Name: What's Driving Global Investment
Uploaded: 2025-05-21
Duration: 14 min 2 s

Emerging technologies and evolving market conditions make for an unpredictable investment climate, and that's before you add the possibility of a global trade war. How are global investment managers separating the signal from the noise and identifying areas of sustainable growth? What regions and sectors hold untapped potential? And how should investors be thinking about risk versus reward in this environment? Two prominent global wealth managers share their investment strategies for securing returns, in even tumultuous times.

What's Driving Global Investment

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furniture like where are we going to sit? Um thank you for joining us and you know I I love your job because in addition you have to be wise about money, but it's so much the psychology of money and where we put it and how we react to money, and we've been talking a lot about the investment climate. I'm curious what you're seeing from a just human behavior point of view because I'm perhaps projecting my own, you know, relationship, but it inspires a lot of fear, doesn't it? What are you seeing out there? Great to see you, by the way. Nice to see you too. Thank you. Uh, it's actually a very interesting question. We briefly chatted about it back there, but first and foremost, our job is to separate noise from signals. So if you're thinking about investments, how do you make sure that all the noise or the headlines, all that clutter doesn't actually distort one's view of what are the best investment recommendations we have to make? What we have noticed is people's interpretation of everything of this administration. Is driven by people's personal political biases. So for example, if somebody is very democratic, democratically inclined in terms of their politics in the US, they tend to think there's nothing that this administration is doing that is acceptable and they actually say we need to liquidate because we don't, uh, think things are gonna go so well. If you happen to be Republican, they say. Um, maybe he doesn't deliver the messages in the best way possible, but the points are all very valid, and that's what one has to focus on. You see the same thing regionally. So if people are, for example, based in Europe. Especially in the major countries in Germany, they find that some of the things the US president says are not appropriate or offensive, and they don't like the issue of being put under pressure to contribute to NATO defense expenses, even if the point the president is raising is legitimate and it's a point that pretty much every US president since John Kennedy in 1963 has raised. So John Kennedy has said that he actually did it in a worse way. He not only said that the rest of the world isn't paying their fair share. John Kennedy said that they are living off the fat of the land. So actually he was more colorful in how he described it, and yet nobody seemed to mind it then. But fast forward in 2024, President Trump says it and everybody has a different reaction, even though the point is actually pretty legitimate. And the most interesting experiences we have is when it's a husband and wife team. And the wife wants to sell all the assets, all the US equity, yes, exactly. So definitely human psychology and biases are very important. So I, I from that I'm deducing that emotions are perhaps running higher than usual. I mean, that's always the case, or is it unusual, the degree to which this is shaping investment strategy it sounds like. What's very unusual this time is if you look at something called the Economic Policy uncertainty index. It is higher. Now than it was during COVID and during the global financial crisis, which actually doesn't make any sense to think there's more uncertainty today than we had during COVID when we didn't know anything early on. We didn't know anything about the fatality ratio. We weren't sure about transmission. We weren't sure about incubation periods, and we certainly didn't have any vaccines or initially antivirals, and yet uncertainty today is so much greater. So we think that the emotional response is greater today. The markets though haven't quite responded as much because if you think of VIX, a volatility measure, it's not anywhere near as high as it was during the global financial crisis. Unpack the signal and the noise and for like, so tell us, where are you seeing the signals that we should pay attention to if we put our emotions aside. What are you looking at? We've had an investment theme of US preeminence for quite some time. So after the global financial crisis, many people may remember there was a theme that US is on the decline and China is on the rise, and we made a very strong statement that we didn't think that was the case. US is preeminent and it's really important we differentiate between the word exceptional. And the word preeminent, it might look, it might seem the same word. It might look like it means the same thing, but it doesn't exceptional has an absolute sense to it. Preeminence is relative, preeminent relative to other markets. So from an investment perspective, from an economic perspective, we say US is preeminent, and those factors. are not going to get affected by any one administration. For example, people may be surprised, but US is the most productive labor force in the world. It's both in terms of output per hour, so per hour of work it's the most productive, and then what you can look at is the number of hours worked. So across the world, Indians. Chinese, Koreans, and Taiwanese have more hours per year, but among developed economies, US is the highest and it's 5th. It's right after those 4. So you combine higher productivity per hour and there's more hours and you end up with the most productive labor force. Any one administration isn't going to affect that. You look at quality of corporate management. A professor called Nicholas Bloom at Stanford does this study very interesting on quality of corporate management. Corporate management in the US is ranked the highest relative to the rest of the world and within the US, the multinationals have a higher ranking. So is that gonna change that much based on who's president based on any one policy? And so the factors that drive US preeminence that prompt us to recommend clients be overweight US equities isn't getting affected. Now if people listen to the noise. They will think it's getting affected. Too much. We're overindexing on tariffs, trade wars, rhetoric. Is that what is it basically that the fundamental underlying conditions have not changed regardless of what happens in the geopolitical or trade landscape? Obviously geopolitics and what any administration does does move things at the margin, but it doesn't significantly change the underlying strength of the US economy. The earnings per share. The growth in the US is phenomenal. It's one of the highest in the world. If you actually look at earnings per share growth from the trough of the global financial crisis, US has outpaced every single country and every single region in the world. That's not going to change. So the underlying factors are correct, but will tariff wars introduce volatility? Yes. Has it introduced uncertainty? Yes. But on the other hand, for example, this administration is going to do more deregulation. At the margin, deregulation is good for corporate America. Deregulation across different sectors is good for America. So when you look at other factors, then you would say that there are actually some. Positive things coming out of this administration that people should think about as well. Let's talk. I want to talk about you. I want to talk about this region. How are you feeling about what's happening here as an investment thesis? I don't want to, I know you're not the person making, you know, all of these decisions, but when you're thinking about whether it's the Middle East, Saudi Arabia, as it shifted. In your from a preeminence point of view of where, where it's ranked relative to other investment opportunities. Well, we generally have a view that when people talk about emerging markets, they're really focusing on China and areas related to that, and our view is that when it comes to investing in emerging markets, especially China, people need to be incredibly careful. If you had $100 million.10 million dollars, whatever number you want to use, we like using $100 because it's easy percentages versus. Anything else and you invested it in the S&P 500, you'd have 1.2 billion as of the end of the year. If you'd invested in China, you'd have about 27%. So when we're thinking about preeminence, we're always thinking about it from an investment perspective, and these markets here are a little bit too small for us to get involved in. So when we think about emerging markets, it's really only the very large countries that have the size of the capital markets and the liquidity. And then generally our clients in this region have their own incredible businesses with amazing IRRs. So what when we talk to them about these investments, it wouldn't make sense for us to encourage them to invest in markets. They already have all their businesses here, so you are golden. Sacks, let me start. I'm going to ask about you, but let me start with what you hire for, whether it's, I don't know if it's changed, but you, I just read something about incredible ratio of applications to people hired. What actually attracts you to hiring somebody? That's an excellent question. And years and years ago, somebody said, don't always hire the most intelligent person, hire somebody who is intelligent enough, but has a great attitude. And that has actually always stayed with me. This was something maybe 2030 years ago. So obviously we need a base level of education, a base level of intelligence. Uh, but you need to have somebody who's incredibly enthusiastic, somebody who's passionate, and more than anything, somebody who's intellectually curious. So when we interview people, um, I look at the resume and I won't start with the standard questions. I'll look at about some of the less common things they've done and then we'll ask them what interested them, why did they get started, have they pursued their passions, and it's hard to actually be sure. That the person has all the qualities you want, so we spend a fair amount of time with candidates. We're known for interviewing people for rounds and rounds and rounds, and they sort of get tired and bored. Yeah, it's a war of attrition and of course in the age of AI we can all come in with beautiful resumes and backgrounds. So any advice on that front? Are you a fan? Can you spot AI? So our view has been, it's very interesting to ask this question. A couple of years ago when GBT 3.0 was just launched. Somebody asked it to summarize an outlook. Every year we produce an outlook for our clients, the economic and financial market outlook. And so this was early on a couple of years ago, and it summarized it and made a reference to what Goldman Sachs is so nothing about the report itself, but something about Goldman Sachs, and then it made a reference, interestingly enough being in the region to the United Arab Emirates and the United Kingdom. And I'm thinking to myself, I know for a fact we did not mention anything about UAE in the document. So I'm thinking what was it referring to? Where did it see this that it summarized that. And I realized it had gone to the footnotes, the regulatory footnotes that our compliance people insist we have, and it was United Arab Emirates, you and the next one was United Kingdom. One of my colleagues is here and she's laughing because she knows there's so much compliance. And so basically AI had picked up on a couple of headlines at each end of the report and missed all the key points. We actually have a summary in the report, key takeaways. Not one reference. I love that. Well, that is a warning signal to us all. So, so let me ask a question about you personally, not so much, your strengths. Is you are curious. How do you keep yourself informed and take the entire research department out of it? What, what do you find valuable in terms of being a good leader and because from an advice point of view? What advice do you have? Well, for one thing, as a leader, I think it's very important to set a good standard and be a good role model. Like you can't expect everybody else to work on our outlook during the holidays if I'm not working during the holidays. So I think that being a good role model on one's work ethic, on one's intellectual curiosity, so that everything anybody tells you. You ask the next question, so you don't just believe somebody who sent you a research report and take it actually examine it, question it, and it's incredible because even publications you think should be definitely checked and must be 100% accurate or actually not 100% accurate. It's must read fortune that we don't have that problem. So I think just making sure that one is very thorough, teaching your colleagues to be thorough, not to take anything for granted, and really being diligent and listening to a lot of people and reading a lot of diverse sources of opinion. I love that. And in the minute we have left, anything else on your radar you would put on ours, especially what's around the corner? What are you keeping an eye on? What we worry about and we highlighted in our outlook this year was what happens to this US-China relationship. It is the most important and we highlight three areas one obviously the trade wars, and we're seeing where that ends up. The second item would be the geopolitical risk. And the sort of long term as we think about that. And then the other would be the general cyber activity. I don't know how many people here know, but China is pretty active on the cyberspace and they've hacked into all the critical infrastructure in the US, which is a pretty aggressive. Move and so definitely one of the things we worry about is how this will evolve over time. So even if President Trump and President Xi come to some agreement on what the tariffs should be, there is a bigger long term issue that actually we worry about. Stay curious and try to take emotion out of it. Thank you very much. I've really enjoyed this conversation. Please join me in thanking.