Transcript:

Hi, I’m Bianca Rose, Senior Portfolio Manager with Morningstar Investment Management, and I’m here to discuss our weekly Morningstar Market Minute, where we’ll discuss what’s been happening in the economy, markets and key trends this week.

So looking at this week, it has been quiet at the start of the week and then just midweek, we’ve had some more news happen on the all-important tariff front with the US.

The US has reached another deal with Japan, where it’s announced a tariff rate of 15%, which was down from the rate they were looking at, which was around 25%. So that’s been seen as a big positive for the markets, reducing uncertainty, and particularly for Japanese auto companies.

That has also filtered through to effects for Europe and Korea, who are all looking to make trade deals with the US ahead of the 1st of August deadline. So that’s been seen as quite a positive movement this week in markets as it has introduced certainty.

When we look out for the outlook in terms of economic growth and inflation, I think the things that we still see as uncertain from here is how companies react.

We are starting to see that come through during reporting season, where we have seen some mixed results from companies who are looking to pass on those tariff increases to their customers, and some who are actually looking to absorb that in the profit margins. And so that’s probably a key question for us as we look out from the impact of the tariffs.

The other market effect that we’ve seen, also going back to Japan, is electoral results.

On Sunday, we saw the coalition lose its majority position. It needed 50 seats to maintain a majority position but got 47 seats. So now there are question marks about Prime Minister Ishiba—whether he’ll need to resign and also whether the government might need to take a change in tack, in terms of giving policy relief measures, given food inflation in Japan has been quite high, and whether they’ll need to give some relief measures to address cost of living pressures in Japan.

That’s another watch point for us as we look out. Now, looking at what does it mean for us in terms of our positions and so on? Well, you know, we don’t really look to predict government policy changes. We don’t think we have an edge in that. What we do is use our evaluation as our North Star.

For us, it’s continuing to look for areas where we see lower earnings expectations being priced in and just trading around price volatility as tariff news and other news comes out. In recent areas for us over the last few weeks, we continue to buy into consumer cyclical stocks here and there, based on price volatility, and also US and European healthcare stocks.

So thank you for listening. And goodbye.