July 9, 2025 • 31 mins
If our economy is in recovery, why is the supermarket checkout still so brutal?
Listen in on our chat with Brad Olsen, Principal Economist at Infometrics. Brad breaks down why New Zealanders are still facing uncomfortable inflation, despite a gradual economic comeback—and why attractive interest rates aren’t luring buyers into the housing market.
Are investors becoming ‘numb’ to world events after years of outlandish headlines? What’s the latest on those infamous tariffs? Why do the US markets seem "unkillable" despite dire predictions?
Plus, Brad says Kiwi investors have started actively scrutinizing boards and executive strategies, and increasingly turning to emerging alternative sectors like AI and crypto.
For more or to watch on YouTube—check out http://linktr.ee/sharedlunch
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Kyonda, and welcome to Shared Lunch, brought to you by Chase's.
Speaker 2 (00:06):
I'm Helen Madison.
Speaker 1 (00:08):
Today we take a pulse check on the economy. I'll
be speaking with Infametrics principal economist Brad Olsen.
Speaker 3 (00:15):
The worry now a little bit more is that households, businesses,
and professional forecasters are all now thinking that there is
a bit more inflation to come.
Speaker 2 (00:23):
So what does this mean for investors?
Speaker 3 (00:25):
It's only a temporary pause that we're seeing with these tariffs,
and that some of the results could still be pretty damaging.
Speaker 2 (00:30):
What should you be looking out for?
Speaker 3 (00:32):
Everyone's trying to figure out what the sweet spot is
and sort of how to balance what is a lot
of uncertainty.
Speaker 2 (00:38):
And what should you ignore.
Speaker 3 (00:39):
It's been the sort of recognition from a lot of
people that, hey, sometimes that the markets have been over
correcting or a bit overly worried about things and then
seem to come back the other way.
Speaker 1 (00:49):
Before we get started, here's some important information.
Speaker 4 (00:52):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend eating product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (01:06):
Welcome Brad, great to see you again. It's been a while.
Speaker 3 (01:09):
It has been a while. In goodness, what a lot
has happened in the economy in that intervening period. Seems
like we've gone from the brink of World War III
to ceasefires, to tariffs to everything else. I mean, it's
been a pretty wild ride.
Speaker 2 (01:21):
It has.
Speaker 1 (01:22):
Let's start here at home and think about our economy
and growth. It appears that we are sort of stepping
up a little bit after all the kind of recession talk,
et cetera, et cetera. However, it appears to me that
the only real growth we're seeing is in the rural sector,
with milk prices, with beef for burgers to the US,
(01:44):
which is good for exports, and then that yellow gold butter.
Speaker 3 (01:49):
You're definitely right, I mean, the rural sector is definitely
powering the early stages of the economic recovery. You look
at the likes of the trade numbers we've got coming through,
commodity prices all in a better place. I think it's
true as well when you look across the world. That's
also partly a supply story. From other providers. So you
look at the likes of butter, milk, other dairy products,
New Zealand productions actually up, which is unusual when prices
(02:12):
are sort of at the levels that they are. But
it's production out of the likes of Europe and the
Americas that haven't been doing quite as well. New Zealand's
able to provide everyone else wants to pay for it.
We've been doing not too bad. You look at also
the numbers though, so the milk payout that's come through
has generated over nineteen billion of money that'll be going
back into the primary sector. What's interesting is in the
(02:33):
season just finished, you're talking something like four point five
four point six billion dollars more than the season before.
That's more money coming through than the entirety of the
lower interest rates that households be paying this year. So
the primary sector is definitely a very critical part at
the start. The question is does it continue. Because you
do start to see a few of those numbers that
likes the latest couple of global dairy trade options, they've
(02:56):
fallen back a touch and I think that does just
suggest again things are all right for the minute, but
a bit of a question going forward in terms of
how strong it will be. Fonterra has also made it
quite clear that they think there's effectively a bit of
a downside risk. They've come out that said, you know,
milk prices at ten bucks for the season ahead, but
it could range anywhere between eleven and eight. That's a
(03:16):
three dollar range, the biggest they've ever provided, and more
on the downside than there is the upside. I guess
that's almost the tone for the second half of this
year is Yep, there's a recovery coming through, but it's
a very cautious and slow one.
Speaker 1 (03:27):
Is it only the rural sector that are actually going
leaps and bounds or are other do you see other
sort of green shoots? Which is a bit of a
hackneyed phrase at the moment, but I'll use it anyway.
Speaker 3 (03:38):
First three months of this year looked all right. You
saw economic activity that expanded actually quite a bit apecent,
you know, some of the biggest increase in quarterly growth
that we've seen amongst a lot of our international partners.
I think the challenges after that, once you start to
get into April, you have the lights of the tariff
slow down and everything else that's come through you've seen
some of those indicators that have fallen back. At the
(04:00):
start of this year, there were a few parts the
likes of there was some better manufacturing numbers that were
coming forward. You also saw better professional services activity, so
you're getting you know, business services going a bit more again.
Both of those look like they've fallen back of touch
as we've moved through into the mid year period, manufacturing
and services and disease falling back into sort of contractionary territory.
(04:22):
So just that feeling of yes, there's a recovery, but
it's a bit more stop start. It's a bit more
slow to get going than we might have first expected.
And I feel like a lot of people ask me
these days, you know, economist said survived till twenty five
and I sort of have to respond and say, look,
we've got into the thirty first of December for that
come true. But it is going to be a slow
slog I think for this year.
Speaker 1 (04:43):
Yeah, it feels like one step forward to back to
some degree. I mean, the cost of food seems to
still keep rising, fuel keeps rising, and whether that's because
of the conflicts and the like.
Speaker 2 (04:55):
Yeah, I mean, where are we at with inflation.
Speaker 3 (04:58):
Inflation's uncomfortable at the moment, and like probably more uncomfortable
than we would have first been expecting some people in
our forecasting that headline inflation might go through three percent
towards the second half of this year. Now, that of course,
would be the first time that it had breached that
three percent high point of the highest that the Reserve
Bank generally wants it to go. Now, yes, there's an
(05:18):
expectation a short term, but there does just seem to
be enough sort of remaining inflationary pressure to make us
a little bit worried. And some people often ask, you know,
how do you have this when you've got the economy
that's in such a tough zone. You know, it's not
really a conducive environment right to raise prices, but you're
still seeing them. And I do wonder if we're starting
to see almost a twenty twenties version of stagflation. Now
(05:40):
that's a big word to use. I'm not saying we're
going back to the nineteen seventies. It's a very different environment,
but you do just get the feeling that there's a
little bit more of that inflationary undercurrent sitting around food
price inflation's now reaccelerated to four point four percent. What's
interesting is that last time it got sort of to
this high level, and I think you know now at
the highest food price inflation since the end of twenty
(06:02):
twenty three. The difference is at that point it was very,
very broad based, lots of stuff increasing in price all
the time, whereas now it's a bit more concentrated to
a more limited set of items. But the big increases.
You look at the likes of butter up sort of
fifty sixty percent the last year, mints and beef prices
higher again because those international prices. You look at the
(06:23):
likes of coffee, chocolate, olive oil, all of those increasing
all the But it's also it's not everything, but it's
the stuff that you notice so so much more, and
I think that's probably the difference. You've also got the
likes of oil prices, yes, fluctuating quite a lot this year.
But the real one, I think, and the kicker for
households at the minute, is energy prices. You look at
(06:44):
electricity and gas now rising at the fastest they've been
going in over ten years, and again it's just that
uncomfortable piece where from a household perspective. You've got food
prices going up, you've got energy costs going up. And
the worry now a little bit more, is that households, businesses,
and prefertional forecasters all now thinking that there is a
bit more inflation to come. Inflation expectations have increased, not
(07:06):
massively again, not to red alert danger zones, but just
to enough of a position where again the worry starts
to creep in, sort of a bit of a pit
in the bottom of your stomach around inflation sitting by,
and I think that's why the reserve banks in this
really challenging position where they're going the economy doesn't look great,
and I worry again. You look back to where we've
been a couple of years back, the likes of inflation
(07:27):
when it started to get bad. It was at a
time when we thought the economy wouldn't allow inflation to
pass through, and we sort of almost conveniently at the time,
ignored actual inflation starting to creep up again. Not fully
back in the same position, but it seems a little
bit too similar to completely ignore it.
Speaker 1 (07:44):
That's a good segue to the Reserve bank. By the
time this episode goes to air. They will have actually
the Reserve Bank will have actually announced.
Speaker 2 (07:53):
What the official cash rate is.
Speaker 1 (07:55):
Everybody's been hoping it would be another reduction, but it
does feel like consensus is they will hold.
Speaker 3 (08:02):
What was your prediction, We're expecting a hold as well,
to keep their official cash rate where it is at
three point twenty five percent, but also expecting that there
could be a further cut at some point later in
the year. And I guess that's where again that nervousness
creeps in that it's a little bit hard to justify
moving right this moment. You know, there's still the clarification
(08:22):
of what happens with the tariffs around the world, still
a bit more data to come through when it comes
to inflation and similar and so I think again that
sort of question of where does the Reserve Bank go
next is probably the bigger one, and they'll have a
better opportunity in August to be able to explain not
only the most recent decision, but also what that future
pathway looks like, because that's what everyone's concentrated on. Is
(08:43):
there a lot left to go? Are we close to
the end? Have we already seen the end? Quite a
lot of options going forward.
Speaker 1 (08:49):
Yeah, I suppose they're sending out letters at the moment.
According to Trump's officials and to you know, lots of
countries that actually probably have quite high tarifs, they do
something quite quickly, So you're right, we probably might have
to wait until that happens.
Speaker 3 (09:05):
And I mean you look at the market reaction as well.
I mean, when the tariffs originally came through at the
start of April like that, that was a bit of
a mountdown on the markets. What's I think interesting is
that even in recent times you've seen this sort of
the markets actually continue to push higher on some economic news,
but almost conveniently forgetting that there's it's only a temporary
pause that we're seeing with these tariffs, and that some
(09:26):
of the results could still be pretty damaging. I mean,
recently we've seen an agreement with between the US and Vietnam.
They came out and said, look, twenty percent tariff. Now
that's lower than the forty six I think percent they
started with. Twenty percent tariff on everything coming out of
Vietnam is still quite a lot though, and into the
US market becomes quite important because that's where a lot
more manufacturing is based. Anything that transits through Vietnam sitting
(09:50):
at forty percent tariffs and the US gets completely you know,
free access into the market. Like that's still pretty bad
for economic expectations going forward. So I'm a little bit
worried again that people are sort of quite happily blase
because it's been such a tough ride knowing what's coming next.
But if that's any indication again economic growth globally will slow.
(10:10):
If you're seeing those levels of teriffs. They might be
better than what was announced in April, but they're not
good for global economic growth.
Speaker 1 (10:17):
And that's even with China and I think the UK
sort of negotiating, and we'll obviously see other negotiations in
the next month or so. But yeah, it feels still
somewhat bleak.
Speaker 2 (10:27):
Doesn't it.
Speaker 3 (10:27):
Yeah, very challenging, and I mean it's one of those
things for New Zealand, of course, we rely on the
global economic environment to trade. At the moment, I think
we're actually probably not too badly placed. People were still
buying our food stuff, so we're selling to consumers a
lot more if we were selling sort of semi manufactured
goods or sort of intermediate goods that went into the
production process. If we were selling cars, you'd be in
(10:47):
a very, very tough spot. And having been in Korea
earlier this year, when again they are a lot more
wedded to not only the US economy, but to some
of that more manufactured stuff, they were definitely sort of
feeling the pinch a whole lot quicker than we were now.
Speaker 1 (11:00):
Interest rates also always have a bearing on house prices,
so the rate cuts.
Speaker 2 (11:07):
That we've had, we've had several I think it's two.
Speaker 1 (11:10):
Hundred and twenty five basis points over the last few months. However,
it doesn't appear that the heat has come back into
that housing market.
Speaker 3 (11:20):
No, not at all. And despite the fact that you
know you've got some fairly attractive interest rates on offer,
you just haven't seen that same level of buyer demand
spark up to the same degree. At the same time,
you've got a huge number of houses that are still
on the market. I think there's a few elements that.
One is the fact that there is literally half a
year's worth of normal sales setting available on the market.
(11:41):
Takes a while to clear that backlog. You've also got
a lot of new builds that have only sort of
recently been finished up, a lot of selling activity potential
in the market, not as many buyers coming through. You've
seen the likes of net migration pull back, so your
population growth has slowed. But I think particularly again, it's
interesting sort of when you look at some of the
indicat after that tariff announcement in April, there did seem
(12:03):
to be a real feeling amongst potential buyers that they
actually weren't quite as keen to clamber in, you know,
worries around the likes that interest rate they might be paying,
and what it might be in the future, the risk
of do I have a job or not? Will this
completely upset the apple cart, probably more importantly for some
people that probably had their potential deposit in their investments,
all of a sudden they didn't have as much of
(12:24):
a deposit as before. That means that there's still no
real reason that prices are going to be bid up,
and I think for a while then you'll start to
we'll continue to see yes, probably some price rises, but
very very muted as you go through the next couple
of years. And that's probably not a bad place for
New Zealand. What's interesting is it does now mean that
people are increasingly going well, okay, housing market doesn't have
(12:46):
a lot of immediate growth in it. Where am I
making money now? And that seems to be the piece
where people are casting around a lot more for not
only money making options, but a wider variety of those options.
Speaker 1 (12:57):
That's a nice segue into the Cheesies Quarterly Index, which
we have released this week. And definitely there is a
correlation we've seen between interest rates and investor sentiment. We've
got data for the last five years, which is, you know,
it's a good metric, and it would appear that when
rates have come down there is more immediacy in terms
(13:19):
of investing.
Speaker 2 (13:20):
What would you.
Speaker 3 (13:21):
Say, I think there's a few elements to it. One
is that generally, as your interest rates come lower, some
of your sort of less risky options, you know, putting
money into term deposits or similar just isn't nearly as
attractive anymore. When it becomes a little bit harder to
make those returns, you're having to sort of, you know,
change around or think about adjusting your risk profile. I
(13:41):
think it's also though, that as those interest rates come down,
they do normally stimulate a bit more economic activity on
the whole, both here and around the world. That generally
means more economic activity, more selling for the businesses that
you might be investing in, better returns, and similar over time.
So it's sort of reassuring to see that. I think. Also, though,
the big challenge in recent times has been that greater
level of volatility that you've seen coming forward. There's been
(14:04):
a lot of rebalancing, both from retail investors but also
the big institutional guys. Everyone's trying to figure out what
the sweet spot is and sort of how to balance
what is a lot of uncertainty, and the best way
for that seems to be less picking one deliberate strategy
and going all in and more having that quite a
bit more diversified option, which is reassuring to see because
that seems to be the best method. But people are
(14:26):
very much trying to sort of seek out those different opportunities.
Speaker 1 (14:29):
We're also seeing subset of investors which is growing actually
looking to other emerging sectors, like we're talking AI, we're
talking crypto, we're talking defense tech, we're talking autonomous vehicles,
which it's quite exciting in some respects. Obviously, commercialization with
these sort of new tech aspects are coming to the fore.
Speaker 3 (14:52):
I think also though, the availability of some of these
options to investors is new, right, Like, there are some
exciting opportunities there, but some of these again are a
little bit more unproven. And look, if you want to
take that big risk, you might get that big return, sure,
but equally it might not come off to the same degree.
I remember, even a couple of years ago, you started
to see a few more businesses that have basically sold
(15:13):
nothing at that point, and the evaluations continue to skyrock
higher and higher on this expectation of better things to come,
coupled with the fact that people are seeking those sort
of higher returns because inflation has been high, economic pressures
have come on. They are few people like say, not
all of them, but that growing subset caen to find
a different opportunity, and I guess hoping to be not
(15:35):
necessarily the first, but in that sort of early wave
of adopters and investors, because that's where you start to
make some of those longer gains. Over time, you get
an early you sort of ride that wave through. What
will be interesting, I think is that at some point
you will have some of these options that don't perform
as well. That's just how the market works. It'll be
interesting to see how people respond to that in terms
of do they get a little bit burned and then
(15:56):
immediately withdraw or do they go, look, actually, this is
how the markets work. I'm going to be sort of
happy to keep in it for that longer period of time.
I think that people generally will stick around. They're often
going to be younger investors who are have a bit
more risk tolerance, willing to ride the wave for longer.
I mean, it's something that also comes up a lot
more in conversation. You know, people have been asking recently
(16:17):
about the likes of AI, about gold, about carbon credits,
about you know, crypto and similar. But also what's interesting
I think is even some of the subsets of certain industries.
You know, defenses are often a lot hotter and of
greater interest these days. You know, questions around will actually
how do you what are you looking for when it
comes to defense assets? You know, it's not necessarily the
(16:40):
usual will if consumers get to spend more than things
will be better for defense as well. I think that
the geopolitics is going to be a whole lot more challenging,
so different drivers I think means that people are also
seeking out a different sort of information than what they've
had before.
Speaker 1 (16:53):
And I do see like even in the US they're
thinking about being able to use your crypto assets as
part of your for a house. Even in Germany they're
looking at banks are looking at being able to transact
in crypto. I mean, we're not there yet, but it
does seem to be continuing to increase in demand.
Speaker 3 (17:13):
Absolutely not only increase in demand, but becoming more mainstream.
You know, again, you go back sort of five, certainly
ten years ago, and let's be quite honest, crypto was
not mainstream. It was very much fringe. It was seen
to be you know, different odd at some points. I
still think, you know, for a lot of people that
you've got to keep your wits about you in some
of those areas because for sort of every sensible approach
(17:34):
that's being taken in some areas to crypto, there's another
fart coin that comes out every second day as well.
Like the variety there makes it hard sometimes to sort
of say crypto is this and be an all encompassing statement.
There's a bit of variety in there, but it is
becoming more mainstream. There's certainly more opportunity that starts to
come through, and I guess also slightly challenging to say this,
(17:56):
but I think it's real that you look around the world,
less trust and government and similar means that people are
again just wanting to hedge their bets a little bit
more in terms of where they sort of park their
money and their assets. And I think again, for a
lot of people, it's not necessarily saying, look, I'm going
all in on any one sect or whatever it happens
to be, but I'm quite keen. As an investor these days,
(18:16):
it seems on average to be a bit more exposed
to a lot of things, and that sort of broad,
diverse exposure does mean that you can pick up some
of those gains when some of those newer asset classes
start to emerge and provide you more potential. And I
think this is where it's been interesting seeing people develop
the last couple of years when there has been this
sort of implicit conversation amongst New Zealanders around their risk tolerance,
(18:39):
because it has been for you know, when term deposits
were high, where you didn't have to think about risk tolerance.
You parked your money in something that just gave you,
you know, it just continued to provide at a high
and high level. Now that you've got to be a
bit more discerning, I think that's where the level of
interest is coming back. I mean same in terms of
the number or proportion of people on shares as I
expect to are buying companies specifically, Again, a little bit
(18:59):
more new wants there where people are going. Look, I've
done a bit of research. I want to make sure
that I understand my exposure a bit more. These are
the areas I'm starting to push into. So again, I
think we've got a more discerning, a sort of more
more direct investor starting to come through.
Speaker 1 (19:15):
Rat Just thinking about the US economy, there were lots
of predictions that with the tariff uncertainty and the like,
that that economy would start to slow.
Speaker 2 (19:25):
We actually aren't.
Speaker 1 (19:26):
Seeing that, maybe because the tariff situation is on again,
off again, but really it does seem that still a powerhouse.
Speaker 3 (19:33):
Yeah, the US economy seems a little bit unkillable on
that front, I mean a bit serious. I mean, you're right,
people were expecting economic activity to pull back, for inflation
to spike a whole lot higher, for unemployment to start
to increase. You just really haven't seen too many of
those signs. I think underneath the surface is a little
bit in the data that does suggest again more challenges.
(19:55):
You look at the likes of some of the over
revisions that keep coming through to employment numbers in the US,
they do generally continue to be revised lower on this
sort of second and third published. But again there's still
enough in there, there's still enough jobs growth that's keeping
the economic motor humming. I do wonder if part of
it is a timing thing. You know, you have had
in recent times, a whole lot of uncertainty. People have
(20:18):
generally probably just tried to keep on moving forward, haven't
known what way to sort of move in terms of
investment or otherwise. So I do wonder if it might
be sort of again you start to see those impacts
a little bit later on. But again, even then, the
economic motor in the US still seems solid enough for
the moment with the I mean, the feed is still
(20:38):
talking about sort of one to two rates cuts this
year still as well, which is sort of the weird
thing is that the economy looks robust enough, underlying conditions
look a little bit weaker, which might allow you to
cut interest rates a bit more, but you're certainly not
going to get some of the larger cuts that some
people I think hope for to try and stimulate even
more activity, and that's probably the right spot for the
(20:58):
US in general, but it also means that increasingly look
earlier this year, when the tariffs were announced, people were saying,
We're going to completely move away from the US. I'm
just not going to park any money there. I mean,
people have come flocking back pretty quickly because there's still
good returns. They still look at other opportunities too. Europe
still seems to be a bit more in interest than before,
but certainly those US numbers look a little bit more solid.
(21:20):
I guess the question will be as we continue through
the year, do you see a bit more of a
trend start to emerge on either direction, because I think
that's almost part of the problem is that the US
economy is a little bit direction list at the moment.
You're not sure if it's about to trend down or
trend up. It's just it's just moving forward at a
solid pace without sort of any movement up or down.
Speaker 1 (21:39):
Yes, and markets are definitely hitting record highs and NAISDAK
and the S and P five hundred, so it's I
can see why investors, particularly on Cheesy's. We have about
eighty percent of our trading as in US. That said,
forty one percent is held here in New Zealand, so
there's a bit of a difference there, but in terms
of trading, that's definitely where people are still gravitating.
Speaker 3 (22:02):
Yeah, it's interesting as well, right with the volatility that's
come through because I mean, you look at some of
the days we've had this year, like wild wild times
and watching what would you know previously have been a
couple of weeks or months of movement happen, you know,
within seconds or minutes. Has been quite hard to stomach sometimes,
and even amongst that, actually it looks like people have
(22:24):
been buying in a bit more. You know. I'm not
going to say everyone buying the dip, but I think
there's been the sort of recognition from a lot of
people that, hey, sometimes that the markets have been I
think maybe over correcting or a bit overly worried about
things and then seem to come back the other way. Now,
let's be real. I also worry a little bit that
the markets sometimes undercook or don't forward cast as much
(22:45):
of the challenging conditions and sort of take good expected
economic news and sort of just run with it. But
what was fascinating, I think is also in recent times,
when you had conflict in the Middle East, we've been
expecting likes of oil prices some of those other commodities
to spike up sharply. There wasn't anything, in fact, in
terms of actual market action. I think most of the
(23:06):
US market numbers actually went higher despite some of those
commodities starting to show pressure. Now I do wonder if
everyone's become a little bit numb in a sense to
just how many of these big geopolitical things come through.
And people are now starting to look a little bit
more at the numbers and going, Okay, yep, some people
are expecting certain things, but until I actually start to
(23:26):
see them that expectation move to reality. I'm going to
look at what's actually right in front of me, what's
actually being reported here and now, and move with that.
And I think that's again, that's quite a different market
than what we've seen previously. When you jumped at shadows,
you jumped to any sort of little tibit of information.
Now people seem to be not only holding back but
going look when there is actual, real information. I'm going
(23:46):
to work on that. I'm going to pile in a
bit more, and I'm not going to react nearly as
much to sort of just some of that that broader
stuff in the expectation piece. That's a shift.
Speaker 1 (23:55):
Let's jump back to New Zealand and how businesses here
are feeling. There's been a number of out in recent weeks.
Speaker 2 (24:02):
They were looking at a recovery. But what would you say,
we're sentiment.
Speaker 3 (24:06):
Now Sentiments okay? And I guess I say okay, because
depending on how you look at it, in some areas,
the economy still looks weak forward expectations still don't look great,
but confidence about what's sort of coming up next is
still improving, if you will, And I think that's again
probably indicative of where the economy is moving. It's improving
slowly but surely, but it's sort of a sluggish one.
(24:28):
People are still worried in different sectors about how they'll go.
You know, you look at the likes of the construction
sector again pretty tough in many respects, Retail a whole
lot more, mixed, manufacturing a whole lot more, mixed, agricultural
primary sector in a good spot, but I do think
as well. Second half of this year, you do have
people that are refixing onto those lone mortgage rates. Everyone's
trying to act a little bit more limited in terms
(24:51):
of their investment intentions and similar There seems to be
this view of, look, yes, there might well be better
things to come, but I'm going to be very careful
with my money. As a business, I'm going to be
careful with my hiring. And from a household perspective, everyone
seems to be more careful with their cash too.
Speaker 1 (25:05):
Yeah, jobs, I would have thought they would be coming
back a little bit by now, but the figures aren't
really telling us that.
Speaker 3 (25:12):
Every time we get monthly job numbers, they seem to
show a little bit of a slight tick up, but
then that almost always gets revised again within the next
couple of months. And the more interesting indicator in recent
times has been the number of job ads that are
out there, you know, the number of job opportunities that
you can apply for in seasonally adjusted terms. They've basically
been flat now for just about a year now. That's
(25:33):
flat at sort of levels that we haven't seen since
about twenty thirteen or so. So it's been a long time.
The fact that they're flat is good relative to the
idea that they could still be falling, but it also
says that if they've been flat for nearly a year now,
there's not really any real trend of them starting to
pick up any sort of momentum. And you do just
get this feeling again from businesses that they are in
(25:54):
this sort of holding pattern where they would love to
employ more people. They just can't see the sort of
expectations for really strong things ahead enough for you to
start to hire a whole bunch more. You're seeing that
as well a lot more young people that are becoming unemployed.
That's the group who are often losing their jobs, some
of them heading for Australia and similar So some of
those trends I think are fairly well established at this point.
(26:16):
We also haven't seen any real trend that they are
starting to improve any quicker than we might have expected.
In fact, in most cases they're taking a whole lot longer.
Speaker 1 (26:24):
Now, Brad, is there anything positive that investors can look too?
Speaker 2 (26:29):
Where is there any silver linux in somewhere?
Speaker 3 (26:33):
As there seem to be some decent enough deals on
in terms of the prices that you can get various
stocks and options and similar for and again you know,
where you've done a bit of homework, other options seem
to be far over valued considering what they're delivering. But
again that's very case by case. I guess what's interesting
is that normally when we look at different sectors, is
quite a general environment.
Speaker 4 (26:54):
Right.
Speaker 3 (26:54):
You look at retail and you go, well, all of
retail's not doing that well. It's been interesting. In the
New Zealand case, you see a few places where they
put our announcement like, look, training conditions have been worse
than we thought. We've seen, you know, poorer results than
we've been expecting. But other areas sort of a little
bit quietly but pretty confidently going like, hey, numbers are
not bad at the moment. We're going all right, even
(27:16):
within sometimes the same segment, which really does go to
show that is a very discerning environment again, where it's
not sort of just everything moving in one broad thrust.
I do wonder as well if that means that people
are taking more notice of businesses, strategies, who's on the board,
what sort of movements they're making, and how quick because
this does seem to be quite a dynamic environment. Now
by that. I mean, it's shifting so quickly that I
(27:38):
do wonder. You know, people seem to be a lot
more interested in executives. You know, what are they doing,
what's the board doing? Have they made changes quickly enough?
Or have they sort of allowed things to just sort
of languish and then all of a sudden, Oh, some
big changes come through. They haven't reacted to I don't know,
be it you know, government cutbacks. They haven't reacted to
how the market's been shifting. So I do think that
(27:59):
there's an interesting variation in the reports. Like I say, genuinely,
some going look, it's pretty tough out there, and sometimes
operators that you thought would have been a lot more
solid or stable through a downturn. But equally some areas
of the market where you go, geez, that's pretty impressive
that you're still able to make some pretty good numbers happen.
It's a bit more all what has this company going
(28:20):
on below the surface? How are the board performing, how
long have they been there, what are they up to?
You know, are they agitating for change? What's the executive
team doing? What's the strategy? And that I do wonder
as well. I mean I don't think there's a good
indicator here in New Zealand, but like how many people
are showing up to the likes of agms and similar
to try and make sure they either get their point
across to management and the board, but also trying to
(28:44):
gain a little bit more information of what are you
taking us forward into because it is uncertain. You've got
to be nimble, and I think people are sort of
casing out boards and management a lot more than they
did before.
Speaker 2 (28:55):
Is there anything investors should ignore if we end on that?
Speaker 3 (28:59):
I mean, some times it's very easy to doom scroll
right in this environment like be it you know us
sort of market changes and similar. I guess probably a
need to keep your wits about you in terms of
how current your information is. I remember when the likes
of you saw a conflict in the Middle East recently.
I was sometimes reading analysis that had come out that
(29:20):
basically had missed the mark because it had come out
too late. You know, by the time someone had published
and been like, look there's a risk of the oil
goes to one hundred and ten dollars a barrel. Oil
had crashed back below seventy all of a sudden, and
it was just so there is a real need to
be very very current, or to at least be sort
of aware of when stuff has been coming out, so
that you make sure you've got the latest stuff. But also,
(29:41):
like I say, not doom scrolling too much, because there's
a lot out there that as an investor as a person,
you just can't control, and so I think more trying
to put some of that aside, looking for where there
is actionable intelligence that you can actually base a bit
more of a decision off that you might be able
to do something with yourself. Having a bit of a
clear headed strategy, working the information and then making the decision.
(30:02):
That'll probably put you a lot better than sort of
just blind reacting to every sort of market movement, because
certainly the thing that I've experienced the last couple of months,
people are coming forward with a lot more questions about
that volatility. They're going, hey, this has moved massively. Should
I be concerned? And normally the answer that question is
if you were concerned, you should have been concerned before
the big change came through. So if you've got a
(30:24):
good strategy, if you know where you're going, I think
that gives you a lot more confidence as an investor
as to what you're thinking about for the future.
Speaker 1 (30:31):
Yeah, sometimes it pays to hold, doesn't it. But you
don't want to put your head in the sand at
the same time.
Speaker 3 (30:36):
That's the balance, right, You've got to have enough recent
information to be able to make good judgment calls, not
so much that you get bogged down put your head
in the sand. Not so much either that you jump
at every moving shadow. It's a very delicate balance.
Speaker 1 (30:49):
Well, Brad, we could talk forever as usual, but it's
time to go. Thanks so much for coming into the studio.
Speaker 3 (30:54):
Thanks for having me. These are always great fun.
Speaker 1 (30:56):
And thanks to everyone for tuning in. You can watch
your lunch on YouTube tube or find us on your
favorite podcast app. Leave us a rating and tell us
what you like to hear next. Matowa
Kyonda, and welcome to Shared Lunch, brought to you by Chase's.
Speaker 2 (00:06):
I'm Helen Madison.
Speaker 1 (00:08):
Today we take a pulse check on the economy. I'll
be speaking with Infametrics principal economist Brad Olsen.
Speaker 3 (00:15):
The worry now a little bit more is that households, businesses,
and professional forecasters are all now thinking that there is
a bit more inflation to come.
Speaker 2 (00:23):
So what does this mean for investors?
Speaker 3 (00:25):
It's only a temporary pause that we're seeing with these tariffs,
and that some of the results could still be pretty damaging.
Speaker 2 (00:30):
What should you be looking out for?
Speaker 3 (00:32):
Everyone's trying to figure out what the sweet spot is
and sort of how to balance what is a lot
of uncertainty.
Speaker 2 (00:38):
And what should you ignore.
Speaker 3 (00:39):
It's been the sort of recognition from a lot of
people that, hey, sometimes that the markets have been over
correcting or a bit overly worried about things and then
seem to come back the other way.
Speaker 1 (00:49):
Before we get started, here's some important information.
Speaker 4 (00:52):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend eating product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (01:06):
Welcome Brad, great to see you again. It's been a while.
Speaker 3 (01:09):
It has been a while. In goodness, what a lot
has happened in the economy in that intervening period. Seems
like we've gone from the brink of World War III
to ceasefires, to tariffs to everything else. I mean, it's
been a pretty wild ride.
Speaker 2 (01:21):
It has.
Speaker 1 (01:22):
Let's start here at home and think about our economy
and growth. It appears that we are sort of stepping
up a little bit after all the kind of recession talk,
et cetera, et cetera. However, it appears to me that
the only real growth we're seeing is in the rural sector,
with milk prices, with beef for burgers to the US,
(01:44):
which is good for exports, and then that yellow gold butter.
Speaker 3 (01:49):
You're definitely right, I mean, the rural sector is definitely
powering the early stages of the economic recovery. You look
at the likes of the trade numbers we've got coming through,
commodity prices all in a better place. I think it's
true as well when you look across the world. That's
also partly a supply story. From other providers. So you
look at the likes of butter, milk, other dairy products,
New Zealand productions actually up, which is unusual when prices
(02:12):
are sort of at the levels that they are. But
it's production out of the likes of Europe and the
Americas that haven't been doing quite as well. New Zealand's
able to provide everyone else wants to pay for it.
We've been doing not too bad. You look at also
the numbers though, so the milk payout that's come through
has generated over nineteen billion of money that'll be going
back into the primary sector. What's interesting is in the
(02:33):
season just finished, you're talking something like four point five
four point six billion dollars more than the season before.
That's more money coming through than the entirety of the
lower interest rates that households be paying this year. So
the primary sector is definitely a very critical part at
the start. The question is does it continue. Because you
do start to see a few of those numbers that
likes the latest couple of global dairy trade options, they've
(02:56):
fallen back a touch and I think that does just
suggest again things are all right for the minute, but
a bit of a question going forward in terms of
how strong it will be. Fonterra has also made it
quite clear that they think there's effectively a bit of
a downside risk. They've come out that said, you know,
milk prices at ten bucks for the season ahead, but
it could range anywhere between eleven and eight. That's a
(03:16):
three dollar range, the biggest they've ever provided, and more
on the downside than there is the upside. I guess
that's almost the tone for the second half of this
year is Yep, there's a recovery coming through, but it's
a very cautious and slow one.
Speaker 1 (03:27):
Is it only the rural sector that are actually going
leaps and bounds or are other do you see other
sort of green shoots? Which is a bit of a
hackneyed phrase at the moment, but I'll use it anyway.
Speaker 3 (03:38):
First three months of this year looked all right. You
saw economic activity that expanded actually quite a bit apecent,
you know, some of the biggest increase in quarterly growth
that we've seen amongst a lot of our international partners.
I think the challenges after that, once you start to
get into April, you have the lights of the tariff
slow down and everything else that's come through you've seen
some of those indicators that have fallen back. At the
(04:00):
start of this year, there were a few parts the
likes of there was some better manufacturing numbers that were
coming forward. You also saw better professional services activity, so
you're getting you know, business services going a bit more again.
Both of those look like they've fallen back of touch
as we've moved through into the mid year period, manufacturing
and services and disease falling back into sort of contractionary territory.
(04:22):
So just that feeling of yes, there's a recovery, but
it's a bit more stop start. It's a bit more
slow to get going than we might have first expected.
And I feel like a lot of people ask me
these days, you know, economist said survived till twenty five
and I sort of have to respond and say, look,
we've got into the thirty first of December for that
come true. But it is going to be a slow
slog I think for this year.
Speaker 1 (04:43):
Yeah, it feels like one step forward to back to
some degree. I mean, the cost of food seems to
still keep rising, fuel keeps rising, and whether that's because
of the conflicts and the like.
Speaker 2 (04:55):
Yeah, I mean, where are we at with inflation.
Speaker 3 (04:58):
Inflation's uncomfortable at the moment, and like probably more uncomfortable
than we would have first been expecting some people in
our forecasting that headline inflation might go through three percent
towards the second half of this year. Now, that of course,
would be the first time that it had breached that
three percent high point of the highest that the Reserve
Bank generally wants it to go. Now, yes, there's an
(05:18):
expectation a short term, but there does just seem to
be enough sort of remaining inflationary pressure to make us
a little bit worried. And some people often ask, you know,
how do you have this when you've got the economy
that's in such a tough zone. You know, it's not
really a conducive environment right to raise prices, but you're
still seeing them. And I do wonder if we're starting
to see almost a twenty twenties version of stagflation. Now
(05:40):
that's a big word to use. I'm not saying we're
going back to the nineteen seventies. It's a very different environment,
but you do just get the feeling that there's a
little bit more of that inflationary undercurrent sitting around food
price inflation's now reaccelerated to four point four percent. What's
interesting is that last time it got sort of to
this high level, and I think you know now at
the highest food price inflation since the end of twenty
(06:02):
twenty three. The difference is at that point it was very,
very broad based, lots of stuff increasing in price all
the time, whereas now it's a bit more concentrated to
a more limited set of items. But the big increases.
You look at the likes of butter up sort of
fifty sixty percent the last year, mints and beef prices
higher again because those international prices. You look at the
(06:23):
likes of coffee, chocolate, olive oil, all of those increasing
all the But it's also it's not everything, but it's
the stuff that you notice so so much more, and
I think that's probably the difference. You've also got the
likes of oil prices, yes, fluctuating quite a lot this year.
But the real one, I think, and the kicker for
households at the minute, is energy prices. You look at
(06:44):
electricity and gas now rising at the fastest they've been
going in over ten years, and again it's just that
uncomfortable piece where from a household perspective. You've got food
prices going up, you've got energy costs going up. And
the worry now a little bit more, is that households, businesses,
and prefertional forecasters all now thinking that there is a
bit more inflation to come. Inflation expectations have increased, not
(07:06):
massively again, not to red alert danger zones, but just
to enough of a position where again the worry starts
to creep in, sort of a bit of a pit
in the bottom of your stomach around inflation sitting by,
and I think that's why the reserve banks in this
really challenging position where they're going the economy doesn't look great,
and I worry again. You look back to where we've
been a couple of years back, the likes of inflation
(07:27):
when it started to get bad. It was at a
time when we thought the economy wouldn't allow inflation to
pass through, and we sort of almost conveniently at the time,
ignored actual inflation starting to creep up again. Not fully
back in the same position, but it seems a little
bit too similar to completely ignore it.
Speaker 1 (07:44):
That's a good segue to the Reserve bank. By the
time this episode goes to air. They will have actually
the Reserve Bank will have actually announced.
Speaker 2 (07:53):
What the official cash rate is.
Speaker 1 (07:55):
Everybody's been hoping it would be another reduction, but it
does feel like consensus is they will hold.
Speaker 3 (08:02):
What was your prediction, We're expecting a hold as well,
to keep their official cash rate where it is at
three point twenty five percent, but also expecting that there
could be a further cut at some point later in
the year. And I guess that's where again that nervousness
creeps in that it's a little bit hard to justify
moving right this moment. You know, there's still the clarification
(08:22):
of what happens with the tariffs around the world, still
a bit more data to come through when it comes
to inflation and similar and so I think again that
sort of question of where does the Reserve Bank go
next is probably the bigger one, and they'll have a
better opportunity in August to be able to explain not
only the most recent decision, but also what that future
pathway looks like, because that's what everyone's concentrated on. Is
(08:43):
there a lot left to go? Are we close to
the end? Have we already seen the end? Quite a
lot of options going forward.
Speaker 1 (08:49):
Yeah, I suppose they're sending out letters at the moment.
According to Trump's officials and to you know, lots of
countries that actually probably have quite high tarifs, they do
something quite quickly, So you're right, we probably might have
to wait until that happens.
Speaker 3 (09:05):
And I mean you look at the market reaction as well.
I mean, when the tariffs originally came through at the
start of April like that, that was a bit of
a mountdown on the markets. What's I think interesting is
that even in recent times you've seen this sort of
the markets actually continue to push higher on some economic news,
but almost conveniently forgetting that there's it's only a temporary
pause that we're seeing with these tariffs, and that some
(09:26):
of the results could still be pretty damaging. I mean,
recently we've seen an agreement with between the US and Vietnam.
They came out and said, look, twenty percent tariff. Now
that's lower than the forty six I think percent they
started with. Twenty percent tariff on everything coming out of
Vietnam is still quite a lot though, and into the
US market becomes quite important because that's where a lot
more manufacturing is based. Anything that transits through Vietnam sitting
(09:50):
at forty percent tariffs and the US gets completely you know,
free access into the market. Like that's still pretty bad
for economic expectations going forward. So I'm a little bit
worried again that people are sort of quite happily blase
because it's been such a tough ride knowing what's coming next.
But if that's any indication again economic growth globally will slow.
(10:10):
If you're seeing those levels of teriffs. They might be
better than what was announced in April, but they're not
good for global economic growth.
Speaker 1 (10:17):
And that's even with China and I think the UK
sort of negotiating, and we'll obviously see other negotiations in
the next month or so. But yeah, it feels still
somewhat bleak.
Speaker 2 (10:27):
Doesn't it.
Speaker 3 (10:27):
Yeah, very challenging, and I mean it's one of those
things for New Zealand, of course, we rely on the
global economic environment to trade. At the moment, I think
we're actually probably not too badly placed. People were still
buying our food stuff, so we're selling to consumers a
lot more if we were selling sort of semi manufactured
goods or sort of intermediate goods that went into the
production process. If we were selling cars, you'd be in
(10:47):
a very, very tough spot. And having been in Korea
earlier this year, when again they are a lot more
wedded to not only the US economy, but to some
of that more manufactured stuff, they were definitely sort of
feeling the pinch a whole lot quicker than we were now.
Speaker 1 (11:00):
Interest rates also always have a bearing on house prices,
so the rate cuts.
Speaker 2 (11:07):
That we've had, we've had several I think it's two.
Speaker 1 (11:10):
Hundred and twenty five basis points over the last few months. However,
it doesn't appear that the heat has come back into
that housing market.
Speaker 3 (11:20):
No, not at all. And despite the fact that you
know you've got some fairly attractive interest rates on offer,
you just haven't seen that same level of buyer demand
spark up to the same degree. At the same time,
you've got a huge number of houses that are still
on the market. I think there's a few elements that.
One is the fact that there is literally half a
year's worth of normal sales setting available on the market.
(11:41):
Takes a while to clear that backlog. You've also got
a lot of new builds that have only sort of
recently been finished up, a lot of selling activity potential
in the market, not as many buyers coming through. You've
seen the likes of net migration pull back, so your
population growth has slowed. But I think particularly again, it's
interesting sort of when you look at some of the
indicat after that tariff announcement in April, there did seem
(12:03):
to be a real feeling amongst potential buyers that they
actually weren't quite as keen to clamber in, you know,
worries around the likes that interest rate they might be paying,
and what it might be in the future, the risk
of do I have a job or not? Will this
completely upset the apple cart, probably more importantly for some
people that probably had their potential deposit in their investments,
all of a sudden they didn't have as much of
(12:24):
a deposit as before. That means that there's still no
real reason that prices are going to be bid up,
and I think for a while then you'll start to
we'll continue to see yes, probably some price rises, but
very very muted as you go through the next couple
of years. And that's probably not a bad place for
New Zealand. What's interesting is it does now mean that
people are increasingly going well, okay, housing market doesn't have
(12:46):
a lot of immediate growth in it. Where am I
making money now? And that seems to be the piece
where people are casting around a lot more for not
only money making options, but a wider variety of those options.
Speaker 1 (12:57):
That's a nice segue into the Cheesies Quarterly Index, which
we have released this week. And definitely there is a
correlation we've seen between interest rates and investor sentiment. We've
got data for the last five years, which is, you know,
it's a good metric, and it would appear that when
rates have come down there is more immediacy in terms
(13:19):
of investing.
Speaker 2 (13:20):
What would you.
Speaker 3 (13:21):
Say, I think there's a few elements to it. One
is that generally, as your interest rates come lower, some
of your sort of less risky options, you know, putting
money into term deposits or similar just isn't nearly as
attractive anymore. When it becomes a little bit harder to
make those returns, you're having to sort of, you know,
change around or think about adjusting your risk profile. I
(13:41):
think it's also though, that as those interest rates come down,
they do normally stimulate a bit more economic activity on
the whole, both here and around the world. That generally
means more economic activity, more selling for the businesses that
you might be investing in, better returns, and similar over time.
So it's sort of reassuring to see that. I think. Also, though,
the big challenge in recent times has been that greater
level of volatility that you've seen coming forward. There's been
(14:04):
a lot of rebalancing, both from retail investors but also
the big institutional guys. Everyone's trying to figure out what
the sweet spot is and sort of how to balance
what is a lot of uncertainty, and the best way
for that seems to be less picking one deliberate strategy
and going all in and more having that quite a
bit more diversified option, which is reassuring to see because
that seems to be the best method. But people are
(14:26):
very much trying to sort of seek out those different opportunities.
Speaker 1 (14:29):
We're also seeing subset of investors which is growing actually
looking to other emerging sectors, like we're talking AI, we're
talking crypto, we're talking defense tech, we're talking autonomous vehicles,
which it's quite exciting in some respects. Obviously, commercialization with
these sort of new tech aspects are coming to the fore.
Speaker 3 (14:52):
I think also though, the availability of some of these
options to investors is new, right, Like, there are some
exciting opportunities there, but some of these again are a
little bit more unproven. And look, if you want to
take that big risk, you might get that big return, sure,
but equally it might not come off to the same degree.
I remember, even a couple of years ago, you started
to see a few more businesses that have basically sold
(15:13):
nothing at that point, and the evaluations continue to skyrock
higher and higher on this expectation of better things to come,
coupled with the fact that people are seeking those sort
of higher returns because inflation has been high, economic pressures
have come on. They are few people like say, not
all of them, but that growing subset caen to find
a different opportunity, and I guess hoping to be not
(15:35):
necessarily the first, but in that sort of early wave
of adopters and investors, because that's where you start to
make some of those longer gains. Over time, you get
an early you sort of ride that wave through. What
will be interesting, I think is that at some point
you will have some of these options that don't perform
as well. That's just how the market works. It'll be
interesting to see how people respond to that in terms
of do they get a little bit burned and then
(15:56):
immediately withdraw or do they go, look, actually, this is
how the markets work. I'm going to be sort of
happy to keep in it for that longer period of time.
I think that people generally will stick around. They're often
going to be younger investors who are have a bit
more risk tolerance, willing to ride the wave for longer.
I mean, it's something that also comes up a lot
more in conversation. You know, people have been asking recently
(16:17):
about the likes of AI, about gold, about carbon credits,
about you know, crypto and similar. But also what's interesting
I think is even some of the subsets of certain industries.
You know, defenses are often a lot hotter and of
greater interest these days. You know, questions around will actually
how do you what are you looking for when it
comes to defense assets? You know, it's not necessarily the
(16:40):
usual will if consumers get to spend more than things
will be better for defense as well. I think that
the geopolitics is going to be a whole lot more challenging,
so different drivers I think means that people are also
seeking out a different sort of information than what they've
had before.
Speaker 1 (16:53):
And I do see like even in the US they're
thinking about being able to use your crypto assets as
part of your for a house. Even in Germany they're
looking at banks are looking at being able to transact
in crypto. I mean, we're not there yet, but it
does seem to be continuing to increase in demand.
Speaker 3 (17:13):
Absolutely not only increase in demand, but becoming more mainstream.
You know, again, you go back sort of five, certainly
ten years ago, and let's be quite honest, crypto was
not mainstream. It was very much fringe. It was seen
to be you know, different odd at some points. I
still think, you know, for a lot of people that
you've got to keep your wits about you in some
of those areas because for sort of every sensible approach
(17:34):
that's being taken in some areas to crypto, there's another
fart coin that comes out every second day as well.
Like the variety there makes it hard sometimes to sort
of say crypto is this and be an all encompassing statement.
There's a bit of variety in there, but it is
becoming more mainstream. There's certainly more opportunity that starts to
come through, and I guess also slightly challenging to say this,
(17:56):
but I think it's real that you look around the world,
less trust and government and similar means that people are
again just wanting to hedge their bets a little bit
more in terms of where they sort of park their
money and their assets. And I think again, for a
lot of people, it's not necessarily saying, look, I'm going
all in on any one sect or whatever it happens
to be, but I'm quite keen. As an investor these days,
(18:16):
it seems on average to be a bit more exposed
to a lot of things, and that sort of broad,
diverse exposure does mean that you can pick up some
of those gains when some of those newer asset classes
start to emerge and provide you more potential. And I
think this is where it's been interesting seeing people develop
the last couple of years when there has been this
sort of implicit conversation amongst New Zealanders around their risk tolerance,
(18:39):
because it has been for you know, when term deposits
were high, where you didn't have to think about risk tolerance.
You parked your money in something that just gave you,
you know, it just continued to provide at a high
and high level. Now that you've got to be a
bit more discerning, I think that's where the level of
interest is coming back. I mean same in terms of
the number or proportion of people on shares as I
expect to are buying companies specifically, Again, a little bit
(18:59):
more new wants there where people are going. Look, I've
done a bit of research. I want to make sure
that I understand my exposure a bit more. These are
the areas I'm starting to push into. So again, I
think we've got a more discerning, a sort of more
more direct investor starting to come through.
Speaker 1 (19:15):
Rat Just thinking about the US economy, there were lots
of predictions that with the tariff uncertainty and the like,
that that economy would start to slow.
Speaker 2 (19:25):
We actually aren't.
Speaker 1 (19:26):
Seeing that, maybe because the tariff situation is on again,
off again, but really it does seem that still a powerhouse.
Speaker 3 (19:33):
Yeah, the US economy seems a little bit unkillable on
that front, I mean a bit serious. I mean, you're right,
people were expecting economic activity to pull back, for inflation
to spike a whole lot higher, for unemployment to start
to increase. You just really haven't seen too many of
those signs. I think underneath the surface is a little
bit in the data that does suggest again more challenges.
(19:55):
You look at the likes of some of the over
revisions that keep coming through to employment numbers in the US,
they do generally continue to be revised lower on this
sort of second and third published. But again there's still
enough in there, there's still enough jobs growth that's keeping
the economic motor humming. I do wonder if part of
it is a timing thing. You know, you have had
in recent times, a whole lot of uncertainty. People have
(20:18):
generally probably just tried to keep on moving forward, haven't
known what way to sort of move in terms of
investment or otherwise. So I do wonder if it might
be sort of again you start to see those impacts
a little bit later on. But again, even then, the
economic motor in the US still seems solid enough for
the moment with the I mean, the feed is still
(20:38):
talking about sort of one to two rates cuts this
year still as well, which is sort of the weird
thing is that the economy looks robust enough, underlying conditions
look a little bit weaker, which might allow you to
cut interest rates a bit more, but you're certainly not
going to get some of the larger cuts that some
people I think hope for to try and stimulate even
more activity, and that's probably the right spot for the
(20:58):
US in general, but it also means that increasingly look
earlier this year, when the tariffs were announced, people were saying,
We're going to completely move away from the US. I'm
just not going to park any money there. I mean,
people have come flocking back pretty quickly because there's still
good returns. They still look at other opportunities too. Europe
still seems to be a bit more in interest than before,
but certainly those US numbers look a little bit more solid.
(21:20):
I guess the question will be as we continue through
the year, do you see a bit more of a
trend start to emerge on either direction, because I think
that's almost part of the problem is that the US
economy is a little bit direction list at the moment.
You're not sure if it's about to trend down or
trend up. It's just it's just moving forward at a
solid pace without sort of any movement up or down.
Speaker 1 (21:39):
Yes, and markets are definitely hitting record highs and NAISDAK
and the S and P five hundred, so it's I
can see why investors, particularly on Cheesy's. We have about
eighty percent of our trading as in US. That said,
forty one percent is held here in New Zealand, so
there's a bit of a difference there, but in terms
of trading, that's definitely where people are still gravitating.
Speaker 3 (22:02):
Yeah, it's interesting as well, right with the volatility that's
come through because I mean, you look at some of
the days we've had this year, like wild wild times
and watching what would you know previously have been a
couple of weeks or months of movement happen, you know,
within seconds or minutes. Has been quite hard to stomach sometimes,
and even amongst that, actually it looks like people have
(22:24):
been buying in a bit more. You know. I'm not
going to say everyone buying the dip, but I think
there's been the sort of recognition from a lot of
people that, hey, sometimes that the markets have been I
think maybe over correcting or a bit overly worried about
things and then seem to come back the other way. Now,
let's be real. I also worry a little bit that
the markets sometimes undercook or don't forward cast as much
(22:45):
of the challenging conditions and sort of take good expected
economic news and sort of just run with it. But
what was fascinating, I think is also in recent times,
when you had conflict in the Middle East, we've been
expecting likes of oil prices some of those other commodities
to spike up sharply. There wasn't anything, in fact, in
terms of actual market action. I think most of the
(23:06):
US market numbers actually went higher despite some of those
commodities starting to show pressure. Now I do wonder if
everyone's become a little bit numb in a sense to
just how many of these big geopolitical things come through.
And people are now starting to look a little bit
more at the numbers and going, Okay, yep, some people
are expecting certain things, but until I actually start to
(23:26):
see them that expectation move to reality. I'm going to
look at what's actually right in front of me, what's
actually being reported here and now, and move with that.
And I think that's again, that's quite a different market
than what we've seen previously. When you jumped at shadows,
you jumped to any sort of little tibit of information.
Now people seem to be not only holding back but
going look when there is actual, real information. I'm going
(23:46):
to work on that. I'm going to pile in a
bit more, and I'm not going to react nearly as
much to sort of just some of that that broader
stuff in the expectation piece. That's a shift.
Speaker 1 (23:55):
Let's jump back to New Zealand and how businesses here
are feeling. There's been a number of out in recent weeks.
Speaker 2 (24:02):
They were looking at a recovery. But what would you say,
we're sentiment.
Speaker 3 (24:06):
Now Sentiments okay? And I guess I say okay, because
depending on how you look at it, in some areas,
the economy still looks weak forward expectations still don't look great,
but confidence about what's sort of coming up next is
still improving, if you will, And I think that's again
probably indicative of where the economy is moving. It's improving
slowly but surely, but it's sort of a sluggish one.
(24:28):
People are still worried in different sectors about how they'll go.
You know, you look at the likes of the construction
sector again pretty tough in many respects, Retail a whole
lot more, mixed, manufacturing a whole lot more, mixed, agricultural
primary sector in a good spot, but I do think
as well. Second half of this year, you do have
people that are refixing onto those lone mortgage rates. Everyone's
trying to act a little bit more limited in terms
(24:51):
of their investment intentions and similar There seems to be
this view of, look, yes, there might well be better
things to come, but I'm going to be very careful
with my money. As a business, I'm going to be
careful with my hiring. And from a household perspective, everyone
seems to be more careful with their cash too.
Speaker 1 (25:05):
Yeah, jobs, I would have thought they would be coming
back a little bit by now, but the figures aren't
really telling us that.
Speaker 3 (25:12):
Every time we get monthly job numbers, they seem to
show a little bit of a slight tick up, but
then that almost always gets revised again within the next
couple of months. And the more interesting indicator in recent
times has been the number of job ads that are
out there, you know, the number of job opportunities that
you can apply for in seasonally adjusted terms. They've basically
been flat now for just about a year now. That's
(25:33):
flat at sort of levels that we haven't seen since
about twenty thirteen or so. So it's been a long time.
The fact that they're flat is good relative to the
idea that they could still be falling, but it also
says that if they've been flat for nearly a year now,
there's not really any real trend of them starting to
pick up any sort of momentum. And you do just
get this feeling again from businesses that they are in
(25:54):
this sort of holding pattern where they would love to
employ more people. They just can't see the sort of
expectations for really strong things ahead enough for you to
start to hire a whole bunch more. You're seeing that
as well a lot more young people that are becoming unemployed.
That's the group who are often losing their jobs, some
of them heading for Australia and similar So some of
those trends I think are fairly well established at this point.
(26:16):
We also haven't seen any real trend that they are
starting to improve any quicker than we might have expected.
In fact, in most cases they're taking a whole lot longer.
Speaker 1 (26:24):
Now, Brad, is there anything positive that investors can look too?
Speaker 2 (26:29):
Where is there any silver linux in somewhere?
Speaker 3 (26:33):
As there seem to be some decent enough deals on
in terms of the prices that you can get various
stocks and options and similar for and again you know,
where you've done a bit of homework, other options seem
to be far over valued considering what they're delivering. But
again that's very case by case. I guess what's interesting
is that normally when we look at different sectors, is
quite a general environment.
Speaker 4 (26:54):
Right.
Speaker 3 (26:54):
You look at retail and you go, well, all of
retail's not doing that well. It's been interesting. In the
New Zealand case, you see a few places where they
put our announcement like, look, training conditions have been worse
than we thought. We've seen, you know, poorer results than
we've been expecting. But other areas sort of a little
bit quietly but pretty confidently going like, hey, numbers are
not bad at the moment. We're going all right, even
(27:16):
within sometimes the same segment, which really does go to
show that is a very discerning environment again, where it's
not sort of just everything moving in one broad thrust.
I do wonder as well if that means that people
are taking more notice of businesses, strategies, who's on the board,
what sort of movements they're making, and how quick because
this does seem to be quite a dynamic environment. Now
by that. I mean, it's shifting so quickly that I
(27:38):
do wonder. You know, people seem to be a lot
more interested in executives. You know, what are they doing,
what's the board doing? Have they made changes quickly enough?
Or have they sort of allowed things to just sort
of languish and then all of a sudden, Oh, some
big changes come through. They haven't reacted to I don't know,
be it you know, government cutbacks. They haven't reacted to
how the market's been shifting. So I do think that
(27:59):
there's an interesting variation in the reports. Like I say, genuinely,
some going look, it's pretty tough out there, and sometimes
operators that you thought would have been a lot more
solid or stable through a downturn. But equally some areas
of the market where you go, geez, that's pretty impressive
that you're still able to make some pretty good numbers happen.
It's a bit more all what has this company going
(28:20):
on below the surface? How are the board performing, how
long have they been there, what are they up to?
You know, are they agitating for change? What's the executive
team doing? What's the strategy? And that I do wonder
as well. I mean I don't think there's a good
indicator here in New Zealand, but like how many people
are showing up to the likes of agms and similar
to try and make sure they either get their point
across to management and the board, but also trying to
(28:44):
gain a little bit more information of what are you
taking us forward into because it is uncertain. You've got
to be nimble, and I think people are sort of
casing out boards and management a lot more than they
did before.
Speaker 2 (28:55):
Is there anything investors should ignore if we end on that?
Speaker 3 (28:59):
I mean, some times it's very easy to doom scroll
right in this environment like be it you know us
sort of market changes and similar. I guess probably a
need to keep your wits about you in terms of
how current your information is. I remember when the likes
of you saw a conflict in the Middle East recently.
I was sometimes reading analysis that had come out that
(29:20):
basically had missed the mark because it had come out
too late. You know, by the time someone had published
and been like, look there's a risk of the oil
goes to one hundred and ten dollars a barrel. Oil
had crashed back below seventy all of a sudden, and
it was just so there is a real need to
be very very current, or to at least be sort
of aware of when stuff has been coming out, so
that you make sure you've got the latest stuff. But also,
(29:41):
like I say, not doom scrolling too much, because there's
a lot out there that as an investor as a person,
you just can't control, and so I think more trying
to put some of that aside, looking for where there
is actionable intelligence that you can actually base a bit
more of a decision off that you might be able
to do something with yourself. Having a bit of a
clear headed strategy, working the information and then making the decision.
(30:02):
That'll probably put you a lot better than sort of
just blind reacting to every sort of market movement, because
certainly the thing that I've experienced the last couple of months,
people are coming forward with a lot more questions about
that volatility. They're going, hey, this has moved massively. Should
I be concerned? And normally the answer that question is
if you were concerned, you should have been concerned before
the big change came through. So if you've got a
(30:24):
good strategy, if you know where you're going, I think
that gives you a lot more confidence as an investor
as to what you're thinking about for the future.
Speaker 1 (30:31):
Yeah, sometimes it pays to hold, doesn't it. But you
don't want to put your head in the sand at
the same time.
Speaker 3 (30:36):
That's the balance, right, You've got to have enough recent
information to be able to make good judgment calls, not
so much that you get bogged down put your head
in the sand. Not so much either that you jump
at every moving shadow. It's a very delicate balance.
Speaker 1 (30:49):
Well, Brad, we could talk forever as usual, but it's
time to go. Thanks so much for coming into the studio.
Speaker 3 (30:54):
Thanks for having me. These are always great fun.
Speaker 1 (30:56):
And thanks to everyone for tuning in. You can watch
your lunch on YouTube tube or find us on your
favorite podcast app. Leave us a rating and tell us
what you like to hear next. Matowa
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