Stephanie Batchelor: Milford Asset Management expert on the significant drops in the US financial market

Investors have voiced concerns over declining US market growth - resulting in a significant drop.

US President Donald Trump also didn't rule out a recession in a recent interview, which led to further pullbacks this week.

Milford Asset Management's Stephanie Batchelor explained further.

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Episode Transcript

Speaker 1 (00:00):
Stephanie Bachelor, Milford Asset Management with US Tonight. Steph, Hello,
Hi Ryan. Now there's been a big sell off in
the US markets this week. Of course, we're getting close
now to correction territory, which is ten percent off the peak.
What's the latest tire?

Speaker 2 (00:14):
Yeah, So the US market, the S and P five
hundred index is down nine point three percent from its peak,
so it is very close to that ten percent mark.
And it's really due to invest a concern around as
slowing in US economic growth. So as the Trump administration
is settled in, they they've announced a bunch of policies
or potential policies that could dampen growth. These are things

(00:36):
like trade tariffs and cuts to government spending. Over the weekend,
Trump didn't rule out potential recession, so he said there's
going to be a period of transition with what they're doing,
and that led to another almost three percent pullback on Monday.
Then overnight he actually reversed course of it. He downplayed that,
saying he didn't foresee the US going into a recession

(00:58):
and he thinks the country is going to boom, which
did help to cushion a further fall that had started
after he threatened more tariffs on Canada. So it's a
little bit all over the place at the moment.

Speaker 1 (01:09):
It certainly is now the tech companies, the Magnificent Seven,
which are Kream Della Cream of the tech companies, they
have actually been hit harder than most than the broader market.
Is this a sign that you are they leading the
market here or is there tech specific things going on?

Speaker 2 (01:29):
Yeah, there are some tech specific things happening, So it's
the concern is primarily around the amount that these companies
are spending on things like artificial intelligence, and there are
questions around whether they're actually going to be able to
generate a sufficient return on that spend. So we had
the emergence of deep Seek, which raised concerns on this
front back at the end of jan and more recently

(01:53):
there have been rumors around Microsoft postponing and canceling data
center leases, so that's added to some of those And
if you think about the very strong run that some
of these companies have had, you know, some of the
valuations were elevated, and they're also more sensitive to growth
and momentum, so as you would expect, they have sold
off more than the broader market. The Nasdaq is down

(02:15):
about twelve and a half percent, and the Mags seven
are down even more from the peak.

Speaker 1 (02:21):
It's interesting if you look at the Magnificent seven and
you look at Meta, they're the only one so far
this year who's actually managed to managed to get a
positive return. What's with that?

Speaker 2 (02:32):
Yeah, So that one really comes down to the fact
that Meta is viewed as having one of the most
compelling early AI monetization opportunities. So if you think about
how Meta actually makes money, it's through advertising, and it
was already a leader in targeted advertising, and its investments
in AI are really just helping to extend that lead.

(02:55):
So they're helping advertisers create better ads, better target the
right users, and then that in turn helps to improve
user engagement. It keeps us all scrolling on those apps,
and then it's able to better measure how well the
aids are doing, which gives advertisers the confidence to keep
coming back and using metas advertising platform. And you know,

(03:15):
given I think it's around half the world's population uses
a Meta app each month, it's got a huge base
of customers to roll those initiatives out too. So it's
starting in a pretty good spot.

Speaker 1 (03:28):
And we had a lot of change in the Nvidia
stock over the fares of deep seek over in China.
But now there's news that's come out that's hit their stock.
News out of Singapore.

Speaker 2 (03:39):
Yeah, so that was our last week. It sent the
stop down eight percent on the day, and it was
news that Singapore is investigating three people that are thought
to be involved in smuggling in video chips. So the
buyers appeared to be officially buying them from Singapore, but
it looks like they might have actually ended up in China,
which would have been in violin of US sanctions. And

(04:02):
so the reason in video stock fell so much is
that Singapore accounted for almost twenty percent of in videos
revenue last year, So depending on what the investigation finds,
there's a risk that a portion of those sales are
illegal and would then fall away going forward. So for
a stock that depends on constant upgrades and growing revenue,

(04:22):
it's not a good outcome.

Speaker 1 (04:24):
Interesting, Stephanie, Thank you, Stephanie Batcheler, Milforde said management. For
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