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

2
00:00:09,960 --> 00:00:13,400
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.

3
00:00:13,680 --> 00:00:16,040
Speaker 2: We had some weakness and US equities in the last

4
00:00:16,040 --> 00:00:19,079
Speaker 2: session as the market assessed the impact of the trade war.

5
00:00:19,480 --> 00:00:22,000
Speaker 2: And later we'll be joined by Gene Goldman. He is

6
00:00:22,000 --> 00:00:25,720
Speaker 2: the Chief Investment Officer at Satara Financial Group. But we

7
00:00:25,800 --> 00:00:30,040
Speaker 2: begin in Hong Kong where HSBC's Global Investment Summit has

8
00:00:30,240 --> 00:00:33,320
Speaker 2: just wrapped up. Joining me now is Villam Cells. He

9
00:00:33,560 --> 00:00:39,400
Speaker 2: is the Global CIO at HSBC Global Private Banking and Wealth. Vilm,

10
00:00:39,400 --> 00:00:41,319
Speaker 2: thank you so much for making time to chat with us.

11
00:00:41,560 --> 00:00:46,479
Speaker 2: There is so much conversation around tariffs, the economic impact

12
00:00:46,479 --> 00:00:49,639
Speaker 2: that they will likely have, principally whether or not these

13
00:00:49,680 --> 00:00:53,320
Speaker 2: tariffs will contribute to a higher level of inflation. I'm

14
00:00:53,360 --> 00:00:56,800
Speaker 2: going to imagine that you're trying to filter signal and

15
00:00:57,000 --> 00:01:00,680
Speaker 2: noise here, with the tariff conversation really mounting to a

16
00:01:00,720 --> 00:01:03,480
Speaker 2: lot of noise at this point. How are you able

17
00:01:03,560 --> 00:01:06,399
Speaker 2: to kind of find the signal in markets these days?

18
00:01:06,720 --> 00:01:08,800
Speaker 1: Well, it's what our clients try to do as well.

19
00:01:08,800 --> 00:01:11,440
Speaker 1: You mentioned the Global Investment Summit. We actually did a

20
00:01:11,520 --> 00:01:15,039
Speaker 1: poll of seven hundred of our clients across private and

21
00:01:15,080 --> 00:01:18,600
Speaker 1: retail banking, and what came out is that they see

22
00:01:19,440 --> 00:01:22,280
Speaker 1: you know, geopolitics as the number one driver of markets

23
00:01:22,280 --> 00:01:26,480
Speaker 1: fifty percent of clients. Then after that comes you know,

24
00:01:26,520 --> 00:01:30,600
Speaker 1: the fear of stackflation around twenty percent of clients. Then

25
00:01:30,720 --> 00:01:35,319
Speaker 1: luckily there are two positive drivers AI and you know, China,

26
00:01:35,800 --> 00:01:40,240
Speaker 1: and interestingly, very small percentage only that is concerned around

27
00:01:40,360 --> 00:01:43,400
Speaker 1: the debt pile in the US. So that's potentially positive news.

28
00:01:43,600 --> 00:01:47,360
Speaker 1: But I think, you know, just like clients, we don't

29
00:01:47,480 --> 00:01:49,920
Speaker 1: know where the next step is going to be from

30
00:01:49,960 --> 00:01:54,000
Speaker 1: the US administration. I do think the main impact of

31
00:01:54,120 --> 00:01:59,600
Speaker 1: the uncertainty and the rapid changes in policy that uncertainty

32
00:01:59,720 --> 00:02:05,080
Speaker 1: is leading to, you know, a likelihood of some businesses

33
00:02:05,120 --> 00:02:09,920
Speaker 1: and consumers taking away and see approach and therefore premium

34
00:02:09,960 --> 00:02:15,920
Speaker 1: go up, and you know, earning's growth and economic growth

35
00:02:15,960 --> 00:02:19,080
Speaker 1: expectations probably come down a little bit. So we've cut,

36
00:02:19,600 --> 00:02:21,760
Speaker 1: you know, two days ago, we cut our US equity

37
00:02:21,760 --> 00:02:24,960
Speaker 1: allocation from an overweight to neutral, taking advantage of the

38
00:02:25,000 --> 00:02:27,080
Speaker 1: bounds that we've seen over the last few days.

39
00:02:27,200 --> 00:02:30,160
Speaker 2: So is that solely based on valuation.

40
00:02:30,240 --> 00:02:33,400
Speaker 1: Not so much on valuation. I think the valuations obviously

41
00:02:33,480 --> 00:02:36,639
Speaker 1: have fallen quite significantly. For the Magnificent seven, they're way

42
00:02:36,680 --> 00:02:39,600
Speaker 1: below below the ten year average. For the for what

43
00:02:39,720 --> 00:02:43,080
Speaker 1: we call the Forgotten four hundred and ninety three, they're

44
00:02:43,120 --> 00:02:45,760
Speaker 1: about at the ten year average. So they're not yet

45
00:02:45,840 --> 00:02:49,760
Speaker 1: at a level where in and of themselves, low valuations

46
00:02:50,000 --> 00:02:53,000
Speaker 1: make people step in. But I do think the reason

47
00:02:53,120 --> 00:02:57,320
Speaker 1: for our move was rather twofold Number one, that that

48
00:02:57,960 --> 00:03:02,200
Speaker 1: lack of confidence can lead to revisions to growth and earnings,

49
00:03:02,200 --> 00:03:07,200
Speaker 1: and number two that investors are generally also not yet

50
00:03:07,360 --> 00:03:11,640
Speaker 1: underweight their confidence. Investor confidence is very low, but investor

51
00:03:11,720 --> 00:03:13,679
Speaker 1: positioning is not yet very low.

52
00:03:13,960 --> 00:03:17,240
Speaker 2: So are they favoring markets Let's say in Asia, I'm

53
00:03:17,280 --> 00:03:20,680
Speaker 2: thinking of Japan, perhaps even South Korea, China, maybe there

54
00:03:20,720 --> 00:03:24,560
Speaker 2: are opportunities now you mentioned kind of high technology. Where

55
00:03:24,760 --> 00:03:27,000
Speaker 2: is the bias favoring.

56
00:03:26,960 --> 00:03:31,240
Speaker 1: Exactly so, so the bias is towards Asia is also

57
00:03:31,280 --> 00:03:33,880
Speaker 1: the only region that we are overweighted at this point

58
00:03:33,919 --> 00:03:38,400
Speaker 1: in time. The enthusiasm is around China, in part because,

59
00:03:38,480 --> 00:03:41,840
Speaker 1: of course, the deep seek news has triggered that realization

60
00:03:42,040 --> 00:03:45,640
Speaker 1: that many people you know, didn't didn't seem to have them.

61
00:03:46,200 --> 00:03:49,080
Speaker 1: You know, China has progressed quite rapidly in terms of

62
00:03:49,160 --> 00:03:53,640
Speaker 1: technological you know, evolution and everything that is related to that.

63
00:03:53,800 --> 00:03:57,520
Speaker 1: So that's into manufacturing, that's into internet, you know, consumer

64
00:03:57,640 --> 00:04:02,640
Speaker 1: leaders and so on. So that's the first leg driven

65
00:04:02,720 --> 00:04:05,800
Speaker 1: by people that added to their positioning and that enthusiasm

66
00:04:05,840 --> 00:04:09,480
Speaker 1: around technology. Now the next leg is and the debate

67
00:04:09,520 --> 00:04:12,480
Speaker 1: that we had at the conference was around how much

68
00:04:13,200 --> 00:04:17,040
Speaker 1: is the new stimulus to the consumer going to lead

69
00:04:17,040 --> 00:04:20,400
Speaker 1: to a broadening of that economic activity, because that is

70
00:04:20,440 --> 00:04:22,960
Speaker 1: then going to lead to a second leg. I think,

71
00:04:23,560 --> 00:04:25,640
Speaker 1: you know, website for the Chinese market.

72
00:04:25,600 --> 00:04:28,200
Speaker 2: Is there still a great deal of concern among your

73
00:04:28,240 --> 00:04:31,600
Speaker 2: clients about the health of the Chinese consumer? Maybe they

74
00:04:31,600 --> 00:04:34,440
Speaker 2: are healthy, but they are just the sentiment is so

75
00:04:34,680 --> 00:04:37,599
Speaker 2: weak right now. Is that a primary concern still?

76
00:04:38,040 --> 00:04:40,480
Speaker 1: So indeed, as I said, there is a debate around

77
00:04:40,520 --> 00:04:44,640
Speaker 1: that we are seeing the first inklings of the consumer

78
00:04:44,680 --> 00:04:48,279
Speaker 1: feeling that that a little bit better of retail spending

79
00:04:48,320 --> 00:04:54,440
Speaker 1: being supported, of discounting being less. So less discounts mean

80
00:04:54,560 --> 00:04:58,160
Speaker 1: a little bit more confidence from the part of the

81
00:04:58,520 --> 00:05:03,040
Speaker 1: consumer related you know, companies and so on. But it's

82
00:05:03,080 --> 00:05:06,760
Speaker 1: of course, you know, given the very low valuations, it

83
00:05:06,800 --> 00:05:09,520
Speaker 1: is that when you see those first inklings that people

84
00:05:09,600 --> 00:05:12,560
Speaker 1: want to get into it, and so we're seeing evidence

85
00:05:12,680 --> 00:05:16,480
Speaker 1: of hedge funds, for example, being you know, quite actively

86
00:05:16,960 --> 00:05:20,680
Speaker 1: looking for those opportunities as they expect that to be

87
00:05:20,760 --> 00:05:23,159
Speaker 1: the next leg driving the Chinese market higher.

88
00:05:23,560 --> 00:05:26,560
Speaker 2: Was there much in the way of conversation around money

89
00:05:26,600 --> 00:05:29,640
Speaker 2: moving out of Asia to Europe, money.

90
00:05:29,360 --> 00:05:33,080
Speaker 1: Moving out of the US into Europe, or US allocations right,

91
00:05:33,160 --> 00:05:37,400
Speaker 1: US portfolio allocations into Europe and also into Asia. So

92
00:05:37,680 --> 00:05:40,760
Speaker 1: you have that rotation continuing to take place, and I

93
00:05:40,760 --> 00:05:43,000
Speaker 1: think there is still scope for that to that to

94
00:05:43,080 --> 00:05:48,080
Speaker 1: take place, Asian investors do also want to allocate to Europe.

95
00:05:48,120 --> 00:05:51,160
Speaker 1: When I was here two months ago, I saw some

96
00:05:51,200 --> 00:05:54,159
Speaker 1: of the most pessimistic views on Europe, and now it's

97
00:05:54,279 --> 00:05:57,200
Speaker 1: much you know, more positive, obviously because of the dram

98
00:05:57,320 --> 00:06:00,520
Speaker 1: and package, but also the hope that even if it

99
00:06:00,560 --> 00:06:03,279
Speaker 1: is mainly defense, this is going to lead to more

100
00:06:03,880 --> 00:06:06,400
Speaker 1: R and D research and development that then can spill

101
00:06:06,440 --> 00:06:10,560
Speaker 1: over into more competitiveness for Europe. From a longer term perspective,

102
00:06:10,880 --> 00:06:14,080
Speaker 1: clearly people are underweight in Europe as well, squaring that position,

103
00:06:14,160 --> 00:06:18,960
Speaker 1: getting closer to benchmark and adding to it there as well.

104
00:06:19,040 --> 00:06:22,119
Speaker 1: In Europe, the question is going to be how much

105
00:06:22,360 --> 00:06:25,919
Speaker 1: other reforms are there going to be as well, because

106
00:06:25,960 --> 00:06:30,800
Speaker 1: obviously Europe needs to further integrate its capital markets and

107
00:06:31,240 --> 00:06:36,400
Speaker 1: especially create one single market for services. The hope is

108
00:06:36,440 --> 00:06:41,560
Speaker 1: that European leaders are going to use the collaboration on

109
00:06:41,640 --> 00:06:46,920
Speaker 1: defense to also then take initiative on other areas. That

110
00:06:47,120 --> 00:06:50,440
Speaker 1: is obviously we will need to see, but some people

111
00:06:50,440 --> 00:06:54,120
Speaker 1: are taking that as a positive and at least squaring

112
00:06:54,160 --> 00:06:56,680
Speaker 1: their positions, going back to neutral from an underway.

113
00:06:56,800 --> 00:06:59,440
Speaker 2: So the markets are painfully aware of the trade tension

114
00:06:59,480 --> 00:07:02,280
Speaker 2: between more Washington and Beijing, and we know that China

115
00:07:02,680 --> 00:07:05,880
Speaker 2: has been looking for new markets. Europe has represented a

116
00:07:05,960 --> 00:07:09,000
Speaker 2: key market for Chinese goods for some time, but I'm

117
00:07:09,080 --> 00:07:11,960
Speaker 2: curious as to whether or not people in China are

118
00:07:11,960 --> 00:07:15,400
Speaker 2: trying to fortify those relationships given the current tension between

119
00:07:15,600 --> 00:07:17,040
Speaker 2: Washington and Beijing.

120
00:07:17,640 --> 00:07:20,520
Speaker 1: So certainly what could could happen is that, you know,

121
00:07:20,520 --> 00:07:25,720
Speaker 1: when you have trade tariffs in certain from certain countries,

122
00:07:26,160 --> 00:07:29,640
Speaker 1: you can have trade diversion. So what that means is

123
00:07:29,640 --> 00:07:32,160
Speaker 1: that some Chinese goods could end up in Europe. And

124
00:07:32,200 --> 00:07:34,800
Speaker 1: this is one of the reasons why we expect, you know,

125
00:07:34,880 --> 00:07:39,200
Speaker 1: inflation in Europe to continue to be reasonably low. It's

126
00:07:39,240 --> 00:07:41,520
Speaker 1: one of the reasons as well. While we think there

127
00:07:41,560 --> 00:07:45,160
Speaker 1: are opportunities in the European bond market, European bond yields

128
00:07:45,200 --> 00:07:49,200
Speaker 1: have gone up significantly on the back of fears of

129
00:07:49,280 --> 00:07:54,080
Speaker 1: more supply from Germany, but those are now attractive level.

130
00:07:54,160 --> 00:07:58,320
Speaker 1: So German bonds and actually UK guilts as well, you

131
00:07:58,360 --> 00:08:01,600
Speaker 1: know to us are are attractive because some of those

132
00:08:01,600 --> 00:08:04,440
Speaker 1: goods can and end up in the UK in Europe,

133
00:08:04,480 --> 00:08:08,080
Speaker 1: and therefore inflation should remain reasonably well behaved there.

134
00:08:08,400 --> 00:08:12,000
Speaker 2: So I'm curious in terms of topics at the HSBC

135
00:08:12,200 --> 00:08:17,160
Speaker 2: Global Investment Summit, how did artificial intelligence enter into the conversation,

136
00:08:17,320 --> 00:08:20,400
Speaker 2: particularly given the recent news on deep seek.

137
00:08:20,960 --> 00:08:24,560
Speaker 1: Well, it features everywhere, and we also obviously had a

138
00:08:24,560 --> 00:08:28,120
Speaker 1: lot of companies presenting in from the services industries, from

139
00:08:28,120 --> 00:08:31,600
Speaker 1: the manufacturing industries. All of them are saying that AI,

140
00:08:31,880 --> 00:08:35,120
Speaker 1: they are basically users of AI, and there are so

141
00:08:35,280 --> 00:08:42,280
Speaker 1: many different examples there they So the enthusiasm from our

142
00:08:42,320 --> 00:08:47,080
Speaker 1: clients has shifted from the AI enablers to the AI adopters,

143
00:08:47,600 --> 00:08:51,800
Speaker 1: and that is obviously leading to productivity grains across industries.

144
00:08:51,840 --> 00:08:54,760
Speaker 1: But one of the industries that really benefits from it

145
00:08:54,800 --> 00:08:58,800
Speaker 1: is the software industries rather than the hardware where that

146
00:08:58,840 --> 00:09:03,440
Speaker 1: has been hit because people feel that there is going

147
00:09:03,520 --> 00:09:09,160
Speaker 1: to be and fewer semiconductors needed to do the same tasks.

148
00:09:09,600 --> 00:09:14,880
Speaker 1: The software industry really is gearing up to develop all

149
00:09:14,920 --> 00:09:19,680
Speaker 1: of those applications for those different industries to really allow

150
00:09:19,800 --> 00:09:23,920
Speaker 1: them to use AI to develop new products, to develop

151
00:09:23,960 --> 00:09:26,040
Speaker 1: their customer services and so on.

152
00:09:26,320 --> 00:09:28,440
Speaker 2: We'll leave it there, Villain, thank you so much for

153
00:09:28,520 --> 00:09:31,640
Speaker 2: joining us. Villam sells there. He is the Global CIO

154
00:09:31,720 --> 00:09:35,600
Speaker 2: at HSBC Global Private Banking and Wealth. Joining us here

155
00:09:35,679 --> 00:09:45,319
Speaker 2: on the Daybreak Asia podcast. Welcome back to the Daybreak

156
00:09:45,400 --> 00:09:48,640
Speaker 2: Asia Podcast. I'm Doug Chrisner. So we had some weakness

157
00:09:48,640 --> 00:09:51,920
Speaker 2: for US equities as the market considered the impacts of

158
00:09:51,960 --> 00:09:55,320
Speaker 2: the trade war. The consensus view on tariff seems to

159
00:09:55,360 --> 00:09:58,480
Speaker 2: be that they will lead to higher prices, fewer options

160
00:09:58,480 --> 00:10:02,360
Speaker 2: for consumers, and and fewer manufacturing jobs in the US.

161
00:10:02,800 --> 00:10:05,240
Speaker 2: For a closer look, now, I'm joined by Gene Goldman.

162
00:10:05,320 --> 00:10:08,640
Speaker 2: He is the CIO at Satara Financial Group. Gen's on

163
00:10:08,679 --> 00:10:12,120
Speaker 2: the line from El Segundo, California. Thanks for making time

164
00:10:12,120 --> 00:10:14,360
Speaker 2: to chat with us. Gene, Thanks so much. Doug, give

165
00:10:14,400 --> 00:10:16,360
Speaker 2: me your sense of where things stand right now in

166
00:10:16,480 --> 00:10:19,679
Speaker 2: terms of the tariffs having an impact on equity market

167
00:10:19,679 --> 00:10:20,240
Speaker 2: price section.

168
00:10:20,800 --> 00:10:22,840
Speaker 3: Yeah, First of all, it's a great question because clearly

169
00:10:23,040 --> 00:10:25,959
Speaker 3: the tariffs is the news de jore, basically the news

170
00:10:25,960 --> 00:10:29,200
Speaker 3: of the year. So for us, we're more optimistic than

171
00:10:29,240 --> 00:10:31,000
Speaker 3: I think the markets. You know, I do think tariffs

172
00:10:31,000 --> 00:10:32,559
Speaker 3: are going to create a lot of market volatility, and

173
00:10:32,600 --> 00:10:34,920
Speaker 3: we're seeing this already. But if we look at tariffs

174
00:10:34,960 --> 00:10:37,400
Speaker 3: and we say three things why, it won't be as

175
00:10:37,520 --> 00:10:40,200
Speaker 3: bad as the markets are worried about. Number one, I

176
00:10:40,240 --> 00:10:42,880
Speaker 3: do think, you know, President Trump of the administration continues

177
00:10:42,920 --> 00:10:47,160
Speaker 3: to talk about tariffs being retaliatory, not universal. That's a

178
00:10:47,240 --> 00:10:50,120
Speaker 3: very important point. I think. Second of all is that if

179
00:10:50,080 --> 00:10:53,600
Speaker 3: you look at other countries and their exposure to US

180
00:10:53,640 --> 00:10:55,880
Speaker 3: imports to their imports to the United States, it's a

181
00:10:55,920 --> 00:10:59,640
Speaker 3: greater percentage of those countries GDP than our country. Of course,

182
00:11:00,000 --> 00:11:02,439
Speaker 3: that leads room for negotiation. And third of all, if

183
00:11:02,440 --> 00:11:04,640
Speaker 3: we just use use twenty eighteen as a base case,

184
00:11:05,000 --> 00:11:07,440
Speaker 3: during the tariffs, then stocks fell from peak to trough

185
00:11:07,600 --> 00:11:10,520
Speaker 3: by about sixteen percent. But keep in mind we were

186
00:11:10,559 --> 00:11:13,960
Speaker 3: back to pre tariff levels by May of twenty nineteen,

187
00:11:14,080 --> 00:11:16,720
Speaker 3: So yes, there's gonna be uncertainty. Es. Yes, there's gonna

188
00:11:16,720 --> 00:11:18,880
Speaker 3: be lots of market volatility, but we do think it's

189
00:11:18,880 --> 00:11:21,360
Speaker 3: gonna be a little bit less expected. In today's announcement

190
00:11:21,559 --> 00:11:25,320
Speaker 3: about tariffs, it's just more rhetoric really focusing on the

191
00:11:25,320 --> 00:11:29,080
Speaker 3: fact that it's going to be retaliatory and less universal. Yes,

192
00:11:29,120 --> 00:11:31,240
Speaker 3: there are going to be ratifications. I do think that

193
00:11:31,640 --> 00:11:35,199
Speaker 3: you know, consumers may not spend as much on car

194
00:11:35,280 --> 00:11:37,640
Speaker 3: or may maybe you know, they're still going to buy cars,

195
00:11:37,679 --> 00:11:40,280
Speaker 3: but maybe just not buy as many cars. But I

196
00:11:40,320 --> 00:11:42,920
Speaker 3: do think, you know, there's very lack of response from

197
00:11:42,960 --> 00:11:47,439
Speaker 3: so far from the EU, you suggesting maybe potentially more negotiations.

198
00:11:47,960 --> 00:11:51,160
Speaker 3: And you know, if you think about the ratifications, US

199
00:11:51,200 --> 00:11:54,199
Speaker 3: auto exports to the United States are not going to

200
00:11:54,240 --> 00:11:56,040
Speaker 3: be wiped out because it's going to take some time

201
00:11:56,360 --> 00:11:59,959
Speaker 3: for US production to ramp up. Also, demand performed auto

202
00:12:00,240 --> 00:12:03,680
Speaker 3: is fairly priced in elastic and then really a twenty

203
00:12:03,720 --> 00:12:06,760
Speaker 3: five percent tariff doesn't necessarily wipe out the cost advantage

204
00:12:06,840 --> 00:12:10,320
Speaker 3: of lower cost exporters. And what we're seeing, especially we

205
00:12:10,320 --> 00:12:12,640
Speaker 3: saw from Mexico today, we could see a weakening of

206
00:12:12,640 --> 00:12:15,600
Speaker 3: foreign currencies versus the dollar. So I know that the

207
00:12:15,600 --> 00:12:18,480
Speaker 3: tariff uncertainty creates volatility, But I think the good news

208
00:12:18,480 --> 00:12:20,360
Speaker 3: is that we think will be less than the markets

209
00:12:20,400 --> 00:12:21,120
Speaker 3: have anticipated.

210
00:12:21,320 --> 00:12:23,719
Speaker 2: But when you consider where the FED is in all

211
00:12:23,760 --> 00:12:26,400
Speaker 2: of this, I mean there are policy ramifications as well.

212
00:12:26,440 --> 00:12:29,800
Speaker 2: We heard from the head of the Boston FED this afternoon,

213
00:12:29,840 --> 00:12:32,760
Speaker 2: Susan Collins. She was saying, it looks inevitable that tariffs

214
00:12:32,760 --> 00:12:36,160
Speaker 2: will boost inflation, and for that reason, it's likely appropriate

215
00:12:36,240 --> 00:12:38,880
Speaker 2: to keep rate steady for longer. So when you consider

216
00:12:38,920 --> 00:12:41,560
Speaker 2: the fact that we may be in a new regulatory

217
00:12:41,880 --> 00:12:45,160
Speaker 2: regime on monetary policy, is not going to impact the

218
00:12:45,160 --> 00:12:46,240
Speaker 2: equity market at all.

219
00:12:46,640 --> 00:12:48,720
Speaker 3: Yeah, so we go to the FED. Okay, So if

220
00:12:48,720 --> 00:12:51,520
Speaker 3: you think about the FED first and foremost, one of

221
00:12:51,559 --> 00:12:53,560
Speaker 3: our key themes coming into twenty twenty five was that

222
00:12:53,559 --> 00:12:55,200
Speaker 3: the FED would not be a good friend. The FED

223
00:12:55,240 --> 00:12:58,319
Speaker 3: would not cut rates as much as the Marcus anticipated.

224
00:12:58,600 --> 00:13:00,040
Speaker 3: And if you look at the FED, you know the

225
00:13:00,080 --> 00:13:04,480
Speaker 3: FED is seeing fairly pretty good economic growth, stocks somewhat

226
00:13:04,480 --> 00:13:07,240
Speaker 3: close to all time highs, a pretty good labor market,

227
00:13:07,559 --> 00:13:11,080
Speaker 3: but they're seeing above target inflation. So even regardless of

228
00:13:11,120 --> 00:13:13,760
Speaker 3: the tariff uncertainty, I still think they're going to be

229
00:13:13,760 --> 00:13:15,880
Speaker 3: on the sideline for some time. We think the FED,

230
00:13:16,200 --> 00:13:18,760
Speaker 3: regardless of what happens, cuts rates only once or maybe

231
00:13:18,800 --> 00:13:21,280
Speaker 3: not at all for this year. But the good news,

232
00:13:21,400 --> 00:13:24,960
Speaker 3: going back to the market's sort of ramifications, we do

233
00:13:25,040 --> 00:13:27,200
Speaker 3: think that returns this year are going to be good

234
00:13:27,240 --> 00:13:29,480
Speaker 3: but not great. And what I look at is the

235
00:13:29,520 --> 00:13:32,960
Speaker 3: fact that the economy is, you know, we have modest

236
00:13:32,960 --> 00:13:37,080
Speaker 3: economic growth, we have moderating inflation, we have a pretty

237
00:13:37,120 --> 00:13:40,480
Speaker 3: okay labor market, and we also have double digit earnings

238
00:13:40,559 --> 00:13:43,640
Speaker 3: growth expected for the markets. And the other bonus point

239
00:13:43,679 --> 00:13:46,240
Speaker 3: is that the FED is not going to be raising rates.

240
00:13:46,280 --> 00:13:49,040
Speaker 3: So in that type of environment, the market historically does

241
00:13:49,120 --> 00:13:51,360
Speaker 3: good but not great. That's why our target for the

242
00:13:51,400 --> 00:13:54,000
Speaker 3: SMP is still about six to eight percent for the year,

243
00:13:54,120 --> 00:13:56,800
Speaker 3: or about sixty three hundred from where it is right now.

244
00:13:56,960 --> 00:14:00,760
Speaker 2: So beyond just kind of giving me the technicals and

245
00:14:00,800 --> 00:14:04,040
Speaker 2: where the overall market is going to be in your view,

246
00:14:04,360 --> 00:14:07,160
Speaker 2: what are the themes underneath that forecast? I mean, are

247
00:14:07,480 --> 00:14:10,880
Speaker 2: you buying specific industries or sectors of the market right

248
00:14:10,920 --> 00:14:11,880
Speaker 2: now and selling others?

249
00:14:12,240 --> 00:14:14,960
Speaker 3: Sure so coming in So keep in mind, coming into

250
00:14:14,960 --> 00:14:17,520
Speaker 3: the correction, we weren't surprised by the correction. We've been

251
00:14:17,520 --> 00:14:20,080
Speaker 3: saying we expected the correction for some time. We were

252
00:14:20,080 --> 00:14:22,320
Speaker 3: just surprised it took so long for the market to

253
00:14:22,360 --> 00:14:25,280
Speaker 3: actually have a crection. So with that in mind, we

254
00:14:25,360 --> 00:14:27,200
Speaker 3: had sort of a I guess I call it. I

255
00:14:27,280 --> 00:14:29,600
Speaker 3: know it's opening day for baseball, but really using a

256
00:14:29,640 --> 00:14:34,080
Speaker 3: basketball analogy, we were investing, like Shack SAJAQ, a little

257
00:14:34,080 --> 00:14:38,040
Speaker 3: bit biased towards small and midcaps, bias towards healthcare, bias

258
00:14:38,080 --> 00:14:42,400
Speaker 3: towards alternatives, and bias towards quality names. What we're doing now,

259
00:14:42,880 --> 00:14:45,760
Speaker 3: especially with this market pullback we're around, we're looking to

260
00:14:45,800 --> 00:14:48,880
Speaker 3: boost some of our beta within our portfolio. So broadly speaking,

261
00:14:48,960 --> 00:14:53,280
Speaker 3: we're reducing our liquid alternatus exposure in favor of global equity.

262
00:14:53,600 --> 00:14:57,480
Speaker 3: We're also from a positioning standpoint, we continue to be

263
00:14:57,560 --> 00:15:02,520
Speaker 3: overweight value versus growth, continue to be avoid SmallCap in MidCap.

264
00:15:02,560 --> 00:15:04,920
Speaker 3: We do think that market breath will continue to widen.

265
00:15:05,160 --> 00:15:07,400
Speaker 3: And then from a sector standpoint, our favorite sector is

266
00:15:07,440 --> 00:15:10,280
Speaker 3: continue to be healthcare. You know healthcare, you have so

267
00:15:10,320 --> 00:15:15,359
Speaker 3: much advances in biotech and personalized medicine and telehealth solutions

268
00:15:15,560 --> 00:15:20,520
Speaker 3: really revolutionizes patient care. And we also like financial services

269
00:15:20,720 --> 00:15:24,440
Speaker 3: higher yields, somewhat of a steepening yield curve sort of

270
00:15:24,480 --> 00:15:28,120
Speaker 3: the economy not being as bad as the markets think.

271
00:15:28,320 --> 00:15:31,880
Speaker 3: We think take that into consideration. Healthcare and financials will

272
00:15:31,880 --> 00:15:34,480
Speaker 3: be a great opportunity in this environment. The sector that

273
00:15:34,520 --> 00:15:38,000
Speaker 3: we would avoid that we are really scared about energy.

274
00:15:38,080 --> 00:15:40,680
Speaker 3: We think energy it's one of the best performing sectors

275
00:15:41,120 --> 00:15:45,200
Speaker 3: this year. But energy worry worries us because significance supply

276
00:15:45,320 --> 00:15:48,360
Speaker 3: where a record levels of exports, record levels of drilling

277
00:15:48,640 --> 00:15:50,400
Speaker 3: and all of a sudden, you know, Joe baby drill

278
00:15:50,680 --> 00:15:52,880
Speaker 3: puts more pressure where's the oil going to go? And

279
00:15:53,240 --> 00:15:55,960
Speaker 3: you have Sali Arabia the UAE both have come out

280
00:15:55,960 --> 00:15:59,120
Speaker 3: recently and said, hey, if oil prices served, we will

281
00:15:59,160 --> 00:16:01,480
Speaker 3: be ready to put more supply on the market. Not

282
00:16:01,520 --> 00:16:02,880
Speaker 3: a good sector for us to be in.

283
00:16:02,960 --> 00:16:05,200
Speaker 2: Some of the recent sentiment data that we have seen

284
00:16:05,240 --> 00:16:08,400
Speaker 2: on the US consumer has been very weak, and I'm interested, Jean,

285
00:16:08,840 --> 00:16:11,400
Speaker 2: to get your take on how you see the health

286
00:16:11,440 --> 00:16:13,160
Speaker 2: of the American consumer right now.

287
00:16:14,240 --> 00:16:16,000
Speaker 3: We definitely know. One of our other themes was that

288
00:16:16,040 --> 00:16:18,560
Speaker 3: the economy was moderating, we called the Great Moderation, and

289
00:16:18,600 --> 00:16:21,440
Speaker 3: definitely the economy is definitely slowing down. We just don't

290
00:16:21,440 --> 00:16:24,160
Speaker 3: see a recession. We think recession warriors are very overblown.

291
00:16:24,600 --> 00:16:26,880
Speaker 3: Keep in mind, in January it was the coldest January

292
00:16:26,920 --> 00:16:29,800
Speaker 3: since nineteen eighty eight. We also had a very extended

293
00:16:29,840 --> 00:16:31,880
Speaker 3: flu season, so a lot of the weakness that we

294
00:16:31,880 --> 00:16:36,320
Speaker 3: saw in January really affected weather related industries like construction,

295
00:16:36,560 --> 00:16:39,840
Speaker 3: like services like hospitality, And keep in mind it's also

296
00:16:39,960 --> 00:16:43,160
Speaker 3: January and February. Consumers tend to spend a little less

297
00:16:43,160 --> 00:16:46,600
Speaker 3: money after the post holiday season. We are seeing February

298
00:16:46,680 --> 00:16:49,280
Speaker 3: data and March data come in a little bit better

299
00:16:49,360 --> 00:16:51,840
Speaker 3: than expected, and that's a good good sign for us.

300
00:16:52,000 --> 00:16:54,320
Speaker 3: We saw some p andis come out earlier this week

301
00:16:55,040 --> 00:16:58,400
Speaker 3: on the services side, well above expectations. So you take

302
00:16:58,440 --> 00:17:01,520
Speaker 3: this into consideration, just don't see a recession anytime soon,

303
00:17:01,560 --> 00:17:03,280
Speaker 3: at least for this year. And I think that's an

304
00:17:03,320 --> 00:17:07,000
Speaker 3: important connection because if you think about that, a correction

305
00:17:07,160 --> 00:17:10,000
Speaker 3: is a normal part of investing once every thirteen months

306
00:17:10,119 --> 00:17:12,520
Speaker 3: or so. We just don't see a bear market because

307
00:17:12,520 --> 00:17:15,920
Speaker 3: corrections are when markets are worried about a recession. Bear

308
00:17:16,040 --> 00:17:18,800
Speaker 3: markets occur when we actually have a recession. And we've

309
00:17:18,840 --> 00:17:22,159
Speaker 3: only had three bear markets with out a recession nineteen

310
00:17:22,240 --> 00:17:25,720
Speaker 3: sixty two, nineteen eighty seven, and then twenty twenty two.

311
00:17:25,960 --> 00:17:27,720
Speaker 3: So we just don't see a recession. We just don't

312
00:17:27,720 --> 00:17:28,600
Speaker 3: see a bear market.

313
00:17:28,800 --> 00:17:32,560
Speaker 2: So your investment ideas seem focused primarily on the equity side,

314
00:17:32,560 --> 00:17:34,639
Speaker 2: at least that's what I've heard so far. I'm curious

315
00:17:34,680 --> 00:17:37,760
Speaker 2: as to whether you're finding opportunity in the fixed income

316
00:17:37,800 --> 00:17:38,440
Speaker 2: space at all.

317
00:17:38,680 --> 00:17:42,920
Speaker 3: Sure, fix inc them. Broadly speaking, we like fixing them,

318
00:17:43,000 --> 00:17:46,560
Speaker 3: especially high quality, especially treasuries. You know, you think with

319
00:17:46,720 --> 00:17:48,719
Speaker 3: yields about you know, one and a half to two

320
00:17:48,760 --> 00:17:51,960
Speaker 3: percent over inflation, they're pretty attractive. We continue to see

321
00:17:52,040 --> 00:17:55,200
Speaker 3: strong foreign ownership with treasuries. You know, they're driven by

322
00:17:55,200 --> 00:17:58,480
Speaker 3: better yields, by the stronger dollar, and there's a huge

323
00:17:58,480 --> 00:18:02,439
Speaker 3: retail demand for bonds, and so for our perspective, and

324
00:18:02,440 --> 00:18:04,720
Speaker 3: we do think the tenure treasury is pretty close to

325
00:18:04,760 --> 00:18:07,639
Speaker 3: the max I mean, the tenure Treasury tends and max

326
00:18:07,720 --> 00:18:10,840
Speaker 3: out around sort of that year over year us GDP

327
00:18:11,119 --> 00:18:13,960
Speaker 3: nominal rate. It's about five percent, So we're pretty close

328
00:18:14,000 --> 00:18:16,840
Speaker 3: to that upper end range on our end. The area

329
00:18:16,840 --> 00:18:19,040
Speaker 3: that within fixing them that we do worry about though,

330
00:18:19,040 --> 00:18:21,360
Speaker 3: would be high yield, high yielding. Again, we don't see

331
00:18:21,400 --> 00:18:23,679
Speaker 3: a recession, but we'll worries about high yield is that

332
00:18:23,840 --> 00:18:28,600
Speaker 3: high yield spreads are so narrow right now, pricing in

333
00:18:28,680 --> 00:18:31,760
Speaker 3: everything being exactly perfect, and we don't think everything will perfect.

334
00:18:31,760 --> 00:18:33,240
Speaker 3: We think there'll be some bumps. And you know, you

335
00:18:33,280 --> 00:18:36,520
Speaker 3: saw corporate bankruptcies increase a little bit lately. But at

336
00:18:36,560 --> 00:18:38,120
Speaker 3: the end of the day, we don't see a recession.

337
00:18:38,440 --> 00:18:42,639
Speaker 3: But high yield spreads are pricing and everything being super blissful,

338
00:18:42,880 --> 00:18:44,879
Speaker 3: like a perfect game on opening day, and we just

339
00:18:44,920 --> 00:18:45,439
Speaker 3: don't see that.

340
00:18:45,480 --> 00:18:47,479
Speaker 2: All right, We'll leave it there, Gene. It's always a pleasure.

341
00:18:47,520 --> 00:18:49,080
Speaker 2: Thank you so much. Gene Goldman.

342
00:18:49,119 --> 00:18:49,280
Speaker 3: There.

343
00:18:49,320 --> 00:18:52,760
Speaker 2: He is the CIO at Satara Financial Group, joining from

344
00:18:52,760 --> 00:18:58,600
Speaker 2: El Segundo, California. Here on the Daybreakasia Podcast. Thanks for

345
00:18:58,640 --> 00:19:03,280
Speaker 2: listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.

346
00:19:03,600 --> 00:19:06,720
Speaker 2: Each weekday, we look at the story shaping markets, finance,

347
00:19:07,080 --> 00:19:10,159
Speaker 2: and geopolitics in the Asia Pacific. You can find us

348
00:19:10,200 --> 00:19:14,400
Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

349
00:19:14,400 --> 00:19:17,520
Speaker 2: else you listen. Join us again tomorrow for insight on

350
00:19:17,560 --> 00:19:21,720
Speaker 2: the market moves from Hong Kong to Singapore and Australia.

351
00:19:22,119 --> 00:19:24,600
Speaker 2: I'm Doug Prisoner and this is Bloomberg