Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
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Speaker 1: you want to us on this program here in New York,
Speaker 1: Tompus say, obvious Capital Markets Chief US Economists, Good morning
Speaker 1: to Tom. Hey, how are you guys doing? You and
Speaker 1: I have talked before. Sorry, go on, go on. Sorry,
Speaker 1: he's not still behind me right now, Dunkings Shadow literally lazy,
Speaker 1: I can, I can have now checked the internal system.
Speaker 1: He's walked out of the building. Sorry, I'm sorry. Confusing
Speaker 1: a return to trent growth with a journey to somewhere
Speaker 1: a whole lot more worrying. We've talked about this so
Speaker 1: many times through much of now some people confusing full
Speaker 1: employment with a cyclical peak in labor market conditions. You've
Speaker 1: written about that, just explore it further for us. Yeah, So,
Speaker 1: you know, I think one of the one of the
Speaker 1: interesting things is I think people get caught up in
Speaker 1: sort of headlines and and I don't mean news headlines,
Speaker 1: I mean sort of you know, headline economic stuff. Uh.
Speaker 1: And one of the things I think people get lost
Speaker 1: in is particularly if you're looking at employment to population
Speaker 1: ratios or if you're looking at on labor force participation rates.
Speaker 1: And I think if you look at the headlines on
Speaker 1: these things, um, you know, they're they have not really
Speaker 1: done all that much, and I think it leads people
Speaker 1: to sort of, you know, draw this conclusion that, um,
Speaker 1: you know, we're we're still not even remotely close to
Speaker 1: full employment. But what we've been saying to people is okay,
Speaker 1: but you can't look at these those specific headlines. You
Speaker 1: need to look at the cyclical part rate. You need
Speaker 1: to look at the cyclical employment to population ratio. And
Speaker 1: when you do that, um and and sorry just to
Speaker 1: digress cyclically. What I mean is, you know, sort of
Speaker 1: the prime working age cohort, so the fifty four year olds,
Speaker 1: and when you do that, and when you do that,
Speaker 1: what you see is that those measures have all improved dramatically, dramatically,
Speaker 1: which from from our perspective, again, if you look at
Speaker 1: you know, whether it's the part rate or the employment
Speaker 1: population ratio, we're above where we were in even certainly
Speaker 1: in the previous cycle. Um, and so it's really easy
Speaker 1: to make the case that you're you know, if you're
Speaker 1: not at full employment, you're really really close. I guess
Speaker 1: when I see the headlines of of economic stuff, as
Speaker 1: you put in, my big question is should I be
Speaker 1: bullish or bearish today? Right? I mean, is that basically
Speaker 1: what's the what's sort of the much so given the
Speaker 1: fact that we are seeing better employment than expected? Is
Speaker 1: that a bull argument or a bar argue? You know,
Speaker 1: it's funny and and and Jonathan and I have certainly
Speaker 1: had this conversation before. Um, it seems all of a
Speaker 1: sudden now today, like literally over the last week or two,
Speaker 1: that good is good again, which is which is sort
Speaker 1: of perverse, because good was bad, bad was good. We
Speaker 1: had all these like weird sort of iterations, right, which
Speaker 1: is utterly ridiculous in every way. But now, all of
Speaker 1: a sudden today good is good and um so, But
Speaker 1: but again, I stress, this is over the last week
Speaker 1: or two, and I'm defining that in terms of sort
Speaker 1: of the many clients that I speak to on a
Speaker 1: pretty regular basis. And and the thing I find utterly
Speaker 1: amusing about that is nothing has changed, literally, nothing has
Speaker 1: changed over the last week or two. You know, all
Speaker 1: of a sudden, everyone is like feeling a little bit
Speaker 1: better about the backdrop. So I don't know whether it is,
Speaker 1: you know, maybe people are, you know, sort of coming
Speaker 1: to grips with the reality that maybe something is going
Speaker 1: to get done on trade, although I would hasten to
Speaker 1: add that anytime anyone gave me like the bearer case
Speaker 1: for things, it never started it off with trade. But
Speaker 1: but again, maybe maybe that's fair. Um, you know, maybe
Speaker 1: maybe it's the equity markets up year to day. I
Speaker 1: don't know what it is, but all of a sudden,
Speaker 1: people are feel a little bit better about the backdrop
Speaker 1: in I think that's I think that's all well and good.
Speaker 1: But I think I'm just waiting for the next shoe
Speaker 1: to drop now, because I'm telling you, the vast majority
Speaker 1: of people that I spoke to prior to the last
Speaker 1: week or two have been overwhelmingly negative. Um, but now
Speaker 1: all of a sudden, people are feeling a little bit
Speaker 1: better about the stuff. I mean, which I find silly
Speaker 1: because I'm not sure that they're basing on anything. Sound
Speaker 1: So Tom, could that next? Sorry, I don't want to
Speaker 1: make sure that point is not left out there, and ether.
Speaker 1: I've never thought that people should be negative, um, but
Speaker 1: they were so sorry. So would that next shoe to
Speaker 1: drop be the consumer? The consumers arguably the only thing
Speaker 1: holding up this economy, and maybe because of the adam
Speaker 1: near full employment. Yeah, sure, I mean, I think there's
Speaker 1: no question that the consumer is sort of, you know,
Speaker 1: pulling a lot of weight, right, They're punching way above
Speaker 1: of their weight. But I think if you want to
Speaker 1: make the argument for the demise of the consumer, you
Speaker 1: you gotta really you. I don't even know where to
Speaker 1: where you'd go to find that. Um. I mean again,
Speaker 1: let me be clear, I don't look through the world
Speaker 1: with rose cover glasses, UM. But I think labor backdrops
Speaker 1: incredibly tight wage pressures continue to build. UM. The level
Speaker 1: of saving in the United States, whether it's sort of
Speaker 1: just um consumer or total private saving, is incredibly elevated,
Speaker 1: meaning that there's even some some cushion should should the
Speaker 1: consumer sort of suffer through some about of of hesitation.
Speaker 1: So I would say that it's really difficult to make
Speaker 1: the case that the consumers about to roll over when
Speaker 1: all evidence to the contrary, Right, the consumers and phenomenal
Speaker 1: shape the division of the FED has turned into unity.
Speaker 1: It saves for the last couple of weeks, which Mike
Speaker 1: of that I just you know, and Tom and I
Speaker 1: were talking about this on TV a little while ago.
Speaker 1: I mean the fact that Evans, you know, wasn't one
Speaker 1: of the folks looking for a cut after the not
Speaker 1: after the most recently in the meeting prior. I mean
Speaker 1: he he said he wasn't one of the folks looking
Speaker 1: for a cut. I mean, I think for me that that,
Speaker 1: I mean, we sort of had always thought that they
Speaker 1: would have a hard time getting more cuts anyway, but
Speaker 1: that really drove home for us. It's like, you know,
Speaker 1: the hurdle for additional cuts right now is so significant, um,
Speaker 1: when you have all these extreme doves basically on the
Speaker 1: same page at this point. So I think it would
Speaker 1: take real deterioration from here. By the way, let's not
Speaker 1: forget next year is an election year. And while well,
Speaker 1: while anyone who's done this for any lengthy period of time,
Speaker 1: those that the FED has engaged in policy action during
Speaker 1: election years, it usually takes a heck of a lot
Speaker 1: for them to engage. So, um, I think FED on
Speaker 1: hold is for for the for the coming year, is
Speaker 1: absolutely the right call, which is the market seems to
Speaker 1: be buying into So you're saying that you don't want
Speaker 1: to be seen as having too too much of a
Speaker 1: rose colored view of the world. But also you've never
Speaker 1: been negative and this new line no, no, no no, that
Speaker 1: you have never been negative. Yeah, you've been thankating, but
Speaker 1: I'm saying you've been generally positive recently, absolutely, which has
Speaker 1: been really easy. Okay, so you've generally been positive. You
Speaker 1: also don't want to be too rosy. This nuance, I
Speaker 1: think is getting lost in this market and difficult for
Speaker 1: people to read because it has been so monolithic in
Speaker 1: its story. Either the FED was backing it or trade
Speaker 1: was going to torpedo it. What's the sort of trade
Speaker 1: around this in terms of you know, does that mean
Speaker 1: markets go up or down? Yeah? Yeah, So what I
Speaker 1: would say is, I think, you know, one of the
Speaker 1: things that we had built into our view was that
Speaker 1: guilds would actually start to rise, uls will start to
Speaker 1: rise only after we got a trade deal done. Now,
Speaker 1: in fairness, we always thought a trade deal was going
Speaker 1: to get done, but we've been thinking of it more
Speaker 1: in terms of like, you know, sort of a first
Speaker 1: half of event, like sort of you know, some sometime
Speaker 1: early in the first half of the year you get
Speaker 1: a trade deal done. So it's having a little bit
Speaker 1: sooner than we thought. And so if you look at
Speaker 1: our forecast, we had built in a rise and yields
Speaker 1: in the second half of next year. Um, if you
Speaker 1: they do sign this deal. Um, I think it's really
Speaker 1: easy to make the case that yields continue to rise
Speaker 1: from here. So I think it's it's not a good
Speaker 1: backdrop from a from a yield perspective in the unit,
Speaker 1: from a bond perspective in the United States, because yields
Speaker 1: will rise. I think on the on the back of
Speaker 1: this deal, I think the equity market and I think
Speaker 1: our strategists are equity strategistm or listen in line with
Speaker 1: this view as well. You know the equity market is
Speaker 1: going to perform well again in the coming year too, right.
Speaker 1: It's again if the fundamental pieces remaining place for that
Speaker 1: to happen. It's really easy to make that case. Temple
Speaker 1: Selly always great scay thoughts. Thanks to see your buddy
Speaker 1: temple Selly obvious Capital Markets chief US Economists. We're fortunate
Speaker 1: to have David Kirkpatrick in our Bloomberg Interactive broker fortunate
Speaker 1: here there you go. David's a tech on me a
Speaker 1: CEO and founders. So David, I know you you look
Speaker 1: at all things tech, You've got it just a great
Speaker 1: view of what's happening in Silicon Valley is what's going
Speaker 1: on here with you know you look at Uber, you
Speaker 1: look at if do you look at we work pulling
Speaker 1: that deal, the Smile direct deal. There seems to be
Speaker 1: a disconnect between private market valuations coming out of Silicon
Speaker 1: Valley and soft Bank and public markets. What do you
Speaker 1: what do you make of that? This year? Well, SoftBank
Speaker 1: I think had a extreme impact on the market, the
Speaker 1: private market's opinion about what a company could be worth
Speaker 1: because but they believe massio Son believes he can be
Speaker 1: a kingmaker. He can identify which CEOs can take a
Speaker 1: company and make it into the next Facebook. I think
Speaker 1: to some extent, the existence of Facebook in particular confused
Speaker 1: a lot of people thinking that that could happen in
Speaker 1: any industry. And that's sort of the logic behind investing
Speaker 1: all that money in Uber or or we Work which
Speaker 1: SoftBank did? I think we do now have something of
Speaker 1: a bubble, which I think soft Bank is the single
Speaker 1: biggest contributor to So in that sense, it's a problem.
Speaker 1: It's a problem. So the the issue we need, we
Speaker 1: need look at what massa Son is saying here is
Speaker 1: full steam ahead, and where our vision is still very
Speaker 1: much intact. We're gonna raise another hundred billion dollar fund.
Speaker 1: We're gonna keep doing this. At what point, does you know,
Speaker 1: Silicon Valley, maybe some of the more Sandhill Road folks
Speaker 1: to venture capital folks in Silicon Valley push back a
Speaker 1: little bit and say, listen, we have a voice at
Speaker 1: this table. We think the valuations you're putting on some
Speaker 1: of these companies is just too much. That's a good question,
Speaker 1: I think in a lot of the companies. You know,
Speaker 1: one of the things that's happened with soft Bank is
Speaker 1: since they have been the lead investor on so many
Speaker 1: subsequent rounds in specific companies, they keep raising the market
Speaker 1: cap of companies that they so they're showing a paper
Speaker 1: gain in their earlier investments, and a lot of other
Speaker 1: Silicon Valley venture capitals are coming along with that. It's
Speaker 1: hard for them to complain because if soft Bank is
Speaker 1: willing to put in money into you know, we work
Speaker 1: at forty seven billion and you're another VC to put
Speaker 1: money in at five billion, you like that, right until
Speaker 1: it's worth eight billion. Now, in many of these cases
Speaker 1: that that deflation hasn't yet occurred. So I think in
Speaker 1: general you're not see a massive reaction against SoftBank. People
Speaker 1: just hope it continues to succeed. Well, here's my question.
Speaker 1: If you are saying that there is something of a
Speaker 1: bubble here, how does it burst? Well, I think it's
Speaker 1: burst in Uber and we were cases already and that
Speaker 1: has got a lot of people nervous. Do you think
Speaker 1: that we've seen the extent of the pain there. Well,
Speaker 1: here's one thing that I really think is going to
Speaker 1: be closely followed, and that is what happens to the
Speaker 1: money that that soft bank has thrown after bad in
Speaker 1: the case of we Work, because they're putting even more
Speaker 1: money in to save the company, right, they could have
Speaker 1: sort of walked away. I think that's if if we
Speaker 1: Work somehow stabilizes and finds a path to profitability, which
Speaker 1: I can't see happening in any near term, but if
Speaker 1: it were to happen, basically that stanches sort of a
Speaker 1: whole flood of negative stuff that could otherwise happen. Um
Speaker 1: also if uber could somehow figure out a way to
Speaker 1: be profitable. Some people say their food delivery might be
Speaker 1: the he it's a big part of their business, believe
Speaker 1: it or not. But I don't see a big fundamental
Speaker 1: shift happening in terms of the psychologys. Every time we
Speaker 1: used to discuss these companies, we talk about how they've
Speaker 1: disrupted the industry. To remember that disrupted was like the
Speaker 1: buzz word of several years ago. Every conversation disruption, disruption.
Speaker 1: They have destroyed industries, and I just wonder what happens
Speaker 1: to these industries once these companies show they can't make
Speaker 1: a profit. I don't fully buy that way of looking
Speaker 1: at push back then place. I mean I think that
Speaker 1: you know, well, I was saying this on TV before
Speaker 1: you know. Masayoshi san has done something very positive in
Speaker 1: the conviction he's had about the technology, the ability of
Speaker 1: digital technology to transform global economies, and I believe that
Speaker 1: is happening. And I think he has been ultimately the
Speaker 1: one of the biggest cheerleaders for that and put his
Speaker 1: money where his mouth was. And I think that's not bad. Um.
Speaker 1: I think many of these industries needed a in the
Speaker 1: pants um, and I don't think that you've seen I
Speaker 1: don't worry as much as you seem to worry about
Speaker 1: the value destruction that's happened, say in the taxi industry,
Speaker 1: which was an industry largely controlled by the mafia in
Speaker 1: many cities. Right, so hey, you know it took a
Speaker 1: tough guy like like Travis Kolanic to come in and
Speaker 1: shake it up. That wasn't all bad. Devid Kirkpatrick will
Speaker 1: continue the conversation another time to Economy CEO and founder.
Speaker 1: Time is up. It's not that I don't want to argue.
Speaker 1: What promise you might do? Please to say that phone
Speaker 1: again and joining us now, Jeff, you ubs Weath Management,
Speaker 1: head of the UK Investment Office, joining us out of London.
Speaker 1: Good monitor, Jeff. We remain underweight equities, that's the line
Speaker 1: from you guys. Still why Jeff world? You know right now,
Speaker 1: We just think there needs to be a distinction between
Speaker 1: pricing out downside of pricing in the upside. I think
Speaker 1: these two are separate things, and uh, we may have them.
Speaker 1: You started to confuse the two a bit, you know
Speaker 1: at this point, and I think it's important to make
Speaker 1: her that extinction. Look at ware learnings, growth sending you
Speaker 1: just look at what economic growth is heading. I think
Speaker 1: it's a bit too early to pop the champagne bottle
Speaker 1: corks and for now. So Jeff, we got some European
Speaker 1: economic data today, a little bit better on the margin.
Speaker 1: What do you take of that? Well, I think it's
Speaker 1: important to to look at what's better. So on the
Speaker 1: services side, it's all you're looking a bit better. But
Speaker 1: can we say the same for me manufacturing UM and
Speaker 1: UM and taking a step back, what actually is you know,
Speaker 1: driving Europe? You know what other drivers of Europe? If
Speaker 1: you look at German factory orders, you now today UM
Speaker 1: down your five point four percent year on their shore.
Speaker 1: The month of meter number was better. But I still think,
Speaker 1: you know, there's quite a few challenges up ahead and
Speaker 1: UM that will only strengthen the conversation where the fiscal
Speaker 1: is going to happen. Jeff, how much pushback do you
Speaker 1: get from your clients? UM? Not not as much as
Speaker 1: one would think. I think, you know, I think for
Speaker 1: the last two or three years, UM, with the exception
Speaker 1: of maybe you know, December, you know, last year, it
Speaker 1: has been a case of owning this rally reluctantly. I
Speaker 1: think the whole markets reluctant ball than right now US
Speaker 1: equities into being a big overweighting, for example, because there's
Speaker 1: simply a lack of alternatives. And I don't think that's
Speaker 1: some change you know, too much. However, I would I
Speaker 1: would say that this talk of late cycle probably you know,
Speaker 1: has compared to even a year or two ago and
Speaker 1: has really come off. So we're just taking a day
Speaker 1: at a time. I don't think there's too much you know, pushback.
Speaker 1: M there is a bit of an opportunity cost of
Speaker 1: not being more aggressively in the market, and it's something
Speaker 1: that will be cognizant of. Jeff, let's talk about the
Speaker 1: trade negotiations. The so called negotiation gaps have closed. I
Speaker 1: just wonder what's left. Is that a cause for concern
Speaker 1: or hope it's for a course of confirm per se,
Speaker 1: because I just still think there's a disconnect between what
Speaker 1: the market's expecting and what realistically on the two sides,
Speaker 1: and it can actually put forward, you know, for the
Speaker 1: best part of the summer in your China has been stressed.
Speaker 1: It's important to separate the structural issues. On the second
Speaker 1: track of you know, I p of techno things like
Speaker 1: that you know from the tariff side of things. You know,
Speaker 1: tariff side was always going to be the easier one
Speaker 1: in a polical window dressing un versus the long term
Speaker 1: structural issues which will be a multi even a multi
Speaker 1: decade in a process. So I don't think those gaps
Speaker 1: are that wide at all our markets, and you're looking
Speaker 1: for more at this point, and on balance, I would
Speaker 1: say yes, So I think you know that's where the
Speaker 1: risk coope is some disappointment that we have to bear
Speaker 1: in mind. A shorter term relief that's always welcome and
Speaker 1: it's something that we can look forward to. A lot
Speaker 1: of people have been talking about how trade it has
Speaker 1: the trade tensions have already impeded certain businesses. Are there
Speaker 1: certain businesses that you stopped investing in because of the
Speaker 1: effect of the ongoing trade skirmishes. I really think you're
Speaker 1: seeing this across the board, and you know that's why
Speaker 1: it's important to keep relatively conservative in a growth forecast
Speaker 1: for the next year. On the one hand, you know,
Speaker 1: for companies directly involved in trade on the online um,
Speaker 1: you know these products will be hurt by terrorists. You
Speaker 1: know clearly they need to hold back on investment. But
Speaker 1: then that will faller down through the supply chain. Right. So, um,
Speaker 1: if there's a general now slowed down in growth, take
Speaker 1: Eurozone for example, that's being impacted and sot down the
Speaker 1: supply chain, it will impact services or will impact manufacturing
Speaker 1: as well. So the inputs into the company's being invested.
Speaker 1: So I think that that's holding back investment in general
Speaker 1: right now, it's holding back Ktex and it's something that
Speaker 1: again governments may have to step in terms of fiscal
Speaker 1: There's just a view that things have got better, that
Speaker 1: the probability of escalation risk between the United States and
Speaker 1: China has diminished, and Brexit risks have receded as well.
Speaker 1: Jeff the Prime Minister, is speaking outside Number ten Downing Street.
Speaker 1: At the moment the campaigning has already started. The government,
Speaker 1: he says, has an oven ready Brexit deal. What's the
Speaker 1: guidebook for the next five weeks in the UK and
Speaker 1: the issues around Brexit for markets? Well, I think rule
Speaker 1: number one is don't believe a thing that the Poles
Speaker 1: are saying. Right, We've all been there before on both
Speaker 1: sides of the Atlantic, so I think that's important to
Speaker 1: take into account. And also, you know, manifesto promises you
Speaker 1: know that whether you know that can be realized there's
Speaker 1: a separate issue. But I do think we can see
Speaker 1: some convergence in terms of everyone's going to be pledging
Speaker 1: to actually just spend a bit more so you know,
Speaker 1: that may make life a bit easier, you know, for um,
Speaker 1: those word a bit about growth. Um, But I would
Speaker 1: say to follow things that they go along, and just
Speaker 1: in the bear in mind the steal right now, you
Speaker 1: know that's be with it's it's a it's a withdrawal agreement.
Speaker 1: You know, we're still some ways to go before establishing
Speaker 1: the long term relationship between the European Union and the UK.
Speaker 1: And of course you know when we get to the
Speaker 1: twelfth the evening, they throw out some surprises and we'll
Speaker 1: just go from there. So, Jeff, it's interesting. I think
Speaker 1: it's one could argue, as you just mentioned, don't believe
Speaker 1: the polls. Uh, and so I'm going to come down
Speaker 1: to the election. That sounds to me like I'm just
Speaker 1: sitting on the sidelines here. I mean, you just it's
Speaker 1: way too close to call here. Lots of different things
Speaker 1: could actually occur here. Is that kind of what you're
Speaker 1: hearing from some of your clients? Totally. And if you
Speaker 1: look at how we're positioning for this signatic effex. For example,
Speaker 1: the move sterling we've seen is the pricing out of
Speaker 1: no deal risk right for similar trade now you want
Speaker 1: to price out the risk of a total breakdown or
Speaker 1: further escalation. But to go beyond say one thirty two
Speaker 1: and cable, you know, to make a dash through one
Speaker 1: thirty five or two one forty, you know, that's going
Speaker 1: to be a more medium term issue. We have to
Speaker 1: establish you know, a you know what happens after the
Speaker 1: election and being a what that long term relationship is
Speaker 1: going to be as well. So for now it's a
Speaker 1: holding pattern. You've taken off your underway to remove some
Speaker 1: of your shorts, but that's again different from going long.
Speaker 1: So if there is some sort of Brexit agreement in
Speaker 1: the near term, are you going to flood into London
Speaker 1: real estate? Well, um, now there have been plenty of
Speaker 1: them questions on that, you know from our international clients.
Speaker 1: You know that's a traditional um source of investment, you know,
Speaker 1: waiting for John to send in his bids as well.
Speaker 1: But at the same time, I do think you know
Speaker 1: that will depend you know, on the overall in your
Speaker 1: regulatory framework of tax frameworking along with you know what
Speaker 1: the government policies and you know are as well, because
Speaker 1: if you look at the market here, it really goes
Speaker 1: well beyond Brexit. Clearly the uncertainly has more help you
Speaker 1: know that than many moving parts to that side of things,
Speaker 1: and inquiries certainly picking up this year compared to the
Speaker 1: last two years. Just for the record, I'm not sure
Speaker 1: I'm meeting the minimum requirements to open a UBS account well,
Speaker 1: but but but I think I do. Anyway, what do
Speaker 1: you think that you buy London real estate, John, or
Speaker 1: do you think it would be countryside? Are you trying
Speaker 1: to get me in trouble totally on this show. Look,
Speaker 1: I think there's going to be a lot of appetite
Speaker 1: for London real estate given that it's been held back
Speaker 1: so much Jeff. But you've got to get over several obstacles. One,
Speaker 1: it's not just the divorce agreement. The next is the agreement.
Speaker 1: Beyond that, what does the future relationship look like? And
Speaker 1: I just wanted Jeff to that degree. The wall of
Speaker 1: capital that some people think exists that is waiting to
Speaker 1: go into the UK. Does it wait for the election
Speaker 1: to end, or does it wait for the next stage
Speaker 1: of discussions with the European Union to close. I don't
Speaker 1: think it will need to wait for the next European
Speaker 1: discussion because if you look at some of the international interest,
Speaker 1: very sort of that over the last decade or two,
Speaker 1: you know, has been for the UK's relationship, you know,
Speaker 1: for the EU. I think, you know, that's just an
Speaker 1: asset allocation diversification. They see this as an attractive market.
Speaker 1: So I think that side of things, unless you're an
Speaker 1: entrepreneur that wants to invest in the business and let's say,
Speaker 1: you know, there's a commercial element to it, perhaps the
Speaker 1: negotiations will matter for private individuals. I think that's secondary.
Speaker 1: Just before we let you go, Jeff, let's get a
Speaker 1: conviction call from you. What's the big call from you
Speaker 1: guys at the moment? So still, I would say we
Speaker 1: will push back against the notion of adding aggressively to risk.
Speaker 1: We prefer to be somewhat underway. Clip the coupon and
Speaker 1: you clip the dividend and then just focus on the
Speaker 1: growth outlook and see, you know, where the next catalystmer
Speaker 1: comes from. But saying underway for now, hey, Jeff, always
Speaker 1: great to catch how with you if you changed the call,
Speaker 1: no doubt, give us a call and we'll catch you up.
Speaker 1: Jeff you Ubs Wealth Management, head of the UK Investment
Speaker 1: Office joining us out of London. On trade talks, Brexit
Speaker 1: and where to put your money or where not to
Speaker 1: put it? Well, the on again, off again momentum behind
Speaker 1: the trade deal between the US and China seems to
Speaker 1: be on again. A momentum again seems to be building
Speaker 1: a little bit. Maybe even get a phase one type
Speaker 1: of deals signed next month that would be good for
Speaker 1: financial markets, including emerging markets to get the latest. We
Speaker 1: welcome Esther Law. Esther is in emerging markets fixed and
Speaker 1: can putfolio manager for a Mundi asset management located in London. Esther,
Speaker 1: thanks so much for joining us. So give us your
Speaker 1: sense of kind of how you think this trade negotiation
Speaker 1: is going and and what might be in a in
Speaker 1: a trade one, a phase one type of deal, and
Speaker 1: kind of what you think that would mean for merging markets. Yeah,
Speaker 1: good morning, Um, I think they do like a mini
Speaker 1: deal is somehow already priced team. But nonetheless, when we
Speaker 1: have a confirmed mini deal or phase mondeal comes through,
Speaker 1: there should be some relief in emerging market access, especially
Speaker 1: on near methas, which has been lagging the move in
Speaker 1: the hactornity bonds in particular. You know, I gotta say,
Speaker 1: we get these headlines every day, President Trump coming out
Speaker 1: neither indicating it's it's a go or it's not today
Speaker 1: it's a go. On the Chinese side, we have gotten
Speaker 1: a little bit of conflicting messages. Did overnight there was
Speaker 1: a report saying that they were worried that they were
Speaker 1: giving in too much to Washington and not getting enough
Speaker 1: in return. How concerned are you about that type of
Speaker 1: line out of the PBOC and out of out of Premier,
Speaker 1: out of I think I've seen so many back and forth.
Speaker 1: Like you said, Um, the market is much more massaged
Speaker 1: and used to this uncertainty. UM. I am a bit
Speaker 1: worried more because of the price actually getting ahead of itself,
Speaker 1: thinking that there will be more than just like let's
Speaker 1: you opposing the teiant Um. But I really don't expect
Speaker 1: a very smooth and straight road on this trade war. UM.
Speaker 1: I do think that there will be constant back and
Speaker 1: forth and volatility which just become part of our lives.
Speaker 1: So esther as it relates to emerging markets. I mean,
Speaker 1: maybe I'm just too risk adverse, but it's awful difficult
Speaker 1: for the media envisioned investors taking any type of bullish
Speaker 1: stance on inver emerging markets generally, given this trade uncertainty UM,
Speaker 1: which may or may not be resolved in the next
Speaker 1: couple of months, I think, yes, the trade uncertainty has
Speaker 1: you know, will not be a positive fine and it
Speaker 1: will continue to weigh on more growth forecast going forward. However,
Speaker 1: we I think we are in the world that is
Speaker 1: offset by the very loose monetary policy globally and that
Speaker 1: has really make them fixed income in particular looking very attractive. UM. Ultimately,
Speaker 1: I think the EM debt returns has a lot to
Speaker 1: do with the influence and should we have the negative
Speaker 1: real persistence in the you know, in the coming months,
Speaker 1: that would still be relatively supportive for EM fixed income,
Speaker 1: whereas for EM effects and e M the M equities
Speaker 1: that will be a bit more uncree uncertainty. Esther, what's
Speaker 1: your highest conviction that right now? I think, UM, we
Speaker 1: have to go through our usual list UM to to
Speaker 1: select a good fundamentals and ideally which without as less
Speaker 1: noise as possible. UM. I quite like Russia because I
Speaker 1: believe the fundamentals are very strong, and they've gone through
Speaker 1: a lot of adjustments in terms of adjusting to sanctions,
Speaker 1: so in a way they are already quite closed in
Speaker 1: many manners um and the execution of the fiscal rule
Speaker 1: has been very very resilient and that's helping the fiscal
Speaker 1: matrix becoming very very sound. So of Latin America, I
Speaker 1: know there's so much political uncertainty down there, it makes
Speaker 1: it very difficult for investors to look at that area
Speaker 1: with conviction. How are you approaching kind of Latin America
Speaker 1: broadly defined or there any areas that you find of interest.
Speaker 1: I think at the moment, with the reason new strokes,
Speaker 1: Brazil is coming out as a more positive on the
Speaker 1: margin um, the ethics is still going to be a
Speaker 1: big bonnatw um, but I think the passing of the
Speaker 1: pension reforms have removed a big uncertainty out of the way,
Speaker 1: and that should start to see external investors going back
Speaker 1: more into the income market. So you said the central
Speaker 1: banks sort of giving a bit of a tail wind
Speaker 1: to emerging markets, although today it does seem like the
Speaker 1: mood is that central banks are moving towards a holding
Speaker 1: pattern rather than an easing pattern. Is that enough just
Speaker 1: a holding pattern here across the board to continue to
Speaker 1: supp or emerging markets. I think the holding patterns in
Speaker 1: a way actually positive for the currency. To to stop
Speaker 1: the new spread being narrower, we only need to hold
Speaker 1: plot of readatively positive breatuum externally. I think um, that
Speaker 1: is still occase for you in death Esther Law. Thank
Speaker 1: you so much for joining us. Esther is Emerging markets
Speaker 1: fixing comfort Polio manager for a Munday Asset Managers Management
Speaker 1: joining us from London. Thanks for listening to the Bloomberg
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