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

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Speaker 2: Welcome to the Daybreak Asia Podcast. I'm Doug Krisner. Much

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Speaker 2: of the conversation in markets today centered on FED independence. Today,

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Speaker 2: FED Governor Lisa Cook indicated that she will promptly challenge

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Speaker 2: President Trump's move to remove her from the fed's board.

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Speaker 3: Now.

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Speaker 2: Cook's personal attorney said she's going to file a lawsuit,

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Speaker 2: and the FED said it will abide by any court decision.

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Speaker 2: We had a weeker dollar today, yields on longer dated

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Speaker 2: US treasuries up in New York trading, and we'll bring

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Speaker 2: you some perspective from the Asia Pacific momentarily when we

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Speaker 2: hear from Carry Craig, global market strategist at JP Morgan

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Speaker 2: Asset Management. But we begin here in the States. Joining

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Speaker 2: me now is Robert Chine. He is the chief investment

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Speaker 2: officer at Blankie Shine Wealth Management. Robert is on the

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Speaker 2: line from a hot palm desert, California. Thank you, sir

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

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Speaker 2: you to weigh in on what has been happening between

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Speaker 2: President Trump and FED Governor Lisa Cook.

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Speaker 1: Well, if you start the year moving into the new

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Speaker 1: year of the Trump presidency. He was very vocal out

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Speaker 1: of the gate that he wanted to reshape the Federal Reserve,

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Speaker 1: and I think over the last few weeks he's found

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Speaker 1: an opening and an opportunity to sort of see through

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Speaker 1: what he sees and he believes is the proper way

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Speaker 1: of shaping or reshaping the board, the presidents and the

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Speaker 1: Federal Reserve. The challenge that we have there is is

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Speaker 1: that this should be completely independent from Washington, and oftentimes

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Speaker 1: history has shown it's not been from previous presidents. But

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Speaker 1: this is the most aggressive we've ever seen. So what

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Speaker 1: played out today, I think it's historic.

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Speaker 2: If Trump were to succeed, he could secure a dubbsh

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Speaker 2: majority on the board, and at a time when he's

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Speaker 2: pushing for lower interest rates, we know A key question

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Speaker 2: now seems to be Robert whether aggressive FED easing could

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Speaker 2: ultimately send inflation higher. I think that risk was underscore

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Speaker 2: today if you look at the steepening of the Treasury curve.

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Speaker 2: Is that a risk that we need to take seriously?

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Speaker 1: One thousand percent. You've had me on several times, and

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Speaker 1: even before this all played out, I was in the

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Speaker 1: camp of even last year at this time, the Fed's

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Speaker 1: going to be higher for longer, they're going to have

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Speaker 1: to be. Historically speaking, if you look at the last

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Speaker 1: five bouts of inflation going back over the last one

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Speaker 1: hundred years, you know, two of those have really impacted

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Speaker 1: inflation negatively by having easing policy lower interest rates for

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Speaker 1: too long, too quickly, forcing if you know, the most

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Speaker 1: recent is the late seventies early eighties, forcing inflation to

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Speaker 1: spiral upwards out of control, and the Fed had to

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Speaker 1: react very hawkishly as a result. This by you know,

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Speaker 1: we understand that we still technically a restrictive policy, but

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Speaker 1: the government that the GDP is still growing, and so

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Speaker 1: companies are still earning this last earnings call, if you

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Speaker 1: look at the ninety percent of the SP five hundred

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Speaker 1: that are already have reported, we're looking at, you know,

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Speaker 1: double digit earnings growth. So there's a challenge there. Obviously,

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Speaker 1: we have to look at the labor market and that's

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Speaker 1: the Fed's job to make that balance. But right now

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Speaker 1: we could be in some treading some difficult territory here.

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Speaker 2: Yeah, the earning story is definitely a part of this

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Speaker 2: bullish script that the market, the equity market has been

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Speaker 2: trading off of, and it also includes the likelihood of

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Speaker 2: a September rate cut along with, as you pointed out,

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Speaker 2: resilient economic growth. So we have the numbers after the

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Speaker 2: bell tomorrow from in Vidia, give me a sense of

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Speaker 2: what you're expecting.

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Speaker 1: Since in Vidia's you know, first quarter earnings in vidias

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Speaker 1: up thirty five percent, So they're going to have to

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Speaker 1: continue to throw up some amazing numbers in price for

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Speaker 1: perfection to continue their path. Now, is the AI story real? Absolutely?

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Speaker 1: Are we going to see some sort of follow through

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Speaker 1: trading on this? Yeah? Is it an buying opportunity If

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Speaker 1: Nvidia sort of stubs their toe because of the age

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Speaker 1: twenty and they can't sell to China and those are

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Speaker 1: not in their numbers right now, I think that's going

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Speaker 1: to be the story saying Okay, not what the results are,

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Speaker 1: but what the guide is moving forward.

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Speaker 2: It seems like the market has really struggled lately to

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Speaker 2: try to broaden out a bit. Why do you think

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Speaker 2: that's been such a challenging dynamic.

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Speaker 1: We've seen it actually take place earlier this year, beginning

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Speaker 1: of April, but since April ninth, technology as a sector

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Speaker 1: has regained the throne, if you will, we do need

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Speaker 1: to see other sectors We have seen financials sort of

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Speaker 1: catch a bit, which is good over the last few weeks,

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Speaker 1: but healthcare is one of the biggest laggers. So if

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Speaker 1: we want to see a healthy market moving into twenty

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Speaker 1: twenty six, we need to see that broadening up continue,

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Speaker 1: and we're seeing signs of that also down the cap

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Speaker 1: capitalization spector, mid caps and small caps and the rest

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Speaker 1: of two thousand. Obviously, in the anticipation of lower interust

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Speaker 1: rates starting in September, we're starting to see that movement,

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Speaker 1: which is all positive because technology, while has brought us

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Speaker 1: here to the party and it'll keep going, there's other

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Speaker 1: areas in the market that need to participate to maintain

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Speaker 1: the bull market.

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Speaker 2: You mentioned the labor market a moment ago. Today we

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Speaker 2: had from the conference board the reading on US consumer

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Speaker 2: confidence moving a little bit lower in the month of August,

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Speaker 2: and there is some concern on the part of those

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Speaker 2: surveyed about the prospects for finding a job. Give me

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Speaker 2: your sense of where we are right now in terms

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Speaker 2: of labor market activity. Are we beginning to put in

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Speaker 2: a bottom or do you think that there is a

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Speaker 2: lot more weakness on the horizon.

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Speaker 1: I don't think anybody knows about the labor market because

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Speaker 1: we're trying to get a handle on the data. I

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Speaker 1: think the biggest change, if in tenor from the Federal Reserve,

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Speaker 1: was when our own power actually referenced the data. That is,

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Speaker 1: maybe maybe not one hundred percent, and he's been data dependent.

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Speaker 1: The Federal Reserve has been data dependent on the labor

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Speaker 1: market to date. So and obviously we've seen what the

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Speaker 1: administration has done looking at the labor market and sort

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Speaker 1: of the service. I think we are going to see

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Speaker 1: weaker reports. I think maybe under reporting both sides. You know,

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Speaker 1: probably what I'd be curious to see is what percentage

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Speaker 1: of the government labor new jobs is being added versus

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Speaker 1: you know, the rest of the marketplace. I think that's

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Speaker 1: where the true health is is to see, you know,

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Speaker 1: our entrepreneurs adding, our business owners adding, is the private

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Speaker 1: market actually participating if so, to what magnitude and what percentage?

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Speaker 1: Because that's where the confidence comes in. Obviously, we have

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Speaker 1: the big beautiful bill that could add in some capex

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Speaker 1: and sent is for small business owners moving forward. I

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Speaker 1: think that's sort of your catalyst to look forward to.

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Speaker 1: But yeah, the labor markets in question, and I think

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Speaker 1: I can see it's slowing.

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Speaker 2: So we had this unorthodox deal recently where the US

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Speaker 2: government has taken a near ten percent stake in Intel,

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Speaker 2: and today Commerce Secretary Lutnik was suggesting maybe the government

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Speaker 2: could take a position in a defense contractor or a

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Speaker 2: company in another industry. How do you feel about some

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Speaker 2: of the industrial policy that is coming out of the

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Speaker 2: Trump administration.

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Speaker 1: Well, it's not new. We saw the government be a

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Speaker 1: bagstop and the great financial crisis in our auto industry.

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Speaker 1: So and if you look at some of those trades

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Speaker 1: long term holding, the government made a lot of money

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Speaker 1: in a lot of different areas simply because they have

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Speaker 1: the ability to hold it long term. Now there's the

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Speaker 1: other side of the coin, which is, you know, they're

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Speaker 1: not private companies anymore. Excuse me, you're sort of, you know,

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Speaker 1: privatizing these institutions that are publicly traded companies. But you're

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Speaker 1: also having the government sort of way in and now

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Speaker 1: is there the opportunity long term to make money? I

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Speaker 1: think that's ultimately what the administration's moving towards and backing

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Speaker 1: some of those companies that are US based, broad based

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Speaker 1: in terms of manufacturing and production, and supporting those based

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Speaker 1: upon the overall sort of theme that they're coming forward with.

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Speaker 1: The bottom line is I see them making more moves

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Speaker 1: like this, and I think long term, I think they'll

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Speaker 1: play out positively for the US taxpayers.

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Speaker 2: Robert, we'll leave it there. It's always a pleasure. Thanks

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Speaker 2: so much, Robert Shine there. He is the chief investment

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Speaker 2: officer at Blanky Shine Wealth Management. Joining from Palm Desert,

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Speaker 2: California here on the Daybreak Asia podcast. Welcome back to

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Speaker 2: the Daybreak Asia Podcast. I'm Doug Krisner. We stay with

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Speaker 2: today's theme of Fed independence. Yields on two and five

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Speaker 2: year treasuries moved lower in the US session and they

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Speaker 2: are posting further declines right now in Tokyo trading. However,

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Speaker 2: it's a different story at the long end of the curve,

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Speaker 2: as investors seem less keen on duration. From more, we

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Speaker 2: heard from Kerry Craig. He is global market strategist a

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Speaker 2: JP Morgan Asset Management. Carry spoke with Bloomberg TV host

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Speaker 2: Paul Allen and Avril Hong on the Asia trade.

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Speaker 4: Kerry, thanks so much for joining us. It's kind of

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Speaker 4: an interesting picture at the moment. We're seeing equities continuing

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Speaker 4: to rally even the Russell in the US was moving higher.

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Speaker 4: The short end of the curve seems yields are dropping

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Speaker 4: there in terms of fed independence. Is the media more

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Speaker 4: worried about this the markets at the moment.

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Speaker 5: Good morning, Paul. I think it is something that represents

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Speaker 5: a tail risk to the market at the moment, But

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Speaker 5: more broadly, the equity market has been supported by the

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Speaker 5: earnings outlook, the fact you are seeing still a robust

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Speaker 5: economy in many parts of the world, or at least

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Speaker 5: that not recession being priced anymore. And at the same time,

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Speaker 5: you know, it's hard to think about an equity market

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Speaker 5: that's going to collapse without seeing a significant trigger for it.

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Speaker 5: So I think what we're seeing at the feed at

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Speaker 5: the moment is very much a tail risk. They haven't

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Speaker 5: seen a huge reaction in the markets because it's new.

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Speaker 5: How do you really price the set in terms of

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Speaker 5: what may happen when we know there's going to be

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Speaker 5: potentially a link the legal bell around it, and so

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Speaker 5: it's very hard to gauge what the exact outcome may be.

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Speaker 5: So I think you've seen some small moves thereing the

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Speaker 5: dollar in the US and also in the long end

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Speaker 5: of the curve, but for here and now, I think

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Speaker 5: the implications are really around still softening economic policy in

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Speaker 5: terms of the monetary policy from the Federal Reserve, and

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Speaker 5: that's being sort of viewed as a tailwind for markets.

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Speaker 4: Yeah, and more presently, as you're say, in the shorter term,

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Speaker 4: there are some other fish to fry. You know, we've

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Speaker 4: put the PC numbers later on this week and then

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Speaker 4: in the middle of next month. The feed going to

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Speaker 4: hand down is decision. What's your expectation around those inflation

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Speaker 4: figures and what's the bigger concern for the Fed right

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Speaker 4: now inflation or the jobs picture.

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Speaker 5: Well, I think that the you know, if it has

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Speaker 5: that dual mandate, they're thinking about their inflation target, their

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Speaker 5: full employment. I mean, their view on full employment is

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Speaker 5: four point two percent. They're at that, they have their

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Speaker 5: full employment tacked off as it were, and they've got

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Speaker 5: inflation that is, in terms of headline CPI probably close

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Speaker 5: to three percent. The PC number is going to be

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Speaker 5: moving higher probably an hour view, over the course of

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Speaker 5: the release this week, and so you would argue that

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Speaker 5: their inflation target is further or inflation is further from

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Speaker 5: their target their unemployment rate. However, you know what we

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Speaker 5: heard from Jackson Hole and FED Power is that they

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Speaker 5: are concerned around the softness and the labor market, and

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Speaker 5: so they're going to sort of support growth in this environment.

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Speaker 5: I don't think a rate cut is going to do

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Speaker 5: much for the economic outlook initially. I think it is

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Speaker 5: going to lead to the concerns around a little bit

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Speaker 5: more inflation, as will these views around FED independence, and

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Speaker 5: so I think you're likely to see the market start

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Speaker 5: to reflect the potential for a little bit more inflation

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Speaker 5: in the future, even if we do get those rates

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Speaker 5: cuts coming through over the course of September and into

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Speaker 5: the end of the year.

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Speaker 3: So how much for the curve steepening are you expecting

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Speaker 3: and how is the best way to position?

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Speaker 5: Yeah, I think your curves about sixty basis points between

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Speaker 5: the ten and the two at the moment. That's quite

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Speaker 5: significantly steep that it has been for some time. Again,

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Speaker 5: we would be arguing that there's probably more scope for

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Speaker 5: easing from the Federal Reserve. So two cuts this year,

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Speaker 5: potentially more into next year. That should weigh on the

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Speaker 5: end of the curve. And at the long end, you

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Speaker 5: are going to have some more inflation expectations being built

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Speaker 5: in or at least inflation volatility that sees those yields

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Speaker 5: probably not moved down as much as you may think

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Speaker 5: they were, so curve steepening seems to be a pretty

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Speaker 5: popular way to play the market at the moment. You know,

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Speaker 5: we do think that, you know, having a bit of

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Speaker 5: duration a portfolio is not a bad thing given those

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Speaker 5: gross risks that are out there. I mean, there's not

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Speaker 5: a zero chance of a recession happening. It's probably a

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Speaker 5: little bit above average. However, we wouldn't want to walk

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Speaker 5: to far out the curve given some of those movements

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Speaker 5: in the long ger end of the bond market that

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Speaker 5: we have seen. So I think it's quite finely balanced

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Speaker 5: when we think about where you want to sit within

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Speaker 5: the curve in terms of duration, but definitely viewing it

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Speaker 5: as a steepening yield curve over time, Kerry.

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Speaker 3: We're also looking ahead to end VideA earnings. Amid this,

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Speaker 3: we're seeing Asia stocks. They seem to be running a

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Speaker 3: bit higher at the moment. We have the tariff backdrop

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Speaker 3: as well. India could be facing double the red. South

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Speaker 3: Korea came away with the meeting in the US from

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Speaker 3: a positive tone deals bonanza. I think we're hearing about

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Speaker 3: some of these Korean companies and their expansion plans in

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Speaker 3: the US as well. How are you playing South Korea,

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Speaker 3: particularly related to Taiwan. Do you see outperformance the potentially.

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Speaker 5: Yeah, I think we're still quite favorable on North Asian

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Speaker 5: markets more broadly, with it's China, Taiwan, and Korea. I mean,

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Speaker 5: they have done very well this year in terms of

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Speaker 5: their performance, so I think that's something to bear in mind.

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Speaker 5: And valuations have moved up a little bit. I think

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Speaker 5: those are the teach cycle still has more to go

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Speaker 5: in the carve outs we've seen around some of the

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Speaker 5: semiconductors being put into those deals, the offshore investment that

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Speaker 5: will go into the US from some of these companies

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Speaker 5: being something that will support that market. And I think

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Speaker 5: secularly that Ai theme is still very prominent, so we

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Speaker 5: would argue that those are going to be the beneficiaries

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Speaker 5: of it, whether it's China or Korea. I think, you know,

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Speaker 5: you're really coming down to a couple of companies that

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Speaker 5: are driving that decision, So it's really more of a

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Speaker 5: bottom up view in terms of which of those companies

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Speaker 5: you think are better positioned in this environment rather than

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Speaker 5: thinking about those countries. So I think it's a couple

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Speaker 5: of stocks at really driving the decision between South Korea

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Speaker 5: and Taiwan in terms of relative performance, not really necessarily

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Speaker 5: just thinking about the country there.

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Speaker 4: Yeah, in terms of tech in China, we've seen a

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Speaker 4: pretty strong or run up there and in fact a

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Speaker 4: pretty strong rally in general when it comes to Chinese equities.

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Speaker 4: How's that looking to you? Do you feel there's a

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Speaker 4: risk of a correction? Here is the fundamental stack up?

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Speaker 5: Yeah, the fundamentals do look quite good to us. Obviously,

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Speaker 5: there was the valuation argument from earlier in the year,

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Speaker 5: and Chinese equity is still look relatively well priced compared

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Speaker 5: to many developed market pairs. There's some appealing characteristics to

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Speaker 5: the onshore market in China given the lower correlation they

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Speaker 5: have to the US equity, So building in a bit

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Speaker 5: of a diversification of portfolio, but fundamousely again thinking about

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Speaker 5: that tech theme, Chinese tech is a way to play

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Speaker 5: it that's not led to the US and some of

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Speaker 5: the risks that come with that, and we do see

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Speaker 5: that as being more prevalent. It is a little bit

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Speaker 5: disconnected from what we're seeing in the economy as well,

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Speaker 5: given the softness and some of the economic data and

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Speaker 5: only the slow movement in fiscal support coming through from

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Speaker 5: the Chinese government. So I think there's still room to

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Speaker 5: go into China. I think it becomes quite an active

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Speaker 5: position given the outlook for the economy. And again we've

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Speaker 5: seen that bit of a split between what we're seeing

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Speaker 5: in the offshore and the onshore market, where it's really

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Speaker 5: the offshore market we are seeing a lot of these

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Speaker 5: tech themes being more prominent, whereas the onshore market seems

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Speaker 5: to be a little bit more about dividend income some

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Speaker 5: of the performance in the financial So I think there's

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Speaker 5: very much different ways to play China depending on what

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Speaker 5: you're looking for in terms of growth versus income at

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Speaker 5: the moment. But it is a market that we do

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Speaker 5: continue to love in terms of where we can find

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Speaker 5: value around the world and looking for continued performance.

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Speaker 4: Where are you seeing risk at the moment and how

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Speaker 4: are you hedging against that?

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Speaker 5: I mean, I think there's a way of framing how

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Speaker 5: investors a feeling, and that's a little bit of sort

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Speaker 5: of uncomfortably tolerant of what's out there at the moment. Obviously,

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Speaker 5: markets have run pretty hard since we seen that sell

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Speaker 5: off in April. There are concerns around some of the

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Speaker 5: softer economic data that's coming out, obviously the political risk

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Speaker 5: that's still in there. But you know, fundamentally, we do

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Speaker 5: see a global economy that's improving and that should support

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Speaker 5: the outlook for both equities in terms of risk and

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Speaker 5: nomenal growth. But also it's not huge growth. It is

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Speaker 5: subtre and growth around the world, and so we do

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Speaker 5: think about duration in terms of a hedge against that

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Speaker 5: growth shock and a portfolio, but also barbelling that with

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Speaker 5: a little bit more of the credit space in terms

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Speaker 5: of high yield given the carry that you're getting on that,

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Speaker 5: and are rather than owning outright duration the other hedges

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Speaker 5: against that inflation. I think that for us really does

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Speaker 5: to fall to things like altern and real assets. We

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Speaker 5: gain that less sensitivity to the economy, the good outcome,

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Speaker 5: and obviously some in built inflation protection as well. So

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Speaker 5: what do you to think about a broader diversification of

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Speaker 5: assets within a portfolio to really counteract all the risks

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Speaker 5: that are out there in the global economy?

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Speaker 2: All Right?

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Speaker 4: Kerry Craig, Global market strategist at JP Morgan Asset Management.

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Speaker 4: Thanks as always for joining us.

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Speaker 1: With your views.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg