Shane Solly: Harbour Asset Management spokesperson on the US Federal Reserve's plan for rates after the US election

Donald Trump's return to the White House continues to have implications on the US economy.

The US Federal Reserve has indicated it won't be cutting rates again anytime soon.

Harbour Asset Management's Shane Solly explains further.

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Episode Transcript

Speaker 1 (00:00):
Shane. Sally Harbor Asset Management is with us now. Hey Shane,
Hey here, So Shane, the US markets have given back
some of the games since the election. Again, since the election,
when you think it's going to continue to be choppy.

Speaker 2 (00:10):
Well, I look, we've seen last week the US S
and P five that's the board, broad Benchmark's down two percent.
Tech stocks they were down three percent, And it's all
about we're seeing an unwind of this Trump trade, this
losing steam. Federal Reserve came out and said we're not
going to cut quite as fast as we thought. So
the odds of a cut from the US FED that
really back down before last week eighty percent of a cup.

(00:33):
Now they're talking about fifty eight percent next month. So
certainly that's taken some heat out and this initial you
for around mister Trump's appointment, we've seen some people come
to the terms that there's a cost, and that's possibly
higher fiscal spending, higher a budget divisits, but more inflation.
S Bonds, particularly the US tenure bonds go right back
up to four point four percent. We saw that back

(00:53):
in April. So a lot of this team's coming out
is it choppy? Well, last few months of the month, sorry,
last few months for the year, I should say generally
good for US markets. But what we're seeing is earnings
start to get cut for the American market and the
tech stops they're the ones that have been holding up.
They were really weak late last week. But this is

(01:13):
the broader market. Is this earnings momentum that's been driving
the US market starting to fade some of the costs
that so they were associated with the provoking government come in.
So yeah, there's a bit of risk, it could be
a bit choppy.

Speaker 1 (01:24):
Yeah, what are you expecting. We've got our own Reserve
Bank review of the OCR this month. What are you
expecting there?

Speaker 2 (01:30):
Well, market's telling me they're expecting half a percent, So
I've got to go with what the market consensus to saying. So,
you know, the lead indicata is is justing confidence. Business
confidence starting to come off a low base, but it
is still really low. We are seeing inflation pressure continued
to fall, so that the right backing is there for
the RB and Z to continue to cut. Today we've

(01:50):
had some slightly more positive data out of the b
Z business in z PSI. So and that's assumer that says,
how are you feeling about what happens next. Is up
from up to forty six up points three percent, so
not a lot. Still below fifty and fifty years above fifty.
That means that economy is going to grow. If it's
below fifty, it's going to shrimp. So business is still saying, hey,

(02:11):
we're dealing with this slow down. And we also saw
some inflation data out today, some producer price data. I
won't go into the detail, but it basically said businesses
are unable to pass through all the cost increases. So yeah,
there's certainly a lead up for the RBS and to
continue to cut. The surprise would be if it was
a quarter of three quarters of a percent off it's
point seventy five percent, that would be a surprise. But

(02:32):
this is the last time before February next year the
Reserve Bank can make a statement they've got a big break.
So yeah, the past, the less regrets is what they're
talking about. They want to keep some gas in the
tank just in case they have to fight inflation more so,
my guess is that'll be what they do. Half a
percent and we're going to keep someone in the back
pocket just in case.

Speaker 1 (02:52):
Hey, by the way, anything come out of that. The
Fonterra and your shareholders meeting today.

Speaker 2 (02:57):
Look, you know, Fira, it's been a really good story.
That company has done a great job of repositioning. They
reaffirmed their earnings for Coast, gave similar guidance between forty
to sixty cents, but she that's for the Fonterra Shielders
Foundation and that compares to the market expectation of fifty
three cents. Stock was flat on the day, not bad.
The board was just saying, hey, look we're seeing another

(03:17):
year of stable performance. We're focused on keeping the return
on capital up. There have been battling to get the
return on capital back up to ten to twelve percent
from nine to ten, and they're saying, hey, we're going
to keep on focusing on investing for the future. Now.
One of the things that people were watching for is
if there's any update on the sale of the global
consumer business, and there it was none other than to

(03:37):
say the board was saying, it's the right strategy, we're
on track, we're doing the process, we're underway. Just be patient.
So not new, but the confirmation and the less was
pretty important for the broad and New Zealand economy.

Speaker 1 (03:50):
Yeah, brilliant. So Hey Shane, as always, thank you so much.
We talk to you in a week that Shane solely
of Harbor Asset Management. For more from Heather Duplessy Allen Drive.

Speaker 2 (03:58):
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