Logic Monday Espresso Podcast

Monday Espresso Podcast – 24th February 2025

[00:00:00] Nathan Sweeney: It is Monday, the 24th of February. Hard to believe the year is rolling on. I'm Nathan Sweeney, CIO of multi asset at Marlborough. And today I'm really pleased to be joined by Rory Dowie. So Rory is our newest addition to the team. Rory is a portfolio manager within the team and he'll be covering global equities.

[00:00:16] Nathan Sweeney: So good morning, Rory.

[00:00:19] Rory Dowie: Good morning, Nathan.

[00:00:21] Nathan Sweeney: So as mentioned, really good to have you on the pod this morning. So let's start with what was happening in markets last week.

[00:00:27] Rory Dowie: Yeah, so markets were a little bit volatile last week, on the back of a couple of choppy earnings prints, but broadly still remained flat to up, not enough to really change the year to date picture. And Europe's still really leading the way across main developed markets, having an 8% lead over the US so far this year. I guess if there was one notable equity index last week, it was the Hang Seng index in Hong Kong, that's now up over 18% for the year, and really that was buoyed by sentiment around Alibaba's very strong earnings print last week, where Alibaba was up 14%.

[00:01:00] Rory Dowie: Notable day of the week last week was on Thursday, and actually we saw quite a sharp move across equity markets, particularly in the US. And really that came because of some comments made during Walmart's earnings release. And Walmart, the US discount retailer, is typically a very good barometer on the state of the consumer and gives very good guidance to the rest of the markets.

[00:01:18] Rory Dowie: And they were worried a bit about their earnings for next year and actually revised down so that sent a bit of a shudder through some of the consumer stocks.

[00:01:26] Nathan Sweeney: Okay. So quite, quite a lot happening in markets last week. So I think we can delve into some of that and unpack it.

[00:01:32] Nathan Sweeney: First thing I was going to talk about is actually at our Monday morning team meeting last Monday, we learned a new term and I'm not going to try and pronounce it, but it is a fear of buttons ultimately. And this is something that Steve Jobs suffered from, and it led to obviously the production of the iPhone.

[00:01:50] Nathan Sweeney: But I'm kind of weaving this into Donald Trump pushing political buttons last week across Europe and the movement we've seen within defense stocks. So defense stocks were really rip roaring last week. So, what's happening there?

[00:02:05] Rory Dowie: Yeah. So typically the US has contributed a high proportion of its GDP to defense spending, and now we have a Trump government or Trump's in charge of the US.

[00:02:15] Rory Dowie: European countries are now worried that they're going to need to boost spending to level similar as the US otherwise Trump will be coming after them with tariffs or other potential policy changes. So really that's led to huge amount more optimism for some of these defense names. And you saw that in the share price performance we had last week, particularly across European defense names.

[00:02:34] Nathan Sweeney: Yeah. And you also then talked about tech kind of moving within China. And this is really interesting because from a tech perspective, it's a sector in China, which has been out in the cold. So President Xi back in 2020 was looking to realign the economy, moving away from tech into other industries. You will know that Jack Mao is a very influential figure within Chinese tech co owner of Alibaba. And ultimately, we had a meeting last week in the Great Hall of the People in Beijing, and Xi Jinping shook hands with Jack Mao. And you commented on Alibaba's earnings. So let's, let's unpack some of that.

[00:03:17] Rory Dowie: Absolutely. China's typically had a bit of a love hate relationship with some of the tech names in the past and they've had quite strong regulations on some specific sectors. And you know, you've seen over the past 10 years, some parts of that tech market in China been completely wiped out due to regulation changes. And I think really what this conference shows is that that regulatory stance that China has historically had might be shifting.

[00:03:41] Rory Dowie: And really that's really helped to buoy sentiment to some of these Chinese tech names. Obviously we had DeepSeek back in January and obviously we've had Alibaba's strong earnings last week. So really there's a real change in investor sentiment to Chinese tech, which again is one of the main reasons why the Hang Seng index is the strongest performing region this year.

[00:04:00] Nathan Sweeney: Yeah. And we saw some really strong moves from Alibaba following earnings there during the week as well, which has helped that index. I suppose the other thing to comment on is we did have some inflation data in the UK. So good news in that over the month, inflation is down, but ironically, obviously over the last year, inflation is up.

[00:04:17] Nathan Sweeney: But I think consumers should be really focusing on the near term number there. But yeah, what's your take on inflation?

[00:04:22] Rory Dowie: Yeah, so UK CPI declined by 0.4% month on month in January, which was down from plus 0. 3% in December. Headline inflation was 3. 3% year on year. So actually, even though it increased year on year, And it was down in January, that's because of the base effect that we've had essentially, so the way you're measuring that year on year, that shifts over time so month on month, it came down, but actually it increased year on year in January, up from the 2. 5 in December. And we're actually now at the highest level since March 2024. So one to keep an eye on, but yes, it was kind of in line with expectations. So nothing too scary for the market.

[00:04:58] Nathan Sweeney: So this week, obviously we've got some big earnings results.

[00:05:02] Nathan Sweeney: So what should we be looking out for?

[00:05:04] Rory Dowie: Yeah, really, it's NVIDIA that's going to grab the headlines, I think, this week. You know, it's typically one of the last companies to report. The last one of the magnificent seven. They've not been so magnificent this year in their share price performance, but really, still, there's a lot of hope around earnings growth coming from these seven companies.

[00:05:21] Rory Dowie: Obviously, stellar, stellar growth 200% earnings growth type numbers we saw kind of at the start of last year. And really, depending on what we might get in some of the guidance, you might expect other parts of the market to trade up or down, depending on what some of the guidance we get from management.

[00:05:37] Rory Dowie: But really, it would be very interesting to see their views on where we are in the AI cycle and any indication we have from some of the spending on the other big players like Alphabet and Amazon that we saw at the start of earnings season. Yeah, that's really the notable data point next week, I think so yeah, all eyes on, on Wednesday evening, I think it is when they report.

[00:05:56] Nathan Sweeney: Okay. Excellent. Really good to have you on the pod. Some great insight there for the audience. As mentioned previously, if you do have any questions you'd like us to bring up on the pod, send them in. Thank you, Rory and have a great week, everybody.