'Perspectives' by Escala Partners Escala Partners

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.

In this episode, Escala Partners CIO, Tracey McNaughton, talks about AI and its energy demand; Biden’s tariff hike on China; and why we should be a little sceptical of the this weeks’ Federal Budget.
(0:54) The latest Bank of America fund manager survey shows optimism in the stock market is at its highest level since November 2021. Investors are optimistic inflation will decrease and short-term interest rates will get cut.
(3:04) Some big news overnight, apart from the Federal budget, was US President Biden’s tariff announcement on goods coming in from China.
(4:50) Why is all of this important?
(7:42) We will get to the budget. You have just finished heat week with your fund managers. What were some of the themes?
(9:51)Just on AI and energy – we have known for some time that AI consumes lots of energy. Why was it such as surprise to the market?
(12:37) Speaking of inflation. Do you buy the Treasurer’s view that injecting $9.5 billion into the economy is not inflationary?
(15:12) How do you think the RBA will respond?
(16:17) What about the Future Made in Australia initiatives?
(18:46) So, I’m guessing, Tracey, this budget does nothing to change your view on investing in Australia?

In this episode, Escala Partners CIO, Tracey McNaughton, talks about riding the cycle – physically and metaphorically. In a world where there are so many distractions vying for investors’ attention, how can investors “tape up their mirrors”?
(0:57) Tracey, before we start, our clients have been asking for an update on your riding. You have been doing some training, I hear, on a racetrack.
(3:35) So let’s go there. The obvious distraction for investors at the moment is geopolitical risk. How are you guarding against that?
(8:28) What is the data telling you at the moment?
(9:48) Okay, so the risk that the US is going into recession has declined significantly, but what about earnings? We are about halfway through US earnings season. Are we at risk of an earnings recession?
(12:36) We need to talk about AI Tracey. Let’s talk about Apple. Apple continues to move extremely quietly in the AI world – we are really not hearing too much from them. An interesting feature of Apple’s last earnings call was the absence of any mention of artificial intelligence.
(16:43) Turning to Australia, we had a troubling inflation report last week. It told a similar story that we are hearing in other parts of the world, that service sector inflation remains sticky. Does this change your view on Australian equities?

In this episode, Investment Analyst Darragh Kennelly, talks to Nick Edgerton of Stewart Investors to discuss a key engagement initiative Stewart Investors have worked on since 2020 when they identified serious human rights risk that is often overlooked. Conflict minerals are vital materials for the semiconductor industry and are powering the green transition. The pair finally discuss recent examples of sustainable companies incorporating A.I. into their business practices.

Live on stage at our Agenda 2024 client event, Escala Partners CIO, Tracey McNaughton, is in discussion with Gerard Minack from Minack Advisers. Tracey and Gerard discuss interest rates, company earnings and the outlook for economic growth both domestically and overseas.