Tyger Fitzpatrick: Welcome back to another edition of Market Minute. Today I’m joined by Ameya. So thanks for joining me in. The key topic on investors minds at the moment is obviously US earnings and returns on AI investment. So what are you seeing in equity markets over the past week?

Ameya Hattangadi: Last week was an interesting week. It was quite quite choppy. We’ve had a couple of weeks prior where things were a little bit tough and early in the week. Last week we saw a bit of a balance helped by some earnings results. But then Thursday things completely changed and we saw some disappointing results. So an example is a company called Lam Research.

They make manufacturing or they make the equipment that’s used to manufacture semiconductor chips. And though their earnings results was actually quite strong, they announced that they were facing some supply constraints. The market didn’t like it. They were down 10% on the day. And then you also had Jensen Huang from Nvidia who came out and announced that that some of these Nio cloud businesses, which are businesses that rent out, compute, that they were facing funding issues and the market didn’t like that either.

And then on top of that, you had these rising tensions in Iran. So you had all spiking as well. And so you have all of these things combined. And the Nasdaq was down 2.6% on the Thursday, which was its worst day return since June.

Tyger: So would it be fair to say that we’re starting to see some tangible returns on this AI investment?

Ameya: Yeah, it’s kind of interesting. On the one hand, we’re seeing stock markets fall, but on the other hand, you’re actually starting to see some real results from companies and how they’re able to monetise their AI investment, turning it into revenue and earnings for it. So an example is Meta. So they got caught up in the sell off last week.

They announced some numbers on their new AI assistant news. And it reached 10 million customers in the first month. So in September which is when they released it, they got to that level. And the market seemed to perceive that as or it kind of gave them more confidence that they’re able to turn around the investment and generate some real revenue from their business.

Another example was Tesla. So they too were caught off again in the in the sell off last week. But they announced results on their FSD, which is a full self-driving offering for their cars, which also was pretty strong. So what it seems like to me is that although businesses are spending a lot of money on these AI investments, investors are starting to focus more and more on how they’re converting that investment into future growth in earnings and revenue.

Tyger: Moving to Europe now, what are we see in the French bond markets at the moment?

Ameya: So in the French bond market you’ve got the ten year yield that’s gone above 5% for the first time since 2002. And if you look at the spread between French bonds and government and German bonds, that gap has been the widest since the eurozone debt crisis in the early 20 tens. And if you compare the French yield to Greek and Italian yields, which were trading at similar levels at the end of June, around the 3.5%, that spread has widened significantly.

And it just goes to show how quickly things have changed just since the middle of this year. And it’s kind of happened for, say, a couple of reasons, but a lot of reasons. But the two main ones are the fiscal situation and also the political situation. So on the fiscal side, debt to GDP of the country is very high.

It’s at 120%. It’s forecast to hit 130% at the end of this decade. And politically it’s also very tricky. They’ve got a minority government in place that are trying to put in place austerity measures, but it’s only contributing to the frustration. And it’s turning what started off as a cost of living protest into all out riots in major cities across the country.

And you’ve got leading candidates in the upcoming election next year who have very little interest in reform. So people I think are rightly or investors are rightly concerned about.

The political will to make change to the fiscal policy.

Tyger: So I guess my last question for you is how you positioning portfolios based on all this.

Ameya: So in terms of our portfolio from the perspective of multi-asset investing, we’re very focused on disciplined risk management being broadly diversified not just within different asset classes like equities, fixed income property, but also within each asset class. And the other thing is being invested in areas that offer attractive reward for risk. At present, we’re currently looking at particularly consumer facing stocks that we think are attractively priced and where we think there is a gap between the price and value.