15.07.2025

In this episode of SB Talks, Stanford Brown CEO Vincent O’Neill speaks with Chief Investment Officer Nick Ryder.

They discuss:

• RBA Rate Moves – Direction or Timing?
• July 9th US Tariff Deadline Passes, Now What?
• NVIDIA Breaks Records, Again

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Transcript

Vincent: Welcome to SB Talks. Today is Tuesday, July 15th, and I am joined as ever by our Chief Investment Officer, Nick Ryder. Welcome Nick.

Nick: Thank you, Vinny.

Vincent: Now today Nick and I will be discussing last week’s RBA rate decision. We talked tackle as the July nine deadline comes and goes, and we discussed Nvidia as it hits a new high valuation milestone. Welcome to all our listeners.

Last week, Michelle Bullock was the Grinch that stole Christmas in July. Everybody was expecting a rate cut well, lots of people were hoping for a rake cut, I should say. Not necessarily expecting, but we didn’t get it. What have you, taken from not just the announcement, but also I guess some of the follow up material?

Nick: Yeah, well actually I think a lot of people were expecting a rate cut. So according to the Reuters poll, 31 out of 37 economists had had a rate cut close to unanimous. And the market pricing I think was almost like 90-95% price for rate cuts. So, it was quite a surprise. And I listened to part of the post-meeting press conference from Michelle Bullock and I don’t think I came away learning a lot. I mean, it was a bit confused. She did reiterate that it was really more a question of timing rather than direction. That they’d had a couple of concerns about, some of the data points within the monthly CPI data.

Vincent: So what did the call out?

Nick: Construction costs and services and they wanted to wait really until the full quarterly CPI comes out on the 30th of July. And that was really the reason that they voted to keep rates on hold. It was the first time they’d given the split of votes. So, six people voted to pause or hold, and three had voted for a rate cut. So it was quite interesting some of the commentary around that, but they don’t attribute the votes. I’m not sure that it’s necessarily that helpful.  But it was quite interesting, there was I guess, questioning Michelle Bullock as well in the past where the market had been so positioned for a rate cut or a rate rise or a particular move, and the board was thinking in a different direction, there’d been some strategic leaks to people like Terry McCray.

A little bit of managing the expectation. And she said, well, we can’t really do that. I don’t really know what the outcome’s going to be. I think the way the RBA has restructured the monetary setting policy setting board, with some additional independent members. And so the way it works is maybe she doesn’t have as much control over the outcome of the meeting. I really said she couldn’t really guide the market in advance. And so maybe this is a more likely feature going forward where the market’s caught by surprise a bit more.

Vincent: Yeah, so I guess. Where we sit, it’s a reiteration of the direction of travel. We know we’re going down, but it’s more a question on timing as you said. What is the market now pricing?

Nick: So the market’s pulled about 10 basis points of pricing out by year end. So we’re priced for 59 basis points of cuts by year end. A bit over two, two and a half call it. We were around three before the meeting, and they’ve just moved the July cut to August, just sort of rolled it forward a month.

About 90% price for a cut in August. I guess there’s still a few skeptics thinking, you know, maybe they’ll do the same thing again. A lot will depend on the employment report that comes out for June, in the middle of this month, and then the end of the CPI numbers at the end of the month.

Vincent: As you said, there are major numbers, but market expecting probably realistically too, and a 50% chance of a third cut before the end of the year. Whether that rolls into early next year is probably the key question there.

Nick: Yeah. Some of the big banks have pushed their, pushed a cut into February, so they still have the same number of cuts. They’ve just sort of pushed them all back slightly.

Vincent: Yeah, well it’ll be an interesting few weeks ahead, see some of that data and see what is the broader health of the economy. Because we’ve talked here before about some of the weakness that is out there. We’ve also talked Taco here before and it’s back on the agenda. We had our July nine deadline that you’d cautioned us not to get too worried about, and it has come and gone and we have a new one, August 1st.

Nick: Yeah. And I think, once again, I mean, it’s really interesting. The market’s really ignored it. Donald Trump sent out a bunch of letters last week. Particularly to some of the major trading partners. So Japan and South Korea, also threatened, Brazil, as well as, Mexico and Canada and the EU but has pushed the date for these tariffs to come into one August. And then sort of been a bit rubbery around whether their final deals or whether there’s still option to negotiate before that date comes in.

Vincent: And so, we’ve got a few letters sent out and a few, figures. Pinned to the wall, the European union’s 30 heading towards the 30% if they’re theoretically not successful in their negotiations.

Nick: Well, that’s right. And they’re preparing some retaliatory tariffs. But then, the head of the EU trade negotiations are saying, oh, we’re getting close, and Donald Trump said they are coming across to negotiate ahead of one August. I think the market’s just saying, oh, well we’ve seen this, movie before. It’s just another negotiating ploy and getting quite of it all taco, but then with so little market reaction as someone suggested, maybe that emboldens Trump not to back down this time because the market sort of, ignoring it.

I think, there is probably a good chance that some of those tariffs do come into effect on one August. Whether they stick around, will depend in part on that legal case. You might remember, the Court of International Trade blocked Donald Trump’s use of the International Emergency Economic Powers Act as a trade tool, saying there was no international emergency. So it’s possible that some of these things get pulled back when that court case goes through, either later this year or early next year.

Vincent: I’m with you. I’m inclined to believe at some point they’re going to have to start rolling some of these out. And I know we have got the national levels and then we’ve got these particular sector tariffs and other things, and some of them are at play already, but, the sort of kicking of the can down the road probably can’t go on forever. I think we are getting closer to knowing where we stand than we were even sort of two or three weeks ago.

Nick: Yeah, I mean that’s definitely possible. And of course we also had the sector tariffs on copper announced last week. 50% tariff on copper, which has seen the copper price rise to record high. And it’s interesting the price in the US for copper versus in London, has widened now there’s a 24% difference. Take into account that tariff to some degree. So that’s, an interesting development in the copper market. And of course it’ll take a long time for the US to bring on copper mines and copper smelting capability. So it’s not something that can be sorted out in the short term.

Vincent: It does beg quite a few questions around why you go quite so aggressive on that particular tariff.

Nick: Yeah. More recently, in the last day, we’ve had, Donald Trump agree to send weapons to NATO that can be used by Ukraine, particularly some of the more offensive weapons, which previously they were more sort of more defensive. And also threaten Russia with a hundred percent tariffs and secondary tariffs on country. Potentially China and India who buy their oil, buy their oil so that’s another couple of interesting points in that. So this one, it is a supply of arms, but it’s been paid for by their NATO allies.

Vincent: Essentially, America’s saying, okay, well part of our agreement in terms of your increased defence spending is you’re going to buy more of a help Ukraine. Not so much on just US side, but, the more of a collaborative approach across NATO and that’s in the US is a bit a key beneficiary in terms of some of those weapons sales.

Nick: Yeah, and within the last couple of weeks we did have that NATO summit where Trump went across and NATO agreed to increase their spending on defence, both direct defence and critical infrastructure related to defence. Up to 5%, in 2035 and Donald Trump, I guess, seemed more keen around NATO than he had previously. Certainly wasn’t dismissing article five, the mutual defence obligations as part of NATO. So I think that all seems to be reasonably positive for the broader NATO alliance.

Vincent: And you touched on Russia and Putin there before and I guess it’s a key one that he seems to have been very comfortable, largely ignoring Trump to this point. And perhaps he’s sort of starting, just sabre rattle towards the Russians a bit more. And as you said their major income source to help support their war effort is their oil exports and to India and China in particular. Is there anything that you can see playing out there as a threat?

Nick: Yeah, so there’s Senator Lindsey Graham, who’s a Republican from South Carolina, who’s been proposing even more stringent sanctions on Russia with I think tariffs of up to 500%. And things like that and he’s been trying to push that and maybe that’s getting a bit of traction. That would have to go through Congress. But potentially, he’s been pushing that and Trump, previously hadn’t been going in that direction. But after that phone call we had with Putin a couple of weeks ago where he realized that there was no prospect of a ceasefire in the short term he sort of changed his tune.

Vincent: Yeah, so unfortunately that sort of defence spending story I think will have plenty more to run. Nvidia broke through another quite remarkable Amal Stone valuation.

Nick: Yeah, so it’s the first company. Penny to be valued at 4 trillion US dollars. It’s up 22% year to date, and that was after, being 30% lower at one point after the liberation Day tariffs in early April. So quite a turnaround. Obviously the company is continuing to benefit from just strong AI demand. Even though they’ve got issues selling some of their chips to China and places like that, it hasn’t really stopped the company going from strength to strength.

Vincent: Yeah, I guess they are the bellwether of the confidence in ai and as she said, bounce back very aggressively post a little bit of the liberation day concerns and they are riding a confidence wave phenomenal valuation there. Anything else catching your attention?

Nick: We got a few events this week that are interesting. So Chinese GDP comes out today.

Vincent: What are the expectations there?

Nick: A bit of a slower growth in the second quarter. In the first quarter, the economy grew 1.2%. They’re now say it could be about 0.9, so on a run rate basis that’s sort of below their 5% annual target. So that’ll be interesting to look at. We had Chinese exports yesterday they’re actually reasonably strong and it was interesting looking in the detail. China starting to move some of their exports away from the US to places like Africa where we’ve seen strong growth, Thailand, other countries. So, potentially other countries, including Australia could be benefiting from some of these cheap Chinese goods. Finding new homes needs to find a new market. We also get the core CPI or CPI for the US for June. That’ll be closely watched. It was quite a soft number last month because a lot of, a lot of it 0.1%.

Vincent: A lot of attention on the US and, and sort of see the pressure on Powell seems to be ramping up gradually. So, I mean, there’s certainly no evidence that tariffs have found their way into the inflation numbers just yet.

Nick: But people saying, well, it could be like working with a three-to-six-month lag. So tonight’s number will be closely watched for that, and then as you say, still pressure on Powell. There was a report in the Wall Street Journal last week saying that they’re trying to get him on grounds for dismissal for cause based on this sort of overspend on the new Fed headquarters in Washington.

Vincent: He was in charge of that project, wasn’t he?

Nick: He was in charge of that project and it is way over budget, and so shock, you know, he can be fired for cause. So, that is interesting to watch, but I think the chances of that happening are still fairly low. It’s just about leverage.

Vincent: And what pressure that they can bring to bear on and yeah. Wonderful. An excellent summary as always, Nick. Thank you. And thank you to all our listeners.

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