AFH Monday Espresso Podcast

Monday Espresso Podcast - 2nd February 2026

[00:00:00] Rory Dowie: Good morning. Today's Monday, the 2nd of February. My name is Rory Dowie, Portfolio Manager here at Marlborough. Today I'm delighted to be joined by Nick Warmisham again, Nick is one of our Investment Analysts on the team. So Nick, good morning.

[00:00:12] Nicholas Warmisham: Good morning, Rory.

[00:00:14] Rory Dowie: Last week was backend loaded. What I mean by that, it was fairly quiet until Wednesday night where we had Microsoft report their earnings.

[00:00:20] Rory Dowie: We also had earnings from Tesla Meta and Apple. Then on Thursday night, we heard from President Trump about who he's proposing to nominate to be the next Fed chair. I guess before we get into that, Nick January's over. How did markets get on in the first month of this year?

[00:00:35] Nicholas Warmisham: Yeah, I mean, it's been a pretty steady start to the year, albeit with some volatility. From a regional perspective, the theme really is Emerging Markets. They've continued their strong performance from 2025 up over 10% for the month. Aside from that, returns have been more subdued. Europe, the UK, and Japan finished up around three percent. Whilst the US is up around 1.5%. Beyond equity markets, the dollar continues to weaken down around 2% versus the pound.

[00:01:02] Nicholas Warmisham: As sterling investors, that has essentially wiped out gains for US equities. I would also mention gold and silver have continued their strong performance this year, finishing up for the month around 20% and 40% respectively were silver at one point, ticking up around 60%.

[00:01:17] Rory Dowie: So a steady start to the year, then Emerging Markets leading the way and the US dollar continues to weaken.

[00:01:22] Rory Dowie: Interesting the point around precious metals, they continue to be the beneficiary of that weaker dollar. Typically, that dollar is a safe haven asset. So with Trump's volatility, there's been some loss of confidence in that currency, and as a result, you're seeing in central banks and other investors buying other stores of value if you like things like gold and silver.

[00:01:40] Rory Dowie: Thank you for that Nick. Changing tact corporate earnings in the US we had four of the seven largest companies reporting last week. I don't wanna go through all of them in detail, but what were the key takeaways?

[00:01:50] Nicholas Warmisham: Yeah, well, Apple was strong and came in ahead of expectations boyd on by excellent iPhone 17 sales, which were particularly high over the holiday season.

[00:01:59] Nicholas Warmisham: Tesla weren't great though they did announce that they were ramping up facilities for production of the Optimus Humanoid robot with the goal of reaching an output of 1 million units per year. Whilst Meta was probably the standout with 24% revenue growth, they rose 10% on the news. Meta also announced they plan to spend between $115 billion to $135 billion this year.

[00:02:21] Nicholas Warmisham: Nearly double the amount they spent last year.

[00:02:23] Rory Dowie: Okay, so Meta the standout there then. And as you mentioned, large, large capital expenditure numbers for 2026. I think that that number is nearly two times the 2025 numbers so quite remarkable really. Clearly Meta there is seeing the demand for that data set to spending.

[00:02:39] Rory Dowie: Perhaps moving to the company that was less good we haven't mentioned it yet, Microsoft, they reported after the close on Wednesday. Nick, what was the latest there?

[00:02:47] Nicholas Warmisham: Well, actually, if you look at the numbers for Microsoft, they were very good. Revenue is ahead of expectations and grew 17% versus last year. Their intelligent cloud segment was the standout growing 29%.

[00:02:58] Nicholas Warmisham: They reported 110% surge in their order book, meaning the amount of work they've lined up for the future or performance obligations has more than doubled.

[00:03:07] Rory Dowie: So strong numbers, and that came ahead of expectations. Though you would expect the stock to be up on the back of that news, you had a beat on the revenue line and also on the earnings though, actually, if you look at the stock reaction, it was down 10% after the earnings print.

[00:03:20] Rory Dowie: Why do you think that could be?

[00:03:22] Nicholas Warmisham: Well, clearly it's difficult to know with certainty why the market reacts the way it does. But our view is that investors are concerned about those remaining performance obligations. The 110% increase was down to OpenAI. And over the past few months, we've spoken about how OpenAI is still unprofitable.

[00:03:38] Nicholas Warmisham: You have around $1 trillion of investment commitments through to 2030. It seems the market doesn't particularly like companies doing deals with OpenAI as they have concerns around this funding story. So it will be interesting to see whether the company will come good on those promised investments.

[00:03:54] Rory Dowie: Okay, so essentially investors are concerned if it isn't true demand, if you like, and OpenAI can't get their funding or they can't grow those revenues, those reported backlog numbers from Microsoft won't be actually realized as revenue. So that's, you know, one reason why we think the stock is, is down even with those, you know, optically good numbers, and you've sort of seen that with some other stocks over the past few months. Names like Oracle had a similar fate. I guess, changing tact, on Friday we had Trump in the news again, hard not to mention him, this time he said he intends to nominate Kevin Walsh as the next chair of the Federal Reserve in the US.

[00:04:26] Rory Dowie: What's the latest there, Nick?

[00:04:28] Nicholas Warmisham: Yeah, well, like you said there, President Trump officially announced his nomination of Kevin Walsh to be the next chair of the Federal Reserve to replace Jerome Powell in May. Walsh has historically been known as an inflation hawk, meaning he often favored higher interest rates to keep prices stable.

[00:04:44] Nicholas Warmisham: However, he has recently aligned himself with the Trump administration's view that the Fed should be more aggressive in cutting interest rates. Markets took the news fine with little action in the Bond markets. Also, Walsh has served as a Fed governor before from 2006 to 2011. So markets are viewing him as having credibility.

[00:05:02] Rory Dowie: Okay, so a little bit more colour on who could be leading the Federal Reserve then later this year. Perhaps that means we may get more rate cuts as Trump's obviously been pushing for over the past kind of 18 months or so. Finishing up the Nick, what do our listeners have to look out for this week?

[00:05:15] Nicholas Warmisham: Well earning season continues to march on with big names like Amazon and Google reporting this week.

[00:05:21] Nicholas Warmisham: Also, we have jobs, data, and inflation expectations in the US to look forward to.

[00:05:25] Rory Dowie: Great stuff. Thanks Nick, and thanks for joining me again, listeners. We hope you found that useful. As always here if you have any questions and wishing you all a great week ahead.