Latest / Best of Business / Sam Dickie: Fisher Funds expert examines the risks impacting the equity markets

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Sam Dickie: Fisher Funds expert examines the risks impacting the equity markets · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks b Follow
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  Speaker 1: this and our wide range of podcasts now on iHeartRadio,
• 0:16
  Speaker 1: Bryan Bradwae.
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  Speaker 2: Can we go to Sam Dickey for a market update.
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  Speaker 2: Equity markets a whisker off their all time highs, this
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  Speaker 2: despite a few wobbles recently. So what about the risks?
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  Speaker 3: Sam's with us now, Good evening, Good Enning, Ryan.
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  Speaker 2: We've talked a lot about the exciting sort of positive
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  Speaker 2: catalyst for markets over the last few months, but what
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  Speaker 2: are the key risks investors should be focused on this year.
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  Speaker 3: Yes, there's been so many perceived risky headlines so far.
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  Speaker 3: So far this year is kind of like drinking from
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  Speaker 3: a fire hose. So we find it helpful to remember
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  Speaker 3: what really drive stock markets, and that's three things. So
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  Speaker 3: the direction of economic and corporateating is growth, the level
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  Speaker 3: of interest rates, and the valuational price of stock. So
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  Speaker 3: if we look at one key risk in each of
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  Speaker 3: those buckets and ignore the rest of the noise, A
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  Speaker 3: key driver of growth in the US has been the
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  Speaker 3: massive built out of AI infrastructure. So the rubber meets
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  Speaker 3: the road this year on where the big tech companies
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  Speaker 3: can make a return on the hundreds of billions of
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  Speaker 3: dollars they spent on ai and as is in a
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  Speaker 3: side Ryan, remember we were speaking back in October November
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  Speaker 3: about how bubbly things that God in ai Land. The
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  Speaker 3: good news there is there's been a healthy correction in
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  Speaker 3: the riskier names so Orackland cool Weave, which were use
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  Speaker 3: using tons of debt to fund that a built out there,
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  Speaker 3: down forty to fifty percent. Point there is. That's good
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  Speaker 3: news that investors are becoming more discerning. The second one
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  Speaker 3: is on the level of interest rates. Keep an eye
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  Speaker 3: on debt levels of particularly OECD countries like Japan and
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  Speaker 3: the US. So take Japan for example, on the thirty
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  Speaker 3: year debt that the government borrows. Only five to six
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  Speaker 3: years ago, the government used to pay zero percent on
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  Speaker 3: that thirty year bonds. Government bonds were at zero percent.
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  Speaker 3: Today it pays almost four percent, and an interest rate
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  Speaker 3: has been going up rapidly. So the point there is
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  Speaker 3: keep an eye on those longer dated interest rates for
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  Speaker 3: the US and Japan for signs of stress. And the
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  Speaker 3: final thing is markets have had a very strong run
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  Speaker 3: since April last year. Equity markets are up forty four
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  Speaker 3: percent eight months, which is astonishing and the headline valuation
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  Speaker 3: has elevated at twenty two times simplistic price to earnings ratio.
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  Speaker 3: The good news there, though, is that's reflective of just
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  Speaker 3: some of those really big top ten tech companies being
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  Speaker 3: fully valued, like Tesla trades on two hundred times p
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  Speaker 3: which is pretty ritzy. The good news is blue chip
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  Speaker 3: companies or quality companies that sit outside of that top
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  Speaker 3: ten were left behind in twenty twenty five. In fact,
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  Speaker 3: some of those companies of the most out of favor
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  Speaker 3: in thirty years, So that boad's really well for focused,
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  Speaker 3: selective stop picking investors.
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  Speaker 2: What about picking particular markets like you know, Japan and Germany.
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  Speaker 2: There's a lot of talk about their stimulus that, you know,
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  Speaker 2: pumping the cash in, which often leads to the lift
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  Speaker 2: in markets. Is that something that we should pay close
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  Speaker 2: attention to or have we made missed the both on
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  Speaker 2: that already? What's the story there?
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  Speaker 3: I think that's important. That's one of the key lessons.
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  Speaker 3: You and I spoke late late last year about what
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  Speaker 3: were the key lessons of twenty twenty five. Well, the
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  Speaker 3: key lesson is it's possible to make money outside of
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  Speaker 3: the US, and for the third time in fifteen years,
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  Speaker 3: non US markets outperformed in the US, Japan, as you mentioned, China, Brazil,
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  Speaker 3: emerging markets. There's some good places to make money. Japan
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  Speaker 3: has had a specific stock market sort of stimulus package
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  Speaker 3: going on. Apart from the fact they're trying to reflate
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  Speaker 3: their economy, they've also told all of the companies that
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  Speaker 3: are listed on their stock market that they must do
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  Speaker 3: shareholder for any things. They must use some of the
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  Speaker 3: lazy cash on their balance sheet, they must pay higher dividends,
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  Speaker 3: they must drive up return. So that's been really, really positive,
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  Speaker 3: and I think there's still more to run there, notwithstanding
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  Speaker 3: by the way that that overriding risk of the price
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  Speaker 3: of money there. I mean, just keep an eye on
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  Speaker 3: those thirty year bonds. They moved very aggressively two days ago,
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  Speaker 3: so we just want to make sure that the Bank
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  Speaker 3: of Japan doesn't lose control of its bond market.
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  Speaker 2: Sam, if we were to have a Trump Liberation Day
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  Speaker 2: outburst again tomorrow, this is just a hypothetical, but throw
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  Speaker 2: it at you. Do you think the markets would react,
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  Speaker 2: wouldn't react as dramatically as they did last year, Like
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  Speaker 2: we kind of learned the lesson with him a little
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  Speaker 2: bit that he that he you know, he goes crazy,
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  Speaker 2: he does the art of the deal thing, and then
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  Speaker 2: he pulls back and does a deal.
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  Speaker 1: Yeah.
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  Speaker 3: I think it's a spot like one of those diminishing
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  Speaker 3: marginal utility of the shock factor, right, or the out
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  Speaker 3: of the deal it is. I mean when I talk
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  Speaker 3: about drinking from a fire hose to start the year,
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  Speaker 3: that was most of those headlines were related to Trump
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  Speaker 3: policies or tweets, should I say, and whether it be
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  Speaker 3: you know, captain credit card rates in the US. You know,
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  Speaker 3: the Iran headlines of Benersuaeda headlines, the Greenland headlines, and
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  Speaker 3: I think he piled on so much and those policies
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  Speaker 3: came so thick fast it eventually the market did blink
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  Speaker 3: a couple of days ago. But then, of course he's
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  Speaker 3: already subsequently walked away from the Greenland threats to an extent.
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  Speaker 3: The market had a big bounce overnight. So I think
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  Speaker 3: you're did right, Ryan, is a diminishing marginal utility of
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  Speaker 3: the shop factor.
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  Speaker 2: What about the Iran That's the next one on the
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  Speaker 2: cab off the rank. If we're to believe what's coming
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  Speaker 2: out of the White House. We spoke to Marco Rubio's
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  Speaker 2: former pres sect today and he was saying, oh, look,
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  Speaker 2: this is the one you want to watch. This is
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  Speaker 2: coming next. There's a troop build up or military build
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  Speaker 2: up in the Middle East from the United States. Is
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  Speaker 2: that as big a deal? Would it be as big
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  Speaker 2: a deal to markets as say, the Greenland threats have been.
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  Speaker 3: I think these geopolitical you know, flare ups are always
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  Speaker 3: concerning most, not least, because there's a real human element.
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  Speaker 3: Then we shouldn't forget about that. But what history does
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  Speaker 3: tell us. You know, you can go back super long
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  Speaker 3: term over one hundred and five years. You know, we've
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  Speaker 3: had a couple of world wars, you know, depression, numerous recessions,
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  Speaker 3: and still markets are up, you know, hundreds of fold
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  Speaker 3: you know. But then even shorter term, you go back
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  Speaker 3: to Ukraine and even if you'd had tomorrow's newspaper yesterday,
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  Speaker 3: you wouldn't have made any money. People were convinced that,
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  Speaker 3: you know, gas prices would saw, energy prices would saw,
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  Speaker 3: grain prices would saw because you know, Ukraine's the weak
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  Speaker 3: bowl of Europe. The factors. The day before Putin invaded
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  Speaker 3: was the highest price we saw for some of those
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  Speaker 3: gas prices the oil price and some of those food prices,
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  Speaker 3: so it's really hard to trade. The point is it's
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  Speaker 3: really hard to trade around these geopolitical events and politics
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  Speaker 3: as well, the US midterm elections coming up. That's the
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  Speaker 3: first point. The second point is, generally speaking, and I
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  Speaker 3: don't say this lightly, the market fades these things. They
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  Speaker 3: move on from these things fairly quickly. So I would
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  Speaker 3: put that in the imp of not ultra important for
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  Speaker 3: those three things, the price of money or interest rates,
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  Speaker 3: the price of stocks, and the direction of you know,
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  Speaker 3: economic growth.
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  Speaker 2: Interesting. Thanks for letting me throw anything I can, and
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  Speaker 2: I want to hit you, Sam. I always appreciated the problem.
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  Speaker 2: You're insight. Sam Dicky Fisher funds with us Tonight
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