Q+A: Tariffs & slow economy, but ASX soars. Why?

The US is imposing tariffs, and our economy is so slow that the RBA is expected to slash rates - but the ASX is soaring. Why?

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!

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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.
A'm Michael Thompson and Hello Sean Aylmer.

Speaker 2 (00:14):
Hello Michael, Sean.

Speaker 1 (00:16):
Today's question kind of combines a few of those areas, really,
because we have had in recent days the ASX hitting
all time highs. Why when you consider the facts that
we've got tariffs being imposed and all kinds of turmoil,
we have the economy fairly sluggish and interest rate cuts

(00:41):
imminent in order to stimulate the economy, why is the
market going so well? Yes, very good question, well asked,
well asked up front. We are not an investing podcast,
so if you're going to invest, get some advice.

Speaker 2 (00:56):
What you find. Michael, I think I've taught you this
many times out of the last five years, so you
don't seem to have remembered it. Your question this one
you've forgotten issue the idea the market trades on expectations
of profits. So everything you have said is right. We
are in a slow down at the moment. We have
tariff issues, geopolitical issues, but the fact that we think

(01:21):
interest rates are going to fall encourages investors. Because they think, ah, well,
if i'm you know, stocks like JB High five, people
will spend more with lower interest rates. Therefore that's a
good stock to buy, Holt to buy. I use that deliberately,
Harvy Norman I could have used as well, because they're
actually doing really well at the moment those stocks on
the expectations that lower interest rate cuts means people will

(01:43):
go out and buy a computer or a phone, or
replace the stuff that they brought in COVID with their money,
and they'll go out and spend more money replacing that
sort of stuff. So it's about future earnings, is the
short answer.

Speaker 1 (01:57):
But doesn't the turmoil and the potential for tariffs, for instance,
to hit companies and create more uncertainty for them. Doesn't
that then potentially affect their future earnings and kind of
negate the positive effect of lower interest rates locally.

Speaker 2 (02:12):
Yes, so it does to some extent, but not much
in Australia. Okay, tarif's are only ten percent. We're talking
about gold, beef products, pharmaceutical products, not that much else,
to be perfectly honest, Sure, and in fact we may
benefit in some ways because you know, China's trying to
sell stuff the US and it's got a whatever cent tariff,
twenty five percent tariff. Maybe they'll sell it to Australia.

(02:34):
More broadly, like just getting away from those consumer cyclicals,
what we have seen in recent times are some really
strong performances. We've talked about TILSTRA doing really well. So
last year was all about the banks. Now the banks
have definitely come off, but the big miners have done
really well. The energy companies, Woodside, Santas, some of those

(02:56):
guys have done really well. The utilities companies have done
much better than what they've been doing before. The healthcare
company see Self it's back, and so what we're found
in the market is a much broader range of companies
doing better. Notwithstanding the banks have come off, and that
is all about expectations that the local economy is actually

(03:16):
doing pretty well and some will benefit more to be
high Fai and Harvey Norman have so far. Others like
flight Center have had a shocker, so that's directly affected
by travel to Europe and North America and stuff like that.
But broadly, people think the future is going to be better.
So we're getting the share market at me. We went

(03:38):
through eighty eight hundred recently eighty eight hundred. That's unheard
of twelve months ago, big big caveat to all this.
There are plenty of professional investors out there who reckon
the good times can't last. And so the way they
put it, they say, you know, in for a rocky period. Yeah, exactly,

(03:59):
rocky period.

Speaker 1 (04:00):
One last question, and we talk about the kind of
the global factors affecting this or we touched on the
tariffs before. Did we see have we seen in the
last couple of weeks a live demonstration of the fact
that what happens in China matters a lot more to
us than what happens in the US, because we saw
with the big dam development that was being announced, the massive,

(04:21):
massive project that was being done, we saw a direct
kind of flow on effect to Australia because of that.

Speaker 2 (04:27):
Yes, so it's five dams they're building, They need commodities
to build that zero, et cetera. So that flew through
to commodity prices, that flows through to Australia. So what
happens in China affects US definitely more directly the US
tariff stuff. It's about a slow down in global growth,
So a slow down and glo global growth hits us,
but it's an indirect effect of the tariff as opposed

(04:48):
to the direct effect that you're talking about China. But
it is really interesting to see if the market can
keep doing what it's doing because it is flying and
there are Commonwealth Bank. I know it's come off, it's
still training at a historically high value based on forecast earnings,

(05:08):
and there's a bunch of stocks like that.

Speaker 1 (05:11):
And that wariness that the good times could kind of
come to an end probably means that it's a good
time to be getting financial advice, isn't it.

Speaker 2 (05:18):
Always is a good night. It's always a good time
to get financial advice, Michael, certainly always.

Speaker 1 (05:22):
All right, it's a great question and very well answered.

Speaker 2 (05:25):
Thank you, Sean. You came up with that question, so
I think that's why you think it's a great question.

Speaker 1 (05:28):
But of course I was trying to be subtle about
that one, but you dropped me right in it. Thank
you very much.

Speaker 2 (05:33):
Sure, Thanks Michael.

Speaker 1 (05:34):
I remember if you got your own question that you
would like us to answer, then send it on through
via the website go to Fearangreed dot com dot au
or any of the social media platforms LinkedIn Facebook, Instagram,
or we shall pop it on the list. I'm Michael Thompson,
and there's a fear and greed Q and a