1
00:00:02,520 --> 00:00:11,680
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak

2
00:00:11,680 --> 00:00:15,280
Speaker 1: Asia podcast. I'm Doug Chrisner. So we have three key

3
00:00:15,360 --> 00:00:18,560
Speaker 1: central bank decisions on the horizon. The Bank of Japan

4
00:00:18,680 --> 00:00:21,680
Speaker 1: is up first. No change from the BOJ is expected.

5
00:00:22,000 --> 00:00:24,520
Speaker 1: We'll also hear from the FED this week, as well

6
00:00:24,600 --> 00:00:27,440
Speaker 1: as the Bank of England. But it's the Fed's decision

7
00:00:27,520 --> 00:00:31,040
Speaker 1: that markets are eagerly awaiting. Since the statement will be

8
00:00:31,160 --> 00:00:35,520
Speaker 1: parsed for any assessment as to how President Trump's trade

9
00:00:35,560 --> 00:00:38,960
Speaker 1: policies are affecting the outlook, Let's take a closer look

10
00:00:39,000 --> 00:00:41,760
Speaker 1: now with our guest Peter McGuire. He is the CEO

11
00:00:41,920 --> 00:00:45,960
Speaker 1: of Trading dot Com Australia, joining us from Sydney. Peter,

12
00:00:46,040 --> 00:00:48,720
Speaker 1: thank you so much. It's always a pleasure. No one

13
00:00:48,880 --> 00:00:51,280
Speaker 1: is expecting the Fed to do anything, but I think

14
00:00:51,360 --> 00:00:53,400
Speaker 1: the devil is going to be in the details in

15
00:00:53,440 --> 00:00:56,520
Speaker 1: the statement. What are you expecting the Fed to kind

16
00:00:56,560 --> 00:00:57,400
Speaker 1: of lay out there?

17
00:00:58,840 --> 00:01:01,440
Speaker 2: Well, good morning dog think Greening's from Sydney.

18
00:01:01,520 --> 00:01:05,240
Speaker 3: I'm not expecting any real great surprises, But as you said,

19
00:01:05,400 --> 00:01:08,800
Speaker 3: devil's in the detail, it's going to be the commentary.

20
00:01:09,440 --> 00:01:11,800
Speaker 2: I don't you know. The market is very much.

21
00:01:12,120 --> 00:01:16,240
Speaker 3: You know, we're going to see everyone's anticipating to stand

22
00:01:16,280 --> 00:01:20,240
Speaker 3: pat at this meeting, investors a penciling seventy five basis

23
00:01:20,280 --> 00:01:23,479
Speaker 3: points worth of reductions this year, and that was at

24
00:01:23,520 --> 00:01:27,160
Speaker 3: some point last week, you know, twenty five basis points

25
00:01:27,200 --> 00:01:30,559
Speaker 3: worth of reductions to projected by the fed's latest dot plot.

26
00:01:30,600 --> 00:01:33,040
Speaker 3: I want to see where the dot plot is. I

27
00:01:33,120 --> 00:01:36,720
Speaker 3: also want to take on board the commentary, the interpretation

28
00:01:36,880 --> 00:01:40,920
Speaker 3: from retail sales perspective, what's happening from an employment front,

29
00:01:40,920 --> 00:01:44,520
Speaker 3: all of these factors naturally from FED chair power, and

30
00:01:44,560 --> 00:01:50,120
Speaker 3: then the great uncertainty as far as the President Trump

31
00:01:50,160 --> 00:01:53,360
Speaker 3: effect and the avalanche of news that that presents on

32
00:01:53,400 --> 00:01:57,240
Speaker 3: a daily basis, that changes I think the footprint of

33
00:01:57,360 --> 00:01:59,400
Speaker 3: so many interpretations.

34
00:01:59,440 --> 00:02:01,640
Speaker 2: As far as market expectation.

35
00:02:01,880 --> 00:02:05,600
Speaker 1: So are you expecting, given the FEDS announcement, a big

36
00:02:05,640 --> 00:02:09,240
Speaker 1: dollar move subsequent to that, Well.

37
00:02:09,000 --> 00:02:11,200
Speaker 3: It's currently sitting. I think we've seen the move in

38
00:02:11,240 --> 00:02:13,000
Speaker 3: a lot of ways. We're running at one O three

39
00:02:13,160 --> 00:02:18,800
Speaker 3: twenty five for the US dollar index, Euro's nudging closer

40
00:02:18,840 --> 00:02:22,040
Speaker 3: to that one ten yen, you know, one for nine

41
00:02:22,080 --> 00:02:25,359
Speaker 3: pound broken one point thirty. So I feel as though

42
00:02:25,400 --> 00:02:28,280
Speaker 3: you could see a little bit further move for the

43
00:02:28,400 --> 00:02:30,560
Speaker 3: US dollar index. You've got the ten year running at

44
00:02:30,560 --> 00:02:35,440
Speaker 3: four twenty four point two eight. I just I'll wait

45
00:02:35,480 --> 00:02:39,760
Speaker 3: and see, Doug. It's so difficult to see any further

46
00:02:39,880 --> 00:02:41,800
Speaker 3: softness as far as US dollar index.

47
00:02:41,840 --> 00:02:43,200
Speaker 2: I'm not going to be surprised.

48
00:02:43,240 --> 00:02:45,240
Speaker 3: But what we've seen over the last couple of weeks

49
00:02:45,280 --> 00:02:48,799
Speaker 3: has been dramatic. It's been a huge sell off, and

50
00:02:49,680 --> 00:02:55,240
Speaker 3: I'm just observing at all and inhaling all of this current.

51
00:02:56,160 --> 00:02:58,200
Speaker 2: Yeah, the circumstances of the play.

52
00:02:58,240 --> 00:03:00,120
Speaker 1: A lot of that sell off. The flip side of

53
00:03:00,160 --> 00:03:02,400
Speaker 1: it seems to be this rally that we have seen

54
00:03:02,440 --> 00:03:03,480
Speaker 1: in the euro right.

55
00:03:04,600 --> 00:03:06,960
Speaker 3: You bet you you know what we were we were

56
00:03:07,080 --> 00:03:10,120
Speaker 3: nudging just you know, in January, everyone's saying we're going

57
00:03:10,120 --> 00:03:14,000
Speaker 3: to see sub parody running you know that one o one,

58
00:03:14,040 --> 00:03:15,280
Speaker 3: one o two sort of handle.

59
00:03:15,320 --> 00:03:18,519
Speaker 2: You're now nudging one ten. Who could have believed that?

60
00:03:18,639 --> 00:03:19,760
Speaker 2: How it's played out in.

61
00:03:19,720 --> 00:03:25,000
Speaker 3: That quick six or seven week time frame. So if

62
00:03:25,000 --> 00:03:27,480
Speaker 3: it breaks one ten, maybe a one eleven is the

63
00:03:27,520 --> 00:03:31,160
Speaker 3: new handle. And also you can't take your eyes off

64
00:03:31,200 --> 00:03:35,320
Speaker 3: the en so you know, all of those considerations. The

65
00:03:35,480 --> 00:03:38,160
Speaker 3: currency markets have been electric over the last you know,

66
00:03:38,360 --> 00:03:39,360
Speaker 3: six to eight weeks.

67
00:03:39,640 --> 00:03:41,680
Speaker 1: We also have a rate decision this week from the

68
00:03:41,680 --> 00:03:44,560
Speaker 1: Bank of England. What are your expectations there. How do

69
00:03:44,600 --> 00:03:46,960
Speaker 1: you feel about the UK economy right now?

70
00:03:48,440 --> 00:03:49,960
Speaker 2: Well, you've got to be conscious of it.

71
00:03:50,000 --> 00:03:53,600
Speaker 3: I'm not expecting a rate cut, expect that tomorrow they're

72
00:03:53,640 --> 00:03:57,240
Speaker 3: experiencing a soft patch when you know you're determining high

73
00:03:57,320 --> 00:04:01,040
Speaker 3: inflation elevated risks of a split those on Thursday. So

74
00:04:01,120 --> 00:04:05,600
Speaker 3: I'm conscious as far as you know. Again, retoric coming

75
00:04:05,640 --> 00:04:10,440
Speaker 3: from coming from the Governor and from the decision makers.

76
00:04:10,440 --> 00:04:13,880
Speaker 3: Governor Bailey mentioned after the February sixth meeting the consumers

77
00:04:13,920 --> 00:04:16,960
Speaker 3: are more priced conscious and holding back on spending dug

78
00:04:17,440 --> 00:04:19,880
Speaker 3: and there's a twelve percent probability of a rate cup

79
00:04:19,880 --> 00:04:23,600
Speaker 3: with the next twenty five basis points there that'll be

80
00:04:23,640 --> 00:04:24,800
Speaker 3: probably more to like.

81
00:04:24,920 --> 00:04:26,160
Speaker 2: You know, the June meetings.

82
00:04:26,240 --> 00:04:31,200
Speaker 3: So I'm not expecting anything from a rate cup perspective,

83
00:04:31,240 --> 00:04:34,240
Speaker 3: but I think again you've just got to listen to

84
00:04:34,760 --> 00:04:37,960
Speaker 3: the retoric and listen to the announcement and take on

85
00:04:38,000 --> 00:04:39,400
Speaker 3: board the commentary.

86
00:04:39,160 --> 00:04:42,800
Speaker 1: You mentioned the end a moment ago. Expectations are that

87
00:04:42,839 --> 00:04:44,720
Speaker 1: the VOJ is going to be on hold, but there

88
00:04:44,800 --> 00:04:47,560
Speaker 1: is certainly a lot of inflationary pressure building in that

89
00:04:47,640 --> 00:04:51,360
Speaker 1: economy that would push the Bank of Japan to raise

90
00:04:51,480 --> 00:04:53,279
Speaker 1: rates in the near term here right.

91
00:04:54,160 --> 00:04:56,520
Speaker 3: Yeah, you bet, you know, fifty percent probability of a

92
00:04:56,520 --> 00:05:00,400
Speaker 3: twenty five basis point to be that'll be materialized by June.

93
00:05:00,400 --> 00:05:02,200
Speaker 2: They'll stay on hold this week.

94
00:05:02,480 --> 00:05:05,719
Speaker 3: As you mentioned, Doug, you've got an acceleration of economic activity,

95
00:05:05,960 --> 00:05:09,120
Speaker 3: hawkish remarks by the policy makers, and you know that agreement.

96
00:05:09,160 --> 00:05:12,560
Speaker 3: What's got to be very conscious of that historic pay

97
00:05:12,640 --> 00:05:16,200
Speaker 3: rise that you've seen, or pay height between companies and unions.

98
00:05:16,600 --> 00:05:19,640
Speaker 3: So the next tiger is nearly fully priced in for September.

99
00:05:19,640 --> 00:05:22,040
Speaker 3: If that doesn't, you've got a round about as I said,

100
00:05:22,040 --> 00:05:25,520
Speaker 3: about an eighty percent probability for the Baja or maybe

101
00:05:25,520 --> 00:05:26,679
Speaker 3: sixty percent by.

102
00:05:28,279 --> 00:05:31,120
Speaker 2: By June. So that seems to be the state of play.

103
00:05:31,680 --> 00:05:35,080
Speaker 3: And you know, when you're looking at consumer inflation, dug

104
00:05:35,200 --> 00:05:36,480
Speaker 3: expectations have jumped.

105
00:05:37,000 --> 00:05:39,720
Speaker 2: So yeah, that's the whole storyline there.

106
00:05:40,480 --> 00:05:43,640
Speaker 1: We've talked a lot about the tariff policy from the

107
00:05:43,640 --> 00:05:46,719
Speaker 1: Trump administration and a lot of the volatility that it

108
00:05:47,040 --> 00:05:50,279
Speaker 1: has created. Certainly when you look at currencies like the

109
00:05:50,320 --> 00:05:55,360
Speaker 1: Mexican peso, the Canadian dollar, no shortage of volatility. Are

110
00:05:55,360 --> 00:05:58,400
Speaker 1: there currencies that you're monitoring closely when you look at

111
00:05:58,400 --> 00:05:59,040
Speaker 1: this trade war?

112
00:06:00,400 --> 00:06:03,280
Speaker 3: Oh, you've got to keep I think the you can't

113
00:06:03,320 --> 00:06:07,480
Speaker 3: take your focus certainly off the Euro and that seems

114
00:06:07,480 --> 00:06:10,200
Speaker 3: to be the trade. I think that the retail market

115
00:06:10,200 --> 00:06:13,880
Speaker 3: have been really wrapped in because of the huge move

116
00:06:13,920 --> 00:06:16,480
Speaker 3: you've seen and the pound. But really I think it's

117
00:06:16,520 --> 00:06:21,200
Speaker 3: been eurocentric and we're keeping a mind's eye as far

118
00:06:21,279 --> 00:06:23,840
Speaker 3: as as you said Canada and Mexico when you're looking

119
00:06:23,880 --> 00:06:26,920
Speaker 3: at the big picture. Canada seventy six percent of its

120
00:06:26,920 --> 00:06:29,159
Speaker 3: exports do go to the USA and that accounts for

121
00:06:29,240 --> 00:06:32,359
Speaker 3: nine eight percent of jr DP. Mexico seventy eight percent

122
00:06:32,360 --> 00:06:34,880
Speaker 3: of its exports go to the USA and accounts for

123
00:06:34,920 --> 00:06:37,680
Speaker 3: thirty seven percent of its GDP. So naturally those two

124
00:06:37,800 --> 00:06:41,279
Speaker 3: currencies are very closely looked at from a cross rate

125
00:06:41,360 --> 00:06:45,679
Speaker 3: and trade perspective. And that's really a great attraction again

126
00:06:45,720 --> 00:06:49,440
Speaker 3: to currency trade is because of the I think the

127
00:06:49,480 --> 00:06:51,719
Speaker 3: big blowouts that you see as far as move.

128
00:06:52,080 --> 00:06:54,719
Speaker 1: So what have you been seeing with the Aussie dollar

129
00:06:54,800 --> 00:06:55,880
Speaker 1: and your neck of the woods.

130
00:06:57,480 --> 00:07:00,240
Speaker 2: That's a sleep at the wheel. I can't.

131
00:07:01,560 --> 00:07:03,160
Speaker 3: I said it to you the last time we spake,

132
00:07:03,200 --> 00:07:06,200
Speaker 3: I said, the Aussie pace out, it's still running at

133
00:07:06,200 --> 00:07:08,360
Speaker 3: sixty three and a half. It's just got you know,

134
00:07:08,560 --> 00:07:12,240
Speaker 3: it just doesn't seem to it's a lagger at sixty

135
00:07:12,280 --> 00:07:15,160
Speaker 3: three sixty one, Doug, you know it just we're going

136
00:07:15,200 --> 00:07:18,480
Speaker 3: to have employment numbers coming out this week. Nothing seems

137
00:07:18,480 --> 00:07:21,760
Speaker 3: to be shifting the Aussie at all. Maybe we're going

138
00:07:21,800 --> 00:07:24,800
Speaker 3: to see another rate cut in the not too distant future,

139
00:07:25,200 --> 00:07:27,960
Speaker 3: which would certainly take more wind out of the sales

140
00:07:28,000 --> 00:07:32,320
Speaker 3: from a US Aussie perspective. So I just don't see

141
00:07:32,320 --> 00:07:34,280
Speaker 3: a lot happening in the short term. You know, we

142
00:07:34,800 --> 00:07:37,000
Speaker 3: used to be closer to that seventy to seventy five

143
00:07:37,040 --> 00:07:40,280
Speaker 3: handle and now you're closer to sixty. So it's a

144
00:07:40,320 --> 00:07:42,760
Speaker 3: great time to visit Australia with a strong US dollar.

145
00:07:42,840 --> 00:07:45,680
Speaker 1: Let me tell you, so, give me your best cross

146
00:07:45,760 --> 00:07:47,360
Speaker 1: right now. Long short, what is it?

147
00:07:49,000 --> 00:07:50,920
Speaker 3: Well, it's been over the last couple of weeks has

148
00:07:50,960 --> 00:07:53,680
Speaker 3: been very much euro so you know one O nine

149
00:07:53,800 --> 00:07:56,760
Speaker 3: fifty is maybe it's to the tail.

150
00:07:56,640 --> 00:07:58,120
Speaker 2: End of it, but maybe you're going to see a

151
00:07:58,160 --> 00:07:59,400
Speaker 2: one eleven. Let's just see.

152
00:07:59,440 --> 00:08:02,440
Speaker 3: As far as commentary coming from the FED this week

153
00:08:02,520 --> 00:08:05,520
Speaker 3: really tells the story and Yan and Pound. You've got

154
00:08:05,520 --> 00:08:08,800
Speaker 3: those three markets because of the three central bank meetings

155
00:08:08,840 --> 00:08:11,520
Speaker 3: in the next thirty six hours. So keep an eye

156
00:08:11,560 --> 00:08:15,080
Speaker 3: on Pan, keeping oil on Japanes Jinn and certainly don't

157
00:08:15,120 --> 00:08:16,840
Speaker 3: take your focus away from Europe.

158
00:08:17,120 --> 00:08:19,080
Speaker 1: We'll leave it there, Peter, it's always a pleasure. Thank

159
00:08:19,120 --> 00:08:21,920
Speaker 1: you so much. Peena McGuire. He is the CEO at

160
00:08:21,920 --> 00:08:25,480
Speaker 1: Trading dot Com Australia, joining us from Sydney. Here on

161
00:08:25,520 --> 00:08:37,920
Speaker 1: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.

162
00:08:38,120 --> 00:08:41,880
Speaker 1: I'm Doug Chrisner. So, the US equity market declined today

163
00:08:42,080 --> 00:08:46,360
Speaker 1: on signs investors are reducing their exposure to US risk assets.

164
00:08:46,920 --> 00:08:50,160
Speaker 1: The latest survey from Bank of America shows investors have

165
00:08:50,280 --> 00:08:53,439
Speaker 1: cut their holdings of US equities by the most on record,

166
00:08:53,520 --> 00:08:57,800
Speaker 1: while at the same time cash levels have jumped. Seems

167
00:08:57,880 --> 00:09:01,439
Speaker 1: like worries over tariffs and a possible economic slowdown are

168
00:09:01,520 --> 00:09:03,840
Speaker 1: the big part of the story. Let's take a closer

169
00:09:03,840 --> 00:09:05,800
Speaker 1: look now with our guest Rob Williams. He is the

170
00:09:05,840 --> 00:09:11,200
Speaker 1: chief investment strategist at Sage Advisory, joining us from Austin, Texas. Rob,

171
00:09:11,240 --> 00:09:13,240
Speaker 1: thanks for being with us. Talk to me a little

172
00:09:13,240 --> 00:09:16,560
Speaker 1: bit about how you see the macro story unfolding right now,

173
00:09:16,600 --> 00:09:19,920
Speaker 1: particularly given the thread of even more tariffs.

174
00:09:21,360 --> 00:09:23,920
Speaker 4: Yeah, I mean that's been the dominant factor. Sort of,

175
00:09:23,920 --> 00:09:28,440
Speaker 4: the catalyst has been the the insane level of uncertainty, right,

176
00:09:28,800 --> 00:09:31,720
Speaker 4: and that is certain that's built into the soft data

177
00:09:31,840 --> 00:09:36,320
Speaker 4: anything survey confidence base will get hit by uncertainty and

178
00:09:36,360 --> 00:09:38,880
Speaker 4: the tarifs for doing that. But it's also you know,

179
00:09:38,920 --> 00:09:42,000
Speaker 4: it's just created a lot of fears that growth is

180
00:09:42,040 --> 00:09:44,520
Speaker 4: going to be revised down right. We were going to

181
00:09:44,880 --> 00:09:48,760
Speaker 4: trough out here the second quarter sometime, you know, somewhere

182
00:09:48,800 --> 00:09:50,680
Speaker 4: around two percent, and now people are going to have

183
00:09:50,720 --> 00:09:53,400
Speaker 4: to reevaluate that or we're going to hit one percent,

184
00:09:53,480 --> 00:09:56,079
Speaker 4: or were going to hit sub one percent. So it's

185
00:09:56,160 --> 00:09:59,320
Speaker 4: kind of we've gone into the year thinking we were all,

186
00:09:59,559 --> 00:10:02,080
Speaker 4: you know, very bullish and the growth was going to

187
00:10:02,080 --> 00:10:03,880
Speaker 4: be so strong that the Fed was not going to

188
00:10:03,920 --> 00:10:06,080
Speaker 4: be able to cut rates, and now we're we've had

189
00:10:06,120 --> 00:10:08,640
Speaker 4: to reevaluate that whole thing, and the market has had

190
00:10:08,640 --> 00:10:11,319
Speaker 4: to reprice for that, and it's and it struggles to

191
00:10:11,960 --> 00:10:13,240
Speaker 4: find that pricing still.

192
00:10:13,520 --> 00:10:15,160
Speaker 1: So what is your sense are we going to have

193
00:10:15,200 --> 00:10:15,840
Speaker 1: a recession?

194
00:10:17,240 --> 00:10:20,320
Speaker 4: You know, our official call has not moved, you know,

195
00:10:20,440 --> 00:10:24,560
Speaker 4: shifted to recession, but we do believe growth forecasts are

196
00:10:24,600 --> 00:10:25,560
Speaker 4: going to have to be reduced.

197
00:10:25,600 --> 00:10:25,760
Speaker 1: Right.

198
00:10:25,760 --> 00:10:30,400
Speaker 4: You'll probably see the FED, you know, go that way tomorrow. Right,

199
00:10:30,480 --> 00:10:32,640
Speaker 4: So I think you don't have to hit recession to

200
00:10:32,640 --> 00:10:36,880
Speaker 4: continue to rattle the markets and cause problems here and

201
00:10:36,920 --> 00:10:39,920
Speaker 4: sort of self feed some more slow down you get

202
00:10:39,960 --> 00:10:42,720
Speaker 4: you get sub one percent, and I don't know, you

203
00:10:42,760 --> 00:10:44,480
Speaker 4: still consider that a soft thing. I don't know, but

204
00:10:44,559 --> 00:10:46,360
Speaker 4: if the plane is certainly going to get closer to

205
00:10:46,400 --> 00:10:49,520
Speaker 4: the ground and make us all very uncomfortable. So I

206
00:10:49,559 --> 00:10:52,240
Speaker 4: think we may get that one percent or sub one

207
00:10:52,280 --> 00:10:55,640
Speaker 4: percent and just get a lot closer to that negative

208
00:10:55,640 --> 00:10:57,320
Speaker 4: growth than we thought we were going to get, and

209
00:10:57,360 --> 00:11:00,600
Speaker 4: that will be enough to uh to keep this risk

210
00:11:00,960 --> 00:11:03,520
Speaker 4: averse sort of tone in the market and keep the

211
00:11:03,559 --> 00:11:06,160
Speaker 4: FED on the table for a couple of cuts later

212
00:11:06,160 --> 00:11:06,560
Speaker 4: in the year.

213
00:11:06,840 --> 00:11:08,640
Speaker 1: So at the long end of the curve, I'm seeing

214
00:11:08,679 --> 00:11:11,800
Speaker 1: a tenure at about four point two eight percent. How

215
00:11:11,880 --> 00:11:14,679
Speaker 1: far can yields move down at this point on the

216
00:11:14,760 --> 00:11:15,720
Speaker 1: long end of the curve?

217
00:11:17,200 --> 00:11:20,000
Speaker 4: Yeah, I mean they've adjusted quite a bit, you know,

218
00:11:20,920 --> 00:11:24,800
Speaker 4: from the fourth quarter sort of repricing. And the problem

219
00:11:24,920 --> 00:11:27,920
Speaker 4: is a FED has got you know, it's a growth problem.

220
00:11:27,920 --> 00:11:30,559
Speaker 4: But inflation is gonna you know, don't We don't think

221
00:11:30,559 --> 00:11:32,760
Speaker 4: it's going to pick back up meaningfully at the moment,

222
00:11:32,800 --> 00:11:35,040
Speaker 4: but it's certainly stalling out a little bit. So there's

223
00:11:35,120 --> 00:11:37,080
Speaker 4: less room at the back end of the curve, and

224
00:11:37,120 --> 00:11:39,920
Speaker 4: probably more room and more value at the front end

225
00:11:39,920 --> 00:11:42,080
Speaker 4: of the curve because that'll be driven more of what

226
00:11:42,120 --> 00:11:44,400
Speaker 4: the Fed is going to have to do later this year.

227
00:11:44,840 --> 00:11:47,800
Speaker 4: So we're back into kind of fair value territory for

228
00:11:47,880 --> 00:11:51,120
Speaker 4: the longer end of the curve. But you know, investors

229
00:11:51,120 --> 00:11:53,120
Speaker 4: shouldn't get tied up in the in the real short

230
00:11:53,200 --> 00:11:55,880
Speaker 4: term interest rate volatility. Bonds are going to do their

231
00:11:56,000 --> 00:11:58,800
Speaker 4: job because you're getting you know, four and a half

232
00:11:58,840 --> 00:12:03,000
Speaker 4: five percent yield in high quality fixed income, So you're

233
00:12:03,000 --> 00:12:06,080
Speaker 4: gonna get you that's a good basis for returns right there.

234
00:12:06,400 --> 00:12:08,800
Speaker 4: So don't get too you know, caught up in the

235
00:12:08,840 --> 00:12:11,760
Speaker 4: week to week, month to month interest rate fair value

236
00:12:11,559 --> 00:12:13,120
Speaker 4: and volatility of rates.

237
00:12:13,200 --> 00:12:17,440
Speaker 1: Right So we're talking about the possibility of weaker growth, okay,

238
00:12:17,559 --> 00:12:23,240
Speaker 1: But if inflation remains stubborn or perhaps has a push higher,

239
00:12:23,640 --> 00:12:26,640
Speaker 1: are we talking about a scenario that could resemble stagflation?

240
00:12:28,160 --> 00:12:31,640
Speaker 4: I mean, that's certainly been tossed around. You know, we

241
00:12:31,640 --> 00:12:34,679
Speaker 4: we lean to more of the growth weakness side at

242
00:12:34,679 --> 00:12:37,640
Speaker 4: the moment. You know, some of the things that's happening.

243
00:12:37,760 --> 00:12:41,240
Speaker 4: You know, the fiscal constraint hasn't really fully hit the

244
00:12:41,320 --> 00:12:44,160
Speaker 4: job market, so we expect to see some deterioration there

245
00:12:44,880 --> 00:12:47,840
Speaker 4: in the coming months, right. I mean, the government sector's

246
00:12:47,840 --> 00:12:49,920
Speaker 4: made up a third of the job growth over the

247
00:12:50,000 --> 00:12:52,960
Speaker 4: last couple of years, and you throw in, you know,

248
00:12:53,080 --> 00:12:56,600
Speaker 4: certain parts of healthcare and social assistance and it becomes

249
00:12:56,679 --> 00:12:58,240
Speaker 4: fifty sixty to seventy percent.

250
00:12:59,120 --> 00:13:00,839
Speaker 2: So we know the growth story is.

251
00:13:00,760 --> 00:13:01,200
Speaker 1: Going to weaken.

252
00:13:01,280 --> 00:13:03,040
Speaker 4: Inflation is a little harder because we don't know what

253
00:13:03,120 --> 00:13:05,200
Speaker 4: terriffs we're going to end up with, we don't know

254
00:13:05,240 --> 00:13:09,040
Speaker 4: how substitution effects play in there. And really the sticky

255
00:13:09,040 --> 00:13:12,800
Speaker 4: inflation story has been a service story, right, and that

256
00:13:13,000 --> 00:13:17,000
Speaker 4: is starting to go the other way because consumer spending

257
00:13:17,000 --> 00:13:20,320
Speaker 4: in the service sector is being hit by tariffs. So

258
00:13:20,360 --> 00:13:23,840
Speaker 4: it's sort of there's some elements that will offset the

259
00:13:23,960 --> 00:13:27,359
Speaker 4: terror story and the inflation story, and for us, it's

260
00:13:27,400 --> 00:13:30,760
Speaker 4: a little more clear of the growth slowdown story.

261
00:13:31,200 --> 00:13:33,360
Speaker 1: So a lot of the European bond markets have been

262
00:13:33,480 --> 00:13:37,160
Speaker 1: rallying lately, particularly in Germany where it looks as though

263
00:13:37,280 --> 00:13:41,240
Speaker 1: lawmakers have just passed a landmark package to increase defense spending.

264
00:13:41,600 --> 00:13:44,240
Speaker 1: Is that where you want to have exposure right now?

265
00:13:44,440 --> 00:13:47,040
Speaker 1: Fixed income markets that are offshore.

266
00:13:46,840 --> 00:13:50,559
Speaker 4: Yeah, both equity and fixed income. I think diversification has

267
00:13:50,640 --> 00:13:53,959
Speaker 4: been a good move so far, especially on the equity side,

268
00:13:54,000 --> 00:13:57,520
Speaker 4: and also kind of non dollar emerging market debt has

269
00:13:57,600 --> 00:13:58,960
Speaker 4: done very well recently.

270
00:13:59,040 --> 00:14:01,360
Speaker 2: I think you want to be safe, becaulse.

271
00:14:01,400 --> 00:14:04,000
Speaker 4: Spreads are tight and there is some economic risks, so

272
00:14:04,040 --> 00:14:06,400
Speaker 4: you don't want to reach, you know, quote unquote reach

273
00:14:06,440 --> 00:14:08,400
Speaker 4: to aggressively for yield, but I think you do want

274
00:14:08,400 --> 00:14:10,440
Speaker 4: to spread yourself out a little bit more. We see

275
00:14:10,440 --> 00:14:15,200
Speaker 4: opportunities in sort of non core markets and then big

276
00:14:15,240 --> 00:14:17,760
Speaker 4: opportunity in the in the mortgage back market here in

277
00:14:17,800 --> 00:14:18,280
Speaker 4: the US.

278
00:14:18,480 --> 00:14:21,000
Speaker 1: Let's assume you're being forced to chase yield in the

279
00:14:21,080 --> 00:14:23,760
Speaker 1: US right now with a risk of slower growth. How

280
00:14:23,760 --> 00:14:25,840
Speaker 1: does the high yield market look to you right now?

281
00:14:26,360 --> 00:14:26,560
Speaker 2: Yeah?

282
00:14:26,600 --> 00:14:30,240
Speaker 4: I mean, you know, you know, yield usually and technical

283
00:14:30,280 --> 00:14:33,880
Speaker 4: is usually trump spreads, so right, we know spreads are tight,

284
00:14:34,040 --> 00:14:36,200
Speaker 4: but yields are attractive, So it's still going to draw

285
00:14:36,320 --> 00:14:39,680
Speaker 4: money in and hopefully keep it somewhat range bound. But

286
00:14:39,800 --> 00:14:42,960
Speaker 4: we were not buyers of adding high yield at this level.

287
00:14:43,240 --> 00:14:46,680
Speaker 4: We're looking for ways to spread out, right. Bank loans

288
00:14:47,080 --> 00:14:51,280
Speaker 4: have have a modestation that their valuations and bank loans

289
00:14:51,280 --> 00:14:53,080
Speaker 4: have been a little bit better than high yield. So

290
00:14:53,120 --> 00:14:56,320
Speaker 4: there's other areas that diversify your high yield and could

291
00:14:56,320 --> 00:15:00,560
Speaker 4: spread yourself out. Like I said, em debt owns even

292
00:15:00,600 --> 00:15:02,440
Speaker 4: a little bit preferred stocks, and I think it's a

293
00:15:02,480 --> 00:15:05,480
Speaker 4: better way than to put all your eggs in one basket.

294
00:15:05,520 --> 00:15:10,360
Speaker 1: On the US spread side, what is your predominant concern? Yeah,

295
00:15:10,400 --> 00:15:11,320
Speaker 1: I mean we kind.

296
00:15:11,120 --> 00:15:14,600
Speaker 4: Of hit on the growth aspect of it, and the

297
00:15:14,720 --> 00:15:18,320
Speaker 4: volatility and the uncertainty sort of feeding into itself and

298
00:15:18,880 --> 00:15:21,880
Speaker 4: getting much worse. And you know, the worst scenario for

299
00:15:21,920 --> 00:15:25,240
Speaker 4: investor is that stagflation one you mentioned, right, because then

300
00:15:25,960 --> 00:15:31,040
Speaker 4: we saw that correlations stocks and bonds are correlated. You

301
00:15:31,040 --> 00:15:33,680
Speaker 4: know when you have an inflation problem, right, So if

302
00:15:34,240 --> 00:15:36,560
Speaker 4: and a low growth problem, so that would hit both

303
00:15:36,600 --> 00:15:39,120
Speaker 4: the equity and the fixed income side. We're less worried

304
00:15:39,120 --> 00:15:41,120
Speaker 4: about a growth slowdown on the fixed income side.

305
00:15:41,200 --> 00:15:41,800
Speaker 2: That'll help you.

306
00:15:41,840 --> 00:15:43,640
Speaker 4: That'll be okay on the fixed income.

307
00:15:43,360 --> 00:15:45,000
Speaker 2: Side and hurt the equity side more.

308
00:15:45,280 --> 00:15:48,160
Speaker 4: But stagflation scenario, which is not our call right now,

309
00:15:48,200 --> 00:15:50,920
Speaker 4: that would be most painful for all asset.

310
00:15:50,560 --> 00:15:53,400
Speaker 1: Classes, no doubt about that. And at the end of

311
00:15:53,480 --> 00:15:55,960
Speaker 1: last week we had data from the University of Michigan

312
00:15:56,000 --> 00:16:00,760
Speaker 1: and a big jump in consumer expectations for and that's

313
00:16:00,760 --> 00:16:04,800
Speaker 1: got to be problematic for the FED. I would imagine, yeah,

314
00:16:04,800 --> 00:16:06,000
Speaker 1: that's it is problematic.

315
00:16:06,040 --> 00:16:09,280
Speaker 4: They're going to have to if the equity market's looking for,

316
00:16:09,640 --> 00:16:13,880
Speaker 4: you know, a douvish help or a put to help

317
00:16:13,920 --> 00:16:15,360
Speaker 4: the equity market. I don't know if they're going to

318
00:16:15,440 --> 00:16:18,160
Speaker 4: get it, because they do have to balance They're going

319
00:16:18,200 --> 00:16:20,520
Speaker 4: to have to acknowledge that we're getting weaker growth, and

320
00:16:20,560 --> 00:16:24,120
Speaker 4: they also have to acknowledge that inflation is stalling a

321
00:16:24,160 --> 00:16:27,760
Speaker 4: bit here and with tariffs and some of the uncertainty,

322
00:16:28,600 --> 00:16:30,840
Speaker 4: it could be more of a problem than they thought.

323
00:16:30,920 --> 00:16:33,880
Speaker 4: So they really got to balance it out here on

324
00:16:33,920 --> 00:16:36,520
Speaker 4: the growth and inflation issue. And so I don't I

325
00:16:36,560 --> 00:16:39,960
Speaker 4: think it's if anything, it'll be okay for bonds and

326
00:16:39,960 --> 00:16:41,760
Speaker 4: I don't think it's going to be helpful for equities.

327
00:16:42,000 --> 00:16:44,960
Speaker 1: You mentioned bank credit a short while ago. Yesterday we

328
00:16:45,040 --> 00:16:47,760
Speaker 1: had news that Michelle Bowman, the Fed governor has been

329
00:16:47,800 --> 00:16:51,960
Speaker 1: tapped to serve as vice chair for Supervision. We know

330
00:16:52,120 --> 00:16:54,880
Speaker 1: that she's been critical of a plan to require banks

331
00:16:54,920 --> 00:16:58,560
Speaker 1: to hold more capital, so maybe she, if she's confirmed,

332
00:16:58,800 --> 00:17:02,480
Speaker 1: she brings a lighter touch to regulation. Does that cause

333
00:17:02,520 --> 00:17:06,240
Speaker 1: you to become a little bit more interested in bank credit?

334
00:17:08,560 --> 00:17:13,000
Speaker 4: I mean, look, the banking sector is one of the

335
00:17:13,080 --> 00:17:17,400
Speaker 4: fundamentally most solid parts of the credit market. So even

336
00:17:17,440 --> 00:17:22,400
Speaker 4: though spreads are tight, there's opportunity in banks, and anything

337
00:17:22,440 --> 00:17:26,280
Speaker 4: that's supported by sort of AI infrastructures there's opportunities, and energy,

338
00:17:26,400 --> 00:17:28,400
Speaker 4: there's opportunities in some of the utilities.

339
00:17:28,760 --> 00:17:30,160
Speaker 2: So yeah, we're.

340
00:17:30,000 --> 00:17:33,479
Speaker 4: Already like the bank and finance sector in credit, and

341
00:17:33,960 --> 00:17:40,440
Speaker 4: you know, less regulation only sort of bolsters that near term, right.

342
00:17:41,000 --> 00:17:43,760
Speaker 4: I don't know if it's a great thing long term,

343
00:17:43,760 --> 00:17:46,760
Speaker 4: but it certainly will probably help spread short term.

344
00:17:47,200 --> 00:17:49,639
Speaker 1: So as long as we're talking about industries, when you

345
00:17:49,680 --> 00:17:52,360
Speaker 1: look at credit markets, are there industries that you want

346
00:17:52,400 --> 00:17:54,200
Speaker 1: to avoid at all costs these days?

347
00:17:55,920 --> 00:17:59,160
Speaker 4: You know, probably the things that are in the most

348
00:17:59,440 --> 00:18:03,200
Speaker 4: kind of consumer discretionary areas of the market, the most

349
00:18:03,240 --> 00:18:06,679
Speaker 4: consumer cyclical areas of the market, and some of the

350
00:18:06,680 --> 00:18:11,399
Speaker 4: communication areas of the market where spreads are still very tight,

351
00:18:12,080 --> 00:18:15,200
Speaker 4: and they're more you know, they have a higher beta

352
00:18:15,280 --> 00:18:18,280
Speaker 4: or attachment to if the consumer retrenches a little bit.

353
00:18:18,760 --> 00:18:20,720
Speaker 4: So that's kind of what you kind of you can

354
00:18:20,800 --> 00:18:25,440
Speaker 4: actually keep a full allocation to investment grade credit and

355
00:18:25,480 --> 00:18:28,159
Speaker 4: a bond portfolio and be set up to be defensive

356
00:18:28,480 --> 00:18:31,800
Speaker 4: because you can have a shorter sort of interest rate

357
00:18:31,920 --> 00:18:34,440
Speaker 4: risk in that credit exposure, and then you can also

358
00:18:34,560 --> 00:18:38,080
Speaker 4: have lower beta sectors and names. So if you get

359
00:18:38,080 --> 00:18:40,600
Speaker 4: spread widening, you you know, you get hurt, but you

360
00:18:40,640 --> 00:18:42,800
Speaker 4: outperform the index a little bit, and then you can

361
00:18:43,119 --> 00:18:45,800
Speaker 4: you know, use some dry powder to take advantage of

362
00:18:45,840 --> 00:18:46,680
Speaker 4: wider spreads.

363
00:18:46,760 --> 00:18:50,400
Speaker 1: What about the margage I'm sorry, what about them? Let

364
00:18:50,400 --> 00:18:52,680
Speaker 1: me say that again. What about the mortgage market?

365
00:18:53,720 --> 00:18:55,800
Speaker 4: Yeah, I mean that's been a good story for a

366
00:18:55,840 --> 00:18:59,160
Speaker 4: while now, right, you know, usually you have to give

367
00:18:59,280 --> 00:19:04,040
Speaker 4: up yield to be in in high quality government backed

368
00:19:04,080 --> 00:19:08,160
Speaker 4: agency mortgage versus credit. Right and right now you're picking

369
00:19:08,240 --> 00:19:10,000
Speaker 4: up a little bit of yield. So you're picking up

370
00:19:10,080 --> 00:19:13,800
Speaker 4: quality and you have good liquidity, and you're actually picking

371
00:19:13,880 --> 00:19:16,960
Speaker 4: up a little yield. You know, you're you're getting similar

372
00:19:17,000 --> 00:19:19,680
Speaker 4: yields are like a triple B corporate bond So that's

373
00:19:19,720 --> 00:19:21,840
Speaker 4: a great that's a great trade. Right now you have

374
00:19:21,880 --> 00:19:25,000
Speaker 4: to be somewhat have active management and do your coupon

375
00:19:25,080 --> 00:19:27,200
Speaker 4: selection and things like that. But it's a great place

376
00:19:27,200 --> 00:19:29,840
Speaker 4: to be because you're you're literally lowering your risk a

377
00:19:29,880 --> 00:19:31,800
Speaker 4: little bit and you're adding a little bit of yield

378
00:19:32,119 --> 00:19:35,040
Speaker 4: and in spreads don't have to tighten. If you go sideways,

379
00:19:35,119 --> 00:19:36,000
Speaker 4: you're still winning.

380
00:19:36,400 --> 00:19:38,520
Speaker 2: So it's so it's okay. So that's been a.

381
00:19:38,480 --> 00:19:41,600
Speaker 4: Good place to be in the in the US market

382
00:19:41,640 --> 00:19:44,680
Speaker 4: for sure, and probably where our largest overweight.

383
00:19:44,280 --> 00:19:46,280
Speaker 1: Is before I let you go, Rob, in terms of

384
00:19:46,520 --> 00:19:48,560
Speaker 1: if you're right and we do get easing from the

385
00:19:48,600 --> 00:19:52,120
Speaker 1: FED at some point this year, what is the magnitude

386
00:19:52,160 --> 00:19:52,880
Speaker 1: of that cut?

387
00:19:53,160 --> 00:19:54,800
Speaker 4: You know, I think the pricing is two and a

388
00:19:54,840 --> 00:19:57,880
Speaker 4: half or three kind of area you know, from now

389
00:19:57,920 --> 00:20:00,840
Speaker 4: to the end of the year. That's certainly feels right

390
00:20:01,359 --> 00:20:04,639
Speaker 4: to what we see in the growth fundamentals in the

391
00:20:04,720 --> 00:20:07,720
Speaker 4: job market. That might hit us is two cuts to

392
00:20:07,720 --> 00:20:11,240
Speaker 4: twenty five basis point cuts. You know, this is all

393
00:20:11,280 --> 00:20:14,240
Speaker 4: subject to change as data evolves. With that. Right now,

394
00:20:14,400 --> 00:20:18,160
Speaker 4: the pricing feels fair in kind of that level.

395
00:20:18,280 --> 00:20:20,359
Speaker 1: Rob will leave it there, thank you so much. Always

396
00:20:20,359 --> 00:20:22,960
Speaker 1: a pleasure. Rob Williams. There. He is the chief investment

397
00:20:23,000 --> 00:20:27,639
Speaker 1: strategist at Sage Advisory. Joining from Austin, Texas here on

398
00:20:27,680 --> 00:20:33,159
Speaker 1: the Daybreak Asia Podcast. Thanks for listening to today's episode

399
00:20:33,200 --> 00:20:37,240
Speaker 1: of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we

400
00:20:37,280 --> 00:20:41,159
Speaker 1: look at the story shaping markets, finance, and geopolitics in

401
00:20:41,200 --> 00:20:44,359
Speaker 1: the Asia Pacific. You can find us on Apple, Spotify,

402
00:20:44,520 --> 00:20:48,000
Speaker 1: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

403
00:20:48,400 --> 00:20:51,320
Speaker 1: Join us again tomorrow for insight on the market moves

404
00:20:51,359 --> 00:20:55,880
Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Chrisner,

405
00:20:56,080 --> 00:21:01,480
Speaker 1: and this is Bloomberg two