Q+A: A new market regime? What investors need to understand
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What factors are contributing to current market volatility?
Welcome to Fearing Greed Q&A, where we ask and answer questions about business, investing, economics, politics, and more. I'm Sean Aylmer. Markets are volatile right now. Investors trying to figure out what to do are contending with a lot of noise. The crisis in the Middle East the higher oil prices, the ongoing specter of tariffs, rising interest rates, stubborn inflation, slow economic growth. It goes on and on and on. So how do seasoned investors see through the noise and stay calm in a crisis? Jonathan Armitage is Chief Investment Officer at Colonial First State. Jonathan, welcome to Fear and Greed Q&A. Thank you very much indeed for having me. So put what's happening today into some historical context.
Is this unprecedented? Or have we been through these sorts of cycles before?
I think we have been through these sorts of cycles, but it's probably been sort of some time since you've seen this level of dislocation. I think you've got to go back to the sort of 1970s to look at the sort of energy level of sort of dislocation. But some historians have suggested there are precedents back in the sort of 60s as well. If you go back to the conflicts in the early 90s or the sort of early to mid 90s and then early 2000s, they were sort of shorter term in nature in terms of disruption. And so some of the sort of when people are reaching back into history, I think you've got to go back quite some time and certainly still well beyond most investors' professional careers.
Okay. So, I mean, most investors include you. You're too young to be an investor in the 1970s, I'm guessing, Jonathan. But what can we learn from that period?
I think that there are a couple of areas that you can look at. The first one is the sort of longer term impact of significant disruptions to energy supplies. I also think that there are some sort of second and third order impacts that sort of come through from These type of events, whether it feeds through into policy decisions, significant – one example is that if you look at the significant build-out of French nuclear power, a lot of its sort of genesis actually came from the energy crisis in the 1970s. So there will be some areas that we can sort of reach into where you may sort of see that this may lead to a sort of reappraisal of energy supplies and the way that energy is generated. But there will be some elements to this which are sort of somewhat unique.
Okay. I mean, there's a sense there then that there are opportunities there. big picture and maybe we'll get to those in a moment maybe just immediately though can we just talk about the noise first and then we'll talk about the opportunities that that may flow over the next kind of five ten years right now as an investor are you more worried about the middle east are you more worried about what higher oil prices does to inflation and interest rates and economic growth is stagflation a possibility i'm kind of trying to get your macro take on it yeah
I might just sort of step back a little bit and sort of put this into a bit of framework, because I think what you're seeing is some things that we've sort of focused on in terms of our own investment thinking for the last sort of three years or so, which is that you are seeing a new regime driving investment markets, more volatile inflation. That doesn't necessarily mean that inflation is higher, but inflation moves around a lot more. You've whether or not that is energy in the short term, or if you look at what we've seen over the last several years around scarcity of rare earths. You've got rising protectionism that was going on before the current American administration imposed significant tariffs.
And you've got the rollback of the globalization that sort of took place over 20, 25 years. post-china coming into the wto and so i think you can put what you're seeing in the middle east in that sort of context this is not sort of suggesting that we could predict the conflict and certainly the way that it has unfolded but what we are seeing is likely more volatile inflation
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