Should your clients be buying the dip in
tech after the sell off we saw yesterday
and the ongoing dip we're seeing in
European defense names?
>> Yeah, so we lean still in on the bullish
side when it comes to AI. I'm not going
to lie on on that. Growth assets, long
duration assets, they tend to like Fed
cutting interest rates. We think they're
going to do the same this time around.
uh when we look at technology, it's
still the sector that we expect to see
very close to a 20% earnings growth from
this year, outpacing by far uh most of
the other sectors that we are that we
are covering. It's very clear at the
moment. It is a little bit of an
uncertain time just because we have
Jackson Hole coming up with that very
important sort of rate setting guidance.
We also have Nvidia coming up next week
as well. So that's a little bit of an
uncertainty at a time where valuations
seem to bit on on the stretch side. So,
so, so, so, so no, we still like it,
guys, to to come to the conclusion here.
>> Okay. You you say, as you say, long
duration assets, they respond to what
happens in interest rates. That's fine.
I shortend yields are going potentially
going to go lower if the Fed does cut
and and you're right on that front. But
longend yields are doing the exact
opposite right now, Mark. The curve is
steepening. I've got a US 30-year that's
north of 5%. I've got a US 10-year
that's pushing higher as well in terms
of the yield. Shouldn't that be a
negative for tech stocks?
that would be a negative for tech
stocks. So what we're expecting is that
the long end of the curve will start to
come down as we start to see those cuts
coming in as well. So if we look at
something at the US 10ear point which is
currently yielding at around 4.3%.
We expect that to come down to around
4%. We expect the five the 30-year to
rally from from current levels close to
5% as as as well. So we think that there
is an opportunity here in tech names
both from the sort of the cutting cycle
but also earnings that are still well on
on track. I think what is happening we
saw this unhinging of the long end of
the curve is certainly uncertainty
around inflation expectations again we
saw these producer prices coming up
inflation expectations in Michigan
survey were sort of moving upwards uh
again Stephen Moran coming in on the Fed
eventually this Fed independent story is
something that makes markets a bit
nervous but I don't think it's going to
change sort of the overall course of of
the Fed and ultimately we think that
long end yields are going to be driven
by the short end as we usually
And Mark, how are you disagregating the
tech sector in the United States right
now? Because of course there's the likes
of Nvidia and those that have led the AI
enthusiasm trade and then there are
those you might deem to be AI lagards
but still exposed to that trend. How are
you uh separating the two and over what
kind of time frames?
>> Uh that's a good question. So we've very
much in this early phase over the last
one two years focused very much on the
enap of be it sort of the the chip
makers and and and the like at the
moment we tend to focus a bit in around
some of the more defensive names with
sort of more stable earnings growth. I
think as we're moving out over the next
one to two years we're going to see more
of the sort of applications or the usage
of AI that's going to be exciting. So I
think this is a journey that has started
where we're still in the early innings
of of this game. So when we look at the
surveys that are being conducted within
US firms, how many have really adopted
AI? We're not even at 10% yet. So I
think again we're in a very early days.
There's still a long game to be played
and we're trying to staying on top of
this as one of our core investment
themes that we guide our our clients
towards in our multi-asset portfolios is
something that we continue to to night.