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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner.

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Speaker 2: The American economy expanded faster than initially estimated in the

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Speaker 2: second quarter, a three point three percent annualized rate. Now

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Speaker 2: that reflects a pickup in business investment as well as

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Speaker 2: an outside boost from trade, and this news helped us

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Speaker 2: send the US equity market to record highs. However, those

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Speaker 2: gains were to some extent held in check by caution

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Speaker 2: in front of some key inflation data. We'll get the

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Speaker 2: July PCE Friday morning. Core PCE is expected to rise

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Speaker 2: at a two point nine percent rate, that would be

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Speaker 2: the fastest in five months. And in a moment we'll

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Speaker 2: get some perspective from the Asia Pacific. We'll hear from

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Speaker 2: Raj Singh, multi asset portfolio manager at Principal Asset Management.

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Speaker 2: But we begin here in the States, where late Thursday

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Speaker 2: we heard from Fed Governor Chris Waller. He supports cutting

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Speaker 2: interest rates by a quarter point next month, with more

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Speaker 2: reductions likely over the next six months. Even so, Waller

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Speaker 2: does think a half point cut next month isn't necessary.

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Speaker 2: He spoke earlier at a conference hosted by the Economic

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Speaker 2: Club of Miami.

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Speaker 3: I felt this way in July, and all the evidence

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Speaker 3: since then has led me to feel more strongly.

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Speaker 4: About it today.

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Speaker 3: Based on what I know today, I would support a

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Speaker 3: twenty five basis point cut at the committee's meeting on

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Speaker 3: September sixteenth and seventeenth.

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Speaker 2: That is FED Governor Chris Waller. There By the way,

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Speaker 2: he is seen as a potential successor to FED shair

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Speaker 2: Jay Powell. Joining us now for a closer look at

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Speaker 2: the FED story is Alonzo Munos. He is chief investment

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Speaker 2: officer at Hamilton Capital Partners. The firm is based in Atlanta. Today,

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Speaker 2: Alonzo joins us from here in New York City. Thanks

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Speaker 2: for making time to chat with me. I want to

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Speaker 2: begin with the comments that we're hearing this evening in

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Speaker 2: Miami from FED Governor Chris Waller. He seems to be

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Speaker 2: diffusing the need for a larger cut, but he's not

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Speaker 2: excluding the possibility of a fifty basis point move should

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Speaker 2: the payrolls data come in on the week side. Does

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Speaker 2: that seem to make sense to.

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Speaker 4: You, Well, dug it, eating you know, he really does

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Speaker 4: have to thread a needle, and it's a tug of

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Speaker 4: war for him. The FED is in a really difficult

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Speaker 4: position because we're getting a mixed bag on economic data,

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Speaker 4: and we're going into a really really important meeting here

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Speaker 4: in the next couple of week SPED meeting, where the

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Speaker 4: market expects a rate cut. So I think that he's

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Speaker 4: sort of pushing the envelope a little bit. And as

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Speaker 4: you know, we get PC tomorrow, which is a big

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Speaker 4: data point for the FED, and we're going to have

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Speaker 4: to see how this plays out going into the next

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Speaker 4: FED meeting. I think that you know, he's on the

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Speaker 4: right track.

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Speaker 2: Well, the inflation story, I think is key. It's interesting

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Speaker 2: that you mentioned that the PCEE data yes tomorrow morning

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Speaker 2: for July. After the bell today, we had warnings from

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Speaker 2: both Catapillar and GAP. Kind of interesting, a big industrial

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Speaker 2: powerhouse and a major retailer both talking about the headwinds

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Speaker 2: from so this could filter through to the consumer, whether

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Speaker 2: it's on the business end or on the retail side

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Speaker 2: in the near term, which, as you're kind of addressing,

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Speaker 2: could complicate the picture for the FED.

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Speaker 4: Well, I think there's even more complication, Doug. As you know,

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Speaker 4: the deminimous exemption runs out tonight and so consumers potentially

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Speaker 4: are looking at higher prices for all types of goods,

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Speaker 4: and companies are struggling on how to address this tariff

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Speaker 4: disruption issue, and it's something that we're going to continue

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Speaker 4: to watch very closely. On the other hand, though, Doug,

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Speaker 4: when you look at corporate earnings, things still look pretty good.

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Speaker 4: We got a good GDP data, Personal consumption was up.

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Speaker 4: We'll see how personal incoming personal spending comes in tomorrow.

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Speaker 4: But that's what makes this market so difficult, and that's

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Speaker 4: why I refer to this some of war, if you will,

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Speaker 4: where we're getting a mixed bag on economic data. The

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Speaker 4: consumer is still strong, but businesses are saying we have

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Speaker 4: to eventually pass these costs to consumers, potentially raising inflation.

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Speaker 4: Putting the FED and fetch them and pal in a

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Speaker 4: corner as they go this sext meeting.

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Speaker 2: Speaking of the next meeting, we've got this cloud hanging

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Speaker 2: over it with the firing, the attempt at firing of

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Speaker 2: FED Governor Lisa Cook. She filed a lawsuit today. Her

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Speaker 2: lawyer is basically saying that the claims that she allegedly

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Speaker 2: lied on mortgage applications really have to do with an

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Speaker 2: unattentional clerical error, and the lawsuit does call this firing

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Speaker 2: an illegal attempt by the president. He's using a phony

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Speaker 2: pretext that doesn't amount to sufficient cause to remove her.

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Speaker 2: Do you have a sense of how this is going

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Speaker 2: to play out? I know you're not a lawyer, but

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Speaker 2: until we get some resolution, perhaps from the Supreme Court,

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Speaker 2: this is going to be an issue for the market,

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Speaker 2: will it not?

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Speaker 4: Well, it's exactly how you how you framed it. It's

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Speaker 4: a dark cloud over the FED, specifically as they go

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Speaker 4: into their next FED meeting. What we saw from the

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Speaker 4: fixed income markets was not a lot of not a

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Speaker 4: lot of fireworks. We didn't see big moves on the

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Speaker 4: back end of the yield card of anything. We saw

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Speaker 4: a little bit of a reprieve today and it has

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Speaker 4: shruged this off. It's another Trump administration moved to apply

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Speaker 4: pressure from fall angles against a FED that has been

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Speaker 4: unwilling to cut against his recommendations, and so something that's

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Speaker 4: going to continue to hummer over and be very uncomfortable

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Speaker 4: for the FED as we go to the FED making.

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Speaker 2: A lot of talk this week about the artificial intelligence trade.

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Speaker 2: We had the earnings from in Nvidia this week, a

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Speaker 2: forecast that basically indicates a little bit of deceleration in growth.

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Speaker 2: And then today after the bell, Dell Technology has boosted

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Speaker 2: its annual outlook. This company is seeing strong demand for

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Speaker 2: AI servers. I'm curious about how you feel about the

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Speaker 2: AI trade right now.

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Speaker 4: Well, with the market, Doug, it all time highs. It

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Speaker 4: just makes you wonder how much this musket can power higher,

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Speaker 4: specifically on AI enthusiasm. But when we dig through the numbers,

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Speaker 4: it's remarkable. I know you spoke about Dell, but in

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Speaker 4: Nvidia data center revenue was just absolutely astonishing and it's

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Speaker 4: something that's continuing to power this market. As we look

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Speaker 4: back into the last couple of weeks and months, earnings

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Speaker 4: from the Mac seven continue to highlight and really strong catbacks,

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Speaker 4: and it's something that can continue to power this AI enthusiasm,

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Speaker 4: this AI trade forward into the back half of this

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Speaker 4: year and it's something that we're excited about. But again,

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Speaker 4: there's a little bit of caution as we go into

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Speaker 4: the back half of this year that some of these

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Speaker 4: names local little bit overextended.

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Speaker 2: So are you expecting them maybe a pullback in the

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Speaker 2: next quarter.

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Speaker 4: Well, Doug, I don't see why we would. In September

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Speaker 4: is usually, at least over the last ten years, from

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Speaker 4: a seasonality standpoint, not a great month for financial market,

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Speaker 4: specifically US equities, and so we would have some pause

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Speaker 4: and maybe keep a little bit of cash and draw

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Speaker 4: powder on the sidelines to take advantage of the STIPs.

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Speaker 4: But over the long term, we're still very optimistic about

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Speaker 4: the AI trade and some of these names that are

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Speaker 4: driving and leaders in the space.

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Speaker 2: Interesting development today from the European Union they're going to

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Speaker 2: follow through with a demand from President Trump. They have

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Speaker 2: adopted draft regulations to remove all terror on US industrial goods.

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Speaker 3: Now.

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Speaker 2: The block is also going to give some preferential treatment

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Speaker 2: to a few US agricultural and seafood products, and in exchange,

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Speaker 2: the European Commission is saying this is going to pave

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Speaker 2: the way for the US to lower tariffs on European

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Speaker 2: cars and auto parts to fifteen percent. I think that

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Speaker 2: current tariff right is around twenty seven and a half percent.

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Speaker 2: How are you feeling about the tariff story right now?

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Speaker 2: Do you think that the market is becoming a little

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Speaker 2: bit more comfortable or is there still so much uncertainty

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Speaker 2: in regard to how this is going to play out

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Speaker 2: that you just want to maybe be a little bit

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Speaker 2: more cautious.

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Speaker 4: Well, the market has become a little bit callous, if

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Speaker 4: you will, to some of these tariff moves in terraf negotiations.

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Speaker 4: We all remember April when we were scrambling to sort

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Speaker 4: of predict what was going to happen next. But again

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Speaker 4: we're not seeing huge, as you know that huge reactions

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Speaker 4: to either these tariff announcements. Whether the present is being

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Speaker 4: more aggress saver for nations are are they thank some

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Speaker 4: of the heat away from tariff. So something that we're

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Speaker 4: going to continue to watch, but again we're cautious going

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Speaker 4: into the accounts. We're keeping a little bit cash on

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Speaker 4: the sidelines and seeing how this smunket slave that going

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Speaker 4: into the back of the year.

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Speaker 2: Alonso, I'm curious as to whether you're finding opportunities outside

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Speaker 2: of the US right now. Is that a focus for

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Speaker 2: you offshore markets?

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Speaker 4: What we are right now with all the tariff disruptions

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Speaker 4: and really keeping up with this administration, We're trying to

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Speaker 4: keep our dry powder focused on dips in the US markets,

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Speaker 4: but we are looking at Europe, and we are looking

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Speaker 4: at Asia and maybe India is an interesting market. But

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Speaker 4: right now we're concentrated here in the US.

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Speaker 2: Alonzo will leave it there, Thank you so very much.

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Speaker 2: Alonzo Munos He is the chief investment officer at Hamilton

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Speaker 2: Capital Partners. The firm is based in Atlanta. Alonso joining

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Speaker 2: us today from here in New York City on the

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Speaker 2: Daybreak Asia podcast. Come back to the Daybreak Asia podcast

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Speaker 2: time Derek Prisner. So, as mentioned, all eyes will be

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Speaker 2: on the PCE report here in the States Friday morning.

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Speaker 2: For more, we heard from Raj Saying, multi asset portfolio

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Speaker 2: manager at Principal Asset Management. Raj spoke earlier with Bloomberg

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Speaker 2: TV hosts Cherry On and April Honng on the Asia trade.

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Speaker 5: So, Raj, we did see really solid performance on Wall

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Speaker 5: Street in terms of stocks. Are you looking ahead to

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Speaker 5: the inflation data that's coming out later as something that

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Speaker 5: could potentially derail this?

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Speaker 6: Yeah, First of all, on Good Morning, I would say

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Speaker 6: that the inflation data, the today's PCIe reports, definitely we

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Speaker 6: are not looking for big surprises because we know from

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Speaker 6: the PPI and CPI that how it's going to look like.

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Speaker 6: So in terms of what it means like for the

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Speaker 6: Fed policy, I think the September base cases twenty five

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Speaker 6: basis point cut. It's fully priced in into the market.

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Speaker 6: So what will be more for an innovur opinion is

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Speaker 6: how the next Friday is labor market report looks like,

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Speaker 6: and what will be the CPI reading for the August number,

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Speaker 6: whether we see further signs of tariff inflation creeping into

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Speaker 6: that that number. So that's what we'll be watching for.

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Speaker 6: Any big downside surprises on the payroll sides specially can

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Speaker 6: boost the case for a jumbo cut. Otherwise, I think

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Speaker 6: twenty five basis point is is the base case. However,

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Speaker 6: what markets will be looking for will be basically beyond

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Speaker 6: this September meeting, how the FED policy path folds out.

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Speaker 6: People are looking for one d and twenty five basis

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Speaker 6: point of cut in one ear so whether the time

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Speaker 6: period really holds up is the big cushion, and the

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Speaker 6: second beyond that, I would say the policy aspect. Market

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Speaker 6: is really paying a lot of attention to the fat

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Speaker 6: independence aspects, and any erosion of the fat independence can.

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Speaker 4: Spook the market.

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Speaker 7: I was just about to ask you how might the

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Speaker 7: threat to FED independence, or the perceived threat actually play

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Speaker 7: out in markets towards the end of the year and

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Speaker 7: going into next year and might there muddy the waters.

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Speaker 4: Yeah, so I would say it's a twoache.

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Speaker 6: So definitely, as the composition of the fact keeps changing

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Speaker 6: and the tilt goes towards the dowish side of the things,

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Speaker 6: it will be good for the risk assets. So in general,

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Speaker 6: I would say the risk assets are still looking in

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Speaker 6: a pretty good, pretty good spot here despite some of

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Speaker 6: the I would say fragility sewing up in the economic data,

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Speaker 6: especially on the labor side, But where it can have

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Speaker 6: bigger impact will be definitely on the bond side, and

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Speaker 6: that's where right now the action is happening. The US

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Speaker 6: curve is steepening, but bear in mind the cove is

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Speaker 6: steepening everywhere, so definitely it's a factor. Market is also

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Speaker 6: hooked up, But in a long term I'm not sure

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Speaker 6: how much impact it's going to have on the FED

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Speaker 6: policy because ultimately the FED is going to driven by

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Speaker 6: the data, which is labor and inflation, and that's going

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Speaker 6: to drive the policy action to large extent. And despite

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Speaker 6: all the noise we see in the markets, it's highly

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Speaker 6: underappreciated that when you look at the developed market curve,

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Speaker 6: US thirty year is still on a relative basis is

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Speaker 6: the best performing curve out there in the developed market.

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Speaker 6: The German booms are up like thirty close to a

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Speaker 6: sixty basis point, your jgb's thirty year up close to

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Speaker 6: ninety basis point. In fact, we have seen that movement

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Speaker 6: in China as well, So it's a global phenomenon, that

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Speaker 6: cheepening of the curve, but definitely, like like erosion of

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Speaker 6: the faith in the FED policy can have longer term replications,

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Speaker 6: and we'll see how that plays out in the market,

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Speaker 6: but it would be mainly a bond market story at

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Speaker 6: the beginning.

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Speaker 1: We're in China's a story of tech because we do

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Speaker 1: have Ali Baba of course results out today as well.

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Speaker 1: What are we expecting in terms of some opportunities that

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Speaker 1: we could see in that market.

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Speaker 6: Yeah, so China is a very interesting market, and I

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Speaker 6: would say we have been highlighting it for some time.

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Speaker 6: What you see in China is basically that there are

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Speaker 6: a lot of household savings, So the households are sitting

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Speaker 6: close to let's say nineteen twenty three in US dollar,

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Speaker 6: not kind of like the deposits of the So the

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Speaker 6: household savings are in excess in China, especially after COVID

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Speaker 6: that savings have built up. At the same time, the

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Speaker 6: policy makers are definitely trying to guide that long term

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Speaker 6: institutional capital into the market. And the reason for that

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Speaker 6: is that it can act as a catalyst for the

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Speaker 6: economy because of the wealth effect. So in China, I

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Speaker 6: think you may keep seeing this bifocation between the fundamentals

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Speaker 6: and and and the market where the market keep may

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Speaker 6: keep driven by the liquidity aspect because the deposit based

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Speaker 6: that access savings are quite huge, the bond deals are

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Speaker 6: roll low, so that rotation from aquities into equities from

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Speaker 6: fixed income will will be there. And and I think

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Speaker 6: the opportunities lie structurally in the high divisend stocks and

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Speaker 6: in some of these tech stocks, so that bible of

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Speaker 6: tech and high dividends still makes sense to us. And uh,

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Speaker 6: and we have to see what happens to this price

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Speaker 6: war on the on the over capacity side, we see

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Speaker 6: and and market will be definitely UH like passing through

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Speaker 6: the earnings of some of these tech giants, like how

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Speaker 6: that competition is looking like and what it means for

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Speaker 6: the deflation story at the macro site. And the second

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Speaker 6: for the corporate earning story. And I would say that

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Speaker 6: the earning so far are a little bit underwhelming and

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Speaker 6: uh and some of the market thing is market rally

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Speaker 6: is driven by the valuation aspects, because it's it's a

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Speaker 6: liquid driven rally. But I think tech and dividend stock

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Speaker 6: share definitely with their story in China.

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Speaker 1: And just before we let you go, credit spreads grinding

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Speaker 1: lower across the world. Where are you seeing the opportunities?

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Speaker 6: Yeah, I think the credit spreads are quite tight globally,

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Speaker 6: and the credit spreads credit curves are quite flat, so

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Speaker 6: I think we still like the carry so definitely at

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Speaker 6: the short end of the curve we are shifting more

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Speaker 6: from the credit side, and at the longer end of

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Speaker 6: the curve we are switching the duration to more to

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Speaker 6: the treasury duration. Preparing for some of them, maybe we

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Speaker 6: say like the air pocket, which we may see given

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Speaker 6: the uncertainty in the macro data we are expecting on

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Speaker 6: the back of these uh uh, these tariffs and other

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Speaker 6: policies we are seeing from the US administration, and also

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Speaker 6: some of the front loading which has played out so far.

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Speaker 6: Probably it will give back in next thirty six months.

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Speaker 2: That's Raj saying, multi asset portfolio manager at Principal Asset Management,

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Speaker 2: speaking earlier with Bloomberg TV host chair and April Hong

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Speaker 2: here on the Daybreak Asia podcast. Thanks for listening to

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Speaker 2: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 2: we look at the story shaping markets, finance, and geopolitics

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Speaker 2: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 2: Join us again tomorrow for insight on the market moves

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Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Chrisner,

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Speaker 2: and this is Bloomberg