Logic Monday Espresso Podcast

Monday Espresso Podcast - 25th November 2024

[00:00:00] Nathan Sweeney: It is Monday the 25th of November. Today I'm really privileged to have Edward Kennedy on the show or Eddie as we call him. And Eddie is the head of personal portfolios here at Marlborough. And he's been managing money historically at Credit Suisse, so big investment bank. And managing money for ultra high net worth individuals, pensions and charities.

[00:00:20] Nathan Sweeney: So he knows a lot about managing personal portfolios and really knows a lot about individual stocks. And actually that's why we have them on the show today, because we want to delve into some of that. But before we do any of that, let's firstly quickly recap on what was happening in markets last week.

[00:00:36] Nathan Sweeney: So if we look at markets, markets were up about 1 percent and that's looking at US equities and UK equities. Europe was off slightly. We did have some data out during the week, but it was pretty light. But the big news for the week was NVIDIA's earnings. And so I'm going to turn to Eddie now just to give us some insight there.

[00:00:54] Nathan Sweeney: So NVIDIA, obviously now one of the leading companies in accelerating computing. So can you tell us a little bit more about NVIDIA?

[00:01:02] Edward Kennedy: Good morning Nathan. And let me first say it's great to be here. I'm a long time listener of the show and first time participant. Now, on NVIDIA, as you mentioned, it really pioneered accelerated computing, really to help those most challenging computational problems.

[00:01:19] Edward Kennedy: Now, let me just give a little bit of background on NVIDIA itself. What does it actually do? Well, it develops a platform of scientific computing, artificial intelligence, data sciences, autonomous vehicles, robotics, the metaverse, and 3D internet applications. So it's really a, a company, it's at the forefront of the market just now, and it's really driving performance.

[00:01:45] Edward Kennedy: Now, this week it reported earnings. Now, getting to the earnings reports, the option market, which usually tells you the volatility of different stocks post an event, was actually indicating that the stock could be up 8 or down 8%, so people were undecided on what way the earnings would go. Actually, when you've seen the numbers, what they reported was some really solid numbers.

[00:02:10] Edward Kennedy: You've seen year on year revenue growth of about 100%. But the stock was flat. Why is that? Well, it's just got some high hurdle rates and high expectations to come over.

[00:02:21] Nathan Sweeney: Okay. So obviously we've seen some really strong moves from the share price of that company over the last year, but it is slowing now as obviously those expectations are now in line with the market, but clearly we've seen some strong moves over the course of the last year in terms of the market cap of that company.

[00:02:37] Nathan Sweeney: And you know, it's now one of the biggest companies in the world and there's big expectations for AI and NVIDIA is essentially providing the picks and shovels. So it's at the forefront of this. One of the other data points that we had out was inflation.

[00:02:49] Nathan Sweeney: So we had UK inflation, we had Eurozone inflation, so I suppose for me, the key theme here is that we're seeing a pickup in inflation. Is that something investors should be concerned about?

[00:03:01] Edward Kennedy: I wouldn't say that inflation was something to be concerned about just yet. Not like we had in the last few years. Basically, some of the data points was quite transitory.

[00:03:11] Edward Kennedy: If you look on year on year returns. So we think UK inflation still stays close to the 2 percent target for the Bank of England. So it's not something we're really dramatically changing portfolios yet.

[00:03:25] Nathan Sweeney: Yeah, I suppose one of the concerns for investors will be around rate cuts because clearly interest rates are quite high, they're beginning to come down.

[00:03:33] Nathan Sweeney: Do you think we're still going to get those rate cuts coming through?

[00:03:36] Edward Kennedy: Yeah, we are still in the belief that central banks continue to cut rates. It's probably at a slower pace than expected six months ago, but if you look forward to the next three to six months, there's a few rate cuts priced into the market, definitely.

[00:03:53] Edward Kennedy: And that's the direction of travel is lower from here.

[00:03:56] Nathan Sweeney: And if I look to the week ahead, at some of the things that are on the docket for next week, I think one of them is the FOMC minutes. So this is the U. S. Central Bank, it's minutes from their meeting. So just for the audience, you know, why is something like that?

[00:04:10] Nathan Sweeney: Why is that important? Why would the market, look at a meeting like that or look at a data point like that?

[00:04:17] Edward Kennedy: That's data points quite interesting for all us market watchers. We're really intent on looking at what the FOMC is talking about. There's a couple of reasons.

[00:04:26] Edward Kennedy: First of all, within those minutes you'll start to get a feel for what they're talking about, the dot plots and those dot plots are indications where future rates will go and see if there are any changes in that. But also, we're keen watchers of the language. The Fed is very careful about what they talk about and how they change the language. Any change in language about increasing rates, or decreasing rates could see a reaction in the bond market.

[00:04:53] Edward Kennedy: So that's why it's important to keep an eye on what they say.

[00:04:57] Nathan Sweeney: Okay. That's very insightful, actually. And if I look at other the data for the week, I think the key things that investors should be watching out for is inflation data. So we do have more inflation data in the US. And as Eddie said, we've been seeing some tick up in inflation, but it's not something we're concerned about.

[00:05:12] Nathan Sweeney: And we still expect to see interest rate cuts coming through. The other data is actually Eurozone inflation. So pretty much an inflation week next week. So we'll all be watching that closely. As you can all see, we continue to bolster our resources here at Marlborough. It's great to have Eddie on board.

[00:05:26] Nathan Sweeney: It just gives us an extra string to our bow. And thank you all for listening and have a great week. Thank you, Eddie.

[00:05:32] Edward Kennedy: Yep. Thanks for having us, Nathan. And really enjoyed it.