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00:00CAPITAL MARKETS HEAD OF AUSTRALIA -- WHAT IS YOUR OUTLOOK FOR EARNINGS SEASON IN THE LIGHT OF ALL OF THESE MACRO PRESSURES? > > IT SEEMS LIKE WE WILL SEE A SITUATION LIKE LAST EARNINGS SEASON WHERE THE MACRO REALLY OVERRULED ANYTHING WITH CORPORATE EARNINGS. WE ARE GOING INTO A SITUATION WHERE WE HAVE THE CORONAVIRUS AND UNCERTAINTY AROUND THAT WHICH WILL BE PROBLEMATIC. AND THE POTENTIAL IMPACT FROM GDP OF THE BUSHFIRES. PAUL: WE GOT TO START SOMEWHERE. THERE ARE SO MANY PRESSURES TO TALK ABOUT. IT WILL BE A REALLY ROUGH RIDE FOR FINANCIALS. HALF $1 BILLION, 2800 CLAIMS. WHAT IMPACT WILL THAT HAVE? KAREN: IT WILL BE NEGATIVE FOR EARNINGS. WILL BE PROBLEMATIC IS THE FY 20 GUIDANCE. THERE WAS UNCERTAINTY AND WITH THE IMPACT OF THE BUSHFIRES IN CORONA VIRUS IS THE UNCERTAINTY IT CREATES FOR THE MARKETS. WHEN YOU LOOK AT A MARKET USED TO FAIRLY ROUTINE VALUATION, -- TAYLOR: WE ARE TRYING TO AVOID EARNINGS RECESSION IN THE U.S., WHICH IS CATEGORIZED BY TWO NEGATIVE QUARTERS OF YOUR ON YOUR NEGATIVE GROWTH. -- YEAR ON YOUR NEGATIVE GROWTH. ARE YOU LOOKING AT 24? KAREN: WE ARE GOING TO THE FIRST HALF OF 20 RESULTS IN FEBRUARY. WE ARE LOOKING FOR EARNINGS TO BE MUTED. WE ARE SEEING A SITUATION WHERE EARNINGS ARE MARGINALLY UP ON LAST YEAR. THERE IS NO EXCITING EARNINGS STORY TO BE HAD IN AUSTRALIA THIS REPORTING SEASON. TAYLOR: WE WERE TALKING ABOUT HEIGHTENED VALUATIONS COMING IN ON EARNINGS SEASON. IT MEANS THERE IS NO ROOM FOR ERROR. EVEN IF YOU ARE MEDIOCRE, IT IS NOT GOOD ENOUGH TO JUSTIFY THE HEIGHTENED VALUATIONS. MOVING INTO VALUATION IN AUSTRALIA. KAREN: WE ARE SITTING IN THAT PROBLEM WHERE WE SEE A MARKET TRADING AT PEAK. IT IS 11 YEAR BULL RUN ESPECIALLY OF THE MARKET IS AT A HIGH LEVEL WEALTH RECORDS WE HAVEN ' T SEEN EVER -- WITH RECORDS WE HAVE NOT SEEN EVER. A LOT OF THE COMPANIES ARE SO HIGH, YOU HAVE TO DELIVER EARNINGS NOT JUST IN LINE WITH EXPECTATIONS BUT MAKE POSITIVE OUTLOOK STATEMENTS ABOUT THE NEXT SIX MONTHS TO MAINTAIN. PAUL: LET ' S TALK ABOUT THOSE STATEMENTS. GUIDANCE CAN ' T BE VERY GOOD. KAREN: IT IS TRICKY FOR CEO ' S TO GIVE ANY REAL CLARITY AROUND GUIDANCE. A LOT OF IT WILL BE SECTOR SPECIFIC WITH THE CONSUMER SPACE, THE CHINESE DEMAND STORY. IF YOU ARE IN THAT ENVIRONMENT, YOU WOULD BE LOATH TO -- PAUL: WE GOT THE ASX ABOVE 7000 POINTS AT THE MOMENT AND YOUR TARGET IS ABOUT THAT. BUT IN THIS ENVIRONMENT, COULD THAT BE OPTIMISTIC? KAREN: THE PROBLEM WE HAVE IS BESIDE THE NEAR TERM NEGATIVE USE -- NEGATIVE NEWS, WHICH IS FULL OF UNCERTAINTY IS OF THE BUSHFIRES, THE EQUITY MARKETS RETAIN KEY APPEAL BECAUSE THE RATES ARE SO LOW OUTSIDE OF THAT. YOU HAVE ' S OFFSET. IF WE CAN GET THROUGH THIS UNCERTAINTY, YOU COULD SEE THE YEAR END POSITIVELY. TAYLOR: YOU STILL LIKE THE TECH SECTOR. KAREN: YOU SEE TOTAL ADDRESSABLE MARKETS ARE STILL LARGE. VALUATIONS CONTINUE TO BE RISKY, BUT THEY ARE GETTING INCREDIBLE GROWTH. THE OTHER INDUSTRIALS COMPANIES, THE GROWTH NUMBERS ARE HUGE. SOME OF THEM HAVE YET TO MAKE A PROFIT. THE ONES THAT ARE, IT SEEMS LIKE ZERO FOR INSTANCE, FANTASTIC GROWTH OPPORTUNITIES. THERE IS A SHIFT IN THE WAY PEOPLE ARE DOING BUSINESS AND TAKING ADVANTAGE TO THE SHIFT TO THE CLOUDS FOR ACCOUNTING. IT HAS ENDLESS GROWTH AT THE MOMENT. THAT IS WHY WE PREFER THIS OVER THE OLD-SCHOOL FX. TAYLOR: WE ARE FACING THE IOWA CAUCUSES AND LATER ON GET TO THE POLITICAL ELECTIONS IN NOVEMBER. HOW DOES THIS AFFECT EQUITIES? KAREN: THIS YEAR THE CYCLE WILL BE A KEY INDEPENDENT OF WHY THE AUSTRALIAN MARKET HAS A GOOD YEAR. WE ARE AWARE TRUMP SEES THE S & P 500 AS HIS KEY MARKET FOR HOW HE IS GOING. I THINK WE END UP DOING OK BECAUSE IT WILL PROVIDE A DEGREE OF PROTECTION IN THE FIRST HALF OF THIS YEAR. PAUL: GOING TO TALK ABOUT THE RBA HAVING ITS FIRST MEETING OF 2020 TOMORROW, THE FEELING FOR A DOVISH HOLD. IS THE RBA GOING TO BE A BIG PLAYER IN TERMS OF WHERE EQUITIES GO? KAREN: I THINK YOU COULD START TALKING ABOUT MEASURES LIKE QE, AND WE HAVE PUSHED BACK OUR FIRST RATE MOVE, BECAUSE THE RECENT LABOR DATA HAS BEEN QUITE STRONG. THE RBA IS ALWAYS IMPORTANT. PAUL: YOU CAN WATCH US LIVE AND

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Australian Technology Stocks Favored, RBC Capital Says

Karen Jorritsma, head of Australian equities at RBC Capital Markets, talks about earnings and stocks. She speaks with Paul Allen and Taylor Riggs on "Bloomberg Markets." (Source: Bloomberg)

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