There’s been a run of IPOs on Wall Street, and they’ve thrown up some interesting results.
Josh Gilbert, market analyst at social investment network eToro, talks to Jennifer Duke about new listings, how the Aussie share market reacts to Wall Street, the major trends that are still playing out and what the rest of the year might look like for investors.
This is general information only. You should seek professional advice before making investment decisions.
Find out more: https://fearandgreed.com.au
See omnystudio.com/listener for privacy information.
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Jennifer Duke: Welcome to the Fear and Greed daily interview. I’m Jennifer Duke.
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Jennifer Duke: We talk so much about local equities on this podcast.
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Jennifer Duke: Today I wanted to look to the US and see
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Jennifer Duke: what’s happening on Wall Street. Now of course, this is
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Jennifer Duke: general information only and you should definitely seek professional advice
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Jennifer Duke: before making any investment decisions. Now, Josh Gilbert is a market
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Jennifer Duke: analyst at Social Investment Network, eToro, and a regular guest
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Jennifer Duke: on the podcast. Josh, welcome back to Fear and Greed.
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Josh Gilbert: Thanks for having me, Jen.
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Jennifer Duke: How much exactly does our market here in Australia follow
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Jennifer Duke: Wall Street?
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Josh Gilbert: A fair bit. So depending on how the US market’s
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Josh Gilbert: going overnight is usually a good guide of how we
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Josh Gilbert: can expect the Australian market to open the next day.
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Josh Gilbert: It’s usually a bit of an indicator of what to
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Josh Gilbert: expect. Usually gives us a bit of an idea of
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Josh Gilbert: what’s going to happen on the Australian market because the
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Josh Gilbert: US markets are the biggest in the world and they
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Josh Gilbert: drive pretty much everything. The US is the biggest economy
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Josh Gilbert: in the world as well. It is a big factor.
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Josh Gilbert: Again, the Australian market will trade by itself, so the
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Josh Gilbert: performance that we’ve seen from the Australian market and the
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Josh Gilbert: US markets this year are pretty stark in difference. It
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Josh Gilbert: usually just acts as a bit of a guide on
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Josh Gilbert: direction. It doesn’t always mean that if US markets are
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Josh Gilbert: down, Australian markets will trade down, but they are usually
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Josh Gilbert: a bit of a guide.
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Jennifer Duke: There have been quite a few big tech IPOs lately
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Jennifer Duke: in the US, I think chip-maker Arm Holdings is a
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Jennifer Duke: really big one. What can you tell me about that?
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Josh Gilbert: IPOs are sort of catching the attention of investors again
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Josh Gilbert: with some big name listings coming back to the market.
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Josh Gilbert: You mentioned Arm Holdings there, which was probably the biggest
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Josh Gilbert: name of them all, particularly recently. We had a big
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Josh Gilbert: IPO fever in 2021 when we saw a record number
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Josh Gilbert: of IPOs. Then obviously in 2022, we had a really
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Josh Gilbert: difficult year for markets and for corporate businesses. It wasn’t
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Josh Gilbert: the most perfect time to list publicly with share markets
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Josh Gilbert: being in a pretty deep bear market. This year, things have obviously
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Josh Gilbert: picked up. We’re obviously in a much better position in
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Josh Gilbert: terms of how confident corporate businesses feel about listing their
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Josh Gilbert: businesses publicly, and I think that comes down to investor
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Josh Gilbert: appetite as well. You mentioned that we had Arm Holdings,
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Josh Gilbert: but we’ve also had Instacart. We’ve also had a couple
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Josh Gilbert: of other names in that time as well.
As I say,
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Josh Gilbert: it’s a sign that corporate sentiment is improving. As I said,
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Josh Gilbert: and that investors’ appetite for buying is still healthy, and that’s
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Josh Gilbert: a good thing. It shows that although we do have
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Josh Gilbert: interest rates at near decade highs globally, investors are still
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Josh Gilbert: I investing capital into financial markets and they have been
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Josh Gilbert: well received by investors. IPOs have caught the eye of investors. Arm,
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Josh Gilbert: as you mentioned, their shares were up 25% on its
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Josh Gilbert: first day of trading. It’s also important to remember as
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Josh Gilbert: well that the number of stocks listed in the US
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Josh Gilbert: is something like 40% lower than what we had a
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Josh Gilbert: few decades ago. IPOs give investors new choices in markets
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Josh Gilbert: and that’s brilliant, especially given that we are obviously far
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Josh Gilbert: lower than what we’ve seen many, many years ago. I
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Josh Gilbert: think that this isn’t going to be the end. I
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Josh Gilbert: still think we’ve got plenty of IPOs to come. We’ve
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Josh Gilbert: got the likes of Birkenstock, obviously a big name here
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Josh Gilbert: that many will know here in Australia.
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Jennifer Duke: Yes.
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Josh Gilbert: That’s set to make it debut soon over in Europe.
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Josh Gilbert: There are still plenty of big businesses and big corporates
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Josh Gilbert: that are flirting with the idea of IPOs. And for
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Josh Gilbert: those investors that like them, I think they should keep
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Josh Gilbert: their eyes out because there’s going to be more coming
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Josh Gilbert: across Europe and the US soon.
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Jennifer Duke: You mentioned the effect of the higher interest rates and
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Jennifer Duke: the fact that confidence is still actually high among corporates
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Jennifer Duke: and investors regardless. Why do you think that is? What’s
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Jennifer Duke: driving that confidence at the moment?
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Josh Gilbert: I think that we’ve now got this view looking ahead,
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Josh Gilbert: to the year ahead particularly. So usually when we get
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Josh Gilbert: to this period of the year, Q4 seasonality is usually
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Josh Gilbert: really good. Everyone starts to look ahead to the year.
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Josh Gilbert: They’re probably more positive on what’s ahead. We don’t see
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Josh Gilbert: those risks that maybe can come at us in the
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Josh Gilbert: short term. Particularly if we look to 2024, I think
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Josh Gilbert: there is lots of positivity ahead and I think that
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Josh Gilbert: view is built on, we are seeing economies being more
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Josh Gilbert: resilient than many expected: We’re avoiding recessions, we’ve got inflation
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Josh Gilbert: that’s lowering and we’ve got this expectation that rate cuts
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Josh Gilbert: are going to come in 2024. For now, we’re still in
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Josh Gilbert: this period of central banks saying that rates will stay
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Josh Gilbert: higher for longer, which is why we’ve seen a little
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Josh Gilbert: bit of weakness coming from markets over the last couple
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Josh Gilbert: of months. But particularly in the US, core inflation is
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Josh Gilbert: moving in the right direction. We’ve got earnings that are
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Josh Gilbert: recovering and we’re going to see double-digit earnings growth next year.
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Josh Gilbert: I think investors are looking ahead to what is going
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Josh Gilbert: to happen. I think the biggest risk that we see
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Josh Gilbert: is actually being out of markets, not being in them
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Josh Gilbert: because some of those best days can come when being
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Josh Gilbert: out of markets and what we believe is going to
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Josh Gilbert: be a strong 2024. There are always things to worry about
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Josh Gilbert: in markets. If you worry about what’s happening in markets, there’s
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Josh Gilbert: always a good excuse to not be invested. We’ve got
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Josh Gilbert: higher oil prices at the moment, higher bond yields, but
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Josh Gilbert: we think these self- correct, especially on the oil side.
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Josh Gilbert: And ultimately the view of earnings recoveries at double- digit
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Josh Gilbert: growth next year and lower inflation and rate cuts, we
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Josh Gilbert: believe that’s an environment that sets up a good year
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Josh Gilbert: for markets.
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Jennifer Duke: It’s kind of interesting, a lot of those features are
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Jennifer Duke: very much global ones, but in Australia we haven’t had
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Jennifer Duke: very much IPO activity at all lately. Why do you
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Jennifer Duke: think that’s the case?
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Josh Gilbert: It’s a good question and I think that comes down
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Josh Gilbert: to a couple of reasons. Obviously our equity market is
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Josh Gilbert: a little bit smaller than the rest of the world,
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Josh Gilbert: has underperformed really against global markets for a number of
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Josh Gilbert: years now. I think that we do obviously see those
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Josh Gilbert: smaller listings, but we don’t really see those bigger name
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Josh Gilbert: listings, if you like. I think that can come down
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Josh Gilbert: to performance. We’ve obviously still got a Chinese economy that
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Josh Gilbert: is pretty weak and a lot of capital that is
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Josh Gilbert: ultimately overseas at the moment as well. I think if
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Josh Gilbert: corporate businesses are looking where to list publicly, the ASX may
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Josh Gilbert: not always be the first place that they look to.
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Josh Gilbert: I think that will change though.
I think, as I
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Josh Gilbert: say, we are going to start seeing more IPOs over
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Josh Gilbert: the next 12 to 18 months. I do think we will see
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Josh Gilbert: corporate businesses decide to list publicly. It will be a
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Josh Gilbert: better time for capital markets. We will see investors putting
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Josh Gilbert: money back into financial markets, particularly when we see those
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Josh Gilbert: rate cuts happening. That will leave investors with the freedom
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Josh Gilbert: to add a little bit more risk. I think that’s
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Josh Gilbert: when we will start to see more businesses going public,
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Josh Gilbert: and I think Australia will be part of that.
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Jennifer Duke: Stay with me Josh, we’ll be back in a minute.
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Jennifer Duke: I’m speaking to Josh Gilbert from eToro. For a lot
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Jennifer Duke: of the Aussie investors listening, some of their most popular
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Jennifer Duke: US stock’, obviously Apple and Tesla. I don’t want to
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Jennifer Duke: be basic, but I’ve got to ask you what’s happening
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Jennifer Duke: with those. And also with some of the other big
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Jennifer Duke: gainers this year, so Meta and NVIDIA, what’s kind of
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Jennifer Duke: going on in that space?
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Josh Gilbert: I mentioned it a little bit earlier, but we have
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Josh Gilbert: had a bit of a slowdown. We peaked with US
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Josh Gilbert: markets in July and then since that time, we’ve had
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Josh Gilbert: a bit of a pullback. There’s been a number of
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Josh Gilbert: reasons for that. We’ve had this US credit rating downgrade.
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Josh Gilbert: We had the US Treasury announcing trillion dollar debt issuance plans.
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Josh Gilbert: We’ve got that weak summer seasonality from obviously overseas. I
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Josh Gilbert: think we saw a little bit of profit taken after
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Josh Gilbert: what was a huge start to the year. You had
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Josh Gilbert: the NASDAQ 100 up more than 40%, you had the S&P
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Josh Gilbert: 500 up more than 15 to 16% as well. I think it
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Josh Gilbert: was a healthy breather with that as well. But within that,
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Josh Gilbert: you’ve still got NVIDIA that’s up more than 200%, Tesla
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Josh Gilbert: and meta up more than a hundred per cent. Obviously a
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Josh Gilbert: big part of why NVIDIA has done so well has
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Josh Gilbert: come from that AI boom. They’ve reaped the rewards of
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Josh Gilbert: this huge demand that we’ve seen from consumers and obviously
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Josh Gilbert: businesses alike, and they’re leading that sort of race, and
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Josh Gilbert: they’re ultimately delivering. I think that’s really the key point.
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Josh Gilbert: Their Q2 earnings that came out late in August, early
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Josh Gilbert: in August, they promised a big quarter and they absolutely
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Josh Gilbert: delivered revenue climb by more than 100% year over year.
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Josh Gilbert: Earnings jumped by more than 400% as well. When you’re
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Josh Gilbert: delivering those sort of numbers, that’s the reason why we’re
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Josh Gilbert: seeing shares up so significantly. Then you’ve got Meta. They’re
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Josh Gilbert: obviously probably on a slightly different period to what we
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Josh Gilbert: had with NVIDIA, but they’ve gone into this year of efficiency.
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Josh Gilbert: 2022 is when we started to see interest rates come up.
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Josh Gilbert: Inflation was obviously starting to peak and you had businesses
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Josh Gilbert: hunkering down, you had consumers hunkering down, and then this
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Josh Gilbert: year they’ve gone into cost-cutting mode. They’ve completely saved billions
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Josh Gilbert: of dollars on expenses. They’ve got back to double-digit revenue
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Josh Gilbert: growth for the first time in two years. The 3.8
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Josh Gilbert: billion users that it has is obviously a bit of
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Josh Gilbert: a help as well. That’s been a draw card for advertisers.
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Josh Gilbert: It’s brought advertisers back. So advertising revenue has, what we believe, bottomed.
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Josh Gilbert: And we believe that advertisers feel more confident to spend now,
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Josh Gilbert: especially with, as I said at the start, economies being
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Josh Gilbert: more resilient than we first thought. At the start of
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Josh Gilbert: this year. The big conversation was recession, recession, recession, and ultimately,
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Josh Gilbert: it’s not been that. The R word has been resilient,
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Josh Gilbert: and that’s exactly what we’ve seen. There’s businesses that have
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Josh Gilbert: done well and there have been businesses that have maybe underperformed.
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Josh Gilbert: We can look to things like the material sector. Obviously
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Josh Gilbert: China hasn’t been a big help to that. You can
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Josh Gilbert: also look to financials, those sort of businesses have underperformed,
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Josh Gilbert: but we still look to tech as that sort of
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Josh Gilbert: safe haven, if you like, that has continued to perform
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Josh Gilbert: for investors despite what has been a difficult couple of years.
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Jennifer Duke: I’m curious as well, because crypto is something that we were
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Jennifer Duke: hearing a lot about previously, now everyone seems to be
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Jennifer Duke: just talking about AI, but what is actually going on
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Jennifer Duke: with crypto at the moment? Is it still as hype
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Jennifer Duke: as it was before?
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Josh Gilbert: It’s a great point you make when you speak about
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Josh Gilbert: AI there, because I think that this sort of AI hype has sucked
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Josh Gilbert: some of the lifeblood away from crypto. That sort of
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Josh Gilbert: volatility and these big gains that we’ve seen from AI
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Josh Gilbert: stocks and the hype around AI has taken some of
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Josh Gilbert: that excitement away from crypto. But having said that, Bitcoin is
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Josh Gilbert: still up more than 60% year to date and is still
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Josh Gilbert: the best performing asset class in 2023, which is pretty surprising.
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Josh Gilbert: And many people won’t know that because we are used
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Josh Gilbert: to this huge volatility and these big gains and these
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Josh Gilbert: big falls, but the volatility has kind of gone. We
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Josh Gilbert: do still see sell- offs, but I don’t think it’s
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Josh Gilbert: anything more dramatic than what we’ve seen from stock markets
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Josh Gilbert: and other asset classes. Oil, for example, in the last
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Josh Gilbert: couple of years. We are still significantly off those all
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Josh Gilbert: time highs, which is pretty important to know. The all
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Josh Gilbert: time high was around US$69,000 back in 2021, that’s US dollars,
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Josh Gilbert: and we’re still a fair distance from that. We had
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Josh Gilbert: some weakness recently as well coming off the back of
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Josh Gilbert: SpaceX writing off the value of its’ Bitcoin. When you
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Josh Gilbert: have a big name like Elon Musk making moves in
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Josh Gilbert: the crypto space, it’s always going to make a difference.
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Josh Gilbert: But similar to what I mentioned earlier with US markets
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Josh Gilbert: having a good year next year, we think the fundamentals
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Josh Gilbert: for crypto, and particularly Bitcoin, are aligning. We think that it’s
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Josh Gilbert: setting up a strong year next year. First of all,
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Josh Gilbert: we can start with that macro improvement, we mentioned that earlier,
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Josh Gilbert: lower inflation, interest rate cuts. That’s really important for risk assets.
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Josh Gilbert: As I said, it allows investors to take on more risk,
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Josh Gilbert: and crypto absolutely falls into that category. Then we can
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Josh Gilbert: look at the approval of spot ETFs, whether that’s Bitcoin or Ethereum.
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Josh Gilbert: We’ve got improving regulatory clarity, and then in April next
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Josh Gilbert: year we’ve got the Bitcoin halving. Every Bitcoin halving in
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Josh Gilbert: its history has sort of been followed by a bull market.
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Josh Gilbert: So although history doesn’t repeat itself, it certainly does rhyme.
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Josh Gilbert: But I think the big point to all of that
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Josh Gilbert: is a spot ETF, and it seems we are getting
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Josh Gilbert: closer to that reality. We had the BlackRock application that
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Josh Gilbert: went through a few months ago. They’ve got a pretty
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Josh Gilbert: stellar record for having ETFs accepted. I think only one
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Josh Gilbert: declined in their long history. And then we had Grayscale,
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Josh Gilbert: they had a recent court win to convert their current
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Josh Gilbert: trust into an ETF. And it’s so important because this
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Josh Gilbert: allows institutional investment into the space, which we so need
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Josh Gilbert: into crypto. It paves the way for new capital, and
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Josh Gilbert: I think that’s going to be really important. We’ve even got
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Josh Gilbert: the conversation now of central banks diversifying their FX reserves
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Josh Gilbert: to include Bitcoin alongside gold. We are talking about some
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Josh Gilbert: smaller central Asian countries there, but still, it’s a step
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Josh Gilbert: in the right direction. I think all of those factors
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Josh Gilbert: coming together, improving macro, a spot ETF, the idea of
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Josh Gilbert: an improving regulatory environment and the Bitcoin halving, again, investors
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Josh Gilbert: are forward- looking. They’re looking ahead to what will happen,
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Josh Gilbert: and all of those catalysts combined, I think set up
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Josh Gilbert: for a great period for crypto after/ probably being in
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Josh Gilbert: the cold for a period there, as you say, sort
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Josh Gilbert: of a lot of people forgetting or moving away from crypto.
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Jennifer Duke: It sounds like we’ll be talking about crypto a lot
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Jennifer Duke: more for the months ahead. Look, Josh, thank you so
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Jennifer Duke: much for talking to Fear and Greed.
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Josh Gilbert: Thanks for having me, Jennifer.
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Jennifer Duke: That was Josh Gilbert, market analyst at Social Investment Network,
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Jennifer Duke: eToro. This is the Fear and Greed daily interview. Remember,
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Jennifer Duke: this is general information only and you should seek professional
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Jennifer Duke: advice before making any investment decisions. Join us every morning
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Jennifer Duke: for the full episode of Fear and Greed, Australia’s most
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Jennifer Duke: popular business podcast. I’m Jennifer Duke, economics correspondent at Capital
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Jennifer Duke: Brief, and filling in for Sean Aylmer. Have a great day.