Monday Espresso Podcast - 16th June 2025

[00:00:00] Edward Kennedy: Good morning. It's Monday, 16th of June. I'm Eddie Kennedy, head of Personal Portfolios at Malborough, and today on the podcast we'll be discussing rising tensions in the Middle East and what that means for financial markets. The president who never seems to be out in news and the company, where cloud means opportunity, well, at least from a technology perspective.

[00:00:23] Edward Kennedy: I am joined today with Rory Dowie, lead portfolio manager of our global equity strategies. Before we jump into the news, Rory, how did the markets perform last week?

[00:00:32] Rory Dowie: Yeah, good morning, Eddie. So last week, markets were fairly subdued. Well, that was up until Thursday. You know, until Thursday, the US was kind of eking up by sort of small amounts every day, 20 to 30 basis points.

[00:00:43] Rory Dowie: It was kind of similar story across Asia as well but if there was an area of weakness, it was in Europe that was lagging somewhat. We had US inflation on Wednesday and that helped with some of those inflationary concerns that had been sort of coming into the market post the tariff noise. And the week that was subdued, it was subdued until Friday.

[00:01:00] Rory Dowie: And obviously on Friday we had the news breaking of Israel's attacks from Iran and that led to broader concerns of escalation and a wider war. And really on Friday, we saw classic risk off behavior, reacting on that news. Stocks more risky, they fell between and gold and the US dollar spoke.

[00:01:18] Rory Dowie: So those kind of traditional safe haven assets, they rose on that news. I nterestingly as well, oil was up 13% and that's really because the Middle East, you know, the region where that war is happening, accounts for about one third of global crude oil production. And actually that was the largest one day jump in crude since back in March, 2022, and that was when Russia invaded Ukraine.

[00:01:39] Rory Dowie: And no surprise, leaders around the world are obviously calling for peace, and we'll be watching any escalation of that this week.

[00:01:45] Edward Kennedy: Thanks Rory. During these periods I'm reminded of ex-US Secretary of Defense, Donald Rumsfeld. He quoted in saying There are known knowns, things we know that we know and they are known unknowns, things that we know we don't know, but they're also unknown unknowns things that we do not know, we don't know. Clear? Probably not. What we're saying here is basically conflicts are a known risk. However, you're never too sure how markets are going to react to them. That's why de diversification is key. Now, sticking with the US, what can you tell me a bit more about that US
inflation print you talked about and what the ever so shy US president had to say about it?

[00:02:33] Rory Dowie: Yes. So on Wednesday we had us CPI, and actually it was a good print for markets, core CPI that is excluding the more volatile energy and food categories. Often a better measure of sort of the longer term trends in inflation is something that central banks typically focus on more so than the headline numbers.

[00:02:49] Rory Dowie: That CPI rose 0.1% month on month and that came in below expectations of 0.3%. Year on year, that number was also below expectations. Of course CPI came in at 2.8% versus expectations of 2.9%. So again, that was a generally positive print across the board and increased the likelihood of hopefully some rate cuts in the US.

[00:03:12] Rory Dowie: You know, the weakness or the softness in energy prices really led to kind of that softer print and actually, interestingly, there were a handful of other items which we were expecting to show some tariff related jumps, such as autos and clothing prices. They actually posted declines, so they were kind of the key dynamics, leading to that softness on in the core inflation numbers.

[00:03:30] Rory Dowie: Obviously you mentioned there already, Donald Trump, he was tweeting again. You know, he was making some quite strong statements on social media platform X, demanding Jerome Powell lower rates in the US and he's sort of blaming single handedly that Powell is costing the US economy millions of pounds of millions of dollars with these higher rates.

[00:03:47] Rory Dowie: And Trump sort of the view that that kind of war on inflation is pretty much done now. So again, Trump continuing to put the pressure on Jerome Powell.

[00:03:55] Edward Kennedy: Lots of different factors there feeding into inflation. We'll definitely be monitoring that closely to see if it's transitory or it could cause some dark clouds in the horizon, and that is a seamless transition to a company that you want to talk about.

[00:04:11] Rory Dowie: Yeah, indeed. Like we did there. So Oracle, one of the sort of top stocks in the AI space, you know, producer of cloud services, supplier of database software, they reported their, Q1 earnings on Wednesday. And really the numbers were excellent and the guidance was very, very good as well, which was pleasing. Cloud infrastructure revenue, that will increase more than 70% this year up from the 50% growth last year.

[00:04:32] Rory Dowie: So really important. Obviously we've got very high growth numbers and we had that last year, but importantly, we are getting an acceleration in that growth. And that reaffirms some of those positive themes that were coming outta Q1 earnings from other AI names such as Nvidia and Microsoft. So again, that was a really positive and it helped to buoy some of those tech names over the week as well.

[00:04:50] Rory Dowie: Oracle itself was up 13% on the day, and since lows back in April, it's up 62%. So again, it really feels like the AI theme is beginning to kind of gather some momentum again.

[00:05:01] Edward Kennedy: Wow, that's some impressive numbers definitely. It almost feels like there's a disconnect between the bottom up solid fundamentals of stocks and some of the top down macro risk, which actually leans quite heavily into active management during this period.

[00:05:16] Edward Kennedy: Before we go Rory, can you give us a look at what's the week has ahead?

[00:05:21] Rory Dowie: Yeah, so obviously the big thing that we'll be watching carefully is obviously the situation in the Middle East. We're gonna be monitoring that closely for any developments and what that might mean for portfolios.

[00:05:30] Rory Dowie: On the data front, we have jobless claims in the US next week as well as retail sales and housing starts. So we'll be looking at those and what they mean for different parts of the markets. And then kind of closer to home, we have Eurozone inflation next week as well. So yeah, hopefully, we got a deescalation of what's going on in the Middle East somewhat, but yeah.

[00:05:46] Rory Dowie: As always we'll be on top of it.

[00:05:48] Edward Kennedy: Yeah. Let's hope so Rory and thank you for your time today and thank you listeners, as always, send in any questions you may have. Goodbye.