Personal Wealth Management Monday Espresso Podcast

Monday Espresso Podcast - 28th April 2025

[00:00:00] Nathan Sweeney: It is Monday the 28th of April. Today I'm joined by Rory Dowie, portfolio manager on our DFM side. Good morning, Rory.

[00:00:08] Rory Dowie: Good morning, Nathan.

[00:00:10] Nathan Sweeney: Great to have you on the show. There's been a lot happening in markets over the last couple of weeks. Really good to see some respite in markets and actually some positive returns.

[00:00:18] Nathan Sweeney: But let's go through what was driving market returns last week, and there's lots of other bits for us to discuss.

[00:00:24] Rory Dowie: Oh yeah, you said it yourself there, Nathan. Positive returns feels like a while since we've been talking about that, but yeah, markets were up last week and actually in a bit of a reverse, what we've seen this year, it was the US leading the way.

[00:00:35] Rory Dowie: The US was up over 6% last week, you know, ahead of Europe, which was up 3.5% Japan, up 4% and Hong Kong up 2%. And again within the US, interestingly, it was the tech heavy parts of the market namely the NASDAQ, which led the way. The NASDAQ was up over 8%. Remember that's that group of those high tech companies in the US and they're the ones which have really suffered the most this year.

[00:00:55] Rory Dowie: But actually, interestingly, they were up the most last week. What was causing that? No surprise, really Trump and his tariffs, and actually a lot of the news had got a bit more incrementally positive. And so we saw some positive comments around tariff negotiations, Trump as and his administration, and made various positive comments, particularly around the number of countries which were now negotiating with the US.

[00:01:15] Rory Dowie: Supposedly over 70 countries, and then actually on Thursday. The administration announced that they were in talks with Beijing, and obviously we've seen quite a hard line on negotiations with China, and so obviously when the administration came out and spoke about, its potential talks with China, you know, the market took that very, very well.

[00:01:32] Rory Dowie: So I think that was, you know, really what helps to drive some of the positive news and some of that positive return last week.

[00:01:37] Nathan Sweeney: Yeah, we often talk about this in investing. It's one of the key principles of investing. The fact that you can have these big down days in markets or big drawdowns, and often you'll find that the big up days follow in pretty short order.

[00:01:52] Nathan Sweeney: And we have run data on this, and you'll often find that when you get those big down days, you tend to get those big up days within about two weeks of those down days. And this is a great example of this, so a real live example. So it's really good to highlight this principle at this point in time. And the other interesting thing you picked up on was the fact that, you know, the data hasn't gotten materially better, or the news flow materially better.

[00:02:14] Nathan Sweeney: But what you've seen is just an incremental improvement. And this is how markets tend to work, is it can just pick up on the small nuances and that small change in language from the Trump administration and you can get a quick reversal in markets. So it really does highlight that, you know, timing the market is so, so difficult and it is that time in the market, which is, you know, really invaluable And I think, if we look at what's happening in the US at this moment in time, we have corporate earnings coming out, and this will be the real temperature check for actually what's happening in the economy.

[00:02:47] Nathan Sweeney: So what are we seeing from corporate earnings, particularly over the last week?

[00:02:52] Rory Dowie: Yeah, absolutely. So 24% of the S&P 500, those 500 top companies in the US reported earnings last week. So you know, really into the crux of earnings season. And again, it's similar next week. Last week we had some kind of real heavyweight starts report. We had two of the Magnificent seven. Alphabet, which is the parent company of Google and also Tesla.

[00:03:11] Rory Dowie: And actually Alphabet was very strong. If you think about Alphabets, they've probably been one of the main laggards in those magnificent seven stocks this year, and really that's been kind of an overhang from this investigation into their Google search business. You know, the Google, which you know, we all know and use so much every day.

[00:03:27] Rory Dowie: The Department of Justice have basically been looking into that thinking that, because they have such a dominant market share, over 90% in the search business, that's anti-competitive and actually so ironic that for the first time in its history almost Google search is having some sort of competition, namely ChatGPT and some of those other kind of large language based sort of chat bots that are out there.

[00:03:48] Rory Dowie: And actually, when you look at the numbers, they were very, very good. That search business came in ahead of expectations. Up 10% year on year. And again, really that's helped to allay some of those concerns around, the impacts that ChatGPT could be eroding some of that market share and actually some of the cyclical nature of kind of advertising spends.

[00:04:06] Rory Dowie: Obviously when we're getting slowing growth, people are less likely to spend on advertising, which obviously would then have a negative impact for Alphabet. So that was very good for the company's earnings. And I think just secondly, I want to mention just. About AI, obviously we hear a huge amount about it.

[00:04:21] Rory Dowie: The company really emphasised how much demand they're seeing across both the consumer landscape and also enterprises. So from companies, and they're really starting to see kind of momentum build across their AI product range and more and more people are using them, so they're kind of getting that nice sort of secular growth, you know, and across more and more people.

[00:04:38] Nathan Sweeney: I was gonna say, and interestingly, speaking of the consumer, we also had some numbers from Tesla during the week and you know, clearly did some disappointment on that side.

[00:04:48] Rory Dowie: Yeah, absolutely. I mean, Tesla's one of those stocks. It's for me, not so magnificent, but it is grouped in that magnificent seven.

[00:04:54] Rory Dowie: You know, the, numbers were actually were pretty nasty for Tesla, vehicles sold were down again, and actually the stock was up. Why was that? For me, two things. One, it was Musk sort of saying he was gonna be stepping back from the Department of Government Efficiency a bit more. People had be getting a little bit concerned about he's, you know, he's not spending enough time looking at Tesla or making that into the great business it could become.

[00:05:14] Rory Dowie: And then the second thing. If you actually look at Tesla, 90% of its value sits in its terminal value that is kind of beyond the next sort of five or 10 years. And really the market prices, Tesla as a bet on robots factory automation and this kind of next gen type, automated worker if you like.

[00:05:32] Rory Dowie: And actually that isn't really price like an automobile maker. So I think for me it's obviously we have the earnings around, the number of cars that's selling, et cetera, but actually really the stock trades off lots of other news, which really isn't around cars. So I think for me that was why the stock was behaving like that.

[00:05:47] Rory Dowie: But yeah, actually the numbers were pretty nasty if you look operationally at the kind of core automotive business.

[00:05:52] Nathan Sweeney: Yeah. And it's one of those stocks which is quite a big hit with the retail audience. But you know, the caution, word of caution there is obviously it can go through big peaks and troughs and you know, the share price being down over 50% at one point this year.

[00:06:04] Nathan Sweeney: You just have to be very mindful that you're taking a lot of risk on when you buy a single stock. But yeah, so a really, really good week for markets this week. So, signs of softening tone from the US government, which the markets are latching onto, which is great news. Speaking of news, what do we have for the week ahead?

[00:06:20] Rory Dowie: Yeah, absolutely. I think it'd be much of the same, to be honest. Nathan, another heavy, heavy week of earnings. Microsoft, one of the few that report AI related revenues. So that would be interesting to look at. We have Amazon reporting, Qualcomm, just to name a few. One thing I would highlight, April the 30th will mark Trump's 100 days in office.

[00:06:37] Rory Dowie: You know, obviously the presidents wanna have that good 100 days. They wanna have some things to look back on and say they've achieved. Do we maybe get some announcements prior to that date on the tariff front or trade negotiations? Let's see. But again, we'll be watching that very, very closely. We also have some usual macro data, particularly on things like inflation expectations, et cetera. So you know, as a team, we'll be looking closely across all of these things.

[00:06:58] Nathan Sweeney: Thank you, Rory, really insightful. Great to have you on the show and to our listeners, you know, unsettling period in markets, but as you can see, markets can turn around quite quickly.

[00:07:07] Nathan Sweeney: If you do have questions, please do send them in. We would love to bring them up on the show. Have a great week everybody, and thank you for listening.