Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
Speaker 2: We're expecting a flurry of economic data points in the
Speaker 2: week ahead. In the Asia Pacific. The big numbers are
Speaker 2: due on Friday, when China will report on retail sales
Speaker 2: and industrial production. Now in the States, Tuesday's report on
Speaker 2: retail inflation will be a major focus. These numbers should
Speaker 2: help firm expectations on the timing of the next FED
Speaker 2: rate cut. Also Tuesday, we'll have a rate decision from
Speaker 2: the Reserve Bank of Australia. And in a moment we'll
Speaker 2: hear from Swati Pondi, Bloomberg ECOGUV reporter in Sydney. But
Speaker 2: we begin here in the States. Joining me now is
Speaker 2: Eric Stirner. He is the chief investment officer at a
Speaker 2: Pollen Wealth Management. Eric, thank you so much for making
Speaker 2: time to chat with me. Quite up rally that we
Speaker 2: had in big cap tech Friday, Nasdaq comps a record
Speaker 2: closing high twenty one four fifty. Are you continuing to
Speaker 2: buy into this thesis that you've got to be in
Speaker 2: big cap tech, particularly given the trade in artificial intelligence?
Speaker 1: Yeah? Well, first, thanks for having me, And yeah, I
Speaker 1: mean it's interesting because so many have predicted that other
Speaker 1: sectors were going to take the leadership role from these
Speaker 1: mega techs, But here we are, the mega techs still
Speaker 1: leading away, and their earnings are just continued just to
Speaker 1: knock the ball out of the park. And I still
Speaker 1: think we're in the very early endings of this AI revolution.
Speaker 1: And yes, you know some have not the make a
Speaker 1: touch for their rich valuations, but they continue to warnt
Speaker 1: them with the strong earnings and strong outlooks, so I
Speaker 1: think they'll continue to be the leaders in this market.
Speaker 2: So I mentioned a moment ago that we have CPI
Speaker 2: data this week. Over the weekend, we heard from FED
Speaker 2: Governor Michelle Bowman. She's favoring three cuts this year and
Speaker 2: she's urging her fellow policymakers to begin making that type
Speaker 2: of move at the September meeting. What are your expectations
Speaker 2: right now for the Fed?
Speaker 1: Well, what, you know, I believe that the Fed should
Speaker 1: have cut rates this last meeting. And of course, you
Speaker 1: know I'm saying that after the non farm non farm
Speaker 1: payroll report came out on Friday with those major revisions.
Speaker 1: But we've just even before those those revisions of the
Speaker 1: Junior Report, we've seen plenty of evidence of the labor
Speaker 1: market moderating between elevated continued claims. We still are in
Speaker 1: this low higher, low fire environment where it's really hard
Speaker 1: for those unemployed individuals out there trying to get a job.
Speaker 1: And even the ADB Private Payrolls has really shown how
Speaker 1: these restrictive rates are really choking smaller companies. In the
Speaker 1: last two months, you know, companies with over five hundred
Speaker 1: employees have added seventy eight thousand jobs, but smaller companies
Speaker 1: with less than fifty employees they've actually shed twenty nine
Speaker 1: thousand jobs. So I think, you guys, the FED needs
Speaker 1: to be ahead of this because once that the labor
Speaker 1: market typically is the last economic indicator to fall before
Speaker 1: any economic downturn, and once that unemployment rate starts ticking higher,
Speaker 1: it can quickly gain velocity. So I'm hoping that the
Speaker 1: FED and people like Waller and Bowman and everyone else
Speaker 1: gets on board looks at cut rates starting in September,
Speaker 1: and who knows, maybe we'll see three cuts, but of
Speaker 1: course that all depends on con how the rest of
Speaker 1: the inflation reports and labor market reports come in for
Speaker 1: the rest.
Speaker 2: Of the year most definitely, And right now, I think
Speaker 2: we can agree that inflation remains a little stubborn here
Speaker 2: at around two seven. At the end of the week,
Speaker 2: we'll hear from the University of Michigan and one year
Speaker 2: inflation expectations that will be a keen number. Is there
Speaker 2: the risk that growth begins to kind of remain luggish
Speaker 2: in the face of high inflation? And I know that
Speaker 2: the term stagflation has been thrown around a little bit lately,
Speaker 2: But is that a concern that we should kind of
Speaker 2: focus on a little bit.
Speaker 1: It's something that certainly we we factor it into our
Speaker 1: portfolios and as we determine allocations. It's not my base case,
Speaker 1: but but certainly, you know, it's a risk that we
Speaker 1: need to account for. I mean, I think I'm not
Speaker 1: as concerned. I'm slightly concerned. Just just last month, or
Speaker 1: in the month of Junior, we saw import prices We're
Speaker 1: only up zero point one percent, and May import numbers
Speaker 1: were actually down zero point four percent. So I think
Speaker 1: what's that that's showing us is that foreign exporters are
Speaker 1: eating some of these tariffs. So that's why I don't
Speaker 1: think we're going to see. Yes, we probably may see
Speaker 1: a few bumps in inflation between you the next few months,
Speaker 1: but I don't think it's I think it's going to
Speaker 1: be transitory in nature because we're in a much different
Speaker 1: macro environment. We see consumer spending still healthy but moderating,
Speaker 1: same with retail sales, So that's why I'm not as
Speaker 1: concerned about stagflation, but certainly not something we can all
Speaker 1: rule out.
Speaker 2: Are you focused squarely on the equity market these days
Speaker 2: as a place to put capital to work or do
Speaker 2: you want to be maybe looking at portions of the
Speaker 2: fixed income markets.
Speaker 1: Yeah, we know. We like at all markets, both on
Speaker 1: the public and private side, and I still think that
Speaker 1: there's great opportunities in the fixed income markets. I think
Speaker 1: the sweet spot still is in that short to intermediate
Speaker 1: range because I think we're still going to We've seen
Speaker 1: a lot of interest rate volatility between of course the
Speaker 1: tariff and inflation concerns, but also just our budget deficit concerns,
Speaker 1: so I think that volatility is still going to exist.
Speaker 1: So that's why I remain on the short and medium
Speaker 1: part of the fixed income curve. And then because I
Speaker 1: think we are going to have us off landing I
Speaker 1: really like high yields, the high yield that the credit
Speaker 1: quality within the high yield market has improved tremendously. I
Speaker 1: mean pre GFC only forty percent of high yields were
Speaker 1: rated double B or higher. Today over fifty one percent
Speaker 1: or rated double B or higher and eighty five percent
Speaker 1: or B or higher. So I really like the fixed
Speaker 1: the income market, and then for clients that it's suitable for.
Speaker 1: We're also when we put together portfolios, looking at private markets,
Speaker 1: between private credit, private equity, infrastructure. We know there's a
Speaker 1: lot of infrastructure spending needed in this country, so we're
Speaker 1: looking at all areas in the market because I do
Speaker 1: think volatility will remain elevated. So we're just looking at
Speaker 1: every asset class to build a more diversified portfolio for
Speaker 1: our clients these days.
Speaker 2: Are you looking at markets offshore as well?
Speaker 1: Yes, oh, absolutely. We've always maintained allocations to international well.
Speaker 1: Of course, that's really helped this year. I mean it's
Speaker 1: been a great story on the international front. I do
Speaker 1: think that the US may reassume leadership at least for
Speaker 1: the second half of this year. You know, of course,
Speaker 1: the dollar depreciating is going to help companies especially large
Speaker 1: cat companies with a lot of revenues overseas. While it's
Speaker 1: going to be a head wind for European and other countries,
Speaker 1: and I think there was so much front running on
Speaker 1: the tariffs that that's as that fades, that's going to
Speaker 1: draw down on some of the profits from these European exporters.
Speaker 1: So while I still will always be an advocate for
Speaker 1: having international allocation, especially as the world back pedals from globalization,
Speaker 1: I think that's going to lower the correlation between international
Speaker 1: markets and domestic markets, which will help build more diverse
Speaker 1: five portfolios. But because of those reasons, and I think
Speaker 1: I think the international equities are going to take breather well.
Speaker 1: On the US side, we've seen a lot of the
Speaker 1: cloud of uncertainty start to dissipate. We have the one
Speaker 1: Beautiful Bill law signed in the place, so everyone knows
Speaker 1: that what's in that bill, and now we're starting to
Speaker 1: see trade agreements coming to place between with the EU, Japan,
Speaker 1: South Korea, and of course the White House administration still
Speaker 1: has some work to do, but as we remove more
Speaker 1: uncertainty and deregulation plans are probably on the horizon the
Speaker 1: second half of this year. I expect the US markets
Speaker 1: to continue to march higher.
Speaker 2: So before I let you go speaking of the US,
Speaker 2: I want to get your sense of how the American
Speaker 2: consumer is holding up. At the end of the week,
Speaker 2: we'll get the reading on July retail sales. How do
Speaker 2: you think American consumers are doing right now?
Speaker 1: At an aggregate level, I think the consumer remains healthy.
Speaker 1: We've seen the consumer networth increase over fifty trillion since
Speaker 1: the pandemic. But I do think it's becoming a very
Speaker 1: bifurcated story, especially with these higher rates. I mean, I
Speaker 1: think the higher end consumer benefit it more from the
Speaker 1: stock market appreciation, you know, two straight years of twenty
Speaker 1: plus percent returns, and the home equity are quickly rising.
Speaker 1: You know, the low rank consumer might not have as
Speaker 1: much exposure there. And just looking at the consumer spending,
Speaker 1: I mean, fifty percent consumer spending comes from the top
Speaker 1: ten percent of income high income earners, and thirty years
Speaker 1: ago that ten percent of high income earners represented thirty
Speaker 1: six percent. So there is some concern that's becoming a
Speaker 1: little bit more bifurcated. But at an aggregate level, while
Speaker 1: we see reports of credit rising and loans rising, the
Speaker 1: household balance sheets are healthier right now than they were
Speaker 1: pre pandemic. In fact, the household debt ratio is at
Speaker 1: eleven point two percent right now, and the nine years
Speaker 1: before the pandemic it was actually eleven point eight. So
Speaker 1: that tells me that, yes, some of the low rane
Speaker 1: consumers are feeling the strange from higher rates, but overall
Speaker 1: the consumer does remain healthy and that also helped warrants
Speaker 1: or feeds into my bullish outlook for the remainder of
Speaker 1: this year.
Speaker 2: Okay, we'll leave it on that bullish outlook with Eric Sterner. Eric,
Speaker 2: thank you so much. Eric is chief investment officer at
Speaker 2: a Pollen Wealth Management. Joining here on the Daybreak Asia podcast.
Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: Traders in the Asia Pacific will be watching tomorrow's rate
Speaker 2: decision from the Reserve Bank of Australia now. Back in July,
Speaker 2: Governor Michelle Bullock faced some tough questions after the RBA
Speaker 2: held its policy rates steady. This time around, she's expected
Speaker 2: to stay with her cautious stance on the monetary policy outlook.
Speaker 2: Rebecca Jones is Bloomberg's managing editor for Australia and New Zealand.
Speaker 3: We've got an unemployment rate that's not only trending high,
Speaker 3: but it's also above what our Central Bank has been projecting.
Speaker 3: So it does look like it's not going to be
Speaker 3: the curveball of last month. All twenty seven economists that
Speaker 3: we survey are predicting that we're going to get that
Speaker 3: twenty five basis pointcut.
Speaker 2: That is Bloomberg's Rebecca Jones in Melbourne. For more, we
Speaker 2: heard from Swati Pondi, Bloomberg's Eco GUV reporter in Sydney.
Speaker 2: Swati spoke with Bloomberg TV host Avril Honk and Paul
Speaker 2: Allen on the Asia Trade.
Speaker 4: Swati last meeting, we thought this is it, We're easing,
Speaker 4: but it didn't happen surely this time at a walk.
Speaker 5: That's what a lot of people are saying as well.
Speaker 5: Economists expecting a cut, and one of the reasons is
Speaker 5: that they think the appetite to shock the market for
Speaker 5: the RBI is pretty small. Now markets are expecting fully
Speaker 5: pricing in a cut. Economists are ascribing a seventy five
Speaker 5: percent chance, seventy five eighty percent chance of a cut.
Speaker 5: We had inflation data which showed a cooling down in
Speaker 5: prices from the previous quarter, and unemployment data showed that
Speaker 5: the jobless rate is going up a bit. So put together,
Speaker 5: it does look like the RBA could ease by twenty
Speaker 5: five basis points in August, but it's likely to be
Speaker 5: a hawkish cut.
Speaker 2: Yeah, I was just gonna ask Swatty in terms of
Speaker 2: forward guidance, how much is the RBA going to realistically
Speaker 2: be letting on.
Speaker 5: Governor Michelle Bullock has said in the past recent months
Speaker 5: that the RBA strategy is going to be gradual easing,
Speaker 5: going to be one of gradual easing, and that is
Speaker 5: the message that she's likely to read rate tomorrow at
Speaker 5: her press conference as well. So after tomorrow's cut, if
Speaker 5: that happens, markets are expecting one more and there's a
Speaker 5: fifty to fifty chance of a third, So there's not
Speaker 5: a lot of easing that's being priced by markets. And
Speaker 5: it's the case is similar for economists as well, and
Speaker 5: I think Michelle Burdock is likely to either she will
Speaker 5: say that we are fine with that pricing or signal
Speaker 5: that they are fine with that pricing, it's just one
Speaker 5: or two cuts, or she will further push back against
Speaker 5: that against that pricing, saying signaling that the RBA is
Speaker 5: probably at neutral stands at the moment and they would
Speaker 5: likely to just be on a prolonged pause here.
Speaker 4: Well, there was some strong expectation that we would get
Speaker 4: eating at the last meeting, and as I said, it
Speaker 4: didn't happen. But that did lead to some criticism of
Speaker 4: the ABA's communication. Was that warranted.
Speaker 5: Yes, the RBAS communication has been a bit whiplashy this year.
Speaker 5: So when they met for the first time this year
Speaker 5: in February, they cut interest rates and they sounded quite hawkish,
Speaker 5: and then in April they sounded really dubbish. Remember this
Speaker 5: was the meeting just one day before Liberation Day. Uh
Speaker 5: So there was a lot of uncertainty in the market,
Speaker 5: there was a lot of volatility, and so they were
Speaker 5: rightly extremely dubbish. And then the main meeting happened and
Speaker 5: they were again hawkish, and then July they did not cut.
Speaker 5: So it's people are saying that it's really hard to
Speaker 5: discern their signals. It's hard to understand what they would do.
Speaker 1: Uh.
Speaker 5: In RBA's defense, they have a new monetary policy board
Speaker 5: now and they have a new structure where they are voting,
Speaker 5: so it her defense, Michelle Bullock said that it's very
Speaker 5: hard for her to pre enpt what the board would
Speaker 5: do because she doesn't know how which way people would vote,
Speaker 5: and that adds to the uncertainty. So I think through
Speaker 5: the course of this year, maybe next year, as the
Speaker 5: as votes are revealed, as we get more idea about
Speaker 5: how they are responding to data, how they are responding
Speaker 5: to the available information, then probably people will be able
Speaker 5: to better assess how the RBA would react.
Speaker 4: And of course RBA policy so closely linked to the
Speaker 4: national sport of real estate, can we pretty much time
Speaker 4: our watch to easing from the RBA to another rise
Speaker 4: in house prices, which are already and have been in
Speaker 4: those bleed territories for.
Speaker 1: A long time.
Speaker 5: It's already happening. It's already happening. House prices are on
Speaker 5: a tear again and that is a big concern. There
Speaker 5: was a report from Rey White Group to David said
Speaker 5: that every single day, twenty four unaffordable houses are being
Speaker 5: added to the market, which basically is another way of
Speaker 5: saying that every single day the number of unaffordable housing
Speaker 5: in the country is rising by twenty four and that
Speaker 5: is a big number if you put it in perspective
Speaker 5: of the whole year, right, So we definitely have that
Speaker 5: problem of unaffordability. Some economists are saying that is one
Speaker 5: of the reasons we will not see a huge spike
Speaker 5: in prices, but definitely easing monetary policy and easier borrowing
Speaker 5: costs to make housing more attractive for people who can
Speaker 5: afford it.
Speaker 4: All right, Economy reporter Swatty Pandi theres we count down
Speaker 4: to the ABA decision on Tuesday.
Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak
Speaker 2: Asia Edition podcast. Each weekday, we look at the story
Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You
Speaker 2: can find it us on Apple, Spotify, the Bloomberg Podcast
Speaker 2: YouTube channel, or anywhere else you listen. Join us again
Speaker 2: tomorrow for insight on the market moves from Hong Kong
Speaker 2: to Singapore and Australia. I'm Doug Prisoner and this is
Speaker 2: Bloomberg