'Perspectives' by Escala Partners

This week Escala Partners CIO, Tracey McNaughton, discusses how the US central bank overdelivered on interest rate cuts last week and why the Reserve Bank in Australia is under-delivering.

(0:54) The Fed over-delivered in its first rate cut in four years lowering interest rates by half a percent last week. Such a sizeable rate cut is normally associated with a crisis.

(4:27) It’s not just the US. Europe also cut rates this month.

(5:33) We had the Reserve Bank meeting today. Despite the Greens urging otherwise, they decided to keep interest rates unchanged at the 12-year high of 4.35%.

(7:47) Speaking of China, the economy received some much needed support from policy makers today but will it be sufficient do you think?

(12:16) Your mention of Japan is interesting there. Japanese companies are pulling back on spending in China.

(14:17) We are getting a lot of questions from clients on the US debt situation and just where and how it ends. A related question - is there any relationship between rapidly rising government debt and gold prices?

(17:27) The countdown to the US election is on – we are now 43 days out. How is the market positioning?

This week Escala Partners CIO, Tracey McNaughton, discusses the high price Australians are paying to the government for managing our economy and why we should probably be asking for a refund.

(0:52) August has been a very volatile month. The start of September looks like it will be more of the same. How are you and the CIO team navigating these markets?

(4:22) Do you expect this volatility to continue?

(6:04) Another question that came up recently at a client lunch, Tracey, was around population growth. If declining population in places like China and Japan is bad, why isn’t growing population in Australia good?

(9:39) The other factor weighing on Australia is China. Did you see any evidence of this impact in the last GDP report released on Wednesday?

(11:17) Earnings reporting season has just finished in Australia. Is this softer picture for Australia being reflected in company bottom lines?

(12:59) How weak is China?

(15:24) You saw Howard Marks in person last week – did you get any investment tips?

Loose on the bars. That is what Escala Partners CIO, Tracey McNaughton, is telling clients as they navigate the recent bout of financial market volatility. And every revolution leaves past corporate champions behind. Who will be left behind in the AI revolution?

(0:56) Lets talk about the volatility in markets. How did we come to witness the largest 2-day fall in Japanese equities in history?

(5:47) This is a reminder of how volatile public markets can be. Is this why we are seeing a rise in private market activity?

(8:54) Tracey let’s move onto the “catastrophic” earnings report from Intel a few weeks ago. Why is this so significant?

(13:39) We need to spend some time talking about Australia today because it looks like we are on a slightly different path to the US.

(16:10) The other factor important for Australia is what is happening in China. The news is not good there either.

In this episode, Escala Partners CIO, Tracey McNaughton, looks at what is driving recent market volatility - an election correction; a tech-check; or just a Fed-ache. The countdown clock has begun - what are the key battleground states in the US election?

(0:52) Market volatility has picked up in the past few weeks, particularly since the July 11 release of the US inflation report.

(5:42) Earnings season has begun in the US as you say. We are about halfway though. What are some of the themes you are picking up on so far?

(12:21) This is a busy week for the market. What else have we got coming up?

(15:52) Given all of the volatility, what are you telling clients?

(19:02) The US Election is still 97 days away. What do you think is going to happen between now and then?

In this episode of The Fund Managers, Escala Investment Analyst, David Bruty, interviews Chris Prunty, Portfolio Manager of the QVG Opportunities Fund. Chris discusses the fund’s recent participation in the highly-publicised initial public offering (IPO) of Guzman Y Gomez and the attractive characteristics of the company that provide the foundation for a strong runway of growth. The pair also discuss the outlook for small caps here in Australia following a recent rotation in the US that has been driven by the rising expectation of an easing in policy by the Fed.

In this episode, Escala Partners CIO, Tracey McNaughton, talks about the payoff with artificial intelligence and whether the dizzying amounts being spent on semiconductors and infrastructure will be worth it. And what role do private markets play in finding genuine use cases of AI?

(0:54) Well Tracey the big news in the past few days has been the shocking assassination attempt on former President Donald Trump. It’s still early but what, if any, are the consequences?

(3:28) If we did get a Trump win, what would be the impact on markets?

(8:13) The other big event we had last week was the release of lower-than-expected inflation data out of the US. It now looks like we are going to get a rate cut sooner than expected.

(11:21) Just on AI and the impact it is having on some parts of the equity market. Where do you think we are in terms of a peak? Are you in the camp of the optimists?

(16:55) The other feature of the market that is different today compared to the late 1990s TMT boom is the prevalence of private equity. What role is private equity playing in the AI boom?

In this episode, Investment Analyst Darragh Kennelly, talks to Jess Cairns of Alphinity Investment Management and Qinghua Lu of CSIRO to discuss their recently released research report on the implications of artificial intelligence use by companies and investors. They outline the framework for investors to use when assessing key threats and opportunities of AI usage and highlight some interesting responsible AI case studies of large multinationals.

In this episode, Escala Partners CIO, Tracey McNaughton, and Escala Adviser Ed Brooke reflect back on the past 100 episodes since the Perspectives podcast began during covid in 2020. The past four years had it all - lockdowns, recessions, recoveries, bank runs, bank collapses, wars, uprisings, innovations, bubbles that burst, bubbles that inflated, elections that surprised, elections that divided.

(0:20) A lot changed due to covid, and one of those changes at Escala was this podcast. Our first episode aired on March 18th 2020 and this marks our 100th podcast. Tracey, congratulations on your century.

(1:07) Tracey, it's been a remarkable period. We seem to have jam packed multiple cycles and events in less than five years, let's start with some of your most memorable moments.

(7:39) How about you, Ed?

(10:15) Looking back, what's changed?

(13:05) What do you think Ed, what's changed the most for you?

(14:54) What about China, how has China changed?

(16:28) Tracey, over the last 4.5 years, what surprised you the most?

(17:33) What about you, Ed?

(18:37) One thing that was real however, was emotions. They were heightened over this time - how did you keep calm and carry on?

(19:13) What would be your "Stock of the Century"? Have to be Nvidia, wouldn't it?

(20:46) I've got a question for you now, Ed. What has been your greatest learning over this period?

(22:22) They're two of my key learnings, how about you Tracey?

(24:05) We'll wrap things up there, thanks for your insights once again Tracey and of course for all your insights over the past 100 episodes. Let's hope it's smooth sailing now on your way to a double century.

In this episode, Escala Partners CIO, Tracey McNaughton, talks about what she sees as the three main takeaways from the recent string of elections around the world. She and Ed talk about what Le Penn describes as the "return of nations", the rise of nationalism, and what it may mean for investors.

(0:49) Tracey, let's start with the topic of the day, inflation. We had some key data out of the US.

(1:56) The easing cycle has started for some though hasn't it.

(3:17) Why is that? We had data out last week showing the economy barely growing and yet the expectation is the Reserve Bank will be one of the last to cut interest rates?

(4:33) Elections have been another important topic. In the past couple of weeks we have had elections in Mexico, South Africa, India and Europe. What do you make of the results we have seen so far?

(9:30) What are the investment implications emerging so far from these elections?

(12:41) India is a market that you and the CIO team like a lot given its favourable demographics and it being one of the key beneficiaries of the rejigging of supply chains away from China. Does the election outcome change your view at all?

(15:14) One of the reasons you and the team are less convicted on China is the changing shape of global supply chains - moving away from China.

(17:05) So while China is still the manufacturer to the world, alternative manufacturing hubs are being established.

In this episode, Escala Partners CIO, Tracey McNaughton, talks about the connection between community, political stability, and the size of government. We are now in an age of big government. This has implications for economic growth, inflation, and central bank independence.

(0:55) Tracey, firstly, how was the ride last weekend?

(1:16) I’m a cyclist but even I know you can’t ride a motorcycle without a clutch.

(4:24) We saw that with the budget a fortnight ago, didn’t we? Government spending as a share of GDP has increased.

(6:04) When did this shift toward protectionism start? Was it with the election of Trump in 2016?

(8:21) What about Europe? Isn’t Europe China’s largest trading partner?

(10:00) I suppose with so many countries going to the polls this year, the idea of placating disgruntled voters with election sweeteners puts even more pressure on government budgets.

(11:53) We were talking in our Investment Committee meeting this week about why the US is so surprisingly resilient – even in the face of 11 interest rate hikes. Gerard put up a great chart that showed the relationship between increased government spending and higher economic growth.

(14:22) Governments might be going their own way, but markets all seem to be going one way – and that’s up.

(16:14) Turning to Australia. We had the latest inflation data for the month of April yesterday. It came in a little hotter than expected.

(18:00) We have also had some activity data recently that points to a weakening outlook here.