1
00:00:02,520 --> 00:00:07,040
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:10,640 --> 00:00:13,640
Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner.

3
00:00:14,000 --> 00:00:16,680
Speaker 2: Markets in the Asia Pacific are on the back foot

4
00:00:16,720 --> 00:00:19,239
Speaker 2: a bit today. This is after a selloff among big

5
00:00:19,280 --> 00:00:22,200
Speaker 2: cap tech stocks in the US. Shares in in Nvidia,

6
00:00:22,239 --> 00:00:25,280
Speaker 2: We're down three and a half percent in the Tuesday session.

7
00:00:25,560 --> 00:00:27,960
Speaker 2: The chip maker will be reporting earnings next week. And

8
00:00:28,080 --> 00:00:30,080
Speaker 2: in a moment we'll get the view on markets from

9
00:00:30,160 --> 00:00:34,200
Speaker 2: Gene Goldman. He is the CIO at Setera Financial Group.

10
00:00:34,280 --> 00:00:37,800
Speaker 2: But we begin this morning in the Lion city of Singapore.

11
00:00:37,920 --> 00:00:41,000
Speaker 2: Joining us now is Ritesh ganary Wall. He is head

12
00:00:41,040 --> 00:00:44,320
Speaker 2: of Investment and Advisory at Seifhe Retesh, thank you so

13
00:00:44,400 --> 00:00:46,680
Speaker 2: much for making time to chat with me. Let's begin

14
00:00:46,720 --> 00:00:48,920
Speaker 2: with a global macro right now. There are so many

15
00:00:48,960 --> 00:00:53,920
Speaker 2: forces at work. Inflation seems to be stubborn in many jurisdictions.

16
00:00:54,280 --> 00:00:57,880
Speaker 2: Equity markets are at or very near all time highs

17
00:00:57,880 --> 00:01:01,240
Speaker 2: in many cases. Certainly that's true in the US and

18
00:01:01,400 --> 00:01:05,080
Speaker 2: in Japan as well. And there's concern about weaker growth

19
00:01:05,160 --> 00:01:08,839
Speaker 2: going forward. How do you see the overall landscape these days?

20
00:01:09,480 --> 00:01:13,760
Speaker 3: Absolutely? I think you know Number one, you've seen you know,

21
00:01:13,840 --> 00:01:17,520
Speaker 3: growth concerns start to trickle in much more prominently over

22
00:01:17,560 --> 00:01:20,160
Speaker 3: the last few weeks, especially if you look at the

23
00:01:20,200 --> 00:01:24,840
Speaker 3: unemployment data. I do believe the central banks are underestimating

24
00:01:24,959 --> 00:01:28,280
Speaker 3: the labor force weakness. We have seen below trend jobs

25
00:01:28,319 --> 00:01:30,280
Speaker 3: data over the last three months now with you know,

26
00:01:30,360 --> 00:01:33,400
Speaker 3: May and June data kind of like revised down into

27
00:01:33,480 --> 00:01:36,880
Speaker 3: the tens of thousands, right, and even the labor force

28
00:01:36,920 --> 00:01:40,679
Speaker 3: participation is down to sixty two percent. You know, combine

29
00:01:40,720 --> 00:01:43,440
Speaker 3: that with the fact that if you need full employment,

30
00:01:43,480 --> 00:01:46,440
Speaker 3: you need at least eighty thousand you know, jobs created.

31
00:01:46,880 --> 00:01:50,280
Speaker 3: If there is any further downward revisions and downsides to

32
00:01:50,440 --> 00:01:53,440
Speaker 3: this jobs data, that can have a pretty meaningful effect

33
00:01:53,560 --> 00:01:55,760
Speaker 3: on the unemployment rate. And that's part of the reason

34
00:01:55,800 --> 00:01:58,280
Speaker 3: why you've seen kind of like a reversal from July

35
00:01:58,400 --> 00:02:00,640
Speaker 3: to August in terms of you know, the spectations of

36
00:02:00,680 --> 00:02:04,720
Speaker 3: a FED cut coming in in September. So so you know,

37
00:02:04,840 --> 00:02:08,160
Speaker 3: now there's almost like an eighty five percent plus you know,

38
00:02:08,240 --> 00:02:11,480
Speaker 3: probability that the FED will start cutting, you know, from

39
00:02:11,840 --> 00:02:15,560
Speaker 3: September onwards, Like we'll obviously hear from Jackson Hole, but

40
00:02:16,160 --> 00:02:19,080
Speaker 3: essentially we are now you know, starting you know with

41
00:02:19,120 --> 00:02:21,280
Speaker 3: the FED pivot in September. This is one of the

42
00:02:21,280 --> 00:02:23,800
Speaker 3: calls that we had, you know, made as part of

43
00:02:23,800 --> 00:02:26,480
Speaker 3: our H two outlook as well. And while I guess,

44
00:02:26,480 --> 00:02:28,800
Speaker 3: like you know, on inflation, if you you know, just

45
00:02:28,960 --> 00:02:32,680
Speaker 3: read the latest data. While the PPI was hot, the

46
00:02:32,680 --> 00:02:36,399
Speaker 3: headline inflation is still you know, manageable and soft overall

47
00:02:36,480 --> 00:02:41,400
Speaker 3: and absorbing all kind of like tariff related aspects as well.

48
00:02:41,880 --> 00:02:43,680
Speaker 2: When I listen to you, you don't seem to be

49
00:02:43,720 --> 00:02:46,919
Speaker 2: too concerned that inflation could prove to be a little stubborn.

50
00:02:46,960 --> 00:02:49,120
Speaker 2: Here you reference the hot PPI that we had in

51
00:02:49,160 --> 00:02:52,399
Speaker 2: the States recently. Let's remember too that Japan has been

52
00:02:52,960 --> 00:02:57,200
Speaker 2: in a inflationary environment a well above target for some time.

53
00:02:57,320 --> 00:03:00,000
Speaker 2: I think the exception is probably the story in China,

54
00:03:00,160 --> 00:03:02,720
Speaker 2: wouldn't you agree? But I'm wondering whether or not there

55
00:03:02,960 --> 00:03:06,480
Speaker 2: is a risk that inflation could prove to be a

56
00:03:06,520 --> 00:03:07,200
Speaker 2: little sticky.

57
00:03:07,840 --> 00:03:11,440
Speaker 3: See I think fair enough, and yes, it could prove

58
00:03:11,480 --> 00:03:15,080
Speaker 3: to be sticky. But when you think about on the balance,

59
00:03:15,120 --> 00:03:17,280
Speaker 3: when there are two forces in play with respect to

60
00:03:17,440 --> 00:03:22,320
Speaker 3: employment and inflation, the FED cannot, you know, ignore the

61
00:03:22,360 --> 00:03:25,679
Speaker 3: fact that the labor market is showing clear signs of weakness,

62
00:03:25,960 --> 00:03:28,600
Speaker 3: so that will start dominating you know, conversations as we

63
00:03:28,600 --> 00:03:32,520
Speaker 3: move forward. And part of the inflation obviously is tariff related,

64
00:03:32,600 --> 00:03:35,000
Speaker 3: which could be temporary to begin with, and as you

65
00:03:35,040 --> 00:03:36,920
Speaker 3: can see, it is reflecting more on the good side

66
00:03:37,000 --> 00:03:40,680
Speaker 3: rather than the services side. So again, while you know,

67
00:03:41,320 --> 00:03:45,360
Speaker 3: the next couple of months could be tricky in terms

68
00:03:45,400 --> 00:03:48,520
Speaker 3: of really a certaining are we on a disinflationary path

69
00:03:48,680 --> 00:03:51,800
Speaker 3: still or you know, the inflation you know, picks up

70
00:03:51,840 --> 00:03:54,680
Speaker 3: a bit, But overall, I think between the two forces,

71
00:03:54,720 --> 00:03:58,320
Speaker 3: if labor market weakness continues to hold, that's what is

72
00:03:58,360 --> 00:04:00,800
Speaker 3: going to dominate what going to happen with the FED.

73
00:04:00,920 --> 00:04:04,200
Speaker 2: I'm curious about opportunities that you're seeing, particularly in the

74
00:04:04,200 --> 00:04:06,800
Speaker 2: Asia Pacific. We can talk first about Japan. We know

75
00:04:06,840 --> 00:04:08,920
Speaker 2: the ni K is not far away from an all

76
00:04:08,920 --> 00:04:11,840
Speaker 2: time high. What is driving this? Do you think?

77
00:04:12,600 --> 00:04:15,640
Speaker 3: Well? Number one, I think the biggest macro stories this

78
00:04:15,720 --> 00:04:19,080
Speaker 3: year has been the depreciation of the US dollar, and

79
00:04:19,200 --> 00:04:21,200
Speaker 3: what that tells you is that the US is no

80
00:04:21,320 --> 00:04:25,279
Speaker 3: longer the only game in town after years of US dominance. Actually,

81
00:04:25,320 --> 00:04:28,279
Speaker 3: non US equities have outperformed in the first half of

82
00:04:28,320 --> 00:04:31,440
Speaker 3: the year, and led by you know, China, led by

83
00:04:32,320 --> 00:04:37,240
Speaker 3: you know, developed x US countries as well, and almost

84
00:04:37,240 --> 00:04:40,240
Speaker 3: fifty percent plus of that was driven by the US

85
00:04:40,320 --> 00:04:44,080
Speaker 3: dollar depreciation. So the bar for you to invest into

86
00:04:44,120 --> 00:04:47,240
Speaker 3: the US becomes much higher in terms of, you know,

87
00:04:47,279 --> 00:04:49,600
Speaker 3: the returns that you're expecting in the first half as

88
00:04:49,640 --> 00:04:53,040
Speaker 3: a Singapore dollar investor s and p up six percent,

89
00:04:53,120 --> 00:04:56,080
Speaker 3: but US dollar depreciated by more than six percent, so

90
00:04:56,120 --> 00:04:58,520
Speaker 3: your net net zero versus if you are a more

91
00:04:58,560 --> 00:05:02,120
Speaker 3: globally diversified investor, you would be much better off at

92
00:05:02,120 --> 00:05:05,280
Speaker 3: So if we have seen clients on the margin putting

93
00:05:05,320 --> 00:05:08,599
Speaker 3: new money into the Asia, Pacific and emerging markets region,

94
00:05:08,680 --> 00:05:12,120
Speaker 3: these countries tend to do well when there is a

95
00:05:12,160 --> 00:05:16,200
Speaker 3: dollar weakness happening, and this can continue. After this brief

96
00:05:16,240 --> 00:05:19,159
Speaker 3: pause in July, you're seeing the dollar weakness starting to

97
00:05:19,240 --> 00:05:22,599
Speaker 3: kick off again. And what that means is, you know,

98
00:05:22,640 --> 00:05:26,599
Speaker 3: if you look at whether it is the Japanese market,

99
00:05:26,640 --> 00:05:30,840
Speaker 3: the Chinese market, or the global broader em market, these

100
00:05:30,839 --> 00:05:32,279
Speaker 3: are markets that stand to benefit.

101
00:05:32,640 --> 00:05:35,240
Speaker 2: So you mentioned the Chinese market. On Tuesday, we have

102
00:05:35,320 --> 00:05:38,760
Speaker 2: the Shanghai composite closing at the highest level in about

103
00:05:38,760 --> 00:05:41,880
Speaker 2: a decade. And I'm curious about this story because we

104
00:05:41,920 --> 00:05:44,120
Speaker 2: know there seems to be a bit of a disconnect

105
00:05:44,120 --> 00:05:47,000
Speaker 2: between what happens in the equity market in China and

106
00:05:47,360 --> 00:05:49,720
Speaker 2: how well the economy is performing. Do you have a

107
00:05:49,760 --> 00:05:52,880
Speaker 2: sense of what is driving the price action in China

108
00:05:53,000 --> 00:05:54,760
Speaker 2: right now for the mainland markets.

109
00:05:55,520 --> 00:05:59,600
Speaker 3: Yeah. Absolutely. Look, I think overall, while there are structural

110
00:05:59,680 --> 00:06:04,520
Speaker 3: challenges in the Chinese economy, the reality is we are

111
00:06:04,640 --> 00:06:07,760
Speaker 3: seeing a China that is moving from you know, this

112
00:06:07,880 --> 00:06:11,279
Speaker 3: old economy to a new economy. And the old economy,

113
00:06:11,279 --> 00:06:15,719
Speaker 3: which was more manufacturing and export lead, is transitioning to

114
00:06:15,880 --> 00:06:19,520
Speaker 3: a more consumption driven economy. And what that means is

115
00:06:19,720 --> 00:06:23,760
Speaker 3: if you know there is signs of domestic demand coming in,

116
00:06:24,000 --> 00:06:27,400
Speaker 3: targeted stimulus measures, et cetera, and all, then countries like

117
00:06:27,480 --> 00:06:30,560
Speaker 3: China can do really well. And if you look at

118
00:06:30,839 --> 00:06:35,400
Speaker 3: opportunities within China and the new China sectors that are interesting,

119
00:06:35,760 --> 00:06:39,599
Speaker 3: it comes down to your renewables, your electric vehicles, your

120
00:06:39,640 --> 00:06:42,200
Speaker 3: you know, the AI story is panning out much more

121
00:06:42,279 --> 00:06:45,560
Speaker 3: strongly in China. If you think about the aging population, healthcare,

122
00:06:46,320 --> 00:06:49,000
Speaker 3: and the consumption from the internet e commerce side, and

123
00:06:49,040 --> 00:06:53,680
Speaker 3: all these aspects and sectors within China are the reasons

124
00:06:53,760 --> 00:06:56,360
Speaker 3: why you can expect a much superior risk return profile

125
00:06:57,320 --> 00:06:58,120
Speaker 3: from these parts.

126
00:06:58,520 --> 00:07:00,720
Speaker 2: I think the export economy and China has been one

127
00:07:00,760 --> 00:07:03,960
Speaker 2: of the bright spots. You mentioned the domestic demand story

128
00:07:04,000 --> 00:07:06,880
Speaker 2: that seems to be a little dubious right now, and

129
00:07:06,920 --> 00:07:09,479
Speaker 2: I'm wondering whether you're expecting that the government is going

130
00:07:09,560 --> 00:07:11,600
Speaker 2: to have to do more in terms of stimulus here

131
00:07:11,640 --> 00:07:13,640
Speaker 2: to really kick things into the next gear.

132
00:07:14,560 --> 00:07:18,800
Speaker 3: Absolutely, Look, I think that is a much needed expectation,

133
00:07:18,920 --> 00:07:21,920
Speaker 3: and there have been, you know, some measures to that regard,

134
00:07:22,320 --> 00:07:24,520
Speaker 3: but obviously there is a lot of investment that is

135
00:07:24,560 --> 00:07:28,320
Speaker 3: currently going on within within China to reposition themselves. And

136
00:07:28,400 --> 00:07:30,840
Speaker 3: I agree with you that, you know, the exports have

137
00:07:30,960 --> 00:07:34,840
Speaker 3: been the bright spot from a Chinese perspective, but this

138
00:07:35,000 --> 00:07:37,960
Speaker 3: is also an area where it can continue to be volatile,

139
00:07:38,000 --> 00:07:39,840
Speaker 3: and we will know as we move forward how things

140
00:07:39,920 --> 00:07:42,040
Speaker 3: pan out from a tariff you know, standpoint, et cetera.

141
00:07:42,160 --> 00:07:45,280
Speaker 3: But overall, I do see, you know, things thawing down,

142
00:07:45,320 --> 00:07:48,280
Speaker 3: which in a way is great because you're now not

143
00:07:48,520 --> 00:07:51,320
Speaker 3: just benefiting from that exports sort of kicking in and

144
00:07:51,480 --> 00:07:54,720
Speaker 3: you know, backup, but also you know, the domestic aspects

145
00:07:54,760 --> 00:07:55,760
Speaker 3: becoming much much better.

146
00:07:55,920 --> 00:07:59,240
Speaker 2: Do you believe that India has the potential to challenge

147
00:07:59,440 --> 00:08:01,960
Speaker 2: the Chinese export economy in a major way.

148
00:08:03,440 --> 00:08:07,480
Speaker 3: See, I think again, compared to China, actually, India is

149
00:08:07,520 --> 00:08:13,160
Speaker 3: already a very domestic consumption story. So overall, right now,

150
00:08:13,160 --> 00:08:16,680
Speaker 3: if you think about the relative positioning between India and China,

151
00:08:17,640 --> 00:08:20,480
Speaker 3: there was a shift from China to a more you know,

152
00:08:20,560 --> 00:08:24,600
Speaker 3: India lead export based proposition, and especially like you know,

153
00:08:24,600 --> 00:08:27,360
Speaker 3: if you look at Apple et cetera, they have moved

154
00:08:27,400 --> 00:08:32,040
Speaker 3: their factories into India and you know, trying to manufacture

155
00:08:32,080 --> 00:08:35,679
Speaker 3: iPhone et cetera from there. But again there is a

156
00:08:35,720 --> 00:08:38,480
Speaker 3: lot of uncertainty. India has been slapped with twenty five

157
00:08:38,480 --> 00:08:41,520
Speaker 3: percent tariffs relative to China, which can be slightly lower

158
00:08:41,720 --> 00:08:43,720
Speaker 3: at this juncture, and then there is an additional twenty

159
00:08:43,720 --> 00:08:48,199
Speaker 3: five percent for you know, them buying Russian oil. I

160
00:08:48,480 --> 00:08:50,960
Speaker 3: do believe some of these will be you know, sorted

161
00:08:51,040 --> 00:08:53,840
Speaker 3: as we move forward, especially on the geopolitics front. I

162
00:08:53,960 --> 00:08:58,400
Speaker 3: see you know, things becoming much better and that in

163
00:08:58,440 --> 00:09:02,840
Speaker 3: a way benefiting India over time. But overall, I would

164
00:09:02,840 --> 00:09:06,520
Speaker 3: say that, yes, the export side right now is more

165
00:09:06,559 --> 00:09:10,640
Speaker 3: of a concern on India given the tariff overhang, But

166
00:09:10,720 --> 00:09:13,880
Speaker 3: the domestic consumption story is what I think will position

167
00:09:14,000 --> 00:09:16,480
Speaker 3: India for the greater good if you think about it

168
00:09:17,120 --> 00:09:19,640
Speaker 3: from a five to ten year kind of like horizon.

169
00:09:20,000 --> 00:09:22,000
Speaker 2: Rtesh, We'll leave it there. Thank you so very much.

170
00:09:22,080 --> 00:09:25,880
Speaker 2: Rutesh Canary Wall is head of Investment and Advisory at

171
00:09:25,880 --> 00:09:29,120
Speaker 2: the firm Siphe joining us here from Singapore on the

172
00:09:29,160 --> 00:09:40,800
Speaker 2: Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.

173
00:09:40,800 --> 00:09:44,280
Speaker 2: I'm Doug Chrisner. So, as mentioned, markets are bracing for

174
00:09:44,400 --> 00:09:47,520
Speaker 2: Friday speech from Fed Shair J. Powell at the Jackson

175
00:09:47,559 --> 00:09:50,560
Speaker 2: Hole Symposium. Today, we had yields edging lower across the

176
00:09:50,640 --> 00:09:53,560
Speaker 2: curve as the market seemed to add on Betts for

177
00:09:53,720 --> 00:09:56,280
Speaker 2: a September rate cut the ten You're lost about three

178
00:09:56,280 --> 00:09:58,520
Speaker 2: basis points in New York trading. We were last quoted

179
00:09:58,520 --> 00:10:01,480
Speaker 2: at around four point three zero zero percent. Joining me

180
00:10:01,520 --> 00:10:04,480
Speaker 2: now is Gene Goldman. He is the chief investment officer

181
00:10:04,559 --> 00:10:07,080
Speaker 2: at Satara Financial Group, and I'm pleased to say that

182
00:10:07,160 --> 00:10:09,760
Speaker 2: Gene is here in our New York studio. Thank you

183
00:10:09,800 --> 00:10:12,800
Speaker 2: for stopping by. Are you still constructive on this market

184
00:10:12,880 --> 00:10:15,440
Speaker 2: right now? We were talking before we began to go

185
00:10:15,480 --> 00:10:17,760
Speaker 2: to air here about the fact that things seem to

186
00:10:17,760 --> 00:10:19,800
Speaker 2: be priced a little bit for perfection.

187
00:10:20,200 --> 00:10:23,000
Speaker 1: Yeah, and I totally agree. So I do think everything

188
00:10:23,040 --> 00:10:25,200
Speaker 1: is priced for perfection. But I think what we've been

189
00:10:25,200 --> 00:10:28,319
Speaker 1: telling our Satara advisors is simply this expect a five

190
00:10:28,400 --> 00:10:30,600
Speaker 1: or ten percent pullback. And you can point to three things.

191
00:10:30,720 --> 00:10:34,240
Speaker 1: As you've mentioned, high valuations, uncertainty around earnings, and a

192
00:10:34,280 --> 00:10:37,120
Speaker 1: third point, this is just confusion amongst the FED. If

193
00:10:37,120 --> 00:10:40,200
Speaker 1: you think about evaluations, S and P five hundred has

194
00:10:40,280 --> 00:10:42,640
Speaker 1: rallied twenty eight percent off of its market low fasts

195
00:10:42,679 --> 00:10:45,320
Speaker 1: in fifty years, and at the same time, market breath

196
00:10:45,320 --> 00:10:47,640
Speaker 1: has been terrible. And at the same time, price earnings

197
00:10:47,720 --> 00:10:50,080
Speaker 1: ratio is about twenty two and a half times forward earnings.

198
00:10:50,400 --> 00:10:54,000
Speaker 1: Earnings are uncertain. Earnings have been great, they're uncertain going forward.

199
00:10:54,160 --> 00:10:57,320
Speaker 1: High inflation, slow economic growth. And what really bugs me

200
00:10:57,360 --> 00:10:58,720
Speaker 1: the most is that if you look at the FED

201
00:10:58,840 --> 00:11:02,600
Speaker 1: survey of CFOs, hundreds of CFOs are asked, thirty percent

202
00:11:02,679 --> 00:11:05,400
Speaker 1: said we are going to eat the tariff costs and

203
00:11:05,440 --> 00:11:07,720
Speaker 1: that's going to impact profit margins. That's pressure on near

204
00:11:07,800 --> 00:11:09,800
Speaker 1: term earnings. And then the last point the FED, the

205
00:11:09,840 --> 00:11:12,080
Speaker 1: FED is just confused. They are in a tough predicament.

206
00:11:12,200 --> 00:11:15,640
Speaker 1: I know you allude to Jacksonville earlier. Jay Powell, he's

207
00:11:15,640 --> 00:11:16,880
Speaker 1: not going to be a dove, he's not going to

208
00:11:16,960 --> 00:11:18,600
Speaker 1: be hawk. He's going to be a very wise out

209
00:11:18,640 --> 00:11:21,160
Speaker 1: and he's going to say we are very data focused.

210
00:11:21,240 --> 00:11:23,120
Speaker 1: And if I'm Jay Powell, I'm in a tough situation

211
00:11:23,160 --> 00:11:26,959
Speaker 1: because I'm concerned about rising goods inflation, rising services inflation,

212
00:11:27,240 --> 00:11:29,440
Speaker 1: and the fact that, yes, the labor market's slowing down,

213
00:11:29,679 --> 00:11:31,360
Speaker 1: but average Olley earnings rose.

214
00:11:31,679 --> 00:11:33,559
Speaker 2: So if you've got weaker growth and that's part of

215
00:11:33,600 --> 00:11:36,600
Speaker 2: the story and stubborn inflation, while at the same time,

216
00:11:36,640 --> 00:11:38,640
Speaker 2: you have a White House that's going to be putting

217
00:11:38,679 --> 00:11:41,720
Speaker 2: pressure on the FED to cut interest rates. Not just

218
00:11:41,760 --> 00:11:44,559
Speaker 2: in September, they want to see multiple rate cuts. What

219
00:11:44,640 --> 00:11:47,200
Speaker 2: kind of dilemma does that set up for the Fed

220
00:11:47,280 --> 00:11:50,600
Speaker 2: when you're kind of easing into a cycle where yeah,

221
00:11:50,679 --> 00:11:53,360
Speaker 2: growth may be slowing, but inflation is stubborn.

222
00:11:53,640 --> 00:11:55,440
Speaker 1: It's a terrible dilemma. I mean, go back to the

223
00:11:55,640 --> 00:11:58,520
Speaker 1: dual mandate. The dual mandate says, obviously everyone has jobs

224
00:11:58,559 --> 00:12:01,760
Speaker 1: and keep inflation in check. The Duelman the labor market

225
00:12:01,800 --> 00:12:03,559
Speaker 1: is slowing down, Is it really that bad?

226
00:12:03,679 --> 00:12:03,839
Speaker 3: Though?

227
00:12:04,080 --> 00:12:06,760
Speaker 1: Four point two percent unemployment rate two hundred and twenty

228
00:12:06,760 --> 00:12:09,760
Speaker 1: thousand jobless claims each week. That's about four percent unemployment

229
00:12:09,800 --> 00:12:13,120
Speaker 1: and average alley earnings, as I mentioned, higher than expected,

230
00:12:13,360 --> 00:12:15,640
Speaker 1: and we have more jobs out there than people looking

231
00:12:15,640 --> 00:12:17,800
Speaker 1: for jobs the labor markets. Okay, this gives Effet some

232
00:12:17,880 --> 00:12:20,240
Speaker 1: time to say, let's wait and watch and then the

233
00:12:20,280 --> 00:12:22,559
Speaker 1: inflation story. Yes, I'm worried about that. That's a big story.

234
00:12:22,640 --> 00:12:24,360
Speaker 2: So you believe that the market maybe is a little

235
00:12:24,440 --> 00:12:26,040
Speaker 2: too optimistic about rate cuts.

236
00:12:26,120 --> 00:12:27,920
Speaker 1: Yes, right now the market's saying two or three cuts.

237
00:12:28,000 --> 00:12:30,480
Speaker 1: I'm on the one to two cuts, and I'm just

238
00:12:30,559 --> 00:12:32,280
Speaker 1: being nice. I think could be closer to the one.

239
00:12:32,440 --> 00:12:34,960
Speaker 2: Where are you finding opportunity these days if everything is

240
00:12:35,000 --> 00:12:35,800
Speaker 2: so expensive?

241
00:12:36,120 --> 00:12:39,040
Speaker 1: Yes, so right now we're trying to be more focused

242
00:12:39,040 --> 00:12:41,760
Speaker 1: on the conservative side. We do think socks will pull back,

243
00:12:41,920 --> 00:12:44,840
Speaker 1: so with that in mind, a little bit biased towards conservativism.

244
00:12:45,000 --> 00:12:47,240
Speaker 1: So we like small caps. I know small caps are

245
00:12:47,360 --> 00:12:49,880
Speaker 1: very high, high bata to the market, but with the

246
00:12:49,880 --> 00:12:53,040
Speaker 1: PE ratio eight times forward earnings earnings next year around

247
00:12:53,080 --> 00:12:56,640
Speaker 1: twenty one times, increasing twenty one times, and mark when

248
00:12:56,640 --> 00:12:58,959
Speaker 1: the Fed cuts rates, market breath tends to widen. So

249
00:12:59,040 --> 00:13:02,079
Speaker 1: small caps, MidCap we like value. We like value for

250
00:13:02,120 --> 00:13:04,760
Speaker 1: a while and we like within value financials, industrial.

251
00:13:04,840 --> 00:13:06,760
Speaker 2: But isn't there a big risk to go back to

252
00:13:06,800 --> 00:13:09,560
Speaker 2: the small cap story if the economy begins to slow.

253
00:13:10,200 --> 00:13:12,439
Speaker 1: Yes, but it's not. We don't see a recession anytime

254
00:13:12,480 --> 00:13:15,800
Speaker 1: soon because the economy is stable enough. Yes, things are

255
00:13:15,800 --> 00:13:18,280
Speaker 1: slowing down. Yes, housing is slowing. Yes, the employment picture

256
00:13:18,320 --> 00:13:20,839
Speaker 1: is slowing down a bit, but we're not in dire needs.

257
00:13:20,960 --> 00:13:24,000
Speaker 1: Productivity is still pretty strong. I'll beat a pulled back

258
00:13:24,040 --> 00:13:24,320
Speaker 1: a bit.

259
00:13:24,640 --> 00:13:27,360
Speaker 2: Let's talk a little bit about the artificial intelligence trade.

260
00:13:27,360 --> 00:13:30,520
Speaker 2: We get Nvidia earnings next week. Today the stock pulled

261
00:13:30,559 --> 00:13:33,880
Speaker 2: back about three and a half percent. Talked about rich valuations,

262
00:13:33,920 --> 00:13:38,560
Speaker 2: particularly in certain pockets of tech, megacap tech. Especially where

263
00:13:38,559 --> 00:13:41,360
Speaker 2: do you find yourself in terms of the AI trade?

264
00:13:41,400 --> 00:13:44,000
Speaker 2: Are you inclined to kind of stay on the sidelines

265
00:13:44,120 --> 00:13:46,720
Speaker 2: right now given the valuation story, or is it just

266
00:13:47,000 --> 00:13:49,199
Speaker 2: simply too compelling that you have to be in there

267
00:13:49,360 --> 00:13:50,160
Speaker 2: and participate.

268
00:13:50,559 --> 00:13:52,240
Speaker 1: Well, first of all, let's take a broad picture. We

269
00:13:52,360 --> 00:13:55,559
Speaker 1: believe AI is the future. AI is like electricity eighteen nineties.

270
00:13:55,559 --> 00:13:58,120
Speaker 1: It's going to be so big, So it's an important

271
00:13:58,120 --> 00:14:01,200
Speaker 1: aspect of our society go or basis. But just like

272
00:14:01,240 --> 00:14:03,199
Speaker 1: the tech bubble back in the late nineties. You have

273
00:14:03,240 --> 00:14:06,319
Speaker 1: to look at an investment with valuations, fundamentals and technicals.

274
00:14:06,320 --> 00:14:10,480
Speaker 1: Throughout technicals, valuations are not that super high right now

275
00:14:10,600 --> 00:14:13,200
Speaker 1: for AI, So for US, we are being very selective

276
00:14:13,200 --> 00:14:15,959
Speaker 1: in technology. So we like some AI companies. We do

277
00:14:16,200 --> 00:14:19,000
Speaker 1: like some services companies. We do like software. We do

278
00:14:19,080 --> 00:14:24,280
Speaker 1: like crypto cryptos, excuse me, cybersecurity. But in the AI plate,

279
00:14:24,360 --> 00:14:28,200
Speaker 1: we look at areas next along the continuum, not just semiconductions,

280
00:14:28,240 --> 00:14:31,760
Speaker 1: but looking at applications, looking at the next level where

281
00:14:31,800 --> 00:14:34,960
Speaker 1: AI is going, applications, quantum computing, things like that. We

282
00:14:35,000 --> 00:14:35,840
Speaker 1: think we much better.

283
00:14:36,000 --> 00:14:39,200
Speaker 2: So broadly speaking, today we saw maybe some rotation out

284
00:14:39,200 --> 00:14:43,120
Speaker 2: of tech and into some of the undervalued, underloved names,

285
00:14:43,200 --> 00:14:47,240
Speaker 2: particularly where the American consumer kind of intersects the market.

286
00:14:47,320 --> 00:14:50,880
Speaker 2: Would you be inclined to lean into the consumer at

287
00:14:50,880 --> 00:14:53,560
Speaker 2: this point, particularly when you look at a name like

288
00:14:53,600 --> 00:14:56,880
Speaker 2: home Depot that was up by more than three percent today.

289
00:14:56,760 --> 00:14:58,280
Speaker 1: We would pause in the consumer a little bit. We

290
00:14:58,360 --> 00:15:01,040
Speaker 1: do think the consumer, Yes, average hour again a rising

291
00:15:01,040 --> 00:15:04,400
Speaker 1: above inflation, but let's pause in the consumer. Yes, the

292
00:15:04,400 --> 00:15:06,840
Speaker 1: consumer is doing okay on the upper end, but the

293
00:15:06,840 --> 00:15:10,360
Speaker 1: lower ends are really, really struggling, and I think that

294
00:15:10,840 --> 00:15:12,640
Speaker 1: sneeze we saw today in the last few days in

295
00:15:12,720 --> 00:15:15,400
Speaker 1: terms of AI that reminds me of deep seek back

296
00:15:15,440 --> 00:15:17,760
Speaker 1: earlier this year. That's sort of oh my god. You know,

297
00:15:17,840 --> 00:15:21,360
Speaker 1: we have a very concentrated, very focused marketing right now.

298
00:15:21,600 --> 00:15:23,200
Speaker 1: Top ten names in the S and P five hundred

299
00:15:23,200 --> 00:15:26,200
Speaker 1: are about thirty seven percent of the index. That says

300
00:15:26,200 --> 00:15:30,200
Speaker 1: that any sneeze, any misstep, any uncertainty rising has a

301
00:15:30,320 --> 00:15:32,320
Speaker 1: detrimental effect to the index, and we saw it today.

302
00:15:32,480 --> 00:15:35,080
Speaker 1: We saw the rotation away from momentum names again the

303
00:15:35,120 --> 00:15:38,960
Speaker 1: AI names into low volatility, low momentum names, and I

304
00:15:38,960 --> 00:15:40,840
Speaker 1: think that's going to continue as the markets start to

305
00:15:40,840 --> 00:15:41,640
Speaker 1: reprice themselves.

306
00:15:41,680 --> 00:15:43,880
Speaker 2: So you mentioned the housing market. A moment ago after

307
00:15:43,920 --> 00:15:47,000
Speaker 2: the bell, we heard from the luxury home builder Toll Brothers.

308
00:15:47,520 --> 00:15:51,360
Speaker 2: The company missed street expectations. It seems like there are

309
00:15:51,400 --> 00:15:55,480
Speaker 2: issues around affordability, maybe a little bit of economic uncertainty

310
00:15:55,520 --> 00:15:58,880
Speaker 2: holding back buyers too. Maybe even the interest rate story

311
00:15:59,040 --> 00:16:01,080
Speaker 2: is a part of the narrative here. How do you

312
00:16:01,120 --> 00:16:03,320
Speaker 2: feel about a company like told Brothers.

313
00:16:03,400 --> 00:16:05,400
Speaker 1: Talk for me to comment about companies, but let's just

314
00:16:05,400 --> 00:16:08,120
Speaker 1: say home billers in general, the home building area is

315
00:16:08,160 --> 00:16:10,960
Speaker 1: struggling right now. You see inventory is rising, you see

316
00:16:11,120 --> 00:16:14,520
Speaker 1: prices are coming down, and you saw today building permits

317
00:16:14,600 --> 00:16:17,640
Speaker 1: came in lower than expected. But keep in mind, building

318
00:16:17,640 --> 00:16:19,680
Speaker 1: permits are still well above where they were back in

319
00:16:19,680 --> 00:16:22,600
Speaker 1: the twenty tens, so we're not too concerned. Plus, you've

320
00:16:22,600 --> 00:16:24,520
Speaker 1: seen a huge run up in some of these names,

321
00:16:24,640 --> 00:16:26,960
Speaker 1: so we've watched carefully in terms of whole millers.

322
00:16:27,720 --> 00:16:30,560
Speaker 2: Are you looking at opportunities offshore? We're talking a lot

323
00:16:30,600 --> 00:16:33,040
Speaker 2: about the dynamics that we are seeing here in the US,

324
00:16:33,080 --> 00:16:35,200
Speaker 2: but I'm curious as to what you're finding in areas

325
00:16:35,360 --> 00:16:36,880
Speaker 2: maybe Asia or Europe.

326
00:16:36,960 --> 00:16:39,760
Speaker 1: Sure, in our portfolios today, we are neutral to slightly

327
00:16:39,840 --> 00:16:42,280
Speaker 1: underway international if you look at the benchmarks, and benchmarks

328
00:16:42,320 --> 00:16:44,880
Speaker 1: are about sixty five percent US thirty five percent and

329
00:16:44,920 --> 00:16:47,400
Speaker 1: give or take international, so we're a little bit less

330
00:16:47,400 --> 00:16:49,680
Speaker 1: than that. We actually are looking to reduce some of

331
00:16:49,680 --> 00:16:52,320
Speaker 1: our international exposure pretty soon because we do think the

332
00:16:52,320 --> 00:16:54,520
Speaker 1: dollar is going to reverse. We do think there's going

333
00:16:54,600 --> 00:16:56,920
Speaker 1: to be upward pressure on the dollar. Most of the

334
00:16:56,960 --> 00:17:00,240
Speaker 1: returns internationally have been driven by the weaker dollar. That's

335
00:17:00,240 --> 00:17:03,080
Speaker 1: going to reverse pretty fast, pretty quickly, and with that

336
00:17:03,120 --> 00:17:05,040
Speaker 1: in mind, we want to be more US focused.

337
00:17:05,280 --> 00:17:07,920
Speaker 2: So is part of the dollar strength story that you're

338
00:17:08,119 --> 00:17:10,399
Speaker 2: expecting tied to the fact that maybe the FED is

339
00:17:10,400 --> 00:17:13,199
Speaker 2: going to be more in a box and unable to

340
00:17:14,080 --> 00:17:17,040
Speaker 2: easily kind of accommodate the market in terms of rate cuts.

341
00:17:17,119 --> 00:17:19,280
Speaker 1: Yes, part of it, and the whole fact that other

342
00:17:19,280 --> 00:17:21,760
Speaker 1: countries will be cutting rates faster than the US. Economic

343
00:17:21,760 --> 00:17:25,320
Speaker 1: growth is faster here than other countries, and the demise

344
00:17:25,400 --> 00:17:28,800
Speaker 1: of the US economy that's been so overexaggerated. We think

345
00:17:28,840 --> 00:17:31,880
Speaker 1: that's over exaggerated. US economy, while it will slow down,

346
00:17:31,880 --> 00:17:34,600
Speaker 1: will not slow down as fast as other countries, nor

347
00:17:34,680 --> 00:17:36,000
Speaker 1: will it struggle as much.

348
00:17:36,119 --> 00:17:38,320
Speaker 2: So if you're expecting a pullback in the near term,

349
00:17:38,359 --> 00:17:40,400
Speaker 2: I'm curious as to where you're hiding out. You talked

350
00:17:40,440 --> 00:17:42,440
Speaker 2: a little bit about value, but I'm looking at the

351
00:17:42,600 --> 00:17:45,040
Speaker 2: fixed income space and wondering if you're playing the bond

352
00:17:45,080 --> 00:17:45,920
Speaker 2: market a little bit.

353
00:17:46,040 --> 00:17:48,480
Speaker 1: Yeah, And first, we're not market timers, so we're big

354
00:17:48,520 --> 00:17:51,080
Speaker 1: believers in diversification. And keep in mind, over the last

355
00:17:51,119 --> 00:17:53,080
Speaker 1: forty five years, the average entry year loss in the

356
00:17:53,080 --> 00:17:57,000
Speaker 1: stock market is negative fourteen point one percent. Pullbacks are normal.

357
00:17:57,160 --> 00:17:59,639
Speaker 1: We prefer to be diversified as opposed to market timers.

358
00:18:00,040 --> 00:18:04,280
Speaker 1: On the domestic equity side, we're overweight liquid alternatives, so

359
00:18:04,280 --> 00:18:06,280
Speaker 1: socks and zig when the rest of the market is zagging.

360
00:18:06,480 --> 00:18:09,720
Speaker 1: On the fixed income side, we have a benchmark duration,

361
00:18:10,040 --> 00:18:12,399
Speaker 1: but we've been slowly moving money more towards the longer

362
00:18:12,440 --> 00:18:14,479
Speaker 1: and in order to raise our duration because we do

363
00:18:14,560 --> 00:18:16,760
Speaker 1: believe let's say the FED makes a mistake and the

364
00:18:16,760 --> 00:18:19,600
Speaker 1: FED cuts rates, has to cut rates more than expected

365
00:18:19,640 --> 00:18:21,800
Speaker 1: because they're close to a policy or that's going to

366
00:18:21,800 --> 00:18:23,000
Speaker 1: benefit the duration stample.

367
00:18:23,040 --> 00:18:25,800
Speaker 2: Even if you feel that there is risk that inflation

368
00:18:25,880 --> 00:18:27,480
Speaker 2: is stubborn, you're going to play the long end.

369
00:18:27,600 --> 00:18:29,480
Speaker 1: We will play a long end because we do believe

370
00:18:29,480 --> 00:18:32,440
Speaker 1: the FED near term inflation will be a little bit stubborn.

371
00:18:32,680 --> 00:18:35,000
Speaker 1: But then there comes a point where the FED likely

372
00:18:35,040 --> 00:18:37,400
Speaker 1: makes a mistake. You know, eight of the last nine

373
00:18:37,880 --> 00:18:40,040
Speaker 1: rate cycles the FED has made a mistake. We think

374
00:18:40,119 --> 00:18:42,680
Speaker 1: that likely happens again because they're stuck in the quandary

375
00:18:42,760 --> 00:18:44,680
Speaker 1: right now. So we do believe the FED could come

376
00:18:44,720 --> 00:18:48,160
Speaker 1: in have to play ketchup putting downward pressure on rates later.

377
00:18:48,480 --> 00:18:50,440
Speaker 2: Jane, believe it there. Thank you so very much, Always

378
00:18:50,440 --> 00:18:53,000
Speaker 2: a pleasure. Jean Goldman is the chief investment officer at

379
00:18:53,000 --> 00:18:55,760
Speaker 2: Satara Financial Group, joining us here in New York on

380
00:18:55,800 --> 00:19:01,439
Speaker 2: the Daybreakasia Podcast. Thanks for listening to today's episode of

381
00:19:01,520 --> 00:19:05,600
Speaker 2: the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look

382
00:19:05,600 --> 00:19:09,399
Speaker 2: at the story shaping markets, finance, and geopolitics in the

383
00:19:09,440 --> 00:19:12,720
Speaker 2: Asia Pacific. You can find us on Apple, Spotify, the

384
00:19:12,720 --> 00:19:16,760
Speaker 2: Bloomberg Podcast YouTube channel, or anywhere else you listen. Join

385
00:19:16,840 --> 00:19:19,840
Speaker 2: us again tomorrow for insight on the market moves from

386
00:19:19,880 --> 00:19:24,359
Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Prisoner and

387
00:19:24,480 --> 00:19:25,639
Speaker 2: this is Bloomberg