Christopher
Johnson:
Welcome
to
Morningstar.
Today
I’m
joined
in
the
studio
by
Nicolo
Bragazza,
the
Associate
Portfolio
Manager
at
Morningstar
Investment
Management.
Nicolo,
thank
you
so
much
for
being
here
with
me.
My
first
question
to
you
is,
what
has
led
the
market
sell
off?
Nicolo
Bragazza:
So,
I
think
we
are
really
talking
about
the
drama
in
three
acts
here
because
it
started
first
with
the
Bank
of
Japan,
hiking
rates
unexpectedly.
Then
the
second
step
was
the
Fed
being
a
little
bit
more
dovish
than
what
the
market
expected.
And
then
the
week
ended
with
a
very
disappointing
job
report.
And
so,
these
three
things
together
caused
the
market
sell
off
that
we
saw
because
of
the
moves
on
the
Japanese
yen.
First,
the
unwinding
of
the
carry
trades
and
therefore
the
impact
of
debt
on
tech
stocks
and
stocks
with
high
valuations
more
generally.
CJ:
And
on
tech
stocks,
could
you
argue
that
maybe
the
tech
and
AI
bubble
has
finally
burst?
NB:
First
of
all,
it’s
difficult
to
say
whether
there
is
a
bubble
or
not
in
AI
stocks
and
this
is
because
differently
from
the
past,
for
example,
the
dotcom
bubble,
these
companies
do
generate
revenues
and
earnings,
differently
from
the
previous
examples
of
a
tech
bubble.
But
definitely
we
can
say
that
valuations
are
very
rich
at
the
moment
and
therefore
these
companies
are
very
exposed
to
market
sentiment
as
we
have
seen
over
the
last
couple
of
weeks.
CJ:
And
what
sector
opportunities
are
you
seeing
in
the
near
to
long
time
because
of
the
sell-off?
NB:
Yes,
so
at
the
moment
in
our
multi-asset
funds,
we
are
generally
positioned
with
a
longer
duration
than
usual,
especially
in
the
most
conservative
portfolios
we
have
been
for
a
while.
We
have
had
a
position,
a
dedicated
position
to
the
Japanese
yen
as
well
because
we
thought
that
the
valuation,
the
exchange
rate
of
the
currency
was
not
reflecting
anymore,
the
actual
fundamentals
of
it.
And
also
we
have
been
having,
and
this
is
for
some
time,
an
underweight
to
tech
stocks,
especially
because
of
the
very
high
valuations
that
we
find
there.
We
prefer
instead
of
tech
stocks,
communication
services
as
a
sector
in
the
U.S.
We
think
that
those
companies
have
more
attractive
valuations
with
similar
growth
opportunities
ahead.
And
also
we
like
the
defensive
stocks
more
generally
and
especially
utilities
that
have
been
rallying
in
the
last
couple
of
weeks
because
of
the
reduction,
the
decreasing
interest
rates
that
we’ve
seen
across
the
board.
CJ:
And
I
just
wanted
to
also
ask
you
about
UK
equity.
So,
it
appears
that
they
weren’t
hit
as
hard
as
in
comparison
to
maybe
other
global
markets.
So,
what
was
going
on
there
as
well?
NB:
Yeah,
it’s
always
difficult
to
draw
conclusion
about
the
UK
market
because
it’s
a
collection
of
big
global
companies,
so
companies
generating
revenues
abroad
that
are
in
this
index
and
come
from
very
different
sectors.
Generally,
we
can
say
that
the
UK
market
has
a
strong
exposure
as
a
whole
to
health
care
and
consumer
staples.
And
those
sectors
tend
to
do
pretty
well
when
there
is
an
equity
recession
led
sell
off
in
equities
or
where
there
is
a
change
in
sentiment
across
the
markets.
CJ:
And
after
the
sell
off,
what
do
you
think
the
Federal
Reserve
will
do
next?
They’ve
been
almost
backed
into
a
corner.
NB:
Yes,
so
the
Federal
Reserve
has
been
delivering
a
more
dovish
message
at
the
last
meeting.
We
think
that
generally
the
Fed
will
probably
cut
in
September.
But
I
don’t
think
that
a
cut
in
September
is
a
radical
change.
If
they
had
cut
in
today,
it
wouldn’t
make
a
huge
difference,
honestly.
I
think
it’s
just
a
matter
of
waiting
for
it
and
it
will
happen
sooner
or
later.
CJ:
Is
there
anything
else
you’d
like
to
tell
me
that
I
haven’t
covered
in
the
interview?
NB:
So,
I
think
the
most
important
thing
is
to
focus
on
the
long
term.
We
are
valuation
driven
investors
and
we
focus
on
the
long
term.
So,
when
we
see
moves
in
the
market
of
such
magnitude,
it’s
important
to
think
whether
something
has
changed,
first
of
all,
from
a
fundamental
perspective.
And
if
not,
maybe
it
can
be
an
interesting
entry
point
because
of
better
valuations
compared
to
the
previous
phase
in
the
market.
CJ:
Nicolo,
thank
you
so
much
for
being
here
with
me.
NB:
Thank
you
Chris
for
inviting
me.
CJ:
This
is
Christopher
Johnson
from
Morningstar
UK.
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