Simonelle Mody: Welcome back to the Morningstar Market Minute, where we discuss everything that’s happened in markets over the past week. Today I’m joined by Bryce from the investments team. Bryce, thanks for joining me.

Bryce Anderson: Great to be here.

Sim: The last week in markets bond yields appear to be the topic of conversation right now. What’s your take.

Bryce: Yeah. So central bank activity bond yields really at the center of everyone’s focus over the last week and maybe even beyond. So in the US last week the US fed raise rates and talked about being really tough on inflation. The market’s probably pricing in one one rate. And the prospect of one rate increase in the prospect of potentially two.

And then it got a further nudge. Yields got a further nudge when the Bank of Japan raise rates there as well. Closer to home I think in terms of domestically the RBA in front of Parliament last week talked about inflation being pretty sticky. So inflation is the topic that you’re and the market is pricing a rate increase later this month when the RBA meet.

Sim: An AI CapEx also appears to be another concern might be affecting bond yields. What are you what is your take.

Bryce: Yes. Yeah. So another I guess maybe an obsession in the market is that AI and AI CapEx spend. And really it’s a theme that’s been playing out over quite an extended period. But really what the markets trying to work out is whether the CapEx is going to get a return on that investment. So and that plays into the hyperscalers and the the huge CapEx spend that they’re putting into, into the area.

But also, I guess, the enablers of AI so that the semiconductors and the picks and shovels. So the likes of are Samsung, SK Hynix, these, these players that are important in that ecosystem, that have seen huge gains in the last year, and seeing what it means from here for those for those names.

Sim: And on the AP, software stocks have been pummeled for much of this year. Where does the team sit on that?

Bryce: Sure. So I think it’s not a one size fits all for all software names. So there are definitely some some losers from AI. But there’s also been lots of indiscriminate selling, which has created a bit of opportunity in terms of long term short term issues. But long term, some of these businesses are okay. So we’re finding some opportunities across financial payments, some direct software names and some stuff in this sort of more legal sort of software and area within the markets.

Sim: And consumer is also taking a big hit. Namely Nike recently hasn’t had a great month. What’s your sort of team’s take on that?

Bryce: Yeah. So specifically with Nike there’s I guess the way we view Nikon are trying to assess it as there’s plenty of issues with with Nike. You’ve got the Chinese consumer who’s in the doldrums. Plus they have more domestic options for where they’re looking for apparel. So that’s that’s one issue. Then there’s questions which I guess related to some of that.

Is there their brand and the strength of their brand, which has always been quite, quite a differentiator for them in that sort of space of the market. And then going on to more broadly outside China is the crimping of just people’s discretionary spend and putting off purchases, even if for footwear, etc., that it’s just not where it is now.

Bryce: We probably zoom out from that a bit and think that there brown powers, it could be damaged a little, but it’s still relatively intact. The consumer will eventually come back and China will come back as well. But what our arbitrage is time and taking a longer term time frame that the market’s probably ignoring and lots of investors are ignoring, and that we know that that sentiment will change.

And frankly, when we make money on these things, it’s not when sentiment goes from, I guess good to great, it’s when sentiment goes from absolutely horrible to bad. But there are opportunities outside of that, I guess broad retail and things like luxury retail is where we see some really good opportunities and really good reward for risk for investors.

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