00:00Naeem Aslam is the Chief Investment Officer at Zaire Capital Markets.
00:04Thank you very much for joining me.
00:06Well, the markets do seem particularly resilient.
00:08Why is that in your opinion?
00:11Thanks for having me.
00:12I think there are a number of factors.
00:14Number one is, of course, the AI trade,
00:16because the whole rally is very much driven by certain stocks,
00:20and then that is pushing S&P 500,
00:22or if you're looking at Dow Jones' industrial average,
00:25or whether it is your NASDAQ.
00:26However, we cannot afford the fact that a large number of investors
00:33are completely sleepwalking into a complete disaster.
00:37Now, let me explain what do I mean by that.
00:40What I mean by that is the two important numbers.
00:43One came out last Friday, and that is your consumer confidence at the lowest level,
00:49something that we have not seen in 2007 during the financial crisis,
00:54something that we haven't experienced during the COVID crisis,
00:59something that we haven't experienced at all.
01:02So that is the number, that is the level that it has dropped.
01:06Number two, the PPI data came out a few weeks ago.
01:11That is a storm that is yet to hit the market in terms of the inflation numbers.
01:17Now, I'll give you one final bonus point,
01:20and that is to do with your interest rate expectations.
01:25If you look at the predictions market, you can clearly see,
01:28or the futures fund rate, that the Federal Reserve,
01:32the chances of them of increasing the interest rates,
01:35are sitting at quite a high level that we have not seen.
01:39So investors are completely being ignorant,
01:41or they're just sleepwalking into this disaster.
01:45You've drawn a fairly depressing picture there.
01:49How worried should the global markets be over this prospect of a conflict-induced recession?
01:55I think we are just being dualistic, rather than, unfortunately, that is the reality.
02:01Now, how smart money is moving on the back of that smart money is hedging.
02:06It is hedging in terms of two different strategies.
02:09Number one is, if you are trading, you are trading on a day trading basis,
02:14i.e. you are not carrying risk overnight,
02:16because any tweet, any outcome can change everything in relation to that one.
02:21If you look at today's president's tweets,
02:24now he is asking the allies who are mediating all the conversations,
02:30the whole Arabian, including Pakistan,
02:34to become part of the Abraham Accord,
02:36and that's becoming a condition.
02:38That is a huge, either a disaster,
02:41a ticking time bomb, which is going to happen,
02:43or that would bring the biggest relief rally ever,
02:47and then the president would get a Nobel Prize award if that happens.
02:51Now, number two, in relation to the markets,
02:57you wanted to hedge this particular risk.
03:00You do not want to own equities in terms of the long-term exposure.
03:06Yes, you do want to trade in terms of those particular stocks
03:11where a president is tweeting,
03:13because that is an unusual and uncharted territory,
03:16because we've never seen a sitting president sitting and tweeting about stocks
03:20or taking positions in stocks in his portfolio.
03:24So you do want to take an advantage of that.
03:27You do want to take advantage of AI boom,
03:30which is taking place.
03:32But you need to be selective in relation to what you are investing
03:37and then what you are carrying in terms of a risk overnight.
03:41I want to talk to you briefly, if I may, about oil prices.
03:44Now, they've fallen to below $100 a barrel.
03:46Are things likely to stabilize at that level, do you think?
03:50Not necessarily. Absolutely not.
03:52And I'm sorry for a party people over here, but that is the reality.
04:00Oil prices at $60 represents a completely different picture.
04:04Oil prices below $100 but above $90 represents a completely different picture.
04:10You are still more than half above the average price that it was.
04:15It's not going to bring back anything that quick.
04:18I think we are still going to see, we have not seen the actual reactions.
04:23When was the last time that you went in any of those supermarkets
04:27and then you've experienced, wow, okay, all of a sudden,
04:30my wallet actually has more wounds than it was before
04:35because we haven't recovered from the wounds that have taken place since COVID crisis, right?
04:41Because inflation is permanent fabric of this particular price action that we are seeing now.
04:48Now, with the effect of the Iran war, anything which is going up is going to stay up.
04:54We may see some relief, but inflation has unfortunately moved to a different level
05:00and a large number of people still have to come to reality.
05:05And then I'll just give you the last one and then I'll just call it a day with that one.
05:09And then that is the summer holidays.
05:12Among your friends or any of your viewers who are watching,
05:16you will see summer holidays are not on the agenda.
05:20The borrowing in this country and the borrowing in the United States on the credit cards
05:25is sitting at a record high.
05:26And that is something that you need to take into consideration
05:30before you make any investments into that one
05:32or if you are thinking of a disposable income.
05:35Niam Islam, thank you very much indeed for that.
Comments