First Mover Disadvantage

We’ve all heard of first mover advantage, the prime position earned by the company that innovated before the others. Whether it’s launching a product, claiming market share, or pioneering a new technology, being early is often equated with being better. It's what everyone aims for from company founders through to investors. But history tells a more complex story. There are plenty of examples where being first has effectively been a disadvantage. Understanding this is important for companies, but even more so for investors as they allocate capital for the long term.

What people often forget is that many new technologies, especially those that transform or create new industries, require huge amounts of capital simply to build the underlying infrastructure for the technology to scale and reach the mass market. It means that along the way many of the most exciting companies building towards the vision of mass adoption of a technology fall by the wayside, make too many mistakes or run out of money along the way.

One of the best examples of this in recent times is the rise of the internet. I remember in early 2000, as the massive hype was building, it became clear that this technology was going to be transformative. It was, but the amount of capital needed to get the industry to where it needed to go in those early days was massive. Of course, the dot-com boom helped to ensure that the capital and total investment in aggregate needed to build out the foundations of the industry were raised.

In many of the most transformative industries, from airlines to automobiles, there is a similar pattern. Where the biggest rewards often go to the later entrants. Being first means more risk, more uncertainty, and more cost. It means making many mistakes with no guarantee of a path forward. Meanwhile, fast followers are sitting back, watching, learning, and preparing to strike with better timing, better economics, and fewer mistakes.

This isn’t to say that the first movers never win. They do. But surprisingly, the success stories are the exception, not the rule. Amazon, for example, was an early mover in online retail. By the time traditional retailers caught on, Amazon had already established dominance in infrastructure, logistics, and customer trust. Similarly, Netflix made the leap from DVD rentals to streaming before anyone else was even thinking about it seriously. These companies gained scale, users, and built moats that others struggled to create.

However, there is a much longer list of first movers who never made it. Friendster came before Facebook. AltaVista came before Google. Netscape came before Chrome. Myspace came before Instagram, and Palm Pilots and Blackberry came before the iPhone. First movers have to spend more on R&D and infrastructure, educate the market at their own cost, and make the big mistakes others can learn from as part of building towards mass adoption. Conversely, fast followers can analyse what worked, avoid what didn’t, and capitalise on a more informed and receptive market.

This dynamic is even more pronounced in industries with large capital requirements and slow adoption curves. When the Wright brothers took flight at the turn of the century, they changed the course of history. But it wasn’t until decades later that air travel became a commercial business. Hundreds of airline startups burned through capital before a few major carriers found sustainable models. The same was true with automobiles. Dozens of early manufacturers came and went before Ford revolutionised production with the Model T.

Technologies like the internet, mobile networks, and AI are no different. Being first to market often means bearing the costs of infrastructure, educating consumers, navigating regulatory grey zones, and building products that may not yet have viable markets. Fast followers will have more data, more capital, and the benefit of watching early failures. In many cases, the third or fourth wave of players win by building for a world that’s finally ready.

For investors, the key takeaway is that you don’t have to find the next big thing first. You don't have to rush. You have time. Take that time to understand the industry and where it will be best to invest in the long term. While there will always be companies that garner hype and headlines as new technology emerges, you don't need to rush.

There will always be opportunities throughout the adoption cycle of a new technology. Early-stage companies may deliver great returns when they win, but they also carry immense risk. The middle of the cycle, where demand is more certain and adoption is accelerating, can be just as lucrative with less downside.

AI is a great current example. Dozens of companies are rushing to launch models, tools, and applications. Some are burning through cash just to claim a spot in the conversation. But many of the future winners may not yet exist or will emerge as the business case is clearer and the infrastructure is more robust. Investors need to be patient and remember that being early is not the same as being right.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Inflation Cocktail

From tariffs and trade deals to his conversations with Jerome Powell or Vladimir Putin. It seems that Donald Trump has made himself the centre of attention when it comes to almost everything going on in the world. Having recently announced trade deals with Japan and the EU, it's been fascinating to watch Trump’s approach to international trade and his negotiation tactics.

Trump’s method of appearing unpredictable in escalating and de-escalating in seemingly random ways has helped land him a clear victory.  Ultimately, he’s worn everyone down to the point where countries and investors alike are happy with 15% tariffs, an outcome that just 4 months ago was sending markets into a meltdown. In effect, markets just want the issue solved so everyone can move on. The psychology here is interesting.

So, in a matter of months, Trump has delivered his ‘One Big Beautiful Bill’ and set the framework for redefining international trade. The next stop for Trump is getting interest rates lower. But while Trump’s deal making may well prove to be a masterstroke for the US economy in the short term, the road ahead is more precariously positioned.

He’s made no secret of his desire for lower interest rates in the US. He’s demanding lower rates from the Fed to create cheaper debt and stimulate investment in the US. He’s also made it clear that the independence of the Federal Reserve is a lower priority than getting rates lower. This is a problem in many ways, but how it will alter the landscape for markets and investors in the years ahead is particularly concerning.

Trump is pushing for interest rates to drop to around 1%. He wants to reduce the short-term cost for the US to borrow the trillions of dollars they need each year to fund their deficits. But history tells monetary policy is a balancing act. If you raise rates too high, you risk choking growth. If you cut them too low and you overheat the economy.

The interplay between tariffs, deficits, and interest rates is where the risks multiply. Tariffs are already pushing consumer prices higher, while Trump’s fiscal policies are injecting more money into the economy. If interest rates are forced lower than is prudent, the risk is that inflationary pressures re-emerge far sooner than expected.

For investors, the near term picture looks positive, and markets usually celebrate rate cuts. Share markets may very well continue to rally in 2025 on the expectation of cheaper borrowing and a softer Fed stance. But the outlook beyond that is less comfortable. Artificially low rates, combined with structural deficits and tariffs, create a setup where inflation could return with force. This would push bond yields higher and potentially lead to more volatile equity markets.

While Trump’s current policies might deliver short-term economic momentum, they are potentially sowing the seeds of a more complex and unstable environment ahead. So, as share markets react positively to the prospects of much lower interest rates in the months ahead, investors should keep in mind the prospect of inflation reemerging next.

General Advice Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Car Wars - The Battle Ahead

There is an interesting battlefield emerging in the race to control the next big tech device. Apple saw it coming but shut their project down. Elon Musk was in the lead for a while with Tesla. But it is China who is clearly emerging as the massive winner.

I'm talking about cars.

The humble motor vehicle has been transformed from an analogue machine into the most critical new connected device, combining computers with sensors, microphones, cameras, and remote software controls. Whoever controls this industry will not only shape the future of transport but potentially the future of national security and geopolitics.

China’s BYD is forging ahead with incredible pace, surpassing Tesla in sales and rapidly scaling globally. With more than 4 million vehicles sold in 2024 and a growing foothold in export markets, BYD is forecast to become the world’s leading car manufacturer by the early 2030’s. According to an article in the Australian Financial Review recently, Chinese car brands are projected to account for 43% of vehicle imports into Australia by 2035, up from 17% today.

This is not business as usual. It will be a very different competitive landscape that emerges. The motor vehicle industry has traditionally been fragmented with dozens of manufacturers across continents. But electric vehicles, with their centralised software, battery platforms and connectivity ecosystems, more closely resemble the technology industry in my view. It’s more likely that a handful of dominant players emerge, in a similar way to Apple and Samsung with smartphones or Uber and DiDi in rideshare, to capture the entire market once scale is achieved.

Winning this race isn’t just about cars. It's the future of logistics, automation and surveillance. Modern EVs are rolling data centres. They collect real time geolocation, driving behaviour, voice data and have over the air software update capabilities. In the next decade these vehicles will form the backbone of supply chains, autonomous freight, drone deliver coordination, and potentially military logistics.

This is playing out against the backdrop of deepening US-China tensions. It’s important to be mindful that, despite the noise in the short term around tariffs and trade, the long-term trajectory is economic decoupling and the growing risk of open conflict, be it economic, cyber or military. The recent Microsoft hack, widely attributed to Chinese state backed organisations, highlights how fragile the relationship remains and that these are ongoing risks.

As tensions escalate, Western nations will need to make a decision. Do they continue importing Chinese EVs and risk systemic vulnerability or ban them outright for national security. Regardless of their price or popularity, the risk will simply be too high.

We’ve already seen a preview of this with TikTok. Initially dismissed as a harmless social media app, it has become a flashpoint in debates over data sovereignty and foreign influence. Cars are far more integrated into critical infrastructure. If governments are concerned about a Chinese app on teenagers’ phones, they should be far more concerned about a Chinese operating system embedded in the national transport network.

If China controls this infrastructure in rival nations it creates the potential for coercion, disruption and outright sabotage. Its today's version of controlling the oil supply. Imagine a future where western nations logistics networks are powered by Chinese made electric vehicles, all run on software built and updated in Shenzhen. A single firmware change could bring entire sectors of the economy to a halt. It is a massive strategic risk that is already being embedded in countries around the world.

This is a modern day Trojan Horse. We are welcoming low cost, high tech vehicles into our homes, businesses, and transport systems. These are devices that could one day be switched off, surveilled, or potentially weaponised.

Western carmakers are years behind and without a coordinated industrial strategy, similar to what China has executed for the past decade, there’s a real risk of not being able to catch up. This isn’t a trade issue. It’s not about emissions or consumer choice. It’s about sovereignty. It’s about control. We need to understand that the motor vehicles of the future are not consumer products, but critical infrastructure.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Trump's Tightrope

President Donald Trump has been vocal in his criticism of US Federal Reserve Chair Jerome Powell for some time. Trump wants US interest rates cut significantly and has called for them to be reduced to 1.00% but Jerome Powell has held firm, and interest rates remain in a range of 4.25%-4.50%. Ordinarily, Trump would not hesitate to fire anyone who stands in the way of what he wants in place. But this situation is very different and there are significant implications for global financial markets, the US currency and its institutions if he oversteps.

For background, Powell was handpicked by Trump in 2017 and has served as Fed Chair since 2018. His second four-year term will end in May next year. There are two main concerns. The first is that there are real questions over whether Trump has the legal authority to fire the Chair of the Federal Reserve in the first place. More troubling for investors and global markets is the uncertainty of what comes next, as the Federal Reserve’s credibility hinges on its independence

If Trump removes Powell, especially over policy disagreements like interest rate decisions, it will set a dangerous precedent. Markets will begin to view future Fed decisions as politically motivated, not data driven. Future Fed Chairs aligning with political goals rather than long-term economic stability is a recipe for disaster. Central banks are independent precisely because it enables them to make the hard decisions needed to control inflation. If you undermine this independence, the result is likely long-term inflation fears and less effective monetary policy.

In many respects, this door has already been opened regardless of whether Trump fires Powell or not. There are reports that Trump may announce Powell’s successor much earlier than normal, perhaps in September, in a deliberate attempt to flag to markets that rates will be coming down. While Powell may or may not drop interest rates, it's clear that whoever Trump ultimately nominates will be chosen specifically because of their position that interest rates need to be much lower. The idea here is that markets being forward-looking will understand that, soon enough, low rates will be delivered.

The US has massive debt (over US$36 trillion) and deficits (around US$2 trillion annually). There are huge amounts of borrowing needed to fund the deficit and refinance maturing debt. It’s trillions of dollars each year, and interest costs are massive. Trump’s plan is for interest rates to be dramatically lower in the short term so that it’s cheaper for the US to borrow. In simple terms, that makes sense. But financial markets and the machinations of the economy are more complex than that.

The immediate concern if Trump fires Powell would be the destruction of the Fed’s perceived independence. However, the greater risk lies in the likely consequences: market instability, rising inflation expectations, a weaker dollar, and long-term damage to U.S. economic credibility. Even if short term interest rates fall, the unintended consequences would likely leave the US economy and financial system worse off. There would be lower global demand for US treasuries, and it would be detrimental to the US dollar as the world’s reserve currency.

Trump is going to get his way simply because he is relentless. But how he handles it will matter. Powell is under attack, and the campaign to remove him seems to be going into overdrive. They have called for his resignation, leaked reports that he will be fired, denied the reports and started an investigation in relation to mismanagement in relation to the renovations at the Federal Reserve building. This seems designed to break Powell and make him resign. This is clearly their preferred strategy over firing him, which would potentially create a legal and constitutional crisis that would have far reaching implications.

Yet for all the turmoil, markets seem to be taking everything in their stride. The US economy still appears to be strong. Employment numbers recently were solid, with unemployment lower than expected at 4.1% which is incredibly low. Inflation is in check, so far, but a spike from tariffs is coming. The irony of all this is that as it unfolds, equity markets are likely to initially rally at the prospect of a return to a lower interest rate environment in the next 12-18 months. However, that will soon be followed by fears that the inflation genie is once again out of the bottle, and this time it will not be so simple to fix.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

What is success?

It’s a question I’ve asked dozens of high achievers on my podcast, founders, CEOs and investors. People with stories that others would love to learn from and replicate. But the more I ask it, the more layered the answers become.

One of my recent guests, Amanda Rettig, founder of Mimco and A-ESQUE, raised a point worth thinking about. For her, success isn’t the outcome, it’s the process. The work. The habits. The discipline. She said that while the outcomes were usually very positive and rewarding, they were almost a byproduct. She explained that while they were not achieved by accident, they were not the focus. However, she added a layer by noting that her definition of success had evolved over the years.

I had another interesting conversation with Ben Thompson, co-founder of Employment Hero, when he was on the show about the strengths and weaknesses as a founder. He talked about being curious and determined from a young age. When I suggested these might be two of the most important traits for success, he stopped me and said he has one strength that he places a higher weight on than those. It is the most interesting answer and the first time I have heard it. He wants adventure.

I spoke with Colleen Callander, former CEO of Sportsgirl and Sussan. As a rising star in the world of fashion retail, she reached a point in 2007 at the age of 36 where she was burnt out. Understanding that enabled her to take a step back and reassess. She used the analogy of racing a Ferrari but not wanting to ever get off the track for a pit stop. Inevitably, in a race, that car will simply not finish the race. She emphasised the importance of sustainable success.

I spend a lot of time talking with high achievers, both clients and podcast guests. So, I get to talk to people about their success, how they define it and hear how they did it. We all get the same 24 hours in a day, and it’s incredible to see the difference in what some people can do in their days compared to others. Those days stack up and compound over time.

Now, the people I'm talking with are very successful in the field of business. But there are similar insights that can be transposed from all fields, be it business, sport, politics and life more broadly. So, while I am interviewing people who have successfully created huge businesses, often it isn’t their best skill or what drives them. They might simply love solving problems or creating products. They tend to do what matters most to them.

While success tends to be measured in outcomes and achievements by people on the outside, many of the most successful businesspeople I have met are motivated by their own definition of success.  There’s often a gap in what success means to the individual and what everyone else thinks success is. More money in the bank or wins on the board are fantastic, but they are simplistic measures society uses to mark success. Real success in life happens when people understand and pursue their own definition of success.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Not everything will change

While everyone knows that the artificial intelligence (AI) revolution is here, many people are underestimating how quickly this is going to happen. In just 2.5 years we might already be moving from phase one, where we ask AI questions and it provides answers, to phase two. This next phase is going to see AI and AI agents completing tasks for humans at scale. When humans can set AI to work and automate tasks for them in their day-to-day lives, at work and home, that is a game changer.

From an investor's perspective, it will be quite difficult. We have never before seen the level of disruption that is coming. Nor have we seen change at such speed. There are some obvious places to invest but in the next few years we are going to see many businesses become obsolete. It will be like the disruption that we saw with the internet and cloud over the last 20-30 years. Except AI disruption will be even more transformative and happen over the next 5-10 years.

Most investors are focused on the hyper-scalers in the AI arms race, companies such as Microsoft, Amazon, Meta, Apple, Alphabet and Nvidia. But many other companies will leverage AI to transform their businesses, creating productivity gains and opportunities. Conversely, many companies won’t react quickly enough. It will be more important than ever to avoid holding these companies in your portfolio. It will be critical to identify these stocks before the market understands it and adjusts their value to reflect their bleak future.

There is another type of company worth thinking about beyond the more obvious winners and losers, and that is those that are the least likely to be disrupted by AI. These companies are capital intensive, regulation protected, or infrastructure driven. They will be the types of businesses where AI is a tool for improved efficiency rather than a threat. This is an important part of diversifying an investment portfolio.

In Australia, companies like Transurban and Woodside Energy come to mind. Transurban owns and operates physical toll roads with a monopoly position. AI might improve traffic flow or autonomous vehicles’ use, but cars still need roads. In the case of Woodside, AI doesn’t disrupt demand for physical energy, especially LNG. Drilling rigs, pipelines and LNG export terminals are assets that have high barriers to entry, and long-life infrastructure that AI is unlikely to replace.

In the USA, companies like Caterpillar and Chevron come to mind. Caterpillar makes heavy machinery, with building infrastructure still requiring physical machines. AI may enhance predictive maintenance or autonomous machinery. However, this benefits rather than disrupts CAT’s dominance in large equipment. Chevron’s value lies in oil and gas production and refining, which require physical infrastructure. None of which are easily replaced or replicated by AI.

The result of both the pace and volume of change from AI will be confronting on multiple fronts. AI will result in large job losses, it will change consumer behaviour, and it will impact businesses dramatically. But it will also create new jobs and entire industries and enhance the way we live and work in ways we never imagined were possible. Yet amid all this, the world will still need energy, infrastructure, and physical assets. In a time of disruption and volatility, it's important to understand that not everything will change.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

It's not all noise

The world is a very volatile place today. Conflicts are emerging across the globe. Yet share markets barely seem to react to news of missiles launched and the prospect of a broadening and deepening war. In fact, in the past six months, the most noticeable market volatility wasn’t triggered by military escalation, it came from something far more mundane, Donald Trump reintroducing tariffs. There’s a growing pattern where markets are ignoring the possibility of risk, only reacting once events are fully underway. Markets no longer seem to price in potential disruptions, they wait for confirmation and then adjust. 

Trump's introduction of tariffs is a good example. These were flagged months in advance but share markets didn’t react until the day they were officially announced. There’s perhaps a broader behavioural shift at play, the ‘Trump fatigue’ factor. Not long ago markets moved when he spoke but these days it's a little more like the boy who cried wolf. Markets are starting to ignore his rhetoric, which is probably unwise as he will follow through on some of his plans.

The current tendency of markets to disregard the likelihood of an event, in favour of reacting only to the event itself, is fraught with risk. Investment markets are forward-looking mechanisms, supposedly pricing in future probabilities. However, if markets ignore the 10 or 20 risks looming on the geopolitical, economic, and financial horizon just because they haven’t crystallised yet, then we risk compounding the damage when one or more inevitably do.

I am not suggesting markets react every time tensions rise. But a failure to discount for the realistic possibility of disruption leaves investors overexposed when those possibilities become reality. Markets that don’t factor in risk become fragile, not resilient, and we’ve seen what happens when reality finally hits throughout history.

Geopolitical risk is elevated. Russia’s war in Ukraine continues. China and Taiwan sit in a tense limbo. India and Pakistan remain locked in a dangerous rivalry. And the situation between Israel and Iran has intensified. Each conflict is serious. Taken together, they are a real threat to world peace and economic stability. Yet share markets across the world have hardly reacted at this point. This situation encompasses dozens of second and third order effects that can potentially eventuate.

Credit risk is rising globally. Sovereign debt is ballooning. The cost of servicing that debt is rising. Yet equity markets remain priced for perfection, driven by enthusiasm for artificial intelligence, liquidity expectations, and an assumption that central banks will bail out the downside. The AI narrative is compelling and transformative. But it doesn’t negate risk, and it doesn’t prevent shocks. What’s missing in this moment is not growth or innovation, it’s caution. We are not short of reasons to be prudent. We are short of markets acting prudently.

Investors need to recognise that we’re operating in a world where low-probability, high-impact events are not only possible, but increasingly likely. In that world, a margin of safety or buffer against the impact of error isn’t just wise, it’s essential. Investors who understand the risks that exist and account for them accordingly will be far better prepared for their eventuality than those investors who continue to ignore the risks until they occur.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Unchartered Territory

As I watched markets such as 30-year US and UK Treasuries plummet on Wednesday night it was becoming clear that if Trump followed through as publicly proposed something in the global economy would soon break. It was concerning because without a pause or some kind of intervention, an economic or financial catastrophe was brewing. Whether it was part of his plan or due to pressure from within the Republican Party, he paused and provided the circuit breaker the market needed. It still appears to me, as I outlined last week, that there are two parts to this. It is negotiation in the short term and a strategic repositioning of the US in the long term.

While many are calling Trump pausing most tariffs for 90 days a ‘backflip’ I expect this was part of the plan. Push as hard as you can and at the point at which it looks like something in the system might break hit pause. One of Trump’s advantages in negotiations is his perceived unpredictability. I'm not sure his tactics are a great way to run a country or create stability but purely from a negotiation standpoint it’s effective. The world cheered as he hit pause but in one fell swoop, he set the minimum and maximum parameters and deadline for each country ahead of negotiations.

I'm not pro or anti-Trump in this view; I’m simply looking at it as objectively as I can. My observation is that the anti-Trump camp tends to underestimate him while his supporters tend to overestimate him. I pay attention to what he says and does but also what he doesn't say and do. There are patterns and a method to his madness. He uses hyperbole and misinformation to his advantage, and it keeps people uncertain, so they don’t know what to expect and can't get comfortable. You don’t know if he’s telling the truth or bluffing. You can’t be sure about anything. But that is how he negotiates. All of this gives him control of the negotiation.

With many moving parts to digest and many variables we either don't yet know or don’t know how they will interact. On top of all that at any moment the situation can change, and the goalposts can move. Trump could decide without warning to remove or exempt a country from tariffs. He could extend or truncate the pause in tariffs. Central Banks around the world could start dropping interest rates. The outcome of the escalating trade war between the USA and China will be pivotal. China could adjust its currency or retaliate in an unexpected manner. We don’t know which countries will retaliate, compromise or give in. At any point, there are weaknesses within the global economy or financial markets and these developments can apply additional stress.

There are mixed views on how this all plays out for the global economy. While tariffs are inflationary, they are also likely to negatively impact economic growth. Central banks will soon have to make a very tough choice to make. Do they raise interest rates to fight inflation and potentially destroy the economy or do they cut interest rates to save it and risk adding fuel to the inflationary fire? Unless inflation is running out of control, I believe that a slowing economy will be seen as the biggest pain point, and in the face of an economic slowdown Central Banks will choose to cut interest rates to stimulate the economy and deal with the consequences of high inflation later. There is a long way to go, and patience is key to taking advantage of opportunities as they unfold.

Vladimir Lenin famously said, “There are decades where nothing happens, and there are weeks where decades happen.” As this situation continues to unfold and eight decades of trade agreements are upended, it appears that this is one of those times. This is all unchartered territory. I watched an interview with the legendary investor and founder of Oaktree Capital, Howard Marks where he said this is the most significant change he has seen in his illustrious 5-decade career. When someone held in such high esteem in the investment world makes a comment like that, it’s worth being mindful that this is a significant moment that should not be underestimated.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

The Art of the Tariff

There are a few layers to the tariff conversation that are worth elaborating on given the recent ‘Liberation Day’ tariff announcements and the subsequent share market reaction. Firstly, there's no scenario where you introduce tariffs, and it directly results in better global growth. This is not a positive for the global economic outlook. The share market and company share prices are falling because the prospect of sustained tariffs and potential trade wars are negative for economic growth and business conditions. Investors are no longer under the illusion that Trump is just posturing.

By applying tariffs across the board, he has laid the foundation for every country to effectively renegotiate their existing deals on his behalf and make a better offer. So, in the first instance that is an efficient way to conduct a bulk negotiation. Much simpler than going from country to country one at a time. The tone has been set. Some countries are more in need of the US than others and more amenable to doing a deal. I expect those countries to be rewarded and highlighted to set the tone. Others will simply be opportunistic. Those who retaliate will be penalised.

His policies are changing the shape of global alliances. Europe understands that they can no longer rely on the US and will massively boost defence spending. When there is someone else to do the heavy lifting others will happily take a step back. But once there is not then they become surprisingly capable. So, Europe will be okay with or without the US. The implications here are far reaching and bring into question the USA’s willingness to help allies who have always assumed that they have the US protection if needed. That extends to Australia too.

Prioritising the USA’s national security is more real than ever. The initial phase of the decoupling from China in the USA supply chain saw a range of nations such as Vietnam benefiting. Suddenly imports from China fell and the US was importing more from Vietnam. It looked like the risks in the supply chain were being addressed. But simultaneously Vietnam was importing more from China. There was merely an extra link added to the chain not a new chain. The aggressive tariffs on placed like Vietnam indicate that the US is not only aware of this but very serious about genuinely decoupling from China.

Part of the complication is that the tariffs create far reaching implications across every aspect of the global economy. It will take some time for the consequences to be understood and for the second and third order effects to flow through. These areas range from manufacturing and jobs in the US to the redirection of investment capital across the world. There will be impacts on interest rates, inflation and consumer sentiment. I have concerns about stagflation in the US as this plays out.

The rise of anti-USA sentiment across the world will have an economic impact too.  Travel from Canada to the US is down 70% since the introduction of tariff talks. Will Canadians stop buying US cars like Fords and Teslas? Quite possibly. But will the rest of the world stop buying McDonalds or Coca-Cola? Will they stop using Facebook or Microsoft? I think that is unlikely. However, investors need to consider the implications of all these issues on a case-by-case basis.

Trump’s approach is all about extracting better trade outcomes for the USA in the short term and national security and strategically positioning the USA in the long term. This is all about the USA and the USA’s position in the world in the years ahead. The Trump Administration is clearly of the view that where a country benefits from engaging with the US economy then there is a price to pay to participate. When it comes to defence rightly or wrongly, this is also their attitude. As Winston Churchill once said of the US back in World War II “You can always rely on the USA to do the right thing after they have tried everything else."

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Are your dreams big enough?

I remember many years ago when I was a kid sitting around the dinner table and the family discussion turned to what you would do if you won $1m on lotto. It was always fun imagining what we would do with our newfound fortune. We were talking about buying houses, going on a holiday, selecting a new car, and giving money to our closest family and friends.

But after some quick calculations, it was clear there was not much imaginary lotto money left. Suddenly we were reducing the amount we were giving to family and friends, getting a cheaper car and scaling back the holidays. There was a major problem, but it was not a financial one. It was clear to me that even in our dreams of winning the lottery we had self-imposed financial limits.

I remember saying to mum and dad, “Why don’t we just pretend we won $5m or $10m?” Everyone stopped for a minute and recalibrated. We were rich again now and there was more than enough to go around. That conversation stuck with me for the rest of my life and had a profound effect on my mindset. It was a great insight into the way people limit themselves. It made me realise that if people think like that when they dream, how limiting must their thinking and expectations be in everyday life?

Admittedly, Australia often isn’t the best place to cultivate big ambitious thinking. Tall Poppy Syndrome is alive and well. We love it when people have a go but not when people get too big for their boots. We like people to do well but not too well. I guess it's why we are the ‘lucky country’ and not the ‘massively ambitious overachieving country.’

Too often people with big dreams are discouraged by well-meaning family and friends who haven’t succeeded in achieving their dreams. We limit ourselves to smaller goals because they are more acceptable. If our goals are big, we feel self-conscious about sharing them. I think we learn that at an early age and stop dreaming big and eventually forget how.

For any young people out there, if you have a big dream go for it. But don’t waste time. Don’t get caught up in talking about it. Pursue your dream relentlessly until you make it happen. Don’t do it to impress anyone or do it for anyone but you. Life is too short to spend chasing a goal for someone else.

For any older people out there, if you have a big dream, what’s stopping you? It’s easy to become shackled within the confines of everyday life, especially once you have kids and responsibilities. But life is short and there is no better time than now to start planning to do what you’ve always wanted to do. Find a way to start working on it now so you don’t regret it later.

So next time you hear someone talk about a crazy big dream that makes you raise your eyebrows, why not take a moment to wish them well and remind them to go all in and enjoy the journey ahead. It might just be the encouragement they need at the right time to help them, on their way to becoming the next champion athlete or business success story.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

What’s Your Plan?

One of the most fascinating parts of my job is meeting people who have accumulated wealth over many years, often without even realising they were doing it. High-net-worth individuals (HNWIs) and families usually have a cornerstone asset or business that provided the cash flow to fund additional investments over time. But in many cases, they never sat down and mapped out a grand plan. Instead, they bought assets here and there, sometimes opportunistically, sometimes out of necessity, and before they knew it, they had built significant wealth.

When it comes time to think about the future, especially retirement, many people aren’t quite sure how their assets should be structured to provide an income. More often than not, something triggers the need for a serious conversation: an asset sale, a divorce, an inheritance. Whatever the catalyst, the process doesn’t need to be overwhelming. You are where you are today, and you want to ensure your wealth supports you in the years ahead. The key is to put a clear, strategic plan in place to make that happen.

Getting the Right Structures in Place

Structuring wealth correctly is essential, but it’s not as complicated as many people assume. Most families I work with have a mix of entities — companies, family trusts, and self-managed super funds (SMSFs). This is where collaboration with accountants is critical to ensure everything is set up correctly from the start. The right structure depends on several factors, but tax efficiency and asset protection are almost always top priorities.

Superannuation, for instance, is often misunderstood. I hear people ask whether super is a good investment, but the truth is, super is just a vehicle, it’s not the investment itself. The real advantage of super lies in the tax treatment: a 15% tax rate while accumulating assets and a 0% tax rate when converted to a pension in retirement. That’s an incredibly effective place to build long-term wealth.

The Often Overlooked Area: Estate Planning

One of the trickiest but most important conversations I have with clients is about estate planning and asset protection. No one likes thinking about their mortality, and as a result, too many people put off making a proper plan. But I’ve seen firsthand the impact of not having these conversations — family disputes, contested wills, unnecessary legal battles.

It’s not always as simple as writing a will. Families can be complicated, and if you have multiple entities or trusts, getting proper legal advice is essential. Every family has its dynamics — whether it’s a vulnerable adult child or concerns about a son or daughter-in-law who might not have the best intentions. The right structures, including trusts and other protective mechanisms, can ensure that your wealth is passed down as you intended, without unnecessary risk.

Looking Ahead: Projecting Your Financial Future

A big part of what I do is helping people project their financial position into the future. That could mean forecasting where they’ll be at retirement or estimating their financial situation in their later years. It’s a simple equation, understanding the assets and liabilities today, projecting income and expenses, and then mapping out how that looks over time.

For example, if you have an investment portfolio spread across cash, bonds, shares, and property, it might generate an income of 4-5% per year, plus capital growth. If you’ve accumulated $5 million in assets, that equates to an income of $200,000-$250,000 per year. With $10 million, it’s between $400,000-$500,000 per year. Ideally, you want enough exposure to growth assets so that your wealth keeps pace with inflation, or better yet, exceeds it.

The Final Piece: Investment Strategy

Once we have the structures in place and a clear understanding of future financial needs, the final step is shaping an investment strategy that aligns with your risk profile and long-term goals. This isn’t about chasing the latest market trend, it’s about building a well-diversified portfolio that provides both stability and growth. The goal is simple: to give you confidence in your financial future, knowing that your wealth is working for you.

Planning ahead isn’t just about protecting what you’ve built, it’s about making sure your money continues to support the life you want to live, now and into the future. If you haven’t thought about your long-term strategy yet, there’s no better time to start.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Short term pain. Long term gain.

In just a matter of weeks share markets have corrected and there is talk about a US recession. Most of this is just noise as the world adjusts to Trump doing what he said he would do. The most surprising part of all of this is how surprised everyone seems to be. But regardless of how we got here, we’ve had a long overdue pull back. At the time of writing the S&P500 is down 10% and the NASDAQ down 13%. So, what does it all mean, and what should investors expect next?

I think it's worthwhile considering Trump’s mindset. I once asked the former managing director of an ASX listed company his biggest lesson he learned from his boardroom battles. His answer and his candour surprised me. He said, “when you have power, use it and act quickly”. Those words stood out because they weren’t the usual corporate speak; they were a real insight into how you enact change. I am reminded of those words as I see Trump embark on his second term. I think that's exactly the lesson Trump learned from round one, hence the pace of change of his new administration. He has the power, and he is going to use it, and he is going to move as quickly as possible. This is a very different kind of chaos to his first term. This time it seems that he is moving with real purpose.

From a short-term perspective, the tariff idea as a negotiation tool is great it's an effective stick to motivate other nations to act on objectives in other areas. In the case of Mexico and Canada those tariffs don't seem to be intended as a long-term imposition. Using tariffs in that way has been done numerous times by the Chinese on Australian Industries, so it's not a new idea and it can be effective. As a means to rebalance or level the playing field in a specific area there is also merit as it can assist ailing industries at home who are struggling with cheap goods from other nations. No doubt there will be some retaliation, but overall markets adjust quickly and after a period it’s business as usual albeit under the regime of the new normal. This is where investors were about a month ago.

If in the long term the tariff end game devolves into a tit for tat ever higher tariffs and genuine trade war, then that probably isn’t good for anyone. It’s just destructive. In that situation, tariffs are bad for growth and bad for inflation. Stagflation and recessions are suddenly possible. Markets are now reacting to the uncertainty that all these factors represent. While the economic data is generally okay, the uncertainty that exists does have a real impact. Consumers who are worried about their jobs stop spending, and companies worried about tariffs defer investment. That’s the danger of uncertainty.

It's important not to overreact in these situations because as quickly as Trump implements tariffs and starts trade wars, he will reverse them when he achieves his objectives. Markets will respond to this accordingly and can potentially jump back up as quickly as they fall. We are starting to see countries kowtowing to Trump and making offers to gain favour. I think that's probably a mistake. Trump just wants the best deal, and he will see offers as weakness and hold out for more. So, this process will take time and governments and in turn investors will need to be patient. It won’t be resolved as fast as markets would like and Trump is aware of this. He’s flagged the short-term pain for long term gain to steel the country for the turmoil ahead.

For our investors, their portfolios are underpinned by stocks with solid earnings, and those fundamental drivers haven’t changed. If the economic impact is a recession that will impact everyone, but it's not my base case. The short-term pain in markets is the opportunity we have been waiting for and a chance to buy stocks at cheaper prices. We have plenty of cash on hand to add to our holdings in times like these, and to ensure if markets continue to fall in the weeks and months ahead, we have funds available to continue buying.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

The Wisdom of Poor Charlie’s Almanack

I have often talked about the wisdom of the world's best investor, Warren Buffett. However, his business partner, Charlie Munger, while less famous, is equally wise and humorous. There are so many great insights to be gained from Charlie Munger who passed away in 2023 at the age of 99. Poor Charlie’s Almanack is more than just another business book. The book is a no-nonsense guide to thinking, making decisions, and living life.

1. Rationality

Munger was obsessed with rational thinking. He’s all about using logic, not impulse, to drive decisions. The trick is knowing your biases—like confirmation bias, where you only look for information that backs up what you already think, or availability bias, where you overvalue info that’s easy to remember. These little traps can badly impact your decision-making, but if you can identify them early, you can make far better decisions. Slow down and think rationally so you don’t let excitement or fear dictate your moves. Rational thinking can be the difference between success and failure in any part of your life.

2. Patience

In today’s world of instant gratification, patience can be both rare and difficult to have. Patience isn’t just for investing; it’s a life skill. Whether you’re building a career, a business, or a personal relationship, the key to success is often hanging in there long enough to see it through. Patience doesn’t mean sitting still, it means waiting for the right moment and making the most of it when it arrives. Munger talks about the power of finding a great business or opportunity and holding on for the long term, watching it compound over time. The same applies to everything else in life.

3. Consistency

It’s not often the smartest or most talented person who succeeds, it’s the one who shows up day after day grinding it out. Munger is a huge advocate of consistency and discipline. Success is about being disciplined enough to repeat what works and avoid what doesn’t. It’s about making the right decisions again and again, even when the excitement fades. Munger isn’t talking about perfection; he’s talking about steady progress. It’s boring, but it works. It’s a key factor in long-term success, regardless of your field.

4. Don’t Get in Your Own Way

We all have flaws and Munger often talked about his. But he was also quick to point out that the most important skill you can develop is learning to avoid self-sabotage. Whether it’s overconfidence, laziness, or just ignoring good advice, making the same mistakes over and over is a sure way to fail. Munger doesn’t just encourage people to avoid these behaviors—he pushes people to understand their weaknesses, face them, and actively work to get better. It’s not about eliminating mistakes, but about minimising them by learning from past errors and being brutally honest with yourself.

5. The Multi-Disciplinary Mind

Munger was a firm believer in the power of a multi-disciplinary approach to life. His thinking here is about pulling insights from multiple areas, from economics and history to psychology and biology, whatever paints a fuller picture. It makes sense, why limit yourself to a narrow field of expertise when you can tap into the knowledge of many? If you want to make better decisions, don’t box yourself into a single framework. Instead, consider different domains and apply the best tools to whatever challenge you’re facing. It's a great way to see the bigger picture and make better choices.

6. The Power of Reading and Lifelong Learning

Munger was a lifelong learner who knew that reading is the simplest shortcut to gaining wisdom. But it’s not just business books Munger recommends, he reads across the board. He suggests that the more you expose yourself to different ideas, the sharper your thinking becomes. Books are where you get the kind of intellectual flexibility that can help you solve problems in ways that others can’t even imagine. If you’re not reading regularly, you’re missing out. This reminds me of the famous quote by Mark Twain “The man who does not read has no advantage over the man who cannot read.”

7. Reputation and Integrity

Reputation is everything. You can lose money, time, and even opportunities, but once you lose your reputation, it’s nearly impossible to get it back. Munger’s success was rooted in doing business with integrity and maintaining a strong moral compass. He’s a firm believer that, in the end, the people who thrive are the ones who do the right thing—even when no one’s looking. Reputation isn’t just about avoiding doing the wrong thing; it’s about keeping your word and treating people well. Munger’s advice? Build a reputation based on trust and decency, and everything else will fall into place.

Poor Charlie’s Almanack isn’t just about making investment and money, it’s a blueprint for living a thoughtful, rational, and disciplined life. Munger’s style is simple: think better, wait longer, and avoid missteps along the way. It’s timeless advice that, when followed, will stand the test of time.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Cautiously Optimistic

When asked my view on the global economy and investment markets, I describe my position as cautiously optimistic. I am very bullish on the opportunities over the long term, especially in artificial intelligence and energy, hence my optimism. But I am ever mindful that at any point there are risks to the economy and share market that can lead to a correction and even a bear market. We have been fortunate in the past few years that many of the risks lurking have not happened. That does not mean they will not, in fact eventually some will, hence my caution.

Right now, the world is grappling with several changes, many of which stem from US President Donald Trump’s tearing up of the rule book of international relations and trade. Ordinarily elections come and go and often they are relatively inconsequential to the daily machinations of financial markets. This is different. Trump is taking his opportunity to rewrite the rules of the game and address the perceived imbalances that have become embedded in the global economy.

While it appears Trump is unhappy with and targeting individual countries, he said it best when he explained that he does not blame these countries for the deals in place, they did great deals for their countries. He blames the prior administration(s) in the US. He is right, these deals and frameworks for how the world works have been decades in the making. The problem the world now faces is the uncertainty that comes with the upheaval of changing the global status quo.

So, after a positive honeymoon period for share markets from November last year, the economic reality is now starting to kick in. Nations, companies, and investors alike are starting to understand what tariffs, trade wars, and Trump mean for them on a more granular level. There will likely be a level of dislocation in markets as changes reverberate through markets. But the dust will settle and regardless of the short-term pain that accompanies the change, the key themes of the future remain compelling.

As markets reached new highs, I am always keen to take profit where stocks become overvalued. We have trimmed exposures to blue chip companies such as Commonwealth Bank and Wesfarmers over the past few months as they have become too expensive. They remain core holdings in our client's portfolio, but it's prudent to take profit and reallocate capital to better priced assets at times like this. Keep in mind that at $165 a share Commonwealth Bank was trading at a price earnings ratio of 28x which is ridiculous. Investors need to be careful not to become attached to stocks.

Companies such as Commonwealth Bank and Wesfarmers have been cornerstone stocks for many investors and there is often a reluctance to sell them. In the investment world, it's important to be as objective throughout the ups and downs of the market cycles. It is common sense, but it is more difficult to do than people appreciate. When a company's share price has performed well, we are inclined to expect that it will continue to do so. However, unless the increased share price is driven by similar increases in profits, those gains will not be sustainable.

This is where it is difficult to assess the big tech stocks in the US, especially those with exposure to the AI theme. Our client portfolios include companies such as Microsoft, Amazon, Alphabet, Facebook, and Apple. They have all performed very well. Unlike my approach with traditional companies with more predictable earnings, I have not been taking profit on the big tech companies. The AI theme is a decade plus investment opportunity. Stock prices will not behave rationally along the way. However, the opportunity for future revenue and profit is so significant that I am reluctant to sell them despite their valuations being stretched. The growth opportunity over the next 3, 5 and 10 years makes selling them a greater risk. I'm fine with the volatility and if these stocks pull back 10% or 20% or more, I am not really concerned, it becomes an opportunity to continue adding to the holdings. But it is my view that you cannot afford not to have them in your portfolio.

Remaining objective often means acting counterintuitively. Especially in a world where there seems to be ever mounting risks emerging. The reality is that many will not happen, but certainly some will. Having conviction in the themes you are investing in is critical as is prudently managing capital and not being attached to any particular investment. Your investments must be made based on the future prospects of a company, not the past. Despite the uncertainty in the world, there are always exciting opportunities ahead. So, there will be pull backs and difficulties in the share market and these are not reason for concern but buying opportunities for the long term.

General Advice Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

It's a Marathon, Not a Sprint

Each year, I pick a few items from my bucket list to complete in the 12 months ahead. This year, my number one goal is to run a marathon. A marathon is 42.2 km, and I have no idea if I can do it. I've had people say to me “I couldn’t do that, I hate running”. Well, I am not a runner either. Unlike some people who run like a gazelle, I am in the group where every step seems harder than the last.

Why this challenge? I find a challenge most engaging when I think it’s possible, but I am not sure. I am not interested in doing things I know I can easily do. Where is the fun in that? A marathon is interesting to me because it is hard, and I am not sure if I can do it. So, it's a challenge both physically and mentally. I am excited to find out what tackling such an event will teach me about life and what I can learn about myself. Not just on the day of the run but throughout the entire training process. Even in this early phase of training I've learnt a lot.

Hasten slowly. The first interesting learning was that when you train for a marathon, a common mistake for beginners is to train at too high an intensity. You need to train at a much lower intensity to improve your anaerobic ability. Train at too high a heart rate, you are not improving your ability to run long distances; you are improving your aerobic system for power and speed. It defeats the purpose. I believe in giving it everything you can, so that's always been a struggle to balance the intensity of working at your highest level with the pace needed to sustainably work at that level. Learning how to pace myself in this training has been an interesting and counterintuitive process.                                                                            

Not pushing yourself. One of the hardest parts of this process is not pushing yourself. I have a plan, and I am determined to follow it. That means not only doing the work and being consistent but not doing more than I am meant to. When I ran my first 8 km run a week ago, I felt like I could get to 10 km for the first time. But resisted doing more. The longer run is planned for later. Not pushing myself and instead sticking to the plan is critical. There is a good reason for incrementally increasing the distance, so you condition your body progressively. Run too far, too fast, or too soon, and that's when injuries happen. I’ve done it in the past in other areas, and it sets you back even further.

Book it in. My entire mindset changed once I registered and paid my entrance fee for the event. Previously, I was thinking about it and was starting to train a bit. But once I had an event and a date (Perth Marathon on 12 October) it became real. Everything started to fall into place. The clock was now ticking, and I was committed. I mapped out a training program with the Runna app and tailored my routine to accommodate the new timeline. My training is 3 runs a week. Short runs on Tuesday and Thursday and a long run on Sunday.

Don’t underestimate this challenge. The best lesson I got was after 5 weeks of training. My Sunday long runs had progressively increased from 6km to 7km to 8km before reducing to 5km for the consolidation week. That 5km run was easily the hardest run I've had to do. I struggled the entire way, and I realised halfway through what I had done wrong. I didn’t come prepared mentally. I was easily completing 5km runs at this point and turned up to this one like it was a walk in the park. Not unlike the heavy favourites in any sport who underestimate a lowly ranked opponent and end up suffering a humiliating defeat. Now, I make sure I show up to every run I do ready to work hard.

Achieving the goal. Be mindful of the difference between setting a goal and achieving it. When I went to the Nike store to buy a pair of shoes, the sales assistant asked what the running shoes were for. I explained that I am training for a marathon. Impressed, she said, “Wow, that's awesome” then went on to say she’d only ever done a 21km half marathon. I had to stop her and say I haven't run more than 5km yet. I haven't achieved anything. It's important to not get caught up in the noise of setting a big goal because until you achieve it, it is only talk. This person was clearly a much more accomplished runner than me, and yet their effusive praise for my good intentions would have you think it was the other way around. It's great to have a goal, but it's more important to work towards it and achieve it.

Incremental Improvement. What has surprised me is just how quickly the body and mind adapt. When I first started training in early January, I was able to run for 5 minutes before I had to walk. My first ‘run’ took me 1 hour to do 30 minutes of actual running. It wasn't fast or pretty. Every time I run past the mirrored windows of the Sydney Opera House, I am reminded it's still not, but I am getting faster, and running is getting easier. Six weeks in, I can run 5km in just over 26 minutes, and my longest run so far is 8km. Each week, the program builds incrementally on the previous week, and then every fourth week is a consolidation week where you run less. I still don’t know if I will be able to run the 42.2 km on the day, but already, I can see that it will be possible to build up to it by keeping to the plan and incrementally improving to the next level each month. The most interesting part is that I have actually started to enjoy running and the entire process.

General Advice Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

AI Arms Race

There have been many technological advancements over the years that have been transformative layers for humans to build upon. From the motor car, trains and planes to electricity, computers and the internet. However, none have had the ability to transform the world at the scale and speed as AI.

Earlier technological advancements were often limited to the industries they would ultimately disrupt. But the very nature of AI means every industry will be affected. More importantly, AI is also the missing link that brings technologies together to create synergies that will allow automation to advance by an order of magnitude. For the past decade, we have been hearing about technologies such as the connected home, driverless cars, robots and virtual assistants like Siri and Alexa. But the incremental improvements have yet to embed these in our society. But as these technologies converge with AI, we will quickly see them emerge from novel to ubiquitous.

AI will improve every week and month from here. Don’t be fooled by the stories about AI fails and mistakes; the game changer is that this technology learns and improves on its own. I remember around 2005 trying to use the internet on my Nokia mobile phone. It would take 5-10 minutes for a page to load. It was useless. It was hard to see what practical use this had. Then in 2006, Apple brought out the iPhone, and the entire world changed forever. That was only 20 years ago. AI is going to be twice as big and happen in half the time. In 10 years, the way we live and work will be unrecognisable from today.

OpenAI recently introduced “Operator”, an AI agent designed to autonomously perform various web-based tasks such as booking flights, ordering groceries, and managing reservations. Operator interacts with websites by simulating human actions like clicking, typing and scrolling, enabling it to navigate websites and complete tasks. This is very early days and so it has delivered mixed results so far, but like the internet on the Nokia mobile once the technology catches up to the concept this will change rapidly. This is just one example of a technological change that will be revolutionary. Imagine the complex tasks that can be completed once robotics such as humanoid robots currently being developed by companies such as Tesla and Boston Dynamics are embedded with the ability to complete manual tasks such as lifting objects. Soon enough every home will have a robot worker doing the daily chores. It might sound far-fetched, but so was the idea of a TV or a computer in every home too once. This will happen faster than we think.

We are already starting to see the benefits of AI as large corporations invest heavily in incorporating it into their operations. Google CEO Sundar Pichel said in late 2024 that 25% of new code at the company is now written by AI. Mind blowing. Imagine that level of additional productivity in all businesses. But it’s not just tech companies gaining early benefits, insurance companies are seeing underwriting assessments that would take weeks completed in minutes. Banks are seeing similar results for home loan approvals. Fast food companies such as McDonald’s will soon enough be operating fully automated restaurants, drastically reducing costs and massively increasing productivity. It’s very early days but the potential here is unlimited.

While we understand that many workers are going to lose their jobs, it’s critical to understand that many companies and business models will become obsolete too. The difficulty for investors at this early stage is working out how this plays out. For example, once you can ask the Operator AI app to organise your next holiday and it automatically goes online, finds the best prices and books the entire trip exactly how you want it done, will we even need travel apps? Companies such as Flight Centre, Webjet and Booking.com may well see initial benefits in integrating AI but eventually, they are at risk when your own AI can do everything they can do for you. Businesses with a single sided online marketplace business model will struggle when AI can do everything they can do for a consumer. Companies operating a two-sided marketplace model such as Seek or Carsales will fare better as the underlying platform will be needed to match both sides.

Make no mistake though: AI is an arms race not just between companies but nations. When Chinese AI company Deep Seek recently announced it had developed a similar quality AI software for a significantly lower cost, it sent a shudder through markets and governments alike. Markets were concerned that the scale of the infrastructure spending and assumptions for future profit were overdone. Governments were alarmed at the prospect of a competing nation gaining the edge.

To be clear, I do not think any of this is a concern. If anything, it accelerates the timeline for the ultimate AI endgame. No one is spending less money on AI. It means that the arms race is well and truly on and that the pace of AI advancement will be even faster. The fact that China has advanced with Deep Seek only serves as a wakeup call for the USA, creating the urgency needed to move even faster.

The world dramatically underestimates the pace and impact of AI’s exponential growth in the next 5-10 years. This isn’t just about AI; it is also about AI as the catalyst for major advances as technologies converge. It catapults technology such as robotics and automation into the stratosphere. Businesses are obviously going to derive massive efficiencies, and global productivity will likely increase dramatically in the years ahead. This technology will evolve to become extremely intuitive, and anyone will be able to use it. There will be business winners and losers, but all of us as individuals will see the most benefit as it transforms and improves our daily lives.

General Advice Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

10 Themes for 2025

AI and Automation

In 2025, artificial intelligence (AI) stands out as the most important investment theme as it begins to enter the mainstream and revolutionise all aspects of our lives. This is a multi-decade theme that will advance exponentially. While there is a lot of hype, I believe most people are dramatically underestimating the opportunities and developments in this space. This is technology that learns and improves rapidly. This is an arms race, and the winners will redesign the future of the world. To be clear, there is no sector or industry that will be exempt from the change ahead.

America First

For someone who is often portrayed as unpredictable, President Trump is completely predictable in prioritising America’s interests first. Trump will extract every ounce of economic benefit for the USA in every situation. It's not unreasonable, and in many ways, the rest of the world has been able to coast on the back of the US. This theme includes areas beyond big tech, such as manufacturing, national security, defence and cybersecurity. While the rest of the world adjusts, the clear winners from this are US businesses, large and small. From an investment perspective US listed companies are well positioned to benefit and easily our preferred geography internationally.

Trump, Tariffs and Trade Wars

This theme dovetails into Trump’s America first strategy, and while very real, it's easy to get caught up in all the noise. Much of the headlines Trump creates aid the theatre of his negotiation. However, don’t underestimate Trump’s focus on getting an outcome that will ultimately optimise the USA’s global position. For a nation such as China, where the US wants to level the pricing playing field, they can expect an escalation in the rhetoric and actions from the US that can potentially lead to a trade war. Similarly, with Europe, it's only a matter of time before Trump turns his attention to various perceived inequalities in the relationship. These are likely to be a more sustained policy shift than those we have seen with Mexico and Canada, which were more transactional.

Energy Demand

The global demand for energy continues to rise, driven by population growth, industrialisation in emerging markets, and the increasing electrification of economies. Nations are transitioning to cleaner energy sources such as solar, wind, and battery storage. However, fossil fuels remain crucial in the near term, particularly for energy security and industrial applications. Additional demand for energy globally will require new energy infrastructure, costing trillions in capital investment over the next decade. This new demand, combined with the significant underinvestment in traditional energy over the past decade, will create more opportunities than ever to capture long-term returns in the energy sector.

China Economic Pain

The world’s second-largest economy faces structural challenges. Real estate problems, high debt levels, weak consumer demand, and geopolitical tensions—especially with the U.S.—may weigh on growth. The Trump presidency will likely escalate trade restrictions, further straining China’s exports and supply chains. Global markets may see deflationary pressures from weaker Chinese demand, impacting commodities and multinational firms with China exposure. While China remains uninvestible in my opinion due to unpredictable government, investors should expect economic volatility and reassess China-dependent assets.

Europe Economic Pain

In 2025, Europe faces sluggish growth, high debt burdens, and geopolitical uncertainty. Structural challenges, including weak industrial output, aging demographics, and energy dependence, may limit economic resilience. Ongoing tensions with Russia, potential trade disruptions from a second Trump presidency, and ECB policy constraints could add to the region’s struggles. I see risks in European equities and the euro, while opportunities could arise in U.S. and emerging markets benefiting from capital outflows. Sectors like luxury goods and autos, heavily reliant on global demand, may face headwinds. At the same time Europe is already being hit by China’s slowdown in consumer spending and the prospect of tariffs from the US.

Geopolitical Tensions

Geopolitical tensions have been elevated since Russia attacked Ukraine in 2022. Heightened uncertainty from factors like trade disputes, regional conflicts, and shifting international alliances lead to volatility in stock markets, commodities, and currencies. As tensions continue, investors may turn to safe-haven assets like gold, bonds, and certain defensive stocks while diversifying portfolios to hedge against risk. Additionally, sectors like defence, energy, and technology are all likely to experience growth, driven by government spending and demand for national security.

Private Debt Bubble

There is pain to come from this area. While unlisted assets certainly have a place and can be attractive opportunities, there are several downsides. The biggest one being that it's far more difficult to exit the investment. The rapid growth of this sector in recent years almost certainly means that at some point the music stops and the bubble bursts. With interest rates remaining elevated in many regions due to ongoing inflation risks, companies face higher refinancing costs, putting pressure on their balance sheets. Keep in mind these investments are typically exposed to higher risk borrowers and are often the most vulnerable to a downturn.

Debt & Deficits

The ability of governments to manage debt loads without triggering market instability is critical. But with ever increasing deficits from higher government spending, sovereign bonds will face volatility, while higher borrowing costs will impact growth at some point. The US stands out because of the colossal size of both its debt (US36T) and deficit (US$711Bil), but make no mistake, this is a global issue. The sheer amount of new debt the US needs to raise each year is huge and requires large investment. At some point that forces prices up, which means higher interest rates and that reverberates around the world.

Stagflation

With anaemic growth and inflation remerging, stagflation is beginning to look like the base case for the UK and much of Europe in 2025. That is an unattractive economic backdrop for investors looking at the region. If stagflation takes hold on that region, the overriding concern will be whether this presents risks for the global economic outlook. If inflation remains elevated due to persistent supply chain disruptions, energy price fluctuations, and labour shortages, economic growth could struggle to keep pace, leading to weaker consumer spending and business investment. In this environment, traditional asset classes like equities and bonds may face headwinds.

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

Winning at Business: Lessons from Sport

Great business leaders don’t operate in silos. Their sharpest strategies, boldest decisions, and most resilient mindsets are often built outside the boardroom—on sports fields, in extreme environments, or through personal adversity. The ability to draw from diverse life experiences not only enhances their problem-solving skills but also cultivates a deeper understanding of leadership, teamwork, and perseverance. 

In conversations with some of the best businesspeople in the country there is a clear pattern. Other areas of life, such as sport, teach lessons especially applicable to business success. 

Christian Beck: From Winning the Sydney to Hobart to Winning Legal Tech 

Christian Beck, founder of Leap Legal Software, is a prime example of this interplay between life and business. Known for his grit and innovation, Beck’s success in the tech space mirrors the precision and perseverance that helped him win the Sydney to Hobart Yacht Race, one of the world’s most challenging sailing competitions. 

Sailing a boat to victory in such a challenging race requires exceptional teamwork, strategic foresight, and an ability to adapt to ever-changing conditions. These are the same qualities Beck brings to his business ventures. He has spoken about how the focus on long-term planning during a yacht race—plotting courses, predicting weather patterns, and optimising every decision for the end goal—directly parallels leading a fast-growing tech company. 

Beck’s key lesson? Leadership is about preparation, but it is also about staying calm when the plan goes awry. Just as unexpected storms hit the water, markets can shift without warning. His philosophy: “You can’t control everything, but you can control how you respond.” 

Greg Taylor: Rowing Lessons in Perseverance and Culture 

Greg Taylor, the founder of Step One, credits much of his business acumen to his experience as a rower representing Australia. Rowing at an elite level demands relentless discipline and an unbreakable belief in collective success. As Taylor has often reflected, every stroke in a rowing race is a battle against exhaustion, self-doubt, and the fear of mediocrity—challenges any entrepreneur will recognise. 

What Taylor has carried into his business is a focus on culture. In rowing, the team operates as one; the slightest misalignment can cost a race. This ethos informed his approach to building Step One’s team, emphasising trust, transparency, and alignment of purpose. 

Taylor’s advice? “The best teams aren’t just skilled—they’re connected. They know why they’re rowing together.” It’s an important reminder that business success is rarely a solo achievement. Whether rowing across the finish line or scaling a company, it is the combined effort that pushes you forward. 

Brad Moran: From AFL to a $205 Million Exit 

Brad Moran’s story takes us to the football field. A former AFL player, Moran turned the discipline and strategic thinking he honed on the field into the driving force behind CitrusAD, the e-commerce software platform he co-founded and sold for $205 million. 

For Moran, success in both football and business has revolved around agility and strategic execution. As a professional athlete, he mastered the art of responding instantly to opportunities while sticking to a well-rehearsed game plan. In business, this translated into a unique ability to pivot quickly while maintaining focus on CitrusAD’s mission. 

Moran’s key insight? "The lessons you learn in sport are about resilience and commitment. You might lose a game, but how you recover determines the next outcome." For entrepreneurs, the message is simple: setbacks are inevitable, but it is critical to continue to trust the process and persevere despite the difficulties along the way. 

Sport and Business Success 

What unites Beck, Taylor, and Moran is not just their success but the diversity of experiences they’ve harnessed to fuel their achievements. Their stories highlight three universal lessons: 

1. Discipline is transferable: Whether it’s the daily grind of training for a race or the relentless effort required to scale a company, discipline in one area sharpens your ability to excel in another. 

2. Teamwork is non-negotiable: From yachts to rowing crews to football teams, the importance of collaboration cannot be overstated. Building a strong team with a shared vision is critical for long-term success. 

3. Adversity builds resilience: Stormy seas, grueling training, and tough games prepare you for business’s inevitable challenges. Resilience, as these leaders demonstrate, is a muscle strengthened through experience. 

These examples also point to a broader truth: the best business leaders embrace experiences outside of their core industries. They understand that life is the ultimate training ground—a place to develop empathy, resilience, and creativity. Whether it’s travel, sport, or personal passion projects, engaging with the world beyond work fosters the kind of innovative thinking that gives leaders an edge. 

As Christian Beck, Greg Taylor, and Brad Moran show us, life and business are not separate domains—they are intertwined. Success in one can profoundly influence the other. So, learn to leverage those lessons. For anyone in business it’s important to draw from every experience. Your next big idea or solution might not come from a business book or a strategy meeting but from something as simple as a sport you love or a challenge you overcame. 

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

The Rationale of Buying and Selling

Investing is as much about making sound decisions when buying assets as it is about knowing when to sell. At the core of successful portfolio management lies the principle of diversification and the allocation of capital to investments across asset classes and within those classes. As assets grow at different rates, it's critical to manage your portfolio proactively to adjust the exposures to sectors and investments.  

Asset allocation is a critical part of portfolio management. A well-diversified portfolio will include a mix of growth-oriented assets such as property and stocks and defensive assets like fixed interest bonds, hybrid securities, term deposits, and cash. Then there is diversification within each of the asset classes. Most of our long-term client portfolios will hold 15-20 Australian stocks and a similar number of international stocks. This broad exposure helps to mitigate risk while optimising potential returns. 

If a portfolio is set up to have 70% exposure to growth assets and 30% to defensive assets as the growth assets increase over time the growth defensive split will skew high. Left unchecked you end up with the growth assets being a much higher percentage of the portfolio. It's critical to adjust these weightings periodically to ensure that you don't inadvertently end up with a greater exposure to higher risk assets than you intended to or than is prudent. This also applies to the levels of exposure to each asset class and the specific investments within asset classes, such as when an individual stock grows to become a larger part of the portfolio than is prudent.  

A common conversation I have with clients, especially now as stocks have performed so strongly, is around the timing and rationale of selling to take profits and rebalance the portfolio and then identifying entry points for new investments. If a stock's price has increased significantly faster than its profits, it might be an opportunity to lock in profit, reduce your exposure to the stock and reallocate funds to undervalued investments. The market can often overreact, pushing prices beyond reasonable levels. Selling gradually, or "averaging out," helps manage this risk and ensures gains are locked in while leaving room for further upside as you keep the bulk of the holding.  

A good example of this currently is the Commonwealth Bank of Australia (CBA). Over the past year, its share price climbed from $105 to $160, even as its profits fell slightly. There is a disconnect between the share price increase and CBA’s profit growth. Many investors now have an overweight position in CBA and the banking sector. I think it’s prudent to take some profit as the price rises well beyond the stocks fair value. In many cases we’ve sold small amounts for clients at $150 a share and again at $160. This approach retains the bulk of the holding while strategically reducing exposure to an overvalued asset. If the CBA share price goes higher in the short term, I am happy to continue selling incrementally knowing that we’ve prudently derisked and reinvested in better value assets elsewhere.  

Once profits are realised, the next step is reinvesting. This could mean allocating to another asset class, depending on the portfolio's overall balance, or investing in undervalued companies. Opportunities often lie in overlooked or neglected stocks trading below their fair value. While buying into such companies can be challenging, it’s essential to remain focused on their underlying value rather than current market sentiment. Both buying and selling should follow a measured approach. Investing incrementally allows you to spread risk, especially when markets are high and corrections are more likely. Similarly, gradually selling ensures you benefit from further gains while locking in profits. This disciplined strategy prevents overreactions to short-term market movements, both up and down, and aligns with a fundamental long-term investment philosophy. 

Managing a portfolio is a dynamic process that requires balancing opportunities with prudence. Whether it's reallocating capital from overvalued stocks or identifying undervalued opportunities, the goal is always the same: to manage money in the most efficient and effective way possible. By staying disciplined—buying low and selling high—you can navigate the complexities of the market while maintaining a robust and resilient portfolio. 

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.

What Trump’s Victory Means for Investors

As the dust settles on Donald Trump’s election victory, investors globally are adjusting quickly as they look ahead to 2025 and beyond. Trump’s win is not just a political event, it is a significant adjustment for the investment landscape. While some sectors are poised to benefit, others will struggle with volatility and uncertainty.  

When Trump was first elected in 2016, much of his strategy revolved around prioritising an America-first foreign policy. This created significant shifts in global alliances, trade agreements, and even military positioning. With his return to power, investors need to understand how his emboldened “America First” approach will impact geopolitical stability and market sentiment. 

Trump has previously prioritised military strength, and his second term will see the US continuing to invest heavily in its military as they expand their military budget. This will be to the benefit of defense contractors such as Lockheed Martin. This increase in military budgets is not limited to the US though. Trump previously pressured other NATO countries to meet and increase their defense spending obligations. As geopolitical tensions across the world rise, many countries will be increasing their military spending.  

From a geopolitical perspective, Trump’s proposed use of tariffs is great news for US manufacturers but bad news for almost every other country. In the past, Trump used tariffs as leverage in trade negotiations. This time around, his intent is to protect US businesses and generate income. China is likely to feel the brunt of Trump’s policies which will directly impact Chinese companies exporting to the US. The auto industry is a good example where tariffs of 60% are designed to stop China from exporting cheap electric cars to assist a re-emergence of the US auto manufacturers.   

China’s economy has been struggling for the past few years under the weight of a collapse in the property market, an oversupply of infrastructure projects and the high debts related to these sectors. Additional economic headwinds for China, due to Trump imposed tariffs, won’t help the prospects for commodities, especially for materials. We remain underweight in our exposures to BHP and RIO as lower demand for iron ore continues to be problematic.  

Trump has consistently pushed for energy independence for the US. If he maintains or intensifies his support for domestic energy production, several US energy stocks such as Chevron will benefit. Energy is one of our highest conviction, long-term themes, and as such we remain bullish on domestic energy giants such as Woodside Petroleum and Santos. Additionally, coal stocks, amid global energy concerns, could continue their upward trend, particularly those with strong exports to the U.S. Further, instability in the Middle East, could send prices soaring at any point. Trump’s stance on environmental and social governance (ESG) may hurt companies prioritizing sustainability initiatives and clean energy. 

The financial sector, particularly banks and investment firms, will likely benefit from Trump’s policies. A more lenient regulatory environment in the U.S. has been favorable to banks, allowing them to take on more risk and increase profitability. For Australian investors, this could translate into more growth for companies like Macquarie Group, which is well-positioned in both domestic and international markets. If the Trump administration reduces regulatory hurdles for major banks, Australian financial institutions may find new opportunities in global markets, especially in the U.S. 

A less obvious flow-on effect is in relation to bonds and bond yields. Trump will be spending more than ever, and the US will borrow to do so. This will be trillions of dollars in additional debt. Counter-intuitively, we have seen bond yields move up since the Federal Reserve cut rates by 0.5% in September and since the election bond yields have jumped again. Some of this is related to the sheer volume of debt the US must raise going forward, new debt and refinancing maturing debt. It is basic supply and demand. When you have a lot of something to sell, you need to make the pricing more attractive to the buyers. US debt and deficit are an emerging theme to watch for 2025 and 2026. 

While investment markets have seen Trump’s pro-growth philosophy as great for business, the trillions in additional spending and the proposed tariffs are inflationary as they will cause prices in the US to rise. Inflation in the US is not solved yet and there is an assumption that it is no longer a problem. US inflation is much lower at 2.3% but core inflation is still uncomfortably high at 3.3%. So, with pressure on prices inflation may well be a reemerging concern in 2025. 

For those invested in US stocks, energy, and defense, Trump’s victory looks positive with the prospect of continued growth. On the other hand, those with heavy exposure to China, ESG-focused firms, or international trade could see more volatility.  Investors should be prepared for change and keep an eye on sectors most influenced by US policy shifts. However, perhaps the most important areas to watch in 2025 will be the impact of all this on the US national debt and inflation rate.  

General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.