Mark LaMonica: We’re back for another edition of Market Minute. This week I’m joined by Bryce. So we’ll start out just with what’s going on. So I guess some interesting moves in the bond market. But catch everybody up on what’s happening.

Bryce Anderson: Yeah there has been some moves in the bond market, so I guess it’s on the back of renewed tensions and flowering, of tensions with Iran. And all prices have been elevated, volatile. And I guess the news changing by the day but very volatile. Now on the back of that, markets are starting to think about inflation being higher again.

And that’s been repriced in bond yields. So bond yields go. Global government bond yields across the board have increased. And domestically we’ve seen that with the ten year government bond yield going through 5%.

Mark: Now how do you think about this when you’re managing client portfolios I guess these macro events that are at least in the short term, impacting markets.

Bryce: Despite what many would have you believe, it’s very, very difficult to time short term market moves, particularly on the back of macro shocks or macro outcomes. And frankly, we just try and not play that game. What we do is firstly build portfolios that are resilient to a number of outcomes and a number of drivers. But the thing that we probably react to is prices in relation to where we think fair value for assets are in the long term, and that’s how we shift portfolios around, is pushing our portfolios to where the most attractive opportunities are.

And in terms of what’s happening with bond yields. So bond yields have have increased. So that provides a better entry point for our investors. So we’ve been marginally increasing our bond exposures across our portfolios whether that’s in international bonds or locally through Australian bonds.

Mark: So one thing a lot of investors are turning their attention to is we are in US earnings season. A lot of the big tech companies are going to report over the next several weeks. Any thoughts there on what you’re expecting to see or how markets might react?

Bryce: Look, the market’s hyper focused on the big AI players, the hyperscalers and I guess the ever increasing or what it seems to be ever increasing spend that they’re pushing into AI, whether it’s the infrastructure or everything around that that ecosystem. And I think the one thing that the market seems to be pretty focused on is CapEx. And I think you saw that recently with the result of alphabet.

So they upped their CapEx guidance to I guess the midpoint was 200 billion US for the year, a huge amount. And to put that maybe into context, five years ago, that number was 25 billion. So their CapEx going into into this area is huge. And because they’re up their guidance, the market got a bit spooked. That’s sort of an ever increasing amount.

And so they’re a bit worried about that. So I think that’ll be the focus of the of the market in terms of for those that report in the coming days. So the likes of Amazon Microsoft when they come out, I think that’s what the market will be focused on.

Mark: So with all this investor attention obviously on AI and AI related companies infrastructure, the hyperscalers, or they’re things that markets not paying attention to that maybe you and the team are more focused on.

Bryce: Yeah, sure. So I think that’s really where we tend to tend to look. So we’re looking for long term value. And often where it comes up is where people aren’t looking. Obviously there’s a lot of focus on AI. So we’re looking at things that have been either impacted negatively by AI or just being ignored. So a couple of those would be software.

So software is obviously an industry that has been severely impacted by the threat of AI. The challenge to their business model and some of those threats are real. But some of the price reactions and the across the board, just indiscriminate selling has opened up some opportunities. So we’re seeing some select opportunities within software in things like financial payments.

So a couple of names in there. Also in professional services as well as some select pure software names. We like Microsoft as an example. We’re building some exposure there.