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Fear & Greed, Fear and Greed

As we enter the first full week of reporting season, it’s fascinating to hear what a professional is looking for, and the sectors and stocks they’re watching.

Josh Gilbert, market analyst at social investment network eToro, talks to Sean Aylmer about lithium stocks, AI, Qantas, retailers and more.

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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Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I’m Sean

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Sean Aylmer: Aylmer. Right now we’re in profit season with a whole

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Sean Aylmer: stack of ASX listed companies reporting results this week and

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Sean Aylmer: next and beyond, in fact. It’s always great to speak

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Sean Aylmer: to experts about stocks they’re watching. Of course, this is

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Sean Aylmer: general information only and you should certainly seek professional advice

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Sean Aylmer: before making investment decisions. Josh Gilbert is a market analyst

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Sean Aylmer: at social investment network, eToro and a regular guest on this

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Sean Aylmer: podcast. Josh, welcome back to Fear and Greed.

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Josh Gilbert: Thanks for having me back, Sean.

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Sean Aylmer: So how do you get across earning season? As a

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Sean Aylmer: reporter, I’m trying to cover all these stories and I’m

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Sean Aylmer: very much at the top line. What’s the profit? What’s

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Sean Aylmer: the share price done? What’s dividends? How do you, as

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Sean Aylmer: someone who’s actually got to spend money, how do you

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Sean Aylmer: get across all this stuff?

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Josh Gilbert: Yeah, look, it is really difficult, especially when you get

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Josh Gilbert: a big bulk of companies reporting within the same week.

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Josh Gilbert: Unfortunately, companies don’t tend to look after us in that

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Josh Gilbert: sense, whether it’s US or Australian-

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Sean Aylmer: Nasty.

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Josh Gilbert: … Reporting season, yeah, it all comes at once. But

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Josh Gilbert: I think really as an investor, the best way to

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Josh Gilbert: look at this is pick out the stocks that you

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Josh Gilbert: either own or that you want to focus on. You’re

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Josh Gilbert: never going to be able to get across all of

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Josh Gilbert: these stocks. So pick the ones that you want to

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Josh Gilbert: focus on early, follow their previews, follow their results, and

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Josh Gilbert: that should help you throughout earning season as well. So

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Josh Gilbert: find an economic calendar where you can keep up with

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Josh Gilbert: all of those names.

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Sean Aylmer: Okay. So taking that thread, what are the sorts of

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Sean Aylmer: areas that you are interested in this earning season? And

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Sean Aylmer: then I’m going to go and ask you about how

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Sean Aylmer: you think some of those stocks will perform.

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Josh Gilbert: Yeah, I think look, expectations are going to be high,

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Josh Gilbert: I think, really because we’ve got the ASX 200 sitting near

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Josh Gilbert: record levels. We’ve got the RBA finishing its hiking cycle,

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Josh Gilbert: so there’s lots of good news there. We’re getting closer

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Josh Gilbert: to those rate cuts, which is obviously giving investors plenty

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Josh Gilbert: of optimism around the local market. So I think we are

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Josh Gilbert: going to want to see some good numbers from these

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Josh Gilbert: companies. Investors are going to want to see that to

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Josh Gilbert: ultimately be impressed, even though growth is set to be

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Josh Gilbert: pretty timid. I think miners, the material sectors, that’s probably

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Josh Gilbert: going to be really one that stands out to me

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Josh Gilbert: given what we’re seeing in China. We’ve got a real

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Josh Gilbert: estate sector that had a really great end to 2023.

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Josh Gilbert: A travel sector, Qantas under a lot of pressure at

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Josh Gilbert: the moment as well. Those are probably the three that

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Josh Gilbert: sort of stand out to me, but I think it’s

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Josh Gilbert: going to be a really interesting reporting season either way.

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Sean Aylmer: Okay, so let’s look at the material sector and materials

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Sean Aylmer: covers many of the miners. There’s a big three iron

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Sean Aylmer: ore miners, so BHP at Rio and Fortescue. But beyond

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Sean Aylmer: that, there’s literally hundreds of companies. Let’s take lithium first

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Sean Aylmer: up. Where do you think all those lithium stocks are

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Sean Aylmer: going? They’re shorted totally on the market. What’s the outlook

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Sean Aylmer: for them?

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Josh Gilbert: Yeah, look, I mean it’s been a really, really tough

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Josh Gilbert: time for lithium miners. We’re seeing lithium prices continue to

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Josh Gilbert: free fall to even start this year. That’s coming from

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Josh Gilbert: this idea that we’re seeing EV demand full or weaken

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Josh Gilbert: ultimately. Tesla share prices obviously had a hit in that

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Josh Gilbert: sort of same period as well. And I think the

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Josh Gilbert: big theme of this reporting season is how these companies

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Josh Gilbert: are going to be able to deal with, ultimately, the lithium winter really.

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Josh Gilbert: We’re probably going to see plenty of cost- cutting through

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Josh Gilbert: jobs, pausing projects, exploration being put on hold, dividend cuts

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Josh Gilbert: potentially if those lithium miners are paying dividends. And I

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Josh Gilbert: think really investors are going to want to see what

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Josh Gilbert: those businesses are doing to get through that challenging period

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Josh Gilbert: because that’s going to be really important. How are we

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Josh Gilbert: going to get to the next stage?
I think a

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Josh Gilbert: lot of investors understand that it is a tough time,

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Josh Gilbert: so we’re not going to see the record results that

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Josh Gilbert: we have done in the past, but who can navigate

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Josh Gilbert: this period the best are the ones that are going

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Josh Gilbert: to be coming out on top, and then I think

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Josh Gilbert: investors will stick to.

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Sean Aylmer: Okay. What about the big three miners, and particularly Rio

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Sean Aylmer: and Fortescue, very, very reliant on iron ore prices. How

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Sean Aylmer: do you think they’ll go this reporting season?

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Josh Gilbert: Yeah, well this is again a tricky one I think

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Josh Gilbert: for investors to focus on because we’ve got an economy

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Josh Gilbert: in China that is continuing to struggle. Last week we

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Josh Gilbert: saw four months of falling prices in the region. So

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Josh Gilbert: deflation is essentially becoming entrenched into the economy. And what

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Josh Gilbert: we’ve seen so far from China is that policymakers are

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Josh Gilbert: overpromising, they’re underdelivering, and I think we’re going to need

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Josh Gilbert: to see more support there to lift demand, and ultimately that’s

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Josh Gilbert: having a big impact on the real estate market, which

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Josh Gilbert: of course has a huge impact locally.
So iron ore

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Josh Gilbert: prices have actually remained pretty resilient given all of this,

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Josh Gilbert: which has actually given a bit of a boost to

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Josh Gilbert: miners over the last few months as well. So I

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Josh Gilbert: guess the focus for me going into these results is

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Josh Gilbert: going to be the outlook. That’s going to be really

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Josh Gilbert: important. What’s the next six months going to look like?

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Josh Gilbert: We’ve had iron ore prices remaining resilient. Will they remain

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Josh Gilbert: resilient though moving into the next six months of the

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Josh Gilbert: year if we don’t see a turnaround in China’s economy?

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Josh Gilbert: So that’s going to be really important, but I think

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Josh Gilbert: the good news is that support is on the way

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Josh Gilbert: for China. I think that’s probably what we can take

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Josh Gilbert: away. The bad news that we’ve had in the last

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Josh Gilbert: couple of weeks is probably good news in the sense

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Josh Gilbert: that it means they’ve got to act.

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Sean Aylmer: Stay with me, Josh, we’ll be back in a minute.

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Sean Aylmer: I’m speaking to Josh Gilbert from eToro. You mentioned REITs

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Sean Aylmer: earlier on. The real estate investment trust that covers a

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Sean Aylmer: whole manner of sins really from big commercial office buildings

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Sean Aylmer: through to the local medical center. What part of that

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Sean Aylmer: are you looking at? What do you think could do

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Sean Aylmer: well and perhaps what part of REITs won’t do so well?

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Josh Gilbert: Yeah, well look, real estate was the best performing sector

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Josh Gilbert: on the ASX 200 in the last quarter of 2023. That’s pushed

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Josh Gilbert: valuations higher, and it’s ultimately meant that expectations are going

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Josh Gilbert: to be even higher then, as you head into reporting

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Josh Gilbert: season. But it’s coming from this view that rate cuts

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Josh Gilbert: are on the horizon. These sort of REITs and these companies were

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Josh Gilbert: out favor in the last couple of years as we’ve

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Josh Gilbert: had (inaudible) high interest rates, but they’re getting a

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Josh Gilbert: little bit more love now given that rate cuts are

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Josh Gilbert: coming to view. I think the risks maybe lie within

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Josh Gilbert: the retail and office side of the real estate sector.

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Josh Gilbert: I think that may be a bit of a weight

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Josh Gilbert: on the sector, but I think we’ll get some positivity

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Josh Gilbert: from the industrial side of things. If we look at

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Josh Gilbert: somebody like Goodman Group for example, they’ve had an excellent

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Josh Gilbert: run even during this period.
They’re working very heavily on

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Josh Gilbert: the industrial side with the likes of data centers, which

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Josh Gilbert: essentially is what’s driving AI. That’s everything behind AI. So

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Josh Gilbert: they’re having a fantastic time at the moment. So it’s

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Josh Gilbert: no surprise to probably see some demand there being really

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Josh Gilbert: high. So I think anything around industrial is where we’re

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Josh Gilbert: going to find the bright spots. Retail and office is

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Josh Gilbert: where we might see a little bit of weakness, but

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Josh Gilbert: I think that gives you, sometimes, a little bit of

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Josh Gilbert: room for upside when there’s not really much expected from

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Josh Gilbert: retail and office, but there is going to be big

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Josh Gilbert: expectations on the industrial side.

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Sean Aylmer: Josh say something there, which is just worth pointing out.

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Sean Aylmer: If you want to play AI, it’s not just about going

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Sean Aylmer: and investing in the big AI companies. You can play

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Sean Aylmer: AI by getting the service providers around them and say

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Sean Aylmer: Goodman being an example of that. They provide data centers.

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Sean Aylmer: There are lots of opportunities with these megatrends, be it

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Sean Aylmer: environment, be it AI, where you don’t actually have to

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Sean Aylmer: invest directly into those companies. That’s right, isn’t it?

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Josh Gilbert: Absolutely. Yeah. So I mean, look, obviously the main name when

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Josh Gilbert: we think of probably when it’s come to AI on

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Josh Gilbert: Wall Street, on markets over the last 12 months is

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Josh Gilbert: NVIDIA. That’s the name leading the charge here. There are

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Josh Gilbert: plenty of other businesses that are really benefiting in the

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Josh Gilbert: background, and Goodman Group is one of those that has

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Josh Gilbert: continued to benefit from that as well. So it’s ultimately

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Josh Gilbert: the picks and the shovels of this trend that are

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Josh Gilbert: going to continue to do well in the background as

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Josh Gilbert: well. So it’s not necessarily about finding that name such

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Josh Gilbert: as NVIDIA. It has had a huge run. If you

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Josh Gilbert: haven’t gone onto that early enough, then that’s no problem.

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Josh Gilbert: There are going to be plenty of other names that

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Josh Gilbert: continue to benefit from what is a real technological advancement.

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Sean Aylmer: I also want to ask about travel. Qantas being the

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Sean Aylmer: big one there, but there’s plenty of others, flights and

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Sean Aylmer: corporate travel management, et cetera. What’s the outlook for those guys?

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Josh Gilbert: We were coming off a bit of a weird time

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Josh Gilbert: for travel I think. We had a record year for

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Josh Gilbert: Qantas in 2023, huge profits. But also at the same

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Josh Gilbert: time, you’ve then got these huge issues from customers. We

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Josh Gilbert: are now seeing investigations into price gouging. They’ve had issues

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Josh Gilbert: with unions. So it’s a real mix. It’s really difficult

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Josh Gilbert: to try and look at Qantas with just through one

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Josh Gilbert: lens because there’s really two sides of it. They’re getting

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Josh Gilbert: a real bad time publicly in the press, but in

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Josh Gilbert: the background, the business is actually doing pretty well. Sales

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Josh Gilbert: are still growing. They’ve got a strong balance sheet. They’ve

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Josh Gilbert: got a solid foothold in the domestic market, and they’re

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Josh Gilbert: continuing to see growth in the international business as well,

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Josh Gilbert: which is really important. That’s where they make the bulk

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Josh Gilbert: of their revenue. The domestic market is where the margins

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Josh Gilbert: lie, but the international is where we see the sales

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Josh Gilbert: coming through.
Then you take into everything else as well.

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Josh Gilbert: We’ve got Vanessa Hudson, who’s just taken the helm as

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Josh Gilbert: CEO. So she’s going to have her work cut out

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Josh Gilbert: to deal with all of those issues that I mentioned earlier.

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Josh Gilbert: And the big task when you’re coming in, when you’ve

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Josh Gilbert: got profits at record highs, is shareholders expect that to

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Josh Gilbert: continue. You want to keep profits steady. You want to

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Josh Gilbert: try and win back some of that positive publicity as

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Josh Gilbert: well. So I think that’s going to be really important for her to

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Josh Gilbert: try and get through.
But I think as you said

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Josh Gilbert: more broadly in that travel sector, we want to see

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Josh Gilbert: how demand is holding up. This boom that we had

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Josh Gilbert: post pandemic with everyone wanting to travel, was this trend.

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Josh Gilbert: But ultimately, the cost of living is having a huge

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Josh Gilbert: weight on consumers. So we need to see how that’s

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Josh Gilbert: ultimately affecting demand. Are people really going to be still

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Josh Gilbert: spending thousands of dollars on holiday when they’re struggling to

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Josh Gilbert: maybe buy food at the supermarket or pay their energy

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Josh Gilbert: bill? So that’s, I think, going to be a big takeaway for

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Josh Gilbert: the travel names.

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Sean Aylmer: Just quickly on retail, we had a few last week

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Sean Aylmer: where we had a Myer upgrade. We had Cettire, the

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Sean Aylmer: luxury goods provider perform pretty well. Nick Scali came out

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Sean Aylmer: and surprised investors. Expectations aren’t that high for the retailers

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Sean Aylmer: relative to some of the other sectors, but thus far

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Sean Aylmer: it’s not a bad start for them.

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Josh Gilbert: Yeah, I mean, look, again, probably quite surprising to see

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Josh Gilbert: such positivity from those names. And I think maybe as

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Josh Gilbert: you say, given that we’ve not expected much, there’s probably

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Josh Gilbert: maybe a bit of room for the upside there, given

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Josh Gilbert: that the expectations are so low. I think that the focus here

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Josh Gilbert: is that we have seen a slowdown in retail sales

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Josh Gilbert: in December. It was actually a real dire slowdown, a

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Josh Gilbert: pretty torrid report that we got in December. But November

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Josh Gilbert: is when we saw that spending brought forward for Christmas,

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Josh Gilbert: Black Friday sales, but then also on the other side

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Josh Gilbert: of that, you had consumer confidence, which has been super

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Josh Gilbert: low. I mentioned there about interest rates. The cost of

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Josh Gilbert: living. Retailers have though, remained pretty resilient. I think not

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Josh Gilbert: many people would’ve expected to see this sort of resilience

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Josh Gilbert: that we’ve had from retailers.
So I’d expect to see

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Josh Gilbert: some commentary around strong numbers in November. But as I

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Josh Gilbert: mentioned that that December slowdown in retail sales is going

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Josh Gilbert: to really hurt them, I think. So I think if

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Josh Gilbert: that is followed by any comments that the start of

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Josh Gilbert: this year has been difficult, then that may be what

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Josh Gilbert: investors narrow in on. We saw that at this time

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Josh Gilbert: last year with retailers. They had a great end to

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Josh Gilbert: 2023, but they said that the first three months of

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Josh Gilbert: this year were going to be difficult, and that weighed

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Josh Gilbert: on share prices to begin with. So any sort of

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Josh Gilbert: weak guidance is really going to hurt them. And again,

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Josh Gilbert: if we saw a big slowdown in sales in December,

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Josh Gilbert: that’s really going to be painful for those companies. So

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Josh Gilbert: resilient so far, but I’m struggling to see how resilient

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Josh Gilbert: these names can be this reporting season.

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Sean Aylmer: Josh, thank you for talking to Fear and Greed.

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Josh Gilbert: Thanks for having me, Sean.

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Sean Aylmer: That’s Josh Gilbert, market analyst at social investment network eToro.

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Sean Aylmer: This is the Fear and Greed daily interview. Remember, this

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Sean Aylmer: is general information only, and you should always seek professional

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Sean Aylmer: advice before making investment decisions. Join us every morning for

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Sean Aylmer: the full episode of Fear and Greed, Australia’s best business

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Sean Aylmer: podcast. I’m Sean Aylmer. Have a great day.