What will happen to markets in 2025?

29:35They really are. But like, you know, so we're bad at that and we're kind of bad at putting the best foot forward. And we're, you know, so there's a lot of that vibe stuff that I have previously honestly discounted as a serious factor in UK economic performance. But you can see that one of the things that's happened since the Labour government got elected and since the budget. So when they were in opposition, like Rachel Reeves and Keir Starmer did an absolutely standout job of charming the socks off the city. Like the big investors and the big companies, they were busy mates. It was all going to be great.

30:12That relationship has really gone south. And one of the reasons that people talk about in relation to that is that we're not selling a good story about ourselves and that the government is, you know, appears to be in a hurry to raise taxes. Now, the government got elected to fix public services, and I'm afraid money doesn't come out of the ground, so it's got to come from somewhere. So this is a perfectly valid thing for the government to be doing. But we have got ourselves into a situation where there's a bit of a lack of trust between the two sides, right? Kind of UK PLC, kind of, you know, corporate UK.

30:44Yes, finally. What? What is a UK PLC or PRC? PLC. Oh, I think you said PRC. That's not a fair answer, Matt. Yeah, that's not. I need to hit it for some reason. I just like seeing you jump. I just want to make sure you're on your toes. Yeah, so... No, UK PLC. UK PLC, right? So this idea of like corporate Britain, there is quite a sort of tetchy relationship between them and the government now. Now, I think some of it is special pleading by companies that just don't want to pay more taxes, frankly. But nonetheless, it is important that, you know, business confidence generates more business confidence.

31:19And you need to be just giving companies the sense that they can grow and thrive without getting dinged with higher taxes and with higher, you know, and with tighter regulations. Last time we recorded, Tomei, and you were having some real dramas with your accountant. So how's that been going, mate? They're sacked. So drama sorted. They're a big corporate firm. They didn't really reply to my emails very quickly, like took a week or two at times. And they charged me way too much. I mean, I've got pretty simple taxes and yeah, they were charging me thousands. They saved me some money, but yeah, I had to move on.

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34:08Controversial take. Do you think we need a Trump in England? Someone who's like a little bit more patriotic and he's like, forget everything, we're putting the UK first, We're going to deregulate and we're going to invest in our own businesses and put them on the UK stock market. Without all the drama, obviously, just the patrioticness. That's the thing. That's already happening without the bluster, right? So the stock exchange and kind of, you know, bigwig, you know, influential people around the city and big investment firms are already working hard on making it easier and more attractive to list stocks in the UK.

34:43and to bridge that gap between early stage funding and stock markets better. So that is already happening without a kind of big man who claims to have easy solutions to all of these problems. Because that, I think, is what Trump is going to find out over the course of this year is it's just not as easy as it sounds to keep prices under control, to keep public services running, to do all of the good stuff that you want to do all at once without generating inflation, for example. So I would be very wary of anyone who comes along with easy solutions here because, you know, the people who I know who have been working on firing up the UK stock market for like years now are good, thoughtful, decent, intelligent people who often are giving up their time.

35:27They're not they're not getting paid for this stuff to try to try and fix the market. And and I think we should kind of come a bit slack and let some of these things play out. And again, like, so almost nobody noticed, but FTSE 100, right, the big index of UK stocks, hit a record high the other day. You know, it's had a great run so far this year. So have stocks in Germany. Germany is supposed to be this total basket case, absolutely hopeless, cannot get itself out of the hole of having higher energy costs since the full scale invasion of Ukraine in 2022. Everyone hates Germany, blah, blah, blah, blah, blah.

36:03Oh, look, our stock market's at a record high. And you know, one of the reasons for that is defense. Like if you're going to invest in anything, investing in European companies that make tanks and bullets makes a whole lot of sense at the moment. And there's a lot of investors gravitating towards that. So there's a company called Rheinmetall, which is like a German company that makes like bits for tanks and bullets and stuff like that. Not an expert over here. I hit my own not an expert klaxon. But their stocks have done better than NVIDIA over the past few years. Because one of the things that Trump has done is say to Europe, we're not going to look after you anymore.

36:39You need to really jack up your spending on defence. And that message has got across and there's a lot of investment by governments in defence now. The other thing that I think, so this is a bit of a tangent, sorry, but the other thing that I think really could go right for Europe this year is what if we get some sort of deal on Ukraine? What if there is some, what if peace breaks out? The rebuild of Ukraine will be a big opportunity in terms of like, who's, there's going to be a lot of money spent rebuilding the place, right? Yeah. So there's two things, right? There's just, if you just take it, no one lets a war on your border, right?

37:12And it's just unspeakably. The vibes will be good if it ends. It's unspeakably horrible what's happened over there. And the sooner it stops, the better, albeit no one is trying to push Ukraine into a deal that it doesn't want here. Investors aren't saying, can you just sign on the line and hand it over? That's not how it works at all. But investors are very hopeful that some sort of resolution can be arrived at here. It would be all sorts of difficult to make this stick. And like on your point, Damien, you can't do that reconstruction stuff in just a ceasefire situation. You know, you run a cement company, say, in Poland.

37:47There's a massive opportunity for you in rebuilding Ukraine at some point. Are you really going to send your guys in to do the work there when you think they could get bombed if you don't think the ceasefire will hold. So there's a big, big reconstruction trade there for European engineering companies, cement companies, all that kind of stuff. But it's not going to happen super quickly. But markets move ahead of reality, right? So the minute you have the chance that there's going to be some sort of deal that might stick, my expectation would be that those stocks would do very well. I already know traders who are trying to make those plays because they thought which one, you know, 24 hours it'll be over.

38:2124 hours. Yeah, yeah. See, again, turns out it's just not that simple, Donnie. No, no, no. So you said like about vibes and you said it's important to be kind of positive and upbeat, but you called the UK the ugliest horse in the glue factory. And that feels... So I can... What happened to the greatest nation in the world? That was a quick you-time. I can explain. so um there there was a bit of a kind of over excited moment at the very beginning of 2025 right so trump got elected he's gonna like deliver on all of these potentially um inflationary policies that he's put out there was one thing that bonds really don't like so bonds are like the way that companies borrow money effectively from investors.

39:10They write them IOUs. They're like, don't tell my bond friends, but they're quite boring. But they are the absolute bedrock of financial markets. If your bond market goes wrong, everything goes wrong. If it goes right, nobody notices and it's all fine. But at the start of this year, bond markets went a little bit wrong because there was rising expectation that Trump would actually execute on these inflationary policies he was talking about. Bonds hate inflation. It's like kryptonite. Like the two, they're like cats and dogs. They just cannot be in the same room. They do not like each other. Bonds don't like inflation.

39:42So US government bonds started weakening. And that kind of went through December and carried on into January. Now, the thing is, again, the US is the biggest market on earth and the US government bond market is the biggest government bond market on earth, biggest, most sort of influential, when it starts to fall, other bond markets around the world start to fall as well. And so when investors are looking around, okay, which countries am I less certain about? And which countries' bonds should I sell in sympathy with what's going on in the US market? The UK kind of stood out. First of all, because the government has slightly, It's made life difficult for itself in terms of this kind of slightly fractured relationship it's got with business and this idea that it might need to raise taxes again.

40:31The market didn't super like certain elements of the budget in October. And so the UK just stuck out as a country that suffered a little bit more pain than the other markets. So, you know, German government bonds also sold off. You know, everything sold off. everything weakened. But there was a huge amount of attention around the UK. And again, it's partly because we've got some sort of domestic economic vulnerabilities. And it's partly also because that time when Liz Truss blew up the bond market was really quite recent. And bond investors remember that period really quite clearly. And so we're still slightly on the naughty step with investors.

41:15It's like, you know, you're not going to do that again, are you? And the answer is no, no, we're not going to do that again. So bond prices fell and that meant that the yields on them picked up. And the yields, effectively like borrowing costs for companies and whatnot, reached the same high levels as they reached during the Liz Trust moment in late 2022, but at nothing like the same speed. So people who just really dislike or distrust Rachel Reeves, the chancellor for whatever reason. We're very keen to leap out of their seat and get onto the internet and say, see, the market's completely lost confidence in Rachel Reeves.

41:53It's a crisis all over again. I'm here to tell you that is rubbish. So those yields, those borrowing costs have come pretty much right back down to where they started the year, largely in sympathy again with what's happened in the US because it's like, maybe he's not going to do those tariffs on China after all. So the moral of the story is we all get caught up in whatever it is that is going through Donald Trump's mind at any one point. It's a lovely idea to think, let's just like block his name on Blue Sky and get some widget on my Google thing that just like removes his name from everything I ever read.

42:30I'm just going to pretend he's not there. You can't because he's very material for how all of our investments behave. So heaven knows I would like to just not think about it, but I can't not think about it. So you have to track things like, is he going to like sanction Colombia? Like what the hell is going on here? We all get caught up in Donald Trump's mess. Now, if Trump really kind of goes hell for leather on the tariffs and hell for leather on the deportations, then all things being equal, that is likely to be bad news for the US bond market. And that's going to be bad news for the UK government bond market.

43:10And there is not a damn thing Rachel Reeves can do about that. But to paint that as some sort of loss of confidence in the UK is, I think, a bad faith argument. Do you think that she came close, though? Say, like, if the inflation print wasn't as good or there was these moments, like, it was out of her control, as you're saying, but do you think she came close to being fired if it went the other way? Because the papers made it out, like, they were like, let's get another lettuce out and all of this stuff I saw. No, I really think that was overhyped for a particular audience. You know, I think the government and, like, Treasury could see it for what it really was, which was a bit of a global wobble in bond markets.

43:54And, you know, so for example, I was at a thing at Goldman Sachs the other day, kind of, you know, investment summit kind of day. And they were saying the two episodes, the Liz Truss episode in bond markets in late 22 and what we had at the start of 25 are absolutely not the same thing. There is very little evidence because you can kind of pick apart different reasons why bonds move the kind of uk specific stuff there was actually quite weak but also they were saying in 2022 they were getting phone calls like from government and from the central bank and whatever saying what is going on here is that how long ago it was 2022 yeah late 22 that's scary isn't it yeah no letters can survive that long it just seems like yesterday yeah really really does but so the market functioning broke down.

44:46And that was why you had like banks and hedge funds and whatnot getting called up by the government and saying, what the hell is going on here? This time, it was perfectly orderly. There was a bit of weakening in prices. It has now unwound. The prices have picked back up again. So this might happen again in the sense that, as I say, Donald Trump could really do some serious damage to the US government bond market through a range of different channels. But if people try and tell you this is Rachel Reeves's fault, you should say, no, no, no, no, that Katie Martin says that's not true. And it really isn't true.

45:20I do want to look at Labour though and say, you know, like we say, oh, it's out of their control. The one thing about Donald Trump is he gives an air of a man who does stuff. He comes in and he's like, I'm doing some stuff and here's the stuff I'm doing. It's the vibes. The Labour government feel like they don't do anything or they haven't done anything. The irony is that they have done loads of stuff. It's just that it's like not as it's not as flashy. Right. They're making real progress towards, you know, firing up some infrastructure projects and kind of loosening up planning restrictions so that you can just build some more damn houses and you can kind of, you know, get commercial property up and running.

45:58so they are doing stuff but it's a bit more of the sort of thoughtful tinkering around the edges stuff and a bit less of the big flashy you know here's here's a big new development I'm going to put a ribbon on it and I'm going to cut it and then the ribbon's going to be in red white and blue and you know all this kind of jingoistic thing that is that's really not that's not their style the elephant in the room there is Brexit so the thing that has been just disastrous for UK business investment. So you've got one in the FT today, in fact, like you look at business investment over the past sort of 10 or 20 years, you look at like US kind of, you know, it rises, it takes a hit over COVID, obviously, and then it kind of recovers and keeps on rising again.

46:44Same story in France, same story in Italy, UK business investment just flatlines pretty much since 2016. And that's Brexit. And so the government has a really difficult job there in figuring out when might be the right time to say, you know, maybe we made a bit of a boo-boo here. Maybe this was bad for UK business, particularly UK import and export. Maybe there's something we can put right here. I'm not a political wonk, but I do know that that is a difficult conversation to have. You know, they don't want to alienate people who voted for this and voted for them. It's a really difficult square to circle.

47:25But every honest economist knows that this is the big issue, is having that friction in trade with our biggest trading partner. And, you know, what can we do to unravel that? Can we have a Brentree and go back into... That is such a good term. I've not heard of that. Oh, I'm calling by T a Brentree, the option of Brexit, guys. We're going back in. We're going back in. We're not leaving. re-entry it might need some work but I mean over the course of my lifetime and my grandmother is 101 so I'm planning on kicking around for quite a while over the course of my lifetime yeah I think that's plausible over the course of this parliament no chance zero we're just not ready to have this conversation who wants to get back into another six years of chat about that again can you imagine another referendum the reason no one talks about it is because everyone got so sick of talking about it Yeah.

48:20That's one of the reasons we just got... It was just a huge national argument, and people have quite a low appetite for getting into this huge national argument all over again. But the reality is that it hurts the UK economy. Now, your political instincts might tell you that's a price worth paying. And you think sovereignty trumps absolutely everything else, and it's much more important than having a functioning manufacturing industry in the UK. Other people take a different view. Net migration numbers have never been higher, So sovereignty and controlling your borders, which are two key arguments, kind of fall apart on the basis that more people are coming into the country than ever before, right?

48:57A lot of these things sort of dissolve on contact with reality here. Yeah. Okay. So with the Brexit thing, let's park that. Let's look at the Labour government and do you think they're doing a good job then? Because I think they needed quick wins and they need to do stuff that people can point to and go, it's better now than it was six months ago. And I'm not sure that we have anything yet. The problem is, and I'm not, you know, I'm not here to carry water for either side really, but the problem is, as the government would say, public services have been starved of funding for a really long time.

49:35You know, you go to your local A &E and there are like people in the corridors and the waiting rooms are just like fit to burst. and that's just not something you can like flip a switch and make it go away you know you can't fix that without fixing social care i think actually that is possibly a missed opportunity because the government has said okay we need to fix social care i know let's have another review and the social care industry is like what just do it stop reviewing this damn thing and just spend some more money on it now don't wait for another review that you spend money on and then And it comes out with recommendations in like however many years time.

50:13And then we think about implementing it. Just do it. Just spend the money. Because until you can get people who need help in the home, back at home and out of hospital, then you can't take people off hospital wards. And if you can't clear people off hospital wards, then you can't clear people out of A &E departments. And so everything is connected. And unfortunately for the Labour government, easy wins are not really going to be there, which is why their messaging since they took office in July has been very much, all about we are willing to take difficult decisions and you know basically eat shit over this over a few years raise people's taxes raise companies taxes because trust me in the end this will enhance the quality of your schools and your hospitals and your roads and all the stuff that you care about so you've got to give them a little bit of patience and and for what it's worth that is what uk government bond investors are doing that you know professional investors were not spooked by that stuff that was happening at the start of this year they're willing to stick by the government they believe in its plans so there's just quite a lot of like you know hyperbole that kind of kicks up but i do sorry mate once there but i do i do think that one issue is like the framing of of the taxation so maybe a lot of maybe a lot of people in the uk you know there's the narrative around taxing the uber rich exists and it's grown in popularity it's like the counter to like the anti-immigration argument.

51:35It's like, these are the two sides. Labour come in and say, we won't tax workers. They increase employers and I, which is a tax on workers. It's just like, come on. Like, you know, and I think that's what I look at and go, why are you doing that? I think there's this historic thing where like, the Labour Party and voters are like, slightly stuck in the past in terms of like, Like, Labour always thinks it has to reassure people that they're not going to do like a rerun of the 1970s, right? They're not going to kind of tax everything out of existence. It's like, guys, I know because I was born then.

52:11That's a really long time ago. Why don't we just move on? Stop apologising for stuff in advance and give yourself a bit more flexibility. But this is the political reality. It's very difficult to get through quite hostile parts of the press and UK media if you've got a high tax kind of agenda. agenda. But the reality is, if we want an NHS that's free at the point of care, that costs money. And so, you know, there's this kind of age old thing that like we're trying to run a kind of, you know, like lefty social democratic public services like you see in Scandinavia, with a US style low tax economy.

52:50And those two things don't quite, they don't really sit very well with each other. So we sort of muddle through. But yeah, the big mission for the government now is that they have heard what what you're saying right which is that you can't always be talking about higher taxes and high regulation you have to put forward a really strong growth program that's what they're about to do and we will see how well people receive it i i would dame on this one because i feel like when you go to the white house website you see donald trump you see eagles you see guns you see you want no well i mean who doesn't like eagles and guns but like it's like a movie or america america that's like it's like a movie on the white house website then you click out the movie and then you see all these like dozens of executive orders he's he signed and you're like as an american you would feel okay this is there's a change there's a big shift going on we've got a new president everything's going to be different i feel like with the new labor government everything kind of feels the same there isn't like that impact of change and things are the vibe the vibe seems to be getting better to me it seems like we're still in the same government because nothing's really the vibes are off and things are still expensive and nothing's it's not like they're saying we're going to do this we're going to make these big changes i understand you're saying it takes time but i would like to hear and like see some stuff because people voted for them for a reason to see a different change and personality is the game and like i don't i don't like you know this whole thing of like you can you can vote for personality we can vote for us and we're boring and we'll do some stuff slowly no that's the world is personality driven you know you need you need to have someone with a bit of pizzazz.

54:21Yeah. You know, that kind of... But with limited pizzazz, Keir Starmer did get elected as Prime Minister of the UK. Because he was the best of a bad bunch, people would say. We've had pizzazz. We've had Donald... We've had Boris Johnson. We've had kind of, you know, radical and exciting and that was Liz Truss and we all know how that ended up. So we've tried... I wouldn't call Liz Truss excited. I wouldn't say... She was exciting from the point of view that economically and she was only in the hot seat for like 42 days or something. So it is easy to remember. Maybe 44. I think that was a bit of argument.

54:52But anyway, she was like, I'm going to rip up the UK's economic model and start it all over again. And it was like, no, you can't just do that. So again, that goes back to my point that kind of being radical sounds great. You know, maybe in some circumstances it is great. But if you like screw your economy in the process by, you know, sending the entire UK government bond market just like swirling around the toilet, then nothing good happens. So, you know, markets for what it's worth. I do understand this feeling that we could do with something exciting, right? But markets really like boring. They love boring.

55:33Boring is predictable. Boring, because again, you go back to Donald Trump, you don't know what he's going to tweet tomorrow. Got no idea what his tariff policy is. It could change. It could just absolutely do a 180 overnight. You've got no idea. UK, you know where you are. And that means you can do long-term investment. What I want to take away. I really feel like I'm doing a spokesperson job. for the Labour government here, which is not my intention. I think what, let's look at, let's look at what the Conservatives were. It was chaos, right? It was like a soap opera. Every day was, the discussion was about like the just the madness that was the politics.

56:03Whereas now it's a lot more sensible and it seems to have calmed down. I get that. But I do think that there's like a disconnect between say the markets and what they think and then the lived experience on the ground. And what I may be talking about is more for individuals, for people who live in the country, for it to feel better. and I don't think it feels better. And we can say, oh, but the markets are all time highs. And to your average Brit, it's like, well, what does that mean? Because every time I try and get a train, it's cancelled. Like these are the kind of, you know, why is it? It cost me 300 quid to go from Preston to London the other day.

56:36They cancelled the peak ticket. So I then ended up on a non-peak train that was so packed that I was like this. On your point around this disconnect between markets and humans, I think that has ever been thus, right? This has always been the way. There is a disconnect. And one of the things that I think we really learned last year is that, again, general public are not idiots. And they don't like being told by politicians. In the States, in this case, it was by the Democrats. They don't like being told by central banks, for example, that you've never had it so good you know the inflation is coming down because there is this gulf of understanding around what inflation actually means so people say you're telling me the rate of inflation has come down why are my eggs more expensive and it's like okay we're talking a different language here when inflation comes down that means the rate at which the price of your eggs is getting more expensive slows down it does not mean your eggs get cheaper that's the politicians they said to help with the cost of living crisis to make it more affordable we've brought inflation down by 2 % the price is still going up yeah but so you have wages that kind of come up to to meet that and the two things should balance out but again people see you know I fill up I don't go to supermarkets anymore because it's too annoying but I fill up my my Sainsbury's trolley on my on my app on my phone and every week I'm like what what am I eating like gold how does this I do have a teenage boy to feed but still like it's really expensive and but you know particularly people on low incomes really feel the pain there but this thing around you even saw some newspapers over the course of last year saying you know the inflation has come down so when will when will my coffee be cheaper when will my cheese be cheaper it's like holy hell guys you have not got this at all you don't know how this works and you're misinforming people and again you know if you're in the states and you've got donald trump telling you that China is going to pay the tariffs, it's no wonder people don't know which way is up.

58:41This is just not how this stuff works. Yeah, I think as well, experts don't understand how big the gap is. And, you know, Andrew Bailey will be like, oh, you know, you just the bonds and people are like, what's a bond? What are you talking about? Yeah. But, you know, it's a bit like if you're a specialist in anything, right, you're a brain surgeon. You're like, right. So you just like take out the bit of the skull and you're like, can I just stop you there? What is a skull? You're going to have to really walk me through exactly how that works. If you said build this table, I wouldn't even know what wood it's made out of.

59:12The knowledge gap is huge, right? Okay, so coming back to the expert point then, what I wanted to ask is, does anyone know what 2025 is going to be like? Here's the thing. So there are lots of very well-paid investors and bankers and analysts and strategists out there. I talk to a lot of them. some of them are actual friends of mine they are generally speaking very good people very thoughtful they read everything they have not got the slightest clue like as you said on your podcast they don't have a scooby they don't have a scooby you know they and it goes back to our earlier point right which is you don't know what donald trump is going to do when you don't know what he's serious about and what he's not serious about i mean the greenland thing is that like for real like you know nobody knows any of this stuff and so one of the that really comes across with investors that I speak to at the moment which is you know obviously whenever you talk to them they're like well the outlook is uncertain because like no shit Sherlock you don't know what's going to happen tomorrow that's kind of how the world works so there's always an element of like of chance and of unpredictability with markets you know famously so but the degree to which serious thought for people who are managing sometimes billions of dollars worth of money for other people.

1:00:33The degree to which they are now willing to say to me, I really, I don't, I don't know. So you've got to do two things. You've got to spread your bets, right? So again, if you've gone all in on American exceptionalism, you're probably doing it wrong. You should like spread your bets a bit, have a little bit in China. Maybe they're going to crack this AI thing and make it cheap for the whole world. Hooray. Maybe you should have, you know, something in Europe, you should have something in the UK, you should have something in bonds, you should have something in stocks, you should like mix it up a little bit.

1:01:03So you so that's what people are doing that they're mixing it up, they're spreading their bets, and they're being very willing to like change it all up at the drop of a hat, because you've got to be nimble, because policy is so all over the place. There's a very nice hedge fund manager who I speak to quite a lot. And he's like, it really would help my mental health if I wasn't getting phone calls from people at two in the morning saying Trump has just done something that's going to like be bad for your US government bond holdings or whatever like you know it's exhausting actually to be managing other people's money at the moment because you don't know what's coming out and and when so the levels of uncertainty are much much higher than I'm used to encountering with people who are not idiots should should so to us idiots and it's even more exhausting trying to manage your own money right um especially if you don't feel like you're an expert and you don't have a grasp and you it's like that you don't really understand everything do you think people should just tune out the noise and just you know consistently invest an amount of that if you are annoyingly young like you two you have got like plenty of time to ride this out how old do you think we are hey don't don't don't tell them my age well you just gave him a clue yeah like you've got time to ride this out so u.s markets could go badly wrong this year but you've got time to fix that so i know because i was watching some of your previous work for the love of god get yourself a workplace pension and pay as much money into it as you possibly can and yes that is beer money that is not going to be available for you to spend this month but trust me so i came from like a family that had no money whatsoever The minute I had enough money to pay into a pension, I put in the absolute maximum that I could.

1:02:48And I'm glad for that every day. And there have been good years and there have been bad years and I have barely looked at it. I'm just like, it's fine. You just do your thing. It will grow over time. You've really got to do that and you've really got to be patient. The other thing, if you are doing some sort of investment that's layered on top of that, you know, in addition to a pension that's been managed professionally, only invest what you can afford to lose and don't put all your eggs in one basket it would be not my financial advice because i'm not a financial advisor but that's common sense how many people have i got to get here that say global index or spread it around a bit before you you just say i'm right it's true though it's true so a global global index fund is do you think it's still okay at this time even though you know america is quite a large proportion of it and there's so much uncertainty in America?

1:03:40Because obviously we're both very keen on passive investing. Before you answer, one thing is like, what's the alternative, right? What is the alternative? I mean, you know... Go long on Trump coin. Don't, you will lose it all, don't. By the time this goes out, that thing could be like... It could be zero. It could be like the world currency, it could be zero, yeah. My bet is on the latter, as I've got to say. Yeah, spreading it globally. Yes, the US is a big part of that, but all things being equal, right? say this Chinese AI thing turns out to be the real deal. And it's very early days. And I'm not a nerd, so I don't know.

1:04:14But the US's loss should be China's gain, right? So Chinese markets should benefit from this while US markets maybe come off a little bit. But the other thing is, say the Chinese AI thing, again, is the real deal. That cuts the cost for corporate America massively for implementing AI strategies into whatever it is that they do, maybe they're banks, maybe they are healthcare providers, whatever it is, consumer companies. You know, maybe this opens up cheap, good quality technology for everybody. It could be good for America. Once they pick it apart and go, okay, now that's how you do it. It could ironically be really good for America.

1:04:52It just might not be so good for NVIDIA, which is the US chip maker. And that is problematic because it is a$3 trillion dollar company but only recently right yeah it came from nowhere and one of the things that you know so there's a lot of people now who are like oh well i always said there was going to be a risk to nvidia and it's like did you only i didn't hear you saying that last week and then certainly deep seat comes along and you're like oh harry hindsight over here um but it has been said in investment circles for quite a long time that the first mover advantage is real and clearly like NVIDIA has absolutely raked that in.

1:05:27But it's not normally the first company that like invents the railways that makes all of the money. You know, it's the second, third, fourth, and it's all the companies that end up using the railways. And so, you know, there's nothing new under the sun, right? There's been a huge explosion in this one company. They've done an absolutely tremendous job. But it's not necessarily going to keep going in that same direction. You know, the rise in the stocks has been absolutely explosive they had the right kind of graphics cards at the right time didn't they but like they've got serious competitors out there that will be trying to enter that market it's so profitable that competition will flood into the market right like yeah and i was at an event a little while ago back end of last year with a couple of um irish guys who were in that like the very vibrant irish tech scene and they were like god that jensen wang right he's like the chief exec of nvidia they were like we remember him from like events back in the day nvidia was such a small time poxy little company that he wasn't even allowed into the same parties as we were and you know and he's just kind of come from nowhere and i'm like yeah but he's running a three trillion dollar company and you're at an event with me and apartment island so it's pretty clear who has won this game but it just goes to show you know you think you know who the winners are going to be and you really don't and again like that goes back to your point about like passive like if you think you can pick the individual stocks that are going to beat the market best of luck to you i wish you nothing but luck and wealth and happiness but i'm here to tell you you're going to find that very difficult because you just don't know where that where the dice are gonna land and passive investment again i will get emails from active investors i'm very sorry i love you all very dearly but you know the stock pickers every year the stock pickers like this is going to be the year if they're listening to this they're punching themselves in the face because we have a go about we talk about passive all the time so some of them really know what they're doing the stock pickers i absolutely don't deny that for for a moment but for most people who want a low fee dead cheap really diversified investment that's why passive has taken off as it has over the past 30 years it's dead easy imagine like you saying about saying everyone should run under 100 meters under 10 seconds or whatever it's like it's they're elite athletes of the sport aren't they they're fully immersed in it and they're obsessed and they're saying like you can do it oh yeah great you can do it but 99 of people who have a day job and a life and the train's late they haven't got the time to be really into the markets in that way and to value businesses it's really really really hard it's hard to know who to pick uh when to get in how much to put into each individual name when to get out you know if if this is your idea of fun, then sure, have a little bit of a kind of individual company stock picking thing on the side of what you do with passive.

1:08:25But if you do well, then a large part of that will be down to luck. Yeah. So we've talked about how you can't escape Trump. You can't run away from him. So if you're a long term passive investor, what should you be really doing this year when with all the turbulence? I think it's hard to argue that the US is toast, right? So, the US stock market is going to perform pretty well would be my expectation. But you are going to have some big bumps along the road. So, the question is, how do you handle those bumps? And the answer is, don't panic. So, it's really, really hard when markets turn south. And look, we had this shock from DeepSeek that came along from China, the Chinese AI.

1:09:08There was a drop in the NASDAQ, which is like the US stock index that's like full of techie companies, it fell hard, but it fell about 3%, right? You can live with this. This will rub off. So even when stocks fall really horribly, it's not necessarily a good idea to kind of get out and do the opposite. It's really worth having a bit of money like squirreled away in cash, right? Just like on deposit in a cash ISA or whatever that is, you know, yes, it's boring, but it's never going to do you wrong. But when stocks fall heavily, it's really easy to panic and kind of sell and do something else. So I remember in 2020, COVID crisis, stock market just got absolutely hammered, like a speed that I have not previously seen.

1:09:57It was really rapid. It was really ugly. And I remember the lockdowns were starting. UK was about to go into lockdown, and it was around March the 23rd and stocks were down, I don't know, I'm going to say about 20 % or something. 30%, yeah. And a few fund managers that I speak to were like, right, I'm going to buy. And I was like, are you on drugs? Are you completely mad? What do you mean you're going to buy? Like, we're only just going into lockdown. They were like, it's not going to get worse than this. The authorities are going to step in. They're going to make sure that markets behave themselves.

1:10:26And they were dead right and I was dead wrong. That's when I piled in. Yeah, I got in a little bit. Probably not to their level, but I came from buying a house and like throw all the money in the market. I've got a dip bag, I call it. So whenever... Nice. It's like a little pot of money. So whenever the market crashes, I just buy in. That's a really good idea. But this week was the first time I was like, I was a little bit scared. I was like, I don't know if I could pull the trigger. I bought a little bit, but not as much as I normally would. But then your crypto drops 90 % and you'll throw your jewelry on it.

1:10:51I did. I literally did. Because I have some crypto AI stocks and they just got smashed. Some American crypto AI stock and they lost like 80%, 60%. And I was like, I'm not buying that. Yeah. normally i'd be like yeah discount and i was like i don't know what's gonna happen like even i was like i'm very i like to put a little gamble now and again but i was like this is very uncertain it's very scary like you woke up i just saw red in my portfolio and i was like maybe i'm not gonna buy this let me see how this plays out let's see how this if it's any consolation even professional investors find this really hard as well you know when when the market is like really bleeding out that is always the best time to get in.

1:11:30But even the professionals say it's properly scary. The way to manage that is to just like have a set rule that what I would say is I'll place the order on a Sunday evening at dinner every week. So if I've got a pot of cash, a dip fund, and the market's tanking, there's like a tendency to be like, I want to hit the bottom. Or like if I put it all in, is it going to drop again? So you kind of got to remove the emotion and go, I'm just going to invest 10 % of my money on a set time every week. and then you just buy all the way down and all the way back up again. Yeah, and look, sometimes you do get massive breaks that mean that something doesn't work and doesn't work for a number of years.

1:12:07You look at there was a lot of investment in Chinese stocks, for example, a few years ago. And when that went wrong, it really went wrong and it's never properly recovered. And it was the right move to get out of China for a lot of sorts of investors. But those sorts of shifts where things durably go wrong for a really long time, are quite rare. Could it happen this time? Of course it could. No one's got perfect vision over the future. But if you do get this turbulence along the way, because Donald Trump is just an inherently kind of capricious, turbulent person, you are going to get some quite jerky moves in the market.

1:12:43Try not to freak out about all of them. That's what the professional investors are saying too, is like, I'm trying to keep my eyes on the prize and stick to a kind of narrative and a framework and just kind of ignore the noise. I'm not saying that's easy. I'm saying that's the right thing to try and do. Sorry, quick question. Do you think it could be four years of turbulence? Yeah, it definitely could be four years of turbulence. If he plays his cards right, it could be eight years of turbulence. But the most likely outcome is that it's two years of proper turbulence because he's got to get some of his more aggressive policies over the line before you have those congressional elections halfway through his term, which will make it more difficult for him to execute some of it.

1:13:24So my expectation is like in his first year, he is at the height of his powers, right? And so this is his big rush. You've seen all these hundreds of executive orders and all these, you know, seemingly quite random orders to like cut federal spending in all sorts of different areas, foreign aid, domestic healthcare, all this sort of stuff. You know, he is a man in a hurry. He wants this shock and awe thing and he's achieved it. The thing is, he believes and he's right in a way that the best way to negotiate with people to keep them on the back foot and keep other countries like thinking what's he going to do next so that he's like constantly surprising them and they kind of don't know where to go you look at Greenland and the Danish reaction to that as an example or Colombia or whatever it is other countries just do not know which way he's going to turn and that is a strategic advantage to him it helps him to get what he actually wants.

1:14:15The unfortunate byproduct of that is that markets end up all over the place because investors don't know what he's going to do either. So it's just going to be a bit of a mess. So what happens if you're older and you need the money in the next few years and you don't have decades to wait out turbulence? You know, we were talking earlier about UK government bonds. They're chucking out pretty good yields at the moment. They're chucking out pretty good returns and they're very, say what you like about the UK, say what you like about Rachel Reeves, we're not going to fail to pay our debts back, right?

1:14:45So you're going to get that money back and there are some really good returns on offer. If you really know what you're doing, there are individual UK government bonds that have preferential tax treatment and so you can get some very nice returns out of them. The other thing is cash, right? So I'm still getting 4.6 % or something on my cash ISA with like really low fees. That's higher than the rate of inflation. It's a decent little stash of money that's there for like rainy day stuff. Need to take the dog to the vets. I've got some sort of expenses to pay. I've got very expensive children, all this sort of stuff.

1:15:19You know, it makes a lot of sense to have a bit of money and basically risk-free stuff like deposits and bonds. Like a nice buffer. Buffer, a nice buffer zone. Everyone likes a buffer zone. Yeah, because, you know, like I think longevity, you said that you're you're going to live till 101 that'd be nice um you know people people are going to need to be invested for a lot longer so i always encourage older people you know people are in their 50s and think oh i haven't got decades ahead of me you have you know you're probably going to be in the market for as long as you've already been if you live to if you plan on living to 100 which i think we all have to kind of yeah because if you get to 80 and you run out of money you're in trouble you say well i've actually got i'm going to be invested for 40 years so i do have time to wait it out what i need to be able to deal with is sequencing risk in short-term drops in the market.

1:16:06And you do that through a good cash buffer, three years or some bonds or whatever. The other thing to bear in mind is that UK stocks, in contrast to US, pay really quite high dividends. So these companies that you invest in are effectively handing money back to you every year or whatever it is. It's kind of a sign of health. It's how it's perceived of UK companies. But, you know, like US companies are terrible at dividends. They're getting a little bit better. But, you know, so that is a source of income for a lot of people. Dividends from holding certain like UK stocks got much higher dividend yield than a lot of other countries.

1:16:40Certain European markets are good with dividends too. If you just leave them, they will just recycle into your portfolio. But you can just get a check if you really want to, if you're invested in the right UK stocks. Yeah, even income paying like indexes, you can obviously get high yield ones. But I think even like VWRL is like near 2%, which, you know, is... It's better than a poke in the eye, right? Yeah, especially if you've got it in tax-sufficient accounts. You know, if you've got a lot of money inside of an ISA or something and you're drawing 2 % off that, you probably need 4 % of the portfolio a year as a safe withdrawal rate.

1:17:10You know, there's ways to manage it, right? Yeah, sometimes boring is good. Yeah. I want to finish on one last question. We've talked about transformative technology and the biggest piece of transformative technology in my household in recent years has been my air fryer. And Tomein says that you hate these things. You hate it. You think it's just a small oven. and I agree because you... That's the point! Yeah, your co-host is American, right, Robert? Yeah. They like broilers or whatever they call them. Yeah, and they like air fryers a lot in America and for people that don't know, it's just like a little oven and it's like this big.

1:17:43Exactly, but my point is, look, fine, air fryers, whatever, but most people already have an oven. Also, air fryers don't need to be like your whole personality. Just shut up about them. I don't talk about my microwave. I don't talk about my oven. I don't even talk about my coffee machine or I've got one of those taps that does like boiling water. I don't go on about it. Those are cool though. All I just want people... They are because you just want a cup of tea and you're like, bosh, tea. Yeah, they are really good. But I'm just saying it doesn't have to be your whole personality. Please shut up about air fryers.

1:18:12Have you used one? No, but like... I think we'll end it now. No! This is a hill I'm willing to die on is all I'm saying. Yeah. Well, thank you so much for your time. Thank you so much. Pleasure. Thank you for waking us up today.

1:18:30Please remember, this is not financial advice. Like we say a lot on the podcast, investments can fall and rise. In fact, it's pretty much a guarantee. Past performance is no guarantee of future results. So your money is at risk with investing and other fees may apply. As with everything financial, please do your own research. We really encourage that because no one cares more about your money than you. I'm Damo. Fanti. This was an episode of Making Money from Our Company Most. It was filmed and edited by the team at Flow Spire, Jack and Ben. It was produced by Ruth Edwards and brought together by Will Stollerman.

1:19:00What about Ruth and Toothless a Dog? Yeah, shout out them too.