Latest / Best of Business / Chris Di Leva: Investment markets after the U.S. election

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Chris Di Leva: Investment markets after the U.S. election · Best of Business

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Speaker 4: This is smart money on the Weekend Collective. I'm Tim Beverige.
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Speaker 4: the conversation and with smart money. And my guest is
1:39
Speaker 4: from Harbor Asset Management and his name is Chris Deliver
1:43
Speaker 4: and Chris joins me. Now, good day, Chris. How are
1:45
Speaker 4: you going?
1:46
Speaker 5: Hey Jim, nice to be with you.
1:48
Speaker 4: Yeah, you too. We're going to have a chat about well,
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Speaker 4: basically investment markets as a result of Donald Trump winning
1:56
Speaker 4: the US election, which is obviously going to have an
1:59
Speaker 4: impact on New Zealand's trade and the US dollar, etc.
2:04
Speaker 4: What should we kick off with? What are your what
2:06
Speaker 4: are your first thoughts about this?
2:09
Speaker 5: Yeah, I mean a lot of keywi's probably look at
2:13
Speaker 5: Trump and might not agree with his politics. And the
2:17
Speaker 5: initial reaction we get when we normally talk to people is, oh, no,
2:21
Speaker 5: you know, what's this going to mean? What's this going
2:23
Speaker 5: to mean for our key we saber portfolios? What is
2:26
Speaker 5: this going to mean for the share market? And often
2:31
Speaker 5: there's a lot of a lot of fear, to be honest,
2:33
Speaker 5: you know, thinking about about his agenda. Now we've done
2:38
Speaker 5: a lot of research into this and you know, following
2:41
Speaker 5: the Republican clean sweep, talk to a lot of offshore
2:45
Speaker 5: strategists and I've been able to kind of, you know,
2:49
Speaker 5: paint a picture of how things might look over the
2:53
Speaker 5: next few years. Of course, with Trump, there's always uncertainty,
2:57
Speaker 5: and that's what leads to a lot of apprehension. But
3:02
Speaker 5: I suppose the key things, if I look at on
3:04
Speaker 5: the positive side, are that the key driver of share
3:10
Speaker 5: markets over the long term earnings, and as an investor
3:14
Speaker 5: in a company, you get earnings that are after tax.
3:17
Speaker 5: So one of the big fears before the election was
3:20
Speaker 5: that a lot of Trump's tax cuts from when he
3:23
Speaker 5: was last in power would lapse, and that would have
3:27
Speaker 5: quite a severe impact on the US economy, both personal
3:31
Speaker 5: tax cuts and company tax cuts. So the good news
3:34
Speaker 5: for people who are investing in companies and people with
3:38
Speaker 5: key we saver accounts. A lot of the global share
3:41
Speaker 5: market is in the US. One thing that we know
3:45
Speaker 5: that Trump won't do is repel his own tax cuts,
3:49
Speaker 5: and what he may do has cut them further. So
3:53
Speaker 5: for US shares it's largely been a really good story
3:57
Speaker 5: so far. They're rallied pretty strongly following the election results.
4:04
Speaker 5: One of the things that we have to be more
4:06
Speaker 5: apprehensive on, however, has trade policy, and we don't know
4:12
Speaker 5: what that would look like and that's kind of a
4:15
Speaker 5: negative for markets. Markets don't light up like uncertainty. And
4:19
Speaker 5: at the moment, we just don't know how far he's
4:21
Speaker 5: going to go with tariffs, but he has made some
4:26
Speaker 5: pretty outlandish promises so far. So look, those are the
4:30
Speaker 5: initial thoughts. There's some really there is some good there,
4:34
Speaker 5: but there's also a few things to keep an eye on.
4:38
Speaker 4: Right we are talking with Chris de Lever's director ahead
4:40
Speaker 4: of multi asset and Global Investments from Harvard Asset Management.
4:45
Speaker 4: Your cause on this, by the way, eight hundred and
4:46
Speaker 4: eighty ten eighty In the wake of the Trump victory,
4:51
Speaker 4: clean sweet. Basically, he's going to have more power than
4:53
Speaker 4: he had last time. Where are you going to be
4:55
Speaker 4: putting your money? Or have you got any questions that
4:58
Speaker 4: you want to run by Chris? I'm sure he'll he'll
5:00
Speaker 4: make a good fist of answering well, of course, without
5:03
Speaker 4: giving any specific financial advice. Chris, my first question to
5:06
Speaker 4: you is thing that when you're looking at what we
5:11
Speaker 4: might see happen as a result of Trump's presidency, you
5:15
Speaker 4: might have cast your mind back eight years to what happened.
5:18
Speaker 4: There are there any lessons from history that might repeat
5:21
Speaker 4: themselves or.
5:22
Speaker 5: Not here there are. And actually, if we look at
5:29
Speaker 5: the last time he was in power, the initial reaction
5:33
Speaker 5: from share markets and this all happened in one day,
5:36
Speaker 5: believe it or not, tim but the initial reaction from
5:39
Speaker 5: markets was actually a really negative one, so as it
5:41
Speaker 5: looked like he was going to win, but actually as
5:45
Speaker 5: markets started to digest what his policies would mean, we
5:48
Speaker 5: actually had a really good period for share markets when
5:52
Speaker 5: Donald Trump was last in What was the key driver
5:55
Speaker 5: of that. The key single driver was his tax package.
6:00
Speaker 5: So we saw him put some policies in place around
6:06
Speaker 5: repatriation of earnings but also lower income tax rates for
6:11
Speaker 5: companies and that led to higher post tax earnings of course,
6:16
Speaker 5: so that's something we can learn that actually last time,
6:19
Speaker 5: despite being a result that the market wasn't expecting, it
6:25
Speaker 5: actually turned out okay for investors. We did see him
6:31
Speaker 5: last time, though, create a lot of uncertainty with regards
6:34
Speaker 5: to his trade policy. We saw tariffs. Interestingly, the tariffs
6:38
Speaker 5: he put on were largely not actually repealed, so they're
6:42
Speaker 5: still in place today. So I think it was something
6:45
Speaker 5: indirectly that both administrations actually supported are given Biden didn't
6:50
Speaker 5: repeal them. But look overall, it was a pretty good
6:55
Speaker 5: period for markets, taking away the fact that he was
7:00
Speaker 5: still in power when COVID broke out and we saw
7:03
Speaker 5: a pretty large fall in share markets then. But I
7:06
Speaker 5: don't think we can quite say that he was the.
7:09
Speaker 4: Driver of that. Actually, my initial search on the share
7:14
Speaker 4: market because how long is it since the since the election?
7:18
Speaker 5: Now what it's a couple of weeks, right, And the
7:21
Speaker 5: initial reaction was was really really positive. So there is
7:25
Speaker 5: some trades in the market which are kind of known
7:29
Speaker 5: as Trump winners. So those are, yeah, test Less two.
7:35
Speaker 4: And forty bucks on the fourth of November to three
7:38
Speaker 4: hundred and fifty dollars. It's tailed off a little bit
7:40
Speaker 4: since then. Yeah, yeah, what did you make it?
7:44
Speaker 5: So that's been a winner, and it's I don't think
7:49
Speaker 5: there's any great science to it. People look at them
7:51
Speaker 5: and go, well, Elon Musk is right next to Trump.
7:54
Speaker 5: It's it's got to be really really good for Tesla.
7:57
Speaker 6: Right.
7:57
Speaker 5: Some of the other winners have been banks, bitcoin, in cryptocurrencies,
8:03
Speaker 5: they've been they've been winners. I read a stat the
8:07
Speaker 5: other day which is stounded of me doggy coin, which
8:11
Speaker 5: is kind of a meme crypto coin. The market cap
8:17
Speaker 5: of that is actually larger than the top four US banks,
8:22
Speaker 5: which is kind of mind boggling. But that's gone up,
8:26
Speaker 5: and that's because Trump's agenda is more around deregulation or
8:31
Speaker 5: softer regulation, and that tends to benefit banks and certainly cryptocurrency.
8:37
Speaker 5: Small companies have been doing really well, So smaller companies
8:40
Speaker 5: tend to be more cyclical and linked to the fortunes
8:46
Speaker 5: of the US economy. They've gone pretty well, but there
8:49
Speaker 5: have been some losers. So renewable energy stocks have done
8:53
Speaker 5: really poorly. We know that Trump isn't a big supporter
8:58
Speaker 5: of renewable so solar stocks, wind stocks went down quite significantly,
9:05
Speaker 5: and bond yields have gone up, and that's because there's
9:10
Speaker 5: the expectation that Trump's administration will rack up a lot
9:17
Speaker 5: more debt and that means that the government will need
9:20
Speaker 5: to issue more bonds.
9:22
Speaker 4: Yeah. I was actually wondering what because the other one
9:24
Speaker 4: that's taken it is health stocks and vaccine companies that
9:29
Speaker 4: work on health stocks take a bit have taken a
9:31
Speaker 4: bit of a beating because RFK, who's going to be
9:33
Speaker 4: the Health secretary, obviously is a vaccine well he's a skeptic,
9:39
Speaker 4: but conspiracy theorist on that stuff as well. Actually wonder
9:42
Speaker 4: if that actually might be a goodbye because they take
9:44
Speaker 4: a hit initially, then you sort of wonder whether they're
9:47
Speaker 4: going to actually have a bit of perspective and recover
9:50
Speaker 4: a bit. What do you take that's very specific opinion
9:54
Speaker 4: I'm seeking, But what do you reckon?
9:56
Speaker 5: Yeah, so I think it's a good point in looking at,
10:00
Speaker 5: you know, what is the initial reaction versus what do
10:04
Speaker 5: you think will happen over the long term, because actually,
10:09
Speaker 5: when we look at last time he was in power,
10:13
Speaker 5: and you asked for lessons of the previous time, if
10:16
Speaker 5: I actually look at what renewable stocks did when Trump
10:20
Speaker 5: was last in power, they actually did perfectly good. So,
10:25
Speaker 5: you know, so some of that initial reaction around these
10:28
Speaker 5: things might not necessarily be the correct one. And I
10:33
Speaker 5: think the other thing to take into account is there's
10:36
Speaker 5: a lot of uncertainty on exactly what the policy agenda
10:40
Speaker 5: will look like. So whether it's you know, twenty percent
10:44
Speaker 5: tariffs on China, whether it's sixty percent tariffs on China,
10:47
Speaker 5: whether he reduces the text the corporate tax rate from
10:50
Speaker 5: twenty one percent to fifteen percent. You know, these are
10:53
Speaker 5: things that you don't actually know. So at the moment,
10:56
Speaker 5: these initial trades that have that have gone taken place
11:02
Speaker 5: in the market, there's some of them are more on
11:06
Speaker 5: what people might expect Trump to do as opposed to
11:10
Speaker 5: any kind of finite policy agenda that's been put forward.
11:15
Speaker 4: Okay, let's take let's take some calls, and who's first, Peter, Hello.
11:22
Speaker 6: Good afternoon. Well, I don't know who you can believe,
11:25
Speaker 6: because I think the New York Times said that Trump
11:29
Speaker 6: had a discussion with Purity, which was denied, then it
11:32
Speaker 6: was Elon mus had a discussion with the UN investor
11:37
Speaker 6: in New York, which was later denied. And then in January,
11:41
Speaker 6: the debt ceiling for the US comes up from renewal.
11:45
Speaker 6: So how can you produce taxes when the deficit has
11:50
Speaker 6: never been high and carries on been high, especially with
11:53
Speaker 6: higher interest rates?
11:55
Speaker 4: Are you basically raising the question of what Trump's rhetoric
11:59
Speaker 4: is versus what he's actually going to be able to do.
12:03
Speaker 6: Yeah, well, they're saying they can't reduce. Is he going
12:05
Speaker 6: to cut and slash the the budget? You know, to funders,
12:10
Speaker 6: fact cups? You know, you know what, what do you believe?
12:13
Speaker 6: That's what I'm sunny.
12:14
Speaker 4: Well, for instance, you mean the two million dollars two
12:17
Speaker 4: trillion dollars, Sorry, it was only about a billion times
12:19
Speaker 4: out the two trillion dollars of savings that oh, Elon
12:23
Speaker 4: and the other guy want to want to save. You mean,
12:26
Speaker 4: do what do we read into that?
12:28
Speaker 6: Is that what you're well, how can we believe anything?
12:31
Speaker 4: Well?
12:31
Speaker 6: A louder than words?
12:33
Speaker 4: Well, yeah, I mean, just before we go to go
12:35
Speaker 4: to Christopher his opinion, how much do you believe?
12:39
Speaker 6: Well, Trump says everything, so anyone who leaves a little
12:44
Speaker 6: bit of what he says, they might believe him. But
12:46
Speaker 6: at the end of the day, actions are louder than words.
12:50
Speaker 6: And I think a lot of it was campaign a lecture,
12:54
Speaker 6: especially with Harris, and I don't think he's going to
12:57
Speaker 6: do anything like that at all.
13:00
Speaker 4: Would you put your money where your mouth is on this?
13:01
Speaker 4: And if so, where would you be putting it?
13:07
Speaker 6: Well, the thing is, you know, he says he's not
13:09
Speaker 6: going to have wars and he has water. I think
13:12
Speaker 6: I put my money on that Trump making more money
13:15
Speaker 6: from from politics, you know, that's where I put my money. Okay,
13:20
Speaker 6: regardless of the outcome.
13:22
Speaker 4: You should put buy shares in Trump Inc. Yeah, I mean,
13:25
Speaker 4: what do you what do you think about the rhetoric, Chris,
13:28
Speaker 4: when it comes to what Trump says he's going to do,
13:31
Speaker 4: because that for instance, that two trillion dollars of saving,
13:34
Speaker 4: that savings that Elon Musk and I can't remember the
13:36
Speaker 4: last guys and the other guy, Vivek Ramaswami. I think
13:40
Speaker 4: it might be, you know, they want to they want
13:42
Speaker 4: to get rid of the FBI, to abolish the Department
13:45
Speaker 4: of Education, all that sort of stuff. What does that
13:47
Speaker 4: actually firstly, Chris, what does that actually mean? That rhetoric?
13:51
Speaker 4: What does it? Does it have any effect or what?
13:55
Speaker 5: So? I mean, it's a good point, and it's kind
13:58
Speaker 5: of what I was trying to bring up earlier around
14:02
Speaker 5: a lot of what actually will transpire in the future
14:05
Speaker 5: might not be what people are can say during today
14:09
Speaker 5: because we don't know the clear policy agenda. I mean,
14:13
Speaker 5: the debt ceiling is troubling, but it's actually been troubling
14:17
Speaker 5: for nine a decade now. So we frequently have a
14:23
Speaker 5: debt ceiling discussions and they get close to it and
14:26
Speaker 5: there's political brinkmanship around you know, whether it gets raised,
14:30
Speaker 5: and it always ends up being raised, but with certain concessions.
14:37
Speaker 5: Between the two respective parties. So look, you know, debt
14:41
Speaker 5: is concerning for the US, Debts actually concerning for a
14:48
Speaker 5: whole load of countries, including Japan and some others. But yeah,
14:54
Speaker 5: I mean that's the element that Trump brings. As I
14:56
Speaker 5: was mentioned earlier, it's the uncertainty, and that brings some
15:00
Speaker 5: volatility with it. So yeah, I mean we've just got
15:05
Speaker 5: to wait and I suppose see the agenda. But the
15:09
Speaker 5: result of the election, the fact that there was an
15:12
Speaker 5: election result and a clear result, that's actually been good
15:16
Speaker 5: for markets, right because there was a there was a
15:20
Speaker 5: potential way that this plays out that there wasn't a
15:22
Speaker 5: clear result, we could get something horrible like like what
15:27
Speaker 5: happened last time at Capitol Hill take place. So we've
15:33
Speaker 5: no administration is going to have a complete certainty. But look,
15:38
Speaker 5: the initial signs for markets is that actually we've digested
15:42
Speaker 5: it pretty well. Trump gets inaugurated January twentieth. Following there
15:49
Speaker 5: we'll see a more finite policy agender. I mean, he
15:54
Speaker 5: did to tariffs last time, but we don't know the
15:57
Speaker 5: extent of what ed dou this time.
16:00
Speaker 4: I'll just forgo to our next call. It does obviously
16:03
Speaker 4: change in the US administration. It does bring opportunities, as
16:07
Speaker 4: we say, you know, we see prices bouncing around. Does
16:10
Speaker 4: it bring opportunities beyond the guesswork?
16:12
Speaker 2: Though?
16:12
Speaker 4: Are there things that you can look at and that
16:15
Speaker 4: you know that your team would look at and say, well,
16:18
Speaker 4: we can based on our research and our understanding what's
16:21
Speaker 4: likely to happen, we can confidently invest here and here?
16:25
Speaker 4: Or is it all just well who knows?
16:28
Speaker 5: Oh yeah, I mean.
16:33
Speaker 4: Two extreme, Yeah it is.
16:36
Speaker 5: I mean, I'll tell you the way. It does impact
16:39
Speaker 5: the way we invest. So we definitely don't preempt anything
16:42
Speaker 5: that the politicians do because that just comes with too
16:46
Speaker 5: much unpredictability. But for example, we do look at someone
16:50
Speaker 5: at a country like China and companies that we invest
16:55
Speaker 5: into that are exposed to China, and it makes us
16:58
Speaker 5: more apprehensive, right because we know Trump's going to go
17:02
Speaker 5: in He's going to have a policy agenda that's probably
17:07
Speaker 5: not that China friendly.
17:08
Speaker 4: I think I think that's we can be sure of
17:10
Speaker 4: that one.
17:11
Speaker 5: Yes, yes, So at the margin, we look at that
17:14
Speaker 5: and we take it very seriously when we look at
17:18
Speaker 5: a company. So what I'm talking about there is you know,
17:20
Speaker 5: say a company like like b HP lots of relies
17:25
Speaker 5: on China a lot for its exports. We will take
17:29
Speaker 5: into account that the policy agenda won't be friendly towards
17:36
Speaker 5: their main export market, and we think that's a really
17:40
Speaker 5: sensible way to play it, as opposed to go and
17:44
Speaker 5: you know, Trump's not going to be great for you know,
17:48
Speaker 5: or Trumps can be great for banks. Let's go buy banks.
17:51
Speaker 5: You know, we don't, we don't kind of react like that.
17:55
Speaker 4: Yeah, okay, right, let's take some more calls. Mary.
17:57
Speaker 7: Hello, oh, hello, I really enjoy your show. It's been
18:01
Speaker 7: a great afternoon. Thank you. I just wanted to get
18:05
Speaker 7: your guests view about crypto because I find it difficult
18:09
Speaker 7: to understand it really and it seems to be more
18:11
Speaker 7: difficult to be able to work out how they actually
18:14
Speaker 7: value it. And I just didn't know whether his you know,
18:18
Speaker 7: what he thought about including it in one's retirement portfolio
18:23
Speaker 7: or something like that.
18:25
Speaker 4: Okay, yeah, crypto, Yes.
18:31
Speaker 5: Mary, I've got to be completely honest and say I've
18:37
Speaker 5: got crypto completely wrong. And lots of other people you know,
18:41
Speaker 5: from traditional finance background probably have too, so I think,
18:46
Speaker 5: you know, Warren Buffett and Charlie Munger, there've been some
18:49
Speaker 5: of the most vocal critics of cryptocurrency in the portfolios
18:54
Speaker 5: that we managed. So so I managed multi set portfolios
18:59
Speaker 5: and can we save a portfolios. Look, we don't include it,
19:03
Speaker 5: and the key reason for us is we just don't
19:06
Speaker 5: know how to value it. So we're when we invest
19:10
Speaker 5: in a company, right, we know how to value that company.
19:13
Speaker 5: We might not get it completely right every time, but
19:16
Speaker 5: we have a really solid framework on valuing a company.
19:19
Speaker 5: So I can value a company by looking at the
19:22
Speaker 5: earnings that it's going to deliver me over the next
19:25
Speaker 5: ten years in discount it to today's prices. With cryptocurrency,
19:29
Speaker 5: I just can't do that. I'm effectively getting my return
19:35
Speaker 5: through changes in the price, and I find it really
19:38
Speaker 5: hard to determine what those changes are in the prices.
19:43
Speaker 5: So that's why we don't invest in it and don't
19:47
Speaker 5: include it in portfolios. But then that pigs the question
19:50
Speaker 5: you go, well, if you're not investing in it, all
19:52
Speaker 5: these people are making so much money that coin price
19:55
Speaker 5: keeps going through the roof, and what's the deal with that.
20:00
Speaker 5: So there has always been so since the world moved
20:04
Speaker 5: to fiat currency. And what fat currency is is when
20:08
Speaker 5: your currency is not backed with anything so you know,
20:11
Speaker 5: back thirty or forty years ago, currency was backed by
20:15
Speaker 5: gold in the US, for example. Ever since then, people
20:19
Speaker 5: have been really worried about storing their money purely in cash,
20:27
Speaker 5: okay or in a bank account. Now, that's why gold
20:32
Speaker 5: has been such a popular investment for so long. It's
20:35
Speaker 5: been an anti feart or anti cash way of storing
20:40
Speaker 5: your money, and very much bitcoin has that characteristic as well.
20:47
Speaker 7: Can I just ask this, what therefore do you how
20:50
Speaker 7: do you view the incoming administration in the States as
20:57
Speaker 7: apparent but seemingly going to review regulations around bitcoin? What
21:01
Speaker 7: does that mean exactly?
21:04
Speaker 5: So the incoming administration and one of the key reasons
21:10
Speaker 5: bitcoin has rallied and banks have rallied is that it
21:16
Speaker 5: doesn't look to be on their policy agenda to create
21:20
Speaker 5: further regulation around bitcoin and further regulation around banks. So
21:28
Speaker 5: that's in essence, just creating more rules and hoops for
21:31
Speaker 5: them to jump through. So that's largely been seen as
21:34
Speaker 5: positive and that's why both bank stocks and cryptocurrencies like bitcoin.
21:40
Speaker 5: That's why they've rallied. Because what can really kill a
21:44
Speaker 5: share price or the price of an asset is really
21:48
Speaker 5: strong regulation. We saw that with banks following the global
21:52
Speaker 5: financial crisis, where they delivered really poor returns to customers
21:56
Speaker 5: because they were under quite a large regulatory impost. So
22:01
Speaker 5: the banks made them hold more capital against their assets.
22:05
Speaker 5: So that's why with this administration people have been quite
22:07
Speaker 5: positive of on bitcoin and banks.
22:11
Speaker 4: Okay, man, yep, got on it. Thanks for that, Thank
22:14
Speaker 4: you so much.
22:14
Speaker 7: Okay, thanks, But.
22:16
Speaker 4: Gosh, what would you have given to buying a bitcoin
22:18
Speaker 4: when it was only about ten cents.
22:20
Speaker 5: My brother actually tagged me and he sent me this
22:26
Speaker 5: post he saw on Facebook where somebody, you know, was
22:32
Speaker 5: given a few bitcoin in because they sold something to
22:37
Speaker 5: someone and apparently they sold it something like ninety thousand
22:42
Speaker 5: and it's worth tens of million dollars today. Yeah, there's
22:47
Speaker 5: lots of lots of stories like that. It is. It's
22:50
Speaker 5: quite unbelievable the price.
22:52
Speaker 4: Yeah, I remember getting emails about bitcoin and it was
22:54
Speaker 4: like you get buy it for about I don't know this.
22:56
Speaker 4: I think there was a time it was about a
22:57
Speaker 4: dollar or something. If you bought a thousand bucks of bitcoin,
23:00
Speaker 4: then you'd have a thousand times one hundred and fifty
23:02
Speaker 4: four thousand. Let's not do those numbers, because you know,
23:06
Speaker 4: it's like the world is for of investment stories like that,
23:09
Speaker 4: but there's probably also the alternative one where people buying
23:13
Speaker 4: at a great price neck and it doesn't do so well.
23:15
Speaker 4: But anyway, hey, look we need to take a break.
23:17
Speaker 4: We're back in a moment Chris with Smart Money with
23:20
Speaker 4: Chris de Lever talking about the impact of the Trump
23:24
Speaker 4: victory in the election, taking your cause on O eight
23:27
Speaker 4: one hundred and eighty ten eighty and we've got lots
23:28
Speaker 4: more to talk about. We're back in just to take
23:30
Speaker 4: it's coming out to half past five news talks. He'd
23:32
Speaker 4: be welcome back to Smart Money on the weekend collecting.
23:56
Speaker 4: My guest is Chris de Lever. He's director ahead of
23:58
Speaker 4: a multi asset and global investments at Harbor Asset Management.
24:03
Speaker 4: Let's take some more calls. Chris Nigel, Hello.
24:07
Speaker 8: Good afternoon, the young Tim. It's a gorgeous day underneed
24:10
Speaker 8: and and sunshine with a bit of cloud, but it's
24:15
Speaker 8: going to be stinking hot end and need and tomorrow
24:17
Speaker 8: is supposed to get up to twenty degrees. That we
24:20
Speaker 8: called for you as a Tim.
24:21
Speaker 4: Oh, they're bunschilling up here. Anyway, Have you got a call,
24:26
Speaker 4: Have you got a question for Chris to Lever.
24:28
Speaker 8: Yeah, we'll get on the money.
24:30
Speaker 6: Yep, yep.
24:31
Speaker 8: What does he think of reverse mortgages? Oh, someone on
24:35
Speaker 8: the cusp of retirement.
24:38
Speaker 4: Slightly different question for you there, Chris.
24:41
Speaker 5: Yeah, I'm not a big expert, to be honest, and
24:43
Speaker 5: I hold myself out to be one. You know, looking
24:47
Speaker 5: at them that the key thing to look at it
24:52
Speaker 5: as just the fees em better than them. We've got
24:55
Speaker 5: a couple of our analysts in the team who cover
24:59
Speaker 5: some of the companies that do reverse mortgages, and yeah,
25:03
Speaker 5: I know that the fees em better than them, can
25:06
Speaker 5: be quite can be quite high. Look, I mean I
25:09
Speaker 5: see a role for them in the market, you know,
25:14
Speaker 5: because there are actually just so few investment kind of
25:19
Speaker 5: vehicles out there where you can kind of get paid
25:22
Speaker 5: out a certain amount kind of each month, you know,
25:25
Speaker 5: to help with living goths like saying annuity would So look,
25:30
Speaker 5: I get the purposes of them, but you know, the
25:32
Speaker 5: key thing I'd look at when assessing them is just
25:36
Speaker 5: the fees and obviously therefore the interest rate embedded kind
25:41
Speaker 5: of within them.
25:42
Speaker 4: There was actually there's an episode we had a little
25:45
Speaker 4: while ago, not the last one with Martin Hughes but
25:47
Speaker 4: the one before, Nigel, you can go and check it was.
25:50
Speaker 4: I think it was called a reversion mortgage. Wasn't it
25:52
Speaker 4: was something else. It was when they it's worth looking
25:55
Speaker 4: out the alternative to reverse mortgages. I can't remember what
25:59
Speaker 4: it was called, but it was it's based on you
26:02
Speaker 4: selling part of your house to them, but they can't
26:04
Speaker 4: actually do anything with it.
26:07
Speaker 5: I think that one is a new one offered by Lifetime.
26:12
Speaker 5: So I think the players in New Zealand there have
26:14
Speaker 5: been Heartland and Lifetime has offered a slightly different, as
26:21
Speaker 5: you say, products, So yeah, there are some options kind
26:26
Speaker 5: of out there. But yeah, yeah, I'm not sure to
26:29
Speaker 5: be honest.
26:30
Speaker 4: If you go, that's that's fine. We probably weren't expecting
26:34
Speaker 4: some too much detailing with you on that one, Chris
26:37
Speaker 4: the but Nigel, yeah, go and look for the go
26:40
Speaker 4: and look for the smart money with Martin Hawes, not
26:43
Speaker 4: the last time, but the previous time. It's all on
26:44
Speaker 4: the website and he talks about that there and it's
26:46
Speaker 4: a different it's a it's an alternative you could have
26:49
Speaker 4: a look at and it's hold it.
26:52
Speaker 8: What do you remember when I was talking to the
26:54
Speaker 8: other day, I'm still living in the yether love world,
26:57
Speaker 8: I can't afford that.
26:58
Speaker 4: Well, I'll see if I can find it. I'll see
27:00
Speaker 4: if I can find it and give it a mention. Okay,
27:02
Speaker 4: but yeah, okay sorry.
27:04
Speaker 8: Also one final thing, one final thing if I could,
27:08
Speaker 8: what about the four Bergossi banks owned banks in New Zealand?
27:11
Speaker 8: Do they not do reverse mortgages?
27:14
Speaker 2: I don't know.
27:15
Speaker 4: It's not really Chris's area of expertise unless you've got
27:17
Speaker 4: something you can offer on that, Chris.
27:19
Speaker 5: I don't actually think they do. But yeah, I wouldn't
27:23
Speaker 5: be able to say that with a high degree of confidence.
27:27
Speaker 2: No, no, all good.
27:28
Speaker 4: Hey, thanks for your call that Nigel. Nice to hear
27:30
Speaker 4: from you. But by the way, last time on the show,
27:32
Speaker 4: you're talking a lot about bonds is a good investment
27:34
Speaker 4: versus cash? Is that still the case?
27:38
Speaker 5: It's not as good as it was, And the key
27:41
Speaker 5: reason for that is we've actually seen since then bond
27:45
Speaker 5: returns have been really, really strong. So when I was on,
27:52
Speaker 5: I think we were talking about bonds versus cash because
27:55
Speaker 5: you know, cash was kind of delivering you five and
27:58
Speaker 5: a half percent at the time, and we thought there
28:01
Speaker 5: was some scope for bond yields to fall particularly in
28:06
Speaker 5: New Zealand as inflation started to become more under control.
28:11
Speaker 5: And you know, we still think they're a pretty good investment,
28:15
Speaker 5: but actually not as good as they were. Jeez, I
28:18
Speaker 5: think I was on six or eight months ago to
28:21
Speaker 5: I must have done something to offend you, because I
28:23
Speaker 5: haven't been on since then.
28:25
Speaker 4: You have, no, I think it was.
28:27
Speaker 5: The last time I was on was probably six to
28:29
Speaker 5: eight months ago. Yeah.
28:31
Speaker 4: I think that's down to your team because we have
28:33
Speaker 4: different members from Harbor Asset Management, and really I to
28:37
Speaker 4: check that out. I'm feeling guilty about that.
28:39
Speaker 5: Oh no, it's only Jacob. Yeah, so no, Look, bonds
28:43
Speaker 5: have done, bonds have done really well since then. Look,
28:48
Speaker 5: you know, I still think they've got a good role
28:51
Speaker 5: to play in a portfolio, to kind of be that
28:58
Speaker 5: defensive ballast for when equities are having a tougher time.
29:02
Speaker 5: But a lot of that return you know that we
29:06
Speaker 5: talked about six or eight months ago, has has kind
29:09
Speaker 5: of come, which has been which has been really good.
29:12
Speaker 5: I think there'd be a few investors looking at at
29:14
Speaker 5: term deposits at the moment and probably observing that they've
29:17
Speaker 5: come down, you know, particularly if I look at the
29:20
Speaker 5: twelve month rates you could easily get kind of five
29:25
Speaker 5: and a half percent, say, you know, six or twelve
29:28
Speaker 5: months ago. You know today it's more four to seventy five,
29:33
Speaker 5: you know, to a bit under five percent the way,
29:38
Speaker 5: given inflation is running at two point two percent over
29:42
Speaker 5: the past twelve months. No cash s rates, they will
29:46
Speaker 5: continue to come down. You know, that's been priced by
29:49
Speaker 5: the market. So the key thing I'd say to call
29:52
Speaker 5: is looking at term deposits at the moment, is that
29:57
Speaker 5: what you're getting at the moment. Market forecasts probably show
30:01
Speaker 5: that they come down another you know, one one and
30:04
Speaker 5: a half percent over the next twelve months. So I
30:07
Speaker 5: think bonds and relativity to cash. You know, for me,
30:11
Speaker 5: they're still attractive, but not quite where they were.
30:14
Speaker 4: Yeah, good stuff. Actually, I see it was seventeenth of
30:17
Speaker 4: Junu last time, so it has been a while between
30:20
Speaker 4: drinks for you. You must have you must have had
30:22
Speaker 4: a couple of other people at Harbor Ascid who jump
30:24
Speaker 4: the queue.
30:25
Speaker 5: Oh we definitely yeah, no, we definitely know, we must have.
30:28
Speaker 4: I'll have a check to Andrew, Andrew and Shane just
30:31
Speaker 4: so hey, back off, I've got to play some catch
30:33
Speaker 4: up here anyway. Hey, look we've got to take a break.
30:37
Speaker 4: We'll be back in just a moment. We're talking with
30:39
Speaker 4: Chris de Lever. He's a director and he's head of
30:41
Speaker 4: multi Asset and Global Investments. Any questions you've got about
30:44
Speaker 4: especially looking at the New Zealand dollar it's weakened through
30:48
Speaker 4: the against the United States dollar, and also the questions
30:53
Speaker 4: around what Trump means for investment markets. If you've got
30:55
Speaker 4: your take or you want there's a question you've got
30:57
Speaker 4: for Chris, we'd love to hear from you on eight
30:59
Speaker 4: hundred eighty ten eighty. It's twenty to six News Talks.
31:01
Speaker 2: He'd best conversation.
31:19
Speaker 4: Welcome back to Smart Money. This is the Weekend Collective.
31:21
Speaker 4: I'm Tim Beverige. My guest is Christ de Lever. He
31:23
Speaker 4: is head of multi Asset and Global Investments in Harbor
31:25
Speaker 4: Asset Management. A few questions we've got to get through
31:27
Speaker 4: with your Chris. The first one is so the New
31:30
Speaker 4: Zealand dollar has weakened a lot versus the United States dollar.
31:34
Speaker 4: And we'll get the details on that because it's always
31:37
Speaker 4: relevant if you go into holiday, especially to the States.
31:39
Speaker 4: But how's the New Zealand dollar looking against other currencies
31:42
Speaker 4: like the euro? My guess and I don't have the
31:45
Speaker 4: data and you can. This is why I'd just like
31:46
Speaker 4: to guess fun that not great for holiday to the States.
31:51
Speaker 4: But if you go to Europe, I'm guessing the euro
31:53
Speaker 4: is also falling against the United States dollar? Am I
31:56
Speaker 4: right or wrong?
31:58
Speaker 5: Yeah, you're right. It's a case of US dollar strength
32:03
Speaker 5: as opposed to New Zealand dollar weakness. And and what's
32:08
Speaker 5: driven that US dollar strength? You know, really actually it's
32:13
Speaker 5: really had another leg stronger following the US election results,
32:20
Speaker 5: and you kind of go, well, why is that. The
32:23
Speaker 5: key reason is that you know, Trump will Trump will
32:30
Speaker 5: run deficits, which means that he'll pump a good amount
32:34
Speaker 5: of money into the economy, so the US will have
32:37
Speaker 5: a pretty strong economic growth. The other thing is that
32:42
Speaker 5: the US economy, actually even before Trump and any anticipation
32:47
Speaker 5: of that, is running really really strong. So and particularly
32:54
Speaker 5: in comparison to ours. Right, So if you look at
32:56
Speaker 5: New Zealand, we tightened or signaled that we're tightened interest
33:00
Speaker 5: rates about six months earlier than the US and the
33:05
Speaker 5: rest of the world, and we've really had some quite
33:08
Speaker 5: severe economic slowing. And the reason for that is that
33:13
Speaker 5: when we put up infrastrates in New Zealand, that impact
33:17
Speaker 5: occurs really fast. So a lot of us, when we
33:20
Speaker 5: fix our mortgages, we fix them for six months, one year,
33:24
Speaker 5: two years, very seldom beyond that. So when we put
33:27
Speaker 5: up interstrates in New Zealand, that really started to bite.
33:31
Speaker 5: But now we're starting to put them down and we
33:34
Speaker 5: have inflation within target, we're starting to come out the
33:38
Speaker 5: other side of that. So what we think is at
33:42
Speaker 5: current levels, we're at fifty eight cents versus the US dollar,
33:48
Speaker 5: it's pretty much a twelve month low. In recent times,
33:53
Speaker 5: it got to about fifty five cents in COVID. But yeah,
33:57
Speaker 5: our view as a firm, and what we're doing in
34:01
Speaker 5: portfolios is to actually have less exposure to US dollars
34:06
Speaker 5: at the moment, because we think, you know, fifty it's
34:09
Speaker 5: actually quite a decent level for us to short some
34:15
Speaker 5: of our US dollar exposure. So we think from there
34:20
Speaker 5: it won't happen in the next kind of one month,
34:22
Speaker 5: two months, or one month too, you know, two weeks.
34:26
Speaker 5: You know, it's a longer term view that we think
34:29
Speaker 5: that the key we can probably strengthen versus versus the US.
34:34
Speaker 4: Okay, I've got a text here that assumes some facts
34:37
Speaker 4: that might not be an evidence, but it says, how
34:40
Speaker 4: might possible US stagflation effect New Zealand, specifically the housing market?
34:45
Speaker 4: And I guess the question is, well, the two questions
34:48
Speaker 4: are because I can never remember exactly how to define
34:50
Speaker 4: stagflation and is it actually a possibility? And then it's
34:54
Speaker 4: a loaded text. Really what is it? Could it happen
34:57
Speaker 4: in the States, and what would it mean for US?
35:00
Speaker 5: So stagflation is essentially when inflation goes up more than
35:06
Speaker 5: economic growth does, so it's really what you don't want.
35:11
Speaker 5: And it's typically not a good thing for share markets
35:14
Speaker 5: as well, because it essentially means that interest rates will
35:19
Speaker 5: go up, but earnings, which are linked to economic growth,
35:23
Speaker 5: won't go up as quickly. So it's rarely when I
35:27
Speaker 5: look at economic scenarios that you don't want, stagflation is
35:31
Speaker 5: very very high on the list. So what does that
35:35
Speaker 5: mean in a stagflationary environment? It means that US interest
35:41
Speaker 5: rates will need to stay higher. It means a very
35:45
Speaker 5: strong US dollar, So it probably means it's probably not
35:51
Speaker 5: terrible news for New Zealand exporters because they'll be earning.
35:57
Speaker 5: They'll often earn commodities that are drived in US dollars
36:01
Speaker 5: and bring them back to Key. We But look, it
36:04
Speaker 5: wouldn't be a great environment for people, say, Key, we
36:07
Speaker 5: save a portfolio. If your largest economy in the world
36:10
Speaker 5: that makes up you know, seventy percent of the global
36:14
Speaker 5: share market is in stagflation. What's the risk of stagflation?
36:22
Speaker 5: It's Look, it's it doesn't seem really high that you know.
36:29
Speaker 5: The key scenario that could lead to it is if
36:32
Speaker 5: Trump just keeps spending money and racking up deficits and
36:40
Speaker 5: the menslation runs.
36:41
Speaker 4: On tax cuts. Really, isn't it correct?
36:43
Speaker 5: Yeah, so it would be it would be tax cuts.
36:48
Speaker 5: It will also be if people get worried about interest
36:53
Speaker 5: rates and interest rates kind of go up again, bond
36:55
Speaker 5: yields go up again, that that wouldn't be particularly good.
36:58
Speaker 4: Just a quick dumb question. I look at the simple
37:00
Speaker 4: explanation of a stagflation that you've referred to, so high inflation,
37:05
Speaker 4: low economic growth, and high unemployment. Have we been in
37:08
Speaker 4: a situation of stagflation? Because it doesn't sound like a
37:10
Speaker 4: description which is necessarily that rare.
37:16
Speaker 5: Yeah, I mean we got pretty close to New Zealand, right,
37:19
Speaker 5: we had really really high inflation. Yeah, I mean and
37:22
Speaker 5: we had kind of we had kind of growth coming
37:24
Speaker 5: off that we didn't really have it for a sustained
37:27
Speaker 5: period of time. It was kind of a fleeting moment
37:32
Speaker 5: in time. Really we still had high inflation. We're tightening
37:37
Speaker 5: interest rates, but now we've kind of settled to more
37:41
Speaker 5: inflations within the band. Growth in New Zealand still pretty weak, right,
37:47
Speaker 5: But yeah, I'd say if we were in stagflation.
37:50
Speaker 4: It was very, very minor good stuff. We got to
37:52
Speaker 4: take a break. We'll be back in a moment with
37:54
Speaker 4: Christ Deliver. He's head of multi asse and Global Investments
37:57
Speaker 4: at a harbor Asset meaguement. You want to check out
37:59
Speaker 4: their work and go to harbor Asset dot co dot nz.
38:02
Speaker 4: We'll be back in a moment. It's ten to six. Yes,
38:17
Speaker 4: welcome back to smart Money. Yes we haven't. There's another
38:20
Speaker 4: our themed tune for you. I think that's Gwen Stefani.
38:24
Speaker 4: If I were a rich girl, believe it or not,
38:26
Speaker 4: fun fact for you. Would you ever believe you'd hear
38:28
Speaker 4: and asked like Gwen Stefani singing a song which is
38:31
Speaker 4: pretty much a rip off of something from Fiddler on
38:33
Speaker 4: the Roof, which is if I were a rich man,
38:36
Speaker 4: and I don't imagine how many of our fans would
38:38
Speaker 4: realize how old school that song is. Anyway. Chris de
38:41
Speaker 4: Levera from Harbor Asset Management Lucky. Last question, because we're
38:44
Speaker 4: just about wrapping up now, how are we going with
38:47
Speaker 4: inflation in New Zealand now? Because we we're hearing a
38:50
Speaker 4: lot less about it. Are we under control?
38:54
Speaker 5: Yeah? Well, I mean we're within the band. So the
38:56
Speaker 5: reserve band co operates a band of one to three percent.
39:01
Speaker 5: We're running at two point two percent at the moment.
39:05
Speaker 5: So yeah, it's mission pumplished for the Reserve Bank of
39:10
Speaker 5: New Zealand. We've kind of seen it globally come off
39:15
Speaker 5: quite significantly, and part of it's due to monet prey
39:21
Speaker 5: policy tightening, I use central banks putting up interest rates,
39:25
Speaker 5: but a lot of it is just that normalization of
39:29
Speaker 5: the supply chain issues that we saw happen during COVID
39:33
Speaker 5: and that created bottlenecks. It actually took quite some time
39:37
Speaker 5: to fully work through. And you know, it wasn't just COVID.
39:42
Speaker 5: You know, following COVID, we had Russians, Russia's invasion of Ukraine,
39:48
Speaker 5: you know, which created further supply issues with key commodities
39:53
Speaker 5: like oil and gas. So with a lot of that
39:58
Speaker 5: in the rare vision mirror. Now unfortunately the war isn't
40:01
Speaker 5: in the rearview mirror. But you know, COVID is we've
40:07
Speaker 5: seen that normalization and that's kind of term ysset. Markets
40:12
Speaker 5: have been performing so strongly, right. We went from this
40:15
Speaker 5: period where people thought, oh, no, we're going to have
40:18
Speaker 5: inflation forever, but actually central banks around the world, the
40:23
Speaker 5: US in particular, have managed to get inflation down while
40:28
Speaker 5: not killing economic growth. So it's actually been quite an
40:33
Speaker 5: achievement when you look back on it. I can remember
40:35
Speaker 5: doing shows tim when inflation was rampant, right, and there
40:40
Speaker 5: were cues at the ports with ships going for miles.
40:46
Speaker 5: So isn't it amazing where we've come?
40:49
Speaker 2: Oh?
40:49
Speaker 4: It is indeed. Look we've got about forty seconds left,
40:52
Speaker 4: but just quickly. The cash rate's going to be announced
40:55
Speaker 4: in the about twenty seventh of November, or any revision
40:57
Speaker 4: of it. What are you picking? It's four point seventy
40:59
Speaker 4: five at the moment, isn't it. If I got the
41:01
Speaker 4: wrong it's at four point two five? What have I
41:03
Speaker 4: got anyway?
41:05
Speaker 5: Yeah, it's four point seventy five at the moment. Look,
41:08
Speaker 5: Mark kid expectations are for half a percent cut, so
41:13
Speaker 5: I think our fixed interest team is roughly there or thereabouts.
41:17
Speaker 5: And yeah, for one point twenty five over the next
41:20
Speaker 5: year or so.
41:21
Speaker 4: Good stuff. Hey Chris, thanks so much for your time.
41:23
Speaker 4: Make great work and we'll look forward to next time. Harbor,
41:26
Speaker 4: Thanks so much, Tim harborst Dot Cut and Z. Thanks
41:29
Speaker 4: my producer Tira and Franka Jackson. Next with Sunday six.
41:32
Speaker 4: Thanks for your company. You catch up the Weekend Collective
41:35
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41:36
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