Investors are focused on economic growth over inflation, says Janet Mui

Are you at all surprised what we saw yesterday, the NASDAQ hitting a record close despite the fact that now it looks like the rate cuts will be pushed way further back UBS out with a note saying there’s a / 80% chance we won’t see the first rate cut until September. I I don’t think it’s at all too surprising. I think we have seen that play out in the first quarter. I mean use keep going up, but then actually markets actually kept rallying. So I think markets are more focused on the fact that the US economy is resilient. I mean what do you prefer AUS recession or low, you know, high for longer interest rate, I think I would prefer no recession. So I think that that is actually what is what the data is telling us. Now the US economy can withstand high interest rate. So I think that’s why in the face of high yields, equity markets are still OK, OK, so you think the markets are OK. I want to show a chart right here. Is the week to date for the Magnificent 7, The SNP and the SNP equal weight. There’s been a lot of talk about the broadening of the market and the SNP equal weights the place to be. But this week it certainly was not the Magnificent 7, far outperforming those other two indices. What does that tell us? Does that give us any insight about the direction of investing going forward? Well, I think that there is evidence of a broadening in the equity market rally in the first quarter. You see that primarily in the cyclical sectors. I think that’s primarily based on the economic resilience story. I think that could continue, but I do think that the Magnificent 7 will still be relevant, relevant and I think they will still deliver a big chunk of that earnings. And I think that’s primarily because of the AI theme and also that ongoing technology innovation, et cetera. So talk to me about this AI theme. I mean, AI is supposed to increase productivity, but yet we’re continuing to see earnings expectations decline from the start of the year. So if AI is going to be such a powerful force in the market that’s fueling these magnificent 7 stocks, why are earnings expectations falling and what does that mean? Well, I think that earnings expectation has been very, very robust. And I think a little bit of slowdown in that is not too problematic in our view. And I think actually, if the earnings expectation actually came down a little bit, it means that if the actual data comes out better than that, that is more scope for the rally to carry on. I think this is also not just 1/4 on quarter. I think it is actually a multi year theme that we’re talking about. We’re talking about a lot of hardware and software upgrade, infrastructure upgrades, etcetera. So there’s huge opportunities there. Let’s talk about another multi year theme oil, it was just kind of range bound for quite a bit. Now we’re seeing it moving to the upside even after reports saying that demand is going to fall by 7%. It looks like some of that upside moves due to concerns about supply security. How are you viewing oil? How do you see that impact in the markets going forward? It certainly is inflationary. It is. I think oil prices are quite hard to predict. I think right now we we have a supply deficit. I think that’s what the IEA is forecasting for the rest of the 2024. I think of course the geopolitical tension would be ongoing in the background. So that’s why we have a long energy trade actually, which is a basket of a long energy majors globally. And the thesis is actually primarily based on the fact that these energy companies are improving their capital discipline and shareholders return, but it is also acting as a hatch as inflation and also geopolitical.