Jeremy Hutton: Milford Asset Management expert on the stock market turning around in April

Following the market downturn in March as a result of the Iran conflict , things appear to be more hopeful towards the end of April.

The ceasefire caused a significant market rally and the S&P 500 saw a boost as a result.

Milford Asset Management's Jeremy Hutton explained further.

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Episode Transcript

Speaker 1 (00:00):
Jeremy Hutton Milford Asset Management is with us. Hello, Jeremy.

Speaker 2 (00:04):
Good evening, Heather.

Speaker 1 (00:05):
Now I'm well, thank you.

Speaker 2 (00:06):
Now.

Speaker 1 (00:06):
March and April on the US stock market were two
really contrasting stories where that was a pretty remarkable turnaround.

Speaker 2 (00:13):
Yeah. Just in March, the market reaction was all pain
from the Iran shock. You had oil prices surging, inflation returning,
and interest rate expectations moving higher, and that's a pretty
poor backdrop for equity markets, and we saw the US
market down. The SMP five hundred at one point was
down over ten percent, so Mike was feeling a bit nervous.

(00:35):
Then we got to April and it was a much
much better story, and the market started anticipating that Trump
wanted a way out of of the Iran quagmaia. We
got the two week ceasefire announced on April the seventh,
and that really triggered a pretty remarkable rally in the market,
and within a week it was back to all time highs,

(00:57):
and then the rally extended a bit further into the
end of the We had the strong earnings from some
of the US companies, and the SMP effectively gained twelve
and a half percent from the low's intra month.

Speaker 1 (01:09):
So explain to me what's happening under the surface, chair meet,
because it looks like the AI narrative is gathering even
more steam.

Speaker 2 (01:16):
Yeah, it's true. I mean the mag seven AI tech stocks,
I mean they've contributed contributed a large portion of the
rally during April alone in Vidio was up twenty two percent,
Google twenty one percent, and Amazon twenty four percent. And
these are pretty remarkable shifts for huge companies and has
has created a lot of value. And given their such

(01:39):
large proportions of the SMP index, I mean, they're going
to drive the performance up by themselves. But what was
most interesting to me was if you look at the
largest percentage gains on the index, it was actually the
data center and infrastructure AI infrastructure rally, so not just
the models themselves. So I suppose that AI benefit moving

(02:01):
into secondary areas as well.

Speaker 1 (02:03):
So are we seeing do you think of broadening out
of the AI rally effectively?

Speaker 2 (02:08):
Investors are betting on some of the physical hardware that
goes into these data centers as a very hot play
right now. The market is calling it the picks and
shovels layer of the AI buildout. So it's effectively this
physical hard stuff that's required to build all these things.
So this is infrastructure. It's mainly semiconductors, chips or computer equipment,

(02:29):
and it's also called old world businesses like electricity, commodities,
copper and all of these themes are really really strongly
as well in April, and so some of these older
world businesses, they're almost now being perceived as structural winners
in what's turning into potentially one of the largest capex
events in financial markets history.

Speaker 1 (02:49):
Okay, so what is the outlook from here? I mean,
there are risks obviously, both to the upside and the downside,
right yeah.

Speaker 2 (02:55):
I mean, one can argue that markets have gone back
to their trend, which is hard to do if you
can ignore some of the volatility in March and April
when and we did have some very strong earnings from
the Q one numbers that have been coming out for
US companies over the past two weeks. But I would
just comment that these earnings are only to March and
may not be fully capturing in some of the Middle

(03:18):
East disruption, and they are assuming a relatively clean resolution,
and we know that it's extremely messy over there. So
to the extent that that's not the case, then there
could be some downside. But then on the upside, I mean,
as I mentioned earlier, there's a huge economic stimulus coming
from this AI capex. You've had the recent surge and

(03:38):
clawed revenues, which is helping answer some of the curly
questions that investors had on how sustainable is this AI spend.
And then we do we do have the further earn
it huge earnings tonight with Microsoft, Google Measure and Amazon reporting,
So you know, I think their comments on AI and
the outlook is going to be the next litmus test

(03:59):
for for any moves and markets going forward from here.

Speaker 1 (04:02):
Hi, thank you very much Jeremy for talking us through
Jeremy Hutton Moreford Asset Management. For more from Hither Duplessy
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