Is it the magic of liquidity which is blinding everybody?
Richard Harris: Well, I am not sure it is blinding everybody, but it is definitely having a big impact on what is happening. Clearly, the big beautiful bill or ugly bill, as you might call it, is going to have quite a big impact. That is going to put trillions of dollars into the economy. And as we know, if you put that sort of money into the economy, it ends up in asset prices. So, I think that equities are taking some strength from that. But one of the biggest reasons why we have seen prices move up recently is because Trump comes in with a scary figure or scary announcement such as the 2nd of April tariff increases. And what have we seen since then are roll backs from them. So, the market has seen each little roll back as a victory, as good news.
So, bit by bit, it is priced things back up again and that is what we are seeing at the moment that we are actually seeing small pieces of good news. But if you look at the good news, you can sort of say, well, tariffs in China were going to be 145%. Now, they are going to be 50%, maybe they will be lower. Vietnam 48% or something, maybe they will be 20%, that all seems to the market to be good news. But in reality, that 20% is still very high. It is a lot of cash to find for American buyers because, of course, they are the ones who are going to be paying at the end of the day. So, you have to think that that is going to have a detrimental effect on trade and a detrimental effect on growth that will counteract all the positive features that the big beautiful bill was intended to have.
So, just wondering, now that 9th July approaches closer and closer, what can we hear on the tariff front?
Richard Harris: Well, the extraordinary thing if you do a survey of how much people have been searching for the word tariff, it has gone down pretty well solidly from April 2nd. And what we have had over the last couple of weeks, we have had a lot of news about Iran, a lot of news about global politics, what is going to happen to oil we have been talking about.
Most recently, we have been talking in the last week about what has happened to the big beautiful bill. Well, that was strong armed through. Now, the markets are going to start focusing on tariffs. But they have really not paid much attention to it since April the 2nd, thinking that Trump is going to chicken out. Well, we will have to see if that happens. But on those countries that have signed deals with the US already, tariffs are an awful lot higher than they were at the beginning of the year. So, I think that that is really the factor that we should be looking at not the fact that we have had good news coming because some of these very high tariff levels have been reduced.
So, what should one do, I mean that is the most important question whatever we are discussing is well known? It is a strategy what you adopt at an all-time high which essentially will differentiate the portfolio return. If you sell now, well you miss on the uptick. If you do not sell now, well, you regret because this market already is looking bloated.
Richard Harris: Well, what is basically happening is that there is a big delay in numbers. The big factor that has confounded economists, of course, is how is it that we have seen the economy stay fairly strong despite all these potential features of bad news coming around. Well, a lot of the bad news has not hit yet.
Higher tariffs have not necessarily hit. Issues with the deficit have not necessarily hit. But generally, the bad news has not really hit yet, that is further down the line and it is going to be the same with the big beautiful bill. The tax cuts are going to happen soon. The benefit cuts are going to happen later and over time. So, initially, the markets will still stay pretty buoyant because they would not have an awful lot of reason to sell off.
So, if you have to, let us say, punch in one trade, only one trade, you allowed only one for rest of the year, what will that trade be?
Richard Harris: I think equities, maybe less weighted, less highly weighted than they have been previously, but equities will still continue because bull markets die hard.
