Q+A: Is the current market volatility just business as usual?

Is what going on in financial markets at the moment the same as usual - just noise to look through - or is it different this time around?

Today Sean Aylmer is joined by Todd Hoare, Head of Public Markets at LGT Crestone.

Fear & Greed Q+A: Join Sean Aylmer & Michael Thompson as they answer questions on business, investing, economics, politics and more. If you have your own question, get in touch via our website, LinkedIn, Instagram or Facebook!

This is general information only. Seek professional advice before investing.

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Episode Transcript

Speaker 1 (00:05):
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Sean Aylmerant today. Is the market volatility right now
just noise we have to look through? Or is it
something more? Todd Whore is LGT Crestanes, Head of Public
Markets Todd Welcome back to Fearing Greed Q and A.

Speaker 2 (00:26):
Thanks for having me Sean.

Speaker 1 (00:27):
So is it just noise or something more to it?

Speaker 2 (00:31):
Well, I think we probably need to look at that
through a few different lenses. I mean, I think one
of the more interesting things that we've seen is that
it feels different this time. But we've got to go
back and remember that in twenty eighteen we had a
trade war, albeit it was a bilateral trade war for
the most part between the US and China. But we

(00:53):
have a very similar situation this time around. And let's
not lose sight of the fact that from twenty eighteen
through to just recently markets had almost doubled. So even
though things feel different this time, we'd almost argue that
if you take a long enough lens, things are actually
eerily similar. Orbit starting points are obviously different, but we've

(01:13):
had multiple Middle East conflicts over the last fifteen to
twenty years, probably longer than that if we put a
longer term lens on that. If you look domestically, yes,
the RBA cashrade at three point eight five percent feels high,
but you go back prior to twenty twelve, and three
point eight five would feel very very low. And so

(01:33):
we sit here and we ask ourselves, is today's environment
vastly different from some of the regime changes that we've
seen before. Yes, the ESAI is transformative, it's disruptive, but
so was the mobile phone, so was the internet, so
was migration to the cloud. So there are a lot
of things and a lot of starting points that potentially
make today different. But there are also a lot of

(01:57):
similarities that I think mate today investing environment no more
uncertain than what it has been over a very very
long period of time. There are similarities the starting points
that are just a little bit different. Maybe One of
the things that I think is different, and this is
not a bad thing. I think this is actually a
very strong positive, is that the ability to build portfolios

(02:22):
in this environment for all of these different situations is
much easier than what it was for the better part
of ten to fifteen years. You would rightly remember that
if we go back to the early part of the
last decade and for the longest period, everyone got funneled
into equities. It was great for my career because I
spent my career looking at equities, and everyone was looking

(02:44):
to build their entire portfolio chase yield and income and
dividends only through one asset class. And yet now we've
got bonds, we've got high yield credit, we've got private credit,
we've got alternative assets that weren't mainstream five or even
ten years ago. And so now even though things feel uncertain,

(03:06):
they feel different, they might feel volatile. The ability to
build a defensive portfolio, I think, is that much that
much greater than what it was in the past.

Speaker 1 (03:16):
Is that a reflection of technological change more than anything else.

Speaker 2 (03:21):
I think the speed at which information is disseminated is
certainly quicker than what we have experienced in the past.
It feels like bear markets these this time around, certainly
last they're certainly shorter, and they're sharper. What I would
say is that I'm not sure it's technological in the

(03:43):
sense that information is disseminated quickly, that is true, but
I think the playbooks that regulators are, central bankers, politicians
have at which to I guess, navigate all of these
uncertainties is just vastly better prepared than what it has been.
And so I think that means that yes, we get

(04:06):
these short, sharp corrections, but the willingness and ability of
policymakers to respond rapidly and aggressively is just far greater
than what it used to be.

Speaker 1 (04:15):
As we're talking about this, we haven't mentioned Donald Trump once.
Now there's a tariff war. Sorry that we've mentioned the
trade war, and obviously tariff's a big issue. But in
a sense, I feel that you're kind of looking through
the Trump effect, whatever that is, for good or bad,
and kind of it's about markets. It's about your normal
portfolio construction, making sure you know at risk, reward, etc.

(04:37):
As opposed to fixating too much on what's happening in
the White House.

Speaker 2 (04:40):
Well, and I think it's important that, yes, we've all
read articles where perhaps there is this notion that if
we pay attention to the noise, pay attention to the news,
we are going to be better informed to make better decisions.
After all, Trump does tweet more often than we've ever
seen before, and there is information in that. But I

(05:01):
think if again, if you just take one step back
and we ask ourselves. For example, the one Big Beautiful
Bill Act that he got through, that was his signature
domestic policy. It was all about the extension of the
tax cuts that he initiated in his first turn. The
noise around it that is interesting. It sells newspapers and

(05:24):
the like. But the way we approach it and look
at it is he could not have got that through,
We don't think unless he was able to get offsetting
tariffs through. And what do we mean by that. We
don't mean that they're intrinsically linked, but we look at
it within the constraints with which he can operate. So
if he got that one big beautiful bill through and
there was significant fiscal stimulus without offsetting cost measures within

(05:49):
the bill or without revenue raising from the tariffs, what
would have happened, we think, is that the bond market
would have voted like we saw with Liz Trust in
the UK and yields would have gone higher. And so
what do we mean by all of that? He operates
within a constraint that the bomb market will only allow
him to do so much, and so a similar situation

(06:12):
with power. We read all of the bashing that FED
chairman Powell has been receiving, and obviously he went and
fired the head of the Bureau of Labor Statistics only
last week, so they get why people focused on that.
But at the end of the day, the legislative hurdles
for him to go and fire and dismiss power are

(06:34):
very very great. Also, if he were to go and
do something like that, we suspect that FED independence, FED
credibility on inflation and all of the rest that goes
with it would also get called into question. And again
the bomb market would vote, and we think that they're
important in that all of the noise creates seeming uncertainty.

(06:54):
But if you look at all of it through the
lens of what can he do, not what will he do?
Not what should he do? Not what does he want
to do? But what can he actually do within the
constraints of either the bomb market, the equity market, the
currency market, the judicial system, it actually means he can't
do as much as what everyone thinks or what he

(07:14):
can do gets corraled or guardrailed, And we think that's
pretty important for investors.

Speaker 1 (07:19):
Todd thanks for talking to Fear and Greed.

Speaker 2 (07:21):
Thank you.

Speaker 1 (07:21):
That was Todd Hare, LGT Krestan's head of Public Markets.
This is general information only. Should always seek advice before
making investment decisions. Remember if you've got something you'd like
to know, then send through your question on LinkedIn, Instagram, Facebook,
or at fearinggreed dot com. Today you I'm Jean Almer
and this is Fear and Greed at Q and Day