the global view: Pivot party in the USA 26.08.24

Lachlan Hughes from Swell Asset Management provides his insights on the interest rate pivot led by Jerome Powell. Lachlan highlights that with rates increasing from nearly 0% to over 5%, the economy has remained resilient. However, he notes that higher interest rates will eventually slow down the economy. According to Lachlan, investors are beginning to focus on interest rate sensitive companies and sectors, particularly housing. After analysing the US housing market, he concludes that companies such as Zillow (NASDAQ: ZG) and Intercontinental Exchange (NYSE: ICE) hold advantageous positions owing to their exposure to housing. Interestingly, he remarks that Zillow's future profits will rise with an increase in home transactions.

Drawing attention to the rapidly growing cloud industry, Lachlan articulates how this growth impacts large tech companies such as Microsoft, Amazon and Google (NASDAQ: GOOG). Lachlan suggests that these businesses depend heavily on Nvidia's (NASDAQ: NVDA) GPUs for generative AI. Despite anticipating short-term demand for Nvidia's GPUs, he predicts this demand might experience competition from large cloud companies manufacturing their own GPUs in the long run.

Lastly, when discussing local market trends, Lachlan expresses his concern over the consumer coming under pressure due to rising interest rates. He anticipates businesses with less discretionary goods to fare better than those with more. He advises prudent financial management and the holding of substantial cash reserves. Despite cautioning against current investment in China, he underscores the potential long-term growth both Microsoft (NASDAQ: MSTF) and Amazon (NASDAQ: AMZN) can offer regardless of a challenging financial climate.

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