Shane Solly: Harbour Asset Management expert on what recent weak US data means for the economy

Last week saw the release of some weak economic data out of the US and it's got investors speculating.

Harbour Asset Management's Shane Solly explained further.

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Episode Transcript

Speaker 1 (00:00):
Listen. As I said to you, I'm going to talk
about the OCR in a minute, because that's obviously an
important thing that's going to happen in a couple of
days time. But as I said to you earlier, we're
going to talk to a New Zealand just after half
past about the fact that ComCom has declined their request
to do a review in to Auckland Airports. Now related
slightly related matter. We tried to greet Greg fouran on
to talk about it, and they said, I will just

(00:21):
go and hunt Greg downseat. But then Greg couldn't do it,
and so someone else is going to do It's Christy
mckaye who's going to do it? Who is actually the
right person to talk to about it? Anyway, what I
heard is I'm surprised Greg is still there because they
had his farewell the other day. And what I heard
was that his farewell was in one of the hangars,
which means they couldn't have booze, so they had an

(00:42):
entire farewell boozeless. Would you go to it? I would,
thank god, I declined. I declined because I'm on air
at the time. But if I'd known the circumstances and
I wasn't on it, I would have declined, So thank
god I missed that, because who wants to go to
a goodbye party? There's not even a little Gin and
tonic to suck on. Anyway, Christy doesn't this question is
coming at it, but I'm going to see if I
can confirm this with her. It's nineteen past six, Shane,

(01:04):
Solly Harbor Asset Managements with me. Hey, Shane, Hello, there's
a no. On Friday, Shane, we had some weak US
economic data released. What do you reckon this means for
investment markets?

Speaker 2 (01:14):
Yeah, good question. So on Friday we what it's called
this September US IM Service Index, and that's an institute
of supply management. So the forward looking index came in
week and then expect that it came in at fifty, which
is still sort of neutralish, but the market had been
expecting it to be a more like fifty one and
a half fifty two, So actually a little bit of
a shrinking activity since first time, since they's actually the pandemic.

(01:37):
But bad news is good news and markets, and that
calling and activity means the US Fed a reserve maybe
out a cut rates a bit quicker, and the markets
are actually priced it a ninety five percent chants of
an October cut by the Fed. So yep, markets can
twist it.

Speaker 1 (01:52):
Now we've got the Reserve Bank official cash rate cut. Well,
I think we can call it a cut on Wednesday,
can't we? But what is the market expecting into of
a cut or a double cut?

Speaker 2 (02:01):
Yeah? I think you know a great point. The market
is fully expecting a cut. And I think you know
we've got markets pricing at the zero point three four,
which is a kind of an odd number. So what
it means is at least zero point twenty five percent,
so a quarter of percent, and potential for a zero
point five percent, so that will take us to two
point seventy five or two point five percent. So the
key for investment markets is how dubbish language is dubbish?

Speaker 1 (02:24):
Meaning?

Speaker 2 (02:24):
Will there be more cuts? And so the markets seventy
four nove inbo So if we don't get fifty, this
run round. But if there's some dubbish discussion, there will
be another twenty five and in November. And there's some
people out there saying it should be fifty now and
twenty five again in November. So pretty punchy. But your
markets have run ahead of this, they can run further.
So the ten year government bond y' for example here

(02:45):
there has gone from four point seven percent it's peak
at the last year, to four to twenty five. That's
a reasonable move. New Zealand dollar cross rate against the
US has gone from sixty one to fifty eight. In
New Zealand share market's actually up fourteen percent from its
April low. It's only seventy seen up on a year ago,
but it's still like forty percent, so it's turned a
pretty good rally in anticipation of these rate cuts. See

(03:07):
the mark was a bit flat today, but we did
see all the rate sensitive economic sensitive stocks like Ryman
and some are setting some of the propery stocks for me.

Speaker 1 (03:16):
Now you've got the business opinion out tomorrow, what are
you expecting to see them?

Speaker 2 (03:19):
Yeah, look at QSBO. The inside i QSBO really well regarded.
Last time around back in June was eighteen was the number,
which is pretty low really, so hopefully we'll see a
bit of a lift from this. In terms of the
September quarter, we are getting more and more comment comments
from a company are saying, look those green shots we're
talking about a month or two ago. They're actually growing
into pasture rather than weeds. But so we should see

(03:42):
a decent lift tomorrow from Jane's low, but it may
still be a little while before businesses talking about making.

Speaker 1 (03:47):
Hay brilliant, something at least Shane appreciated. Shane solely harbor
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