what is
20:48
Speaker 1: produced globally, so it's a massive obviously, But I have
20:51
Speaker 1: to say that the demand for copper and iron ore
20:55
Speaker 1: normally goes into infrastructure projects, let's say housing. I think
21:00
Speaker 1: there's not much demand. So I think the when you
21:03
Speaker 1: look at where the consumption will we come from Chinese
21:06
Speaker 1: many service is not going to be very commodity intensive.
21:08
Speaker 1: But there is no question on the fact that everybody
21:12
Speaker 1: see the connection between China's growth and commodity price, So
21:15
Speaker 1: there is obviously commodity prices will go higher, but I
21:19
Speaker 1: think again the rebound will not be very commodity intensive
21:22
Speaker 1: for China, so I think we may actually not see
21:25
Speaker 1: the usual spike in commodity prices then typically follows a
21:30
Speaker 1: period of strong Chinese growth. Okay, interesting, So a lot
21:34
Speaker 1: of the people I'm speaking to the moment are telling
21:36
Speaker 1: me that when they're looking at the asset classes they're
21:38
Speaker 1: interested in over the next year or so, the commodities
21:40
Speaker 1: is right at the top. It doesn't sound like you're
21:43
Speaker 1: in that gang. Yeah, so what what I'm saying is
21:46
Speaker 1: that if we if we look at what asset classes
21:48
Speaker 1: are doing, or what are the best asset classes in
21:51
Speaker 1: this inflation and growth environment, commodities the well when the
21:55
Speaker 1: economy is booming and inflation is booming. Two, But the
21:59
Speaker 1: economy is not me anymore. So I think the best
22:01
Speaker 1: time to buy commodities was probably a year ago. Now
22:04
Speaker 1: we are more into the kind of in an area
22:07
Speaker 1: where goal should do well because inflation is high and
22:12
Speaker 1: gross is weaker, and then we should go potentially into
22:15
Speaker 1: a bond phase when both inflation and gross are weaker.
22:18
Speaker 1: So I think that yes, I can see commodity process
22:21
Speaker 1: stabilizing from here, but I don't see a big rebound
22:24
Speaker 1: because global gross let's not forget it's still weak. China
22:28
Speaker 1: is rebounded, but the rest of the world is effectively slagnating,
22:31
Speaker 1: So I don't see a big rebounding commodity process. Even
22:34
Speaker 1: if I see the secular gross story, low inventories is
22:40
Speaker 1: probably one that has been supplies very limited. So I
22:44
Speaker 1: buy the long term story and commodities, But for the
22:46
Speaker 1: next six to twelve months. I think it's much more.
22:48
Speaker 1: I think it's not that obvious to me. Okay, when
22:51
Speaker 1: you say by the long term story and commodities, what
22:53
Speaker 1: does the you mean by that just as a general
22:56
Speaker 1: long term supplied mond story. Yeah, it basically means that
22:59
Speaker 1: where are the two key drivers of commodity prices? Dollar
23:04
Speaker 1: and the supply and demand balance. Now, the demand is
23:08
Speaker 1: dependent obviously on on global growth. Supply is very weak
23:11
Speaker 1: because there have been very limited investment in the past
23:14
Speaker 1: ten years. When you look at industrial medals and oil
23:17
Speaker 1: as well, and and and the dollar, we expect the
23:20
Speaker 1: dollar to be much weaker. So this is normally a
23:22
Speaker 1: good combination for commodity prices. Right again, if you look
23:25
Speaker 1: at this year, yes, the dollar is down, but the
23:28
Speaker 1: global economy in fact, in fact is stagnating. So I
23:32
Speaker 1: I yes, there is more demand from China, but it
23:34
Speaker 1: is not a booming economy that would normally allow commodity
23:39
Speaker 1: prices to rise. So I think it's yes, you're going
23:42
Speaker 1: to see an improvement probably on on on old private
23:46
Speaker 1: I think the upside is on gold, and I know
23:48
Speaker 1: the gold is also something that you like, But I
23:51
Speaker 1: don't see a big, big spike in commodity prices for
23:53
Speaker 1: the in the for this year. Now, okay, so explain
23:56
Speaker 1: in a little more detail if you don't mind, why
23:58
Speaker 1: this is a good environment for gold. I refer to
24:00
Speaker 1: this kind of diagram right, inflation and let's keep it simple.
24:04
Speaker 1: Gold typically as well, you know, it's typically seen as inflation. Hatch.
24:10
Speaker 1: Last year didn't workwide because the dollar was exception is strong.
24:14
Speaker 1: So what gold needs is a weaker dollar, inflation being high,
24:19
Speaker 1: and actually a decline of real interest rates, because this
24:23
Speaker 1: is actually the opportunity cost of all the goals. So
24:25
Speaker 1: when you on gold, you don't basically don't get any interests,
24:29
Speaker 1: you don't get any couple, nothing. So the opportunity cost
24:33
Speaker 1: of all the gold invest in goal is the real
24:35
Speaker 1: interest rate. They're still low. We tend to forget that
24:38
Speaker 1: interest rates have gone up quite a lot, but if
24:40
Speaker 1: you look at the interest rates relatitive inflation is just
24:43
Speaker 1: didn't get it. So I think this combination of you know,
24:47
Speaker 1: still low real interest rates and the weaker dollar and
24:50
Speaker 1: inflation risk, to me makes gold very attractive. The only
24:55
Speaker 1: issue that we have with gold is that on our
24:57
Speaker 1: evaluation metric, the gold prices asn't. Let's say, it's still
25:01
Speaker 1: relatively high. So the evaluation case for gold is not
25:05
Speaker 1: the strong but all the drivers that historically has pushed
25:09
Speaker 1: the gold higher they are all present now. So I
25:11
Speaker 1: think gold and funny enough, I was actually looking yesterday.
25:15
Speaker 1: If you look at the performance of gold here to day,
25:18
Speaker 1: is actually the best among the major as a classes.
25:21
Speaker 1: But also in the last five years. If you look
25:22
Speaker 1: at the last five years, gold is the best as
25:24
Speaker 1: a class. So I think it's it's not just tactical.
25:27
Speaker 1: You know, we are very abolish and gold, let's say
25:30
Speaker 1: from a second point of view, but tactically, given the
25:33
Speaker 1: weakness in the dollar and is still relatively eye inflation risks,
25:37
Speaker 1: I think gold should do well this year, and it
25:40
Speaker 1: is doing well so far. Yeah, last question on gold,
25:43
Speaker 1: because you know, I'd like to hang around on gold
25:45
Speaker 1: for a best. When you say that in valuation terms,
25:47
Speaker 1: it doesn't look that attractive, how do you value gold
25:50
Speaker 1: eading that relative to silver, relative to oil, relative to inflation,
25:54
Speaker 1: how is it working well? We have a very simple
25:56
Speaker 1: model based on the dollar and the interest rates, and
26:01
Speaker 1: obviously the model is clearly but otherwise it wouldn't be
26:05
Speaker 1: a good model. Very cool, litty with actual prices. But
26:08
Speaker 1: now the gold price is higher than it should be
26:13
Speaker 1: given the strength of the dollar basically last year. So
26:17
Speaker 1: in a sense, you know, the evaluation the gold price
26:20
Speaker 1: is not cheap, but valuation is not everything. Valuation is
26:24
Speaker 1: one of the elements that you have to look at
26:26
Speaker 1: when you make an investment decision. So that's why we
26:29
Speaker 1: expect gold to go high this year, but not to
26:32
Speaker 1: to go up I think probably if you go to
26:35
Speaker 1: tenient is what we expect. But you know that that's
26:38
Speaker 1: that's what we what we expect for this year, and
26:41
Speaker 1: we expect pretty much the same growth over the next
26:43
Speaker 1: five to ten years. So gold for US continues to
26:46
Speaker 1: be a great investment in the medium to the long term.
26:50
Speaker 1: Let me just pick you up on something he said.
26:52
Speaker 1: The evaluation isn't everything. Now, that's what they used to
26:54
Speaker 1: say in the equity market, didn't they. That's that we
26:57
Speaker 1: justified big tech going was. That's that we justified the
27:01
Speaker 1: price of the US equity market in general. In fact,
27:04
Speaker 1: that's how we justified the bubble. Valuation isn't everything. It's
27:08
Speaker 1: all about growth. It's all about that. It's all about that.
27:09
Speaker 1: We're practically back to eyeballs by the end of the bubble.
27:12
Speaker 1: When we looking ahead then and remembering that valuation, well,
27:16
Speaker 1: it might not be everything, certainly in the equity market,
27:19
Speaker 1: it's it's almost everything which part of the global equity
27:23
Speaker 1: market looks attractive to you for this year. Valuation, by
27:27
Speaker 1: the way, matters. We know when it's extreme. And that's
27:30
Speaker 1: one of the lessons sources of last year. Right, we
27:32
Speaker 1: all knew that bonds were expensive, government bonds or let's
27:37
Speaker 1: say bonus worth too law, but because we have seen
27:39
Speaker 1: them for so long, load that they said, well they're
27:43
Speaker 1: not really that. That's that's the new normal. But it
27:45
Speaker 1: was not the new normal, but just wrong. And obviously
27:47
Speaker 1: you can apply the same lodging in some area of
27:50
Speaker 1: tech and and and as well. I think when you
27:52
Speaker 1: look at just a valuation, first of all, let me
27:54
Speaker 1: say that this massive valuation gaps that were present two
27:59
Speaker 1: years go. Let's say emerging markets incredibly cheap, US equally
28:04
Speaker 1: is incredibly expensive, government bond very expensive, death basically corrected.
28:10
Speaker 1: So now all value versus growth in the same logic
28:13
Speaker 1: you remember, Mary, we discussed that many times the value
28:16
Speaker 1: stocks are incredibly cheap relative to grows up. Now the
28:20
Speaker 1: valuation kind of anomalies or the extremes are much less
28:23
Speaker 1: extreme than than than before. There are seen some pockets
28:26
Speaker 1: of good value. Right, So obviously you may say I
28:28
Speaker 1: think Chinese equities, for example, are attractive from evaluation point
28:32
Speaker 1: of view. Then we can debate again if that's enough.
28:35
Speaker 1: But I think valuation is attractive even small caps in
28:39
Speaker 1: some countries, especially in the US, to look actually relatively
28:42
Speaker 1: relatively cheap. But again, after the ready that we have seen,
28:46
Speaker 1: is difficult to say that there are some very very
28:49
Speaker 1: cheap equity markets across the globe. Is very difficult to
28:52
Speaker 1: find them in relative terms, yes, but in absolute terms
28:56
Speaker 1: is very difficult. And to be honest with you is
28:59
Speaker 1: if I tell if I tell you, look inflation is
29:02
Speaker 1: much higher than the normal grossed zero, you would explain
29:06
Speaker 1: valuation to be actually very cheap. But it isn't, which
29:10
Speaker 1: makes me think that also the upside for equities overall
29:13
Speaker 1: is quite limited for this year, and we believe that
29:16
Speaker 1: the real upside is an emerging market. This is this
29:19
Speaker 1: is kind of I know, it's a difficult call. Given
29:23
Speaker 1: what we have seen in the past ten years. It
29:25
Speaker 1: has been horrendous for the emerging market but the real
29:28
Speaker 1: value now is an emerging market, and especially if you
29:31
Speaker 1: take into consideration that emerging market currency are chieved. So
29:35
Speaker 1: you get the upside from China, you get the upside
29:37
Speaker 1: probably from earnings, you get your upside from the currency
29:40
Speaker 1: and and and I think investor not position for that.
29:44
Speaker 1: Everybody is telling me we like emerging market, but when
29:47
Speaker 1: you look at the actual positioning, the position seems to
29:50
Speaker 1: be not in line with what investors are telling me.
29:55
Speaker 1: So I think there is more upside on emerging market
29:58
Speaker 1: for this year. Okay, that's an saying. Everyone is telling
30:01
Speaker 1: me that emerging markets are the right call for this year.
30:03
Speaker 1: And when I get told that by so many people,
30:05
Speaker 1: I kind of seen that there's a little action to
30:07
Speaker 1: follow the words, but perhaps there is not. Yeah, I
30:10
Speaker 1: think It's something also that I it scares me a
30:13
Speaker 1: little bit, is that I've been seeing clients a lot
30:15
Speaker 1: in the past few weeks. There is a lot of
30:18
Speaker 1: consensus around too many calls. So let's say emerging market
30:21
Speaker 1: will do well, bonnios will fall, inflation be fall, interest
30:25
Speaker 1: rates we probably be cut at the end of this year.
30:28
Speaker 1: There is a lot of consensus, and that's actually scares
30:31
Speaker 1: me because I know. That's my experience. When there is
30:34
Speaker 1: too much consensus, typically you have a big surprise. I
30:37
Speaker 1: don't know where the surprise is coming from, but there
30:39
Speaker 1: is a very high level of consensus on almost everything,
30:43
Speaker 1: and it's the first time in many years that I
30:46
Speaker 1: experienced that at the start of the year. So I
30:49
Speaker 1: think there's something that again scares me a little bit. Okay,
30:53
Speaker 1: if you had to pluck with that, surprise might be
30:55
Speaker 1: out of the What do you think it would be. Well,
30:58
Speaker 1: let's look at the positive, right We always tend to
31:00
Speaker 1: look at the surprise in negative terms. Now let's let's
31:04
Speaker 1: be positive. I think some kind of I wouldn't say peace,
31:08
Speaker 1: but ceasefire in Ukraine would be a massive boost. Would
31:12
Speaker 1: be a massive boost because it would allow combody price
31:14
Speaker 1: to fall more. Central Bank may cat grades. There will
31:17
Speaker 1: be obviously a strong rebounding Europe. I don't know. I
31:20
Speaker 1: hope this will happen sooner, as soon as possible, but
31:25
Speaker 1: this could be something that can change things. The negative
31:28
Speaker 1: one I think is that inflation, at some point we
31:32
Speaker 1: reach four or five stop falling, maybe because as you mentioned,
31:37
Speaker 1: Chinese recovering combody prices we go higher, and that's actually
31:40
Speaker 1: can be very damaging for markets, right because if inflation
31:45
Speaker 1: stopped falling, central banks are forced to basically continue maybe
31:49
Speaker 1: they were forced to eye even more, and this would
31:52
Speaker 1: be really damaging because you know, the decline in inflation
31:56
Speaker 1: is the team that everybody is playing currently and a
32:00
Speaker 1: few question that this is challenged. Well, then valuation is
32:04
Speaker 1: too high. Central banks we have to like even more.
32:07
Speaker 1: And that's actually would be basically going back to the
32:11
Speaker 1: same environment of a year ago and offer it's not
32:13
Speaker 1: going to happen. Okay, what about the UK. Everyone is
32:17
Speaker 1: so down on the UK um and has been for
32:20
Speaker 1: some time now, but it is still one of the
32:22
Speaker 1: cheaper markets. The should been a massive outperformer and relatively
32:27
Speaker 1: speaking right over the last year. And when you look
32:30
Speaker 1: at the news, the the actual numbers as opposed to
32:33
Speaker 1: the misery product and the papers on the press, things
32:35
Speaker 1: don't look so bad. No, because I think we all
32:38
Speaker 1: tend to make the same mistake that UK markets are
32:41
Speaker 1: really is not really correlated with UK economy. We're talking
32:45
Speaker 1: about a few big stocks, but not but a few
32:49
Speaker 1: bestos that are basically multinationals right where the exposure to
32:52
Speaker 1: the k economy is is very minimal. I think you
32:55
Speaker 1: know the when you look at also the composition of
32:57
Speaker 1: the UKA of the UK market is for us, it's
32:59
Speaker 1: almost the ideal stack flation play, right because you have
33:03
Speaker 1: a lot of defensive names, very solid, very cash generative,
33:08
Speaker 1: and you also have the commodity exposure via biscuity, energy
33:11
Speaker 1: and mining. So I think that and you know that
33:15
Speaker 1: you've been very embolish on UK stocks mainly on the
33:18
Speaker 1: on the assumption that the composition of the of the
33:22
Speaker 1: UK index basically is very start flash and friendly in
33:26
Speaker 1: a way. Now, what is the problem that then the
33:29
Speaker 1: UK stocks face Now when we have ready the UK market,
33:33
Speaker 1: This was really when nobody wants to actually even they're
33:36
Speaker 1: not even thinking about invest in the UK. Now the
33:39
Speaker 1: UK marketing is continuous to be cheap, but it is investable,
33:43
Speaker 1: that's with it this way. So I think it's in
33:45
Speaker 1: a phase where global growth may potentially re accelerate. And
33:50
Speaker 1: I don't know, I don't think the UK market will
33:52
Speaker 1: do as well in relative terms as last year, but
33:55
Speaker 1: I can see the dvidend yield. The defensive names I
33:59
Speaker 1: think would of really help the performance. But the best
34:02
Speaker 1: probably of the UK market our performances behind us, and
34:06
Speaker 1: there is have to say I don't want to be political.
34:09
Speaker 1: Not with politics. There is still a Brexit. I think
34:12
Speaker 1: the premium in the market and you see that in
34:14
Speaker 1: the relative kind of evaluation of UK versus the rest
34:16
Speaker 1: of Europe. And this won't go away. But I I
34:19
Speaker 1: do believe though that for long term investors, when look
34:23
Speaker 1: at long term investor in the UK market is still
34:25
Speaker 1: a good place to be. As you said, it's not
34:27
Speaker 1: it's not expensive. You have very good companies, well managed
34:31
Speaker 1: and again the UK market has really nothing to do
34:34
Speaker 1: or not so much with the UK economy that is
34:36
Speaker 1: still struggling. Again, we're not in our recession, but it's
34:40
Speaker 1: I think the UK economy will clearly struggle this year.
34:43
Speaker 1: And so if you are thinking about invest in the
34:46
Speaker 1: UK stocks, don't do it because you think the UK
34:50
Speaker 1: economy will move just because of the multinationals and that
34:54
Speaker 1: that are there that will generate still descent profits. I
34:58
Speaker 1: love the idea that the U here's the perfect stagflation
35:01
Speaker 1: and play. I'm given that we're prone to stagflation. That's great, right, well,
35:05
Speaker 1: awfully the stack flational stories behind us, right, because we
35:08
Speaker 1: are saying that gross will improve, an inflation will fall,
35:11
Speaker 1: so actually, maybe what is interesting is that in a
35:13
Speaker 1: year's time will be exactly the opposite scenario when gross
35:17
Speaker 1: is back to normal and improving inflation is back to
35:20
Speaker 1: normal and fully but a lot of things are to
35:23
Speaker 1: go right to to be at that point and definitely
35:25
Speaker 1: is not going to happen the next three months is
35:27
Speaker 1: more like a story for probably the end of this
35:30
Speaker 1: of this year. Let's talk about something that really really
35:33
Speaker 1: has gone wrong. Um, and that's that crypto. And I'm
35:38
Speaker 1: I drive really hard to be open minded about crypto.
35:40
Speaker 1: I mean I really do. I know a lot of
35:41
Speaker 1: our listeners and we just will think that I make
35:43
Speaker 1: no effort at all to be over minded, but it's
35:45
Speaker 1: simply not true. I've watched all the videos that the
35:48
Speaker 1: crypto fans try and make me watch, I've read the books,
35:51
Speaker 1: have done all of it, and I still cannot see
35:55
Speaker 1: a viable future and a viable use case for cryptocurrencies
35:59
Speaker 1: include thing bitcoin. By the way, um, and I wonder
36:02
Speaker 1: how you feel about that, well, you know, when cryptors.
36:06
Speaker 1: You know, obviously a few years ago everybody was was
36:09
Speaker 1: asking us what is our view. My view back then
36:12
Speaker 1: was that cryptocurrency are like a lottery ticket, right, you
36:15
Speaker 1: buy a lot of re ticket, why because you know
36:18
Speaker 1: there's a very very sucessal marginal in significant probability that
36:23
Speaker 1: you're gonna win. But if you win, you win big.
36:26
Speaker 1: And I think if you think in that way, you know, okay,
36:30
Speaker 1: then you can say I can buy a fewer and
36:32
Speaker 1: then let's hope. The point though here, especially what I'm doing.
36:37
Speaker 1: My job is to advise people are to invest wisely
36:41
Speaker 1: for the long term. And to me, a lottery ticket
36:44
Speaker 1: is not an asset. Class is something different. You can
36:47
Speaker 1: still have, you know, you can make money out of it,
36:51
Speaker 1: but it's not something that would suggests my clients to want.
36:54
Speaker 1: Then obviously I'm also not a crypto kind of specialist.
36:59
Speaker 1: I can see the logic behind, you know, in a
37:02
Speaker 1: peer where central bank where printing money like crazy, having
37:07
Speaker 1: some kind of accurrency where the supply was fixed as
37:11
Speaker 1: obviously appeal. I understand that. So this combination with you know,
37:15
Speaker 1: easy money or let's say money printing by central banks,
37:18
Speaker 1: obviously the tech angle, because the blockchain story is very significant,
37:23
Speaker 1: so I can I can see why there was this bubble.
37:26
Speaker 1: But any year we go, the easy money is over
37:29
Speaker 1: monetary titling and the monetor exposes exactly the weak of
37:33
Speaker 1: some of the assumption making about cryptus. Right, but again,
37:37
Speaker 1: I don't think the cryptocurrencies will or should be a
37:40
Speaker 1: building block of investment portfolioce it's like it's really like
37:44
Speaker 1: continue for me to be a lottery ticket, and look
37:47
Speaker 1: at what happened the last few months. It's still very
37:49
Speaker 1: by the way, very Also dependent on regulation is something
37:52
Speaker 1: that's difficult to value. So I still believe that there's
37:56
Speaker 1: not from my point of view and as a class
37:59
Speaker 1: that should be in PORTFOLI use for long term and
38:03
Speaker 1: let's say relatively cautious investors. No, I don't. I don't
38:06
Speaker 1: think so, and my view hasn't changed in the last
38:09
Speaker 1: few In the last few weeks or months, it sounds
38:12
Speaker 1: to me like you've got your own coin based accounts
38:14
Speaker 1: with you know, a couple of thousand pounds worth a
38:15
Speaker 1: bitcoin in it just in case. No, I have nothing
38:19
Speaker 1: but to be honest, I can't blame if someone did
38:22
Speaker 1: it and you know they make good money out of it.
38:24
Speaker 1: So but again, you won the lottery. It doesn't mean
38:27
Speaker 1: that you are an investment groule. I think you won
38:30
Speaker 1: the lottery and that's it. And then if you have
38:32
Speaker 1: to move on, well, I would like to win the lottery. Um, okay,
38:36
Speaker 1: So here we are. It's a confusing year. It's a
38:39
Speaker 1: difficult year. We're worried about consensus. But if I could
38:43
Speaker 1: sum up where you might recommend or suggest a retail
38:47
Speaker 1: investor in ordinary investor to go from here, you'd say them,
38:50
Speaker 1: you know what you should have gold, you should have
38:53
Speaker 1: emerging markets. You should know that commodities are a good
38:56
Speaker 1: long term play. You should have learned from the last
38:59
Speaker 1: couple of years to keep a close eye on valuation.
39:03
Speaker 1: Is there anything else that you might say to an
39:06
Speaker 1: ordinary investor looking at their portfolio and going, oh God,
39:09
Speaker 1: I don't know what to do. Is there anything else
39:11
Speaker 1: that you would say to them today? Yeah? I think, Look,
39:14
Speaker 1: we don't expect this yet to be great right for
39:16
Speaker 1: for equity, for equity investor, but it's gonna be okay.
39:18
Speaker 1: It's gonna be okay. Something I think has changed significantly
39:22
Speaker 1: is the outlook for government bonds and fixed income products.
39:25
Speaker 1: You know, when I when I joined pick Tap ten
39:28
Speaker 1: years ago, bonniers were much much higher. They were obviously
39:32
Speaker 1: this kind of downtrend, But I remember, I don't remember
39:36
Speaker 1: one year where we told investors, look, this is time
39:40
Speaker 1: to increase your location to fix income, and I think
39:44
Speaker 1: this is actually the right time to do it. You
39:47
Speaker 1: start to see some real good evaluation, and government bonds
39:51
Speaker 1: in the sense that you coupon is distant in the
39:54
Speaker 1: US is you know, it's three point five could be
39:56
Speaker 1: four percent. So the point is that there is this
39:58
Speaker 1: is something that you know, we I haven't had in
40:00
Speaker 1: a very long time. Considering that equities are not particularly cheap,
40:04
Speaker 1: I think it's not a good idea to relocate some
40:08
Speaker 1: of your money into government bonds with the assumption from
40:11
Speaker 1: our point of view that we may not see a recession,
40:14
Speaker 1: but we're not going to see a significant pickup in growth,
40:17
Speaker 1: so nominal growth will actually be quite weak because inflation
40:20
Speaker 1: is falling and real growth is very low. So I
40:24
Speaker 1: think what we are actually advising or suggesting our clients
40:27
Speaker 1: is to put some money back into fixed income products
40:31
Speaker 1: right or could be government bonds in the US. We
40:34
Speaker 1: like a emerging market debt because I think this is
40:37
Speaker 1: the time, after a long period of financial repression that
40:42
Speaker 1: basically kept real body is a really interest rates much
40:46
Speaker 1: below where there should be. So I think that would
40:49
Speaker 1: be my let's say something new may be different from
40:54
Speaker 1: the past, is to reallocate money from maybe from cash
40:59
Speaker 1: or from equities in two government bonds. But obviously you
41:02
Speaker 1: need to be selective. We see more value, for example,
41:05
Speaker 1: in US treasuries in government bonds, especially that in America,
41:09
Speaker 1: much less in Europe, where I think there is the
41:13
Speaker 1: risk of central banks to be even tighter and so
41:16
Speaker 1: for bonn eels to rise, and so for retans to
41:20
Speaker 1: remain quite low in the short term. So that would
41:23
Speaker 1: be that's probably the biggest change in terms of our
41:27
Speaker 1: long term view for for this year. Thank you. Look
41:31
Speaker 1: at that's almost exciting. I can't remember the last time
41:34
Speaker 1: I spoke to anybody on a podcast or an energy
41:36
Speaker 1: of any kind where they actually recommended in Christening exposure
41:39
Speaker 1: to the bond market. So thank you for that. The
41:41
Speaker 1: government bonds exciting those seems to be a little bit extreme,
41:45
Speaker 1: but I'm doing my best, look around my best. I
41:49
Speaker 1: like that we have to pull some excitement from the
41:51
Speaker 1: whole like that. Thank you so much for being with
41:55
Speaker 1: us today. I hugely appreciate it. Thank you, Mary, thanks
42:02
Speaker 1: for listening to this week's Marion Talks Money. We will
42:04
Speaker 1: be back next week. In the meantime, if you like
42:06
Speaker 1: our show, and I really hope you do, review it
42:08
Speaker 1: and subscribe wherever you listen to your podcasts. This episode
42:12
Speaker 1: was hosted by me Marion somethingset Web. It was produced
42:15
Speaker 1: by Samersadi. Additional editing by Blake Maples and special thanks
42:19
Speaker 1: of course to Luca Paolini and to John Steppe. Finally,
42:23
Speaker 1: of course, this is your weekly reminder to sign up
42:25
Speaker 1: immediately to John Staley newsletter money Distilled. The link is
42:29
Speaker 1: in the show notes, and you won't regret it.