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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. Welcome to the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Chrisner. On today's episode, we'll

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Speaker 1: look at Wall Street's rebound from April's meltdown. Seems to

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Speaker 1: be showing some signs of exhaustion, and analysts are divided

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Speaker 1: on the market's near term prospects. In a moment, we'll

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Speaker 1: chat with John Creekmere. He is the CIO at Creekmere

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Speaker 1: Wealth Advisors. But we begin this morning in the Asia Pacific.

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Speaker 1: Joining me now is Mark Conan. He is the chief

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Speaker 1: investment officer at AIA Group. Mark joining from our studios

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Speaker 1: in Hong Kong. Good of you to stop by. It

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Speaker 1: would appear, at least for the next three months, that

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Speaker 1: we are in some kind of truth between the US

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Speaker 1: and China with respect to that trade war. I'm curious

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Speaker 1: to get your take your expectations during this next ninety

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Speaker 1: days or so. What are you expecting to see unfold?

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Speaker 2: Well, we're certainly getting some relief in the markets. I

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Speaker 2: think investors have been extremely stressed and tense about the

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Speaker 2: possibility of a total decoupling of the two major economies globally.

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Speaker 2: This truce as you put it, Doug, and it is

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Speaker 2: a truth. Allows for much mediation, much needed mediation, a

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Speaker 2: resumption of communication despite what we were hearing, we understand

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Speaker 2: that the communication had broken down significantly. So this allows

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Speaker 2: appalls in I wouldn't say hostilities, but a resumption of

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Speaker 2: normal relations relationships.

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Speaker 3: So this communication.

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Speaker 2: It also allows for certain headlines to come forward and

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Speaker 2: buoy investments, sentiment, and set a scene for graded communication

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Speaker 2: and hopefully some agreement. But remember the backdrop is still very,

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Speaker 2: very difficult. If we put it in context of Trump

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Speaker 2: one point zero, where there was a trade agreement that

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Speaker 2: was never fully implemented, and we can point fingers as

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Speaker 2: to why that was the case, but the expectations certainly

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Speaker 2: are still quite uncertain. So although headlines look great, there's

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Speaker 2: a lot of work to be done ahead of us.

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Speaker 1: So there had been this view in the market there

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Speaker 1: Trump was essentially using this opportunity to negotiate new trade

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Speaker 1: deals with other US trading partners other than China, and

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Speaker 1: that would have provided the administration and opportunity essentially to

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Speaker 1: set some type of restriction for those trading partners in

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Speaker 1: their dealings with Beijing. The move maybe to isolate China

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Speaker 1: just a bit. I think Beijing even called it collusion.

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Speaker 1: If you accept that that was the strategy that the

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Speaker 1: US had employed. Has that failed out right?

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Speaker 2: Yeah, So that was certainly a topic, and we did

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Speaker 2: see a reaction from Beijing which addressed that directly, that

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Speaker 2: it was inappropriate to use those tactics to isolate air

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Speaker 2: a third.

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Speaker 3: Party, a third country.

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Speaker 2: There are accusations that have further come out in the

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Speaker 2: trade discussion between the US and the agreement. Ultimately the

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Speaker 2: sign between the US and the UK, which was which

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Speaker 2: was to the detriment of China, and I think that

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Speaker 2: has legs. It will still be a topic which will

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Speaker 2: be in the public domain. So I think that that

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Speaker 2: theme is very much there. China now has more direct

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Speaker 2: relationships and bigger trade relationships with more countries than the

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Speaker 2: US does. So I was reading articles that the US

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Speaker 2: had underestimated the extent to which China is fully emmeshed

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Speaker 2: in the global trade system.

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Speaker 3: And China's done a.

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Speaker 2: Lot of work to clean up, if you like, immunize

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Speaker 2: its own supply chains, to make sure that it is

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Speaker 2: robust and less dependent on the US strategically, so the

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Speaker 2: balance in the negotiation is much finer.

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Speaker 3: I would I would suggest.

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Speaker 2: Than than perhaps the US administration had anticipated going in

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Speaker 2: following these tactics of trying to bully China into into

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Speaker 2: into yielding on the trade side.

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Speaker 1: Would it surprise you during this period of negotiation between

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Speaker 1: Washington and Beijing for the China side to essentially continue

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Speaker 1: to work at developing other markets, especially in Latin and

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Speaker 1: South America, kind of going to the point that you're

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Speaker 1: making about the need to broaden and expand into other

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Speaker 1: areas of trade.

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Speaker 2: China's already doing that as we speak today, Doug. There

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Speaker 2: is a major forum in China with the states of

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Speaker 2: Latin American and the Caribbean. So China has continued to

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Speaker 2: use so called soft power as well through investment and

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Speaker 2: infrastructure development and extending concessions in terms of trade terms,

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Speaker 2: both here in Asia very very significantly, which puts a

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Speaker 2: number of other economies sort of in the hotspot, if

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Speaker 2: you like, caught between two stalls between the US and China.

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Speaker 2: But China will continue this. I mean, China's also on

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Speaker 2: its own mission of Made in China twenty twenty five,

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Speaker 2: which was the original strategy when Hi Jinping took office,

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Speaker 2: and that is still playing out as well. So China's

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Speaker 2: emergence as a major trading partner globally continues to be

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Speaker 2: buttressed by other forms of soft power and ways in

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Speaker 2: which it's been building relationships with other trading nations.

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Speaker 1: I'm curious to get your assessment of the net impact

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Speaker 1: now on the Chinese economy. I saw recently the JP

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Speaker 1: Morgan lifted its forecast for China GDP this year to

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Speaker 1: a rate of around four to eight from its earlier

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Speaker 1: estimate of four to one. So in that view, the

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Speaker 1: let's call it a truce is definitely going to have

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Speaker 1: a positive impact on growth, at least in the near term.

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Speaker 3: Yeah, no doubt. I mean, it's a relief.

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Speaker 2: It gives the authorities a little bit more maneuverability in

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Speaker 2: China to take its time as it starts to look

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Speaker 2: at measures to ameliorate the slowdown. So we've been talking,

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Speaker 2: and we've spoken about it before. We've been talking for

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Speaker 2: a long time about stimulus measures, both monetary and fiscal,

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Speaker 2: and we saw more recently measures to marginally improve lending

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Speaker 2: conditions and to set up funds to target particular sectors

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Speaker 2: within the economy. Technology funds available to support the elderly

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Speaker 2: to focused on job creation. All of these things look

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Speaker 2: good in the headlines, but when you read through the numbers,

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Speaker 2: they are modest in scale because, as we know from

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Speaker 2: the past, when China has stimulated with the so called bazooka,

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Speaker 2: the after effect had a very significant impact in terms

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Speaker 2: of misallocation of resources, and the authorities are very reluctant

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Speaker 2: to see that occur again. So it's a step by

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Speaker 2: step at this ceasefire allows China to take a look

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Speaker 2: and see how the land is settling. The landscape is

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Speaker 2: settling after the initial flurry of volatility and you know,

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Speaker 2: sort of weaponizing trade going to go.

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Speaker 1: You refer to the notion of decoupling, and I'm wondering

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Speaker 1: whether you feel that there may be something that has

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Speaker 1: been kind of irrevocably damaged in the relationship between the

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Speaker 1: US and China.

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Speaker 2: I think that's definitely the case. I think the path

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Speaker 2: that we were on previously is no longer viable.

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Speaker 3: I think it's it's.

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Speaker 2: Beholden on China and other nations. Really, this is not

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Speaker 2: limited to China, to really reassess its relationship with the

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Speaker 2: US and its dependency on the US in a number

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Speaker 2: of in a number of areas, in terms of not

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Speaker 2: just economic but also security. So for China, I think

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Speaker 2: economically clearly cleaning up its supply chains, making it more

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Speaker 2: immune from being dependent, and really focusing on which is

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Speaker 2: something which has been around for a long time, the

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Speaker 2: domestic economy and trying to build domestic consumption to replace

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Speaker 2: its dependency on low cost manager factures the flood global markets,

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Speaker 2: and it's something that it needs to get out of.

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Speaker 2: There's been a big drive towards automation, I think, so

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Speaker 2: China has surprised significantly the pace at which it's been

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Speaker 2: able to automate its industrial sector, and that allows for

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Speaker 2: it to be far less dependent.

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Speaker 1: So can markets now settle down and accept this new

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Speaker 1: paradigm or are we in an elevated period of continued

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Speaker 1: uncertainty that's going to create more volatility, especially in the

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Speaker 1: foreign exchange.

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Speaker 2: Well, certainly the pressure valve has been foreign exchange as

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Speaker 2: we've seen dislocation. We've seen currencies in this region, most

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Speaker 2: noticeably the anti dollar Taiwanese dollar has had a major

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Speaker 2: revaluation in a very short period of time, and the

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Speaker 2: degree of proxy hedging because it's not easy to hedge

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Speaker 2: longer term on the anti dollar has caused other currencies

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Speaker 2: to rise in tandem, so there are a number of

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Speaker 2: examples of how that dislocation plays out in the markets.

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Speaker 2: But more fundamentally, yes, I think we are seeing a resetting.

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Speaker 2: We are seeing volatility ease in stock markets. We see

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Speaker 2: the Vick's peak at just over fifty for an extended period,

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Speaker 2: which is very unusual, but it's now back down below twenty.

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Speaker 2: And I think investors have taken a big side of

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Speaker 2: relief as we've seen this truce in the trade negotiations

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Speaker 2: between the US and China. But I don't think that

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Speaker 2: investors are really seeing this as a return to the

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Speaker 2: previous pathway. I think certainly what we're doing is we're

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Speaker 2: taking the opportunity to continue to diversify out of US

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Speaker 2: equities and move money more internationally to get more of

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Speaker 2: a balance in our exposure, which makes a lot of

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Speaker 2: sense given the ride that we've had and the sensitivities

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Speaker 2: that we've had to certain sectors. I think the headlines

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Speaker 2: will steal steer markets we've seen now as Trump has

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Speaker 2: moved through the Gulf States the Middle East, that's had

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Speaker 2: a very significant impact on certain sectors as big announcements

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Speaker 2: have been made, whether or not there's followed through and

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Speaker 2: there's commitment to really deliver on those announcements. In the past,

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Speaker 2: they've typically disappointed, but the headlines do move markets. So

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Speaker 2: the volatility subdued somewhat, but continues to be an issue

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Speaker 2: that we are watchful of and making sure that we're

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Speaker 2: not caught out in the short term as we try

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Speaker 2: and create a more balanced position so that any one

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Speaker 2: factor would not distort valuations.

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Speaker 1: Mark, I'm curious as to whether there is a particular

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Speaker 1: strategy with which you have a high level of conviction

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Speaker 1: that may be a little contrary right now that you

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Speaker 1: think will be effective over the next six, nine, even

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Speaker 1: twelve months from now.

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Speaker 2: Yeah, so we don't think yet US inflation has peaked.

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Speaker 2: We saw the April print which suggested that the impact

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Speaker 2: of tarists was not as heavy as anticipated.

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Speaker 3: I think it's too early to call that.

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Speaker 2: It is definitely the case that we don't see the

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Speaker 2: supply side constraints in the The backlock that we saw

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Speaker 2: at the ports in twenty one to twenty three is

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Speaker 2: not there. The demand supply situation in the labor market

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Speaker 2: is in favor of supplier rather than demand, so that

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Speaker 2: is another inflationary factor which is taken off the table,

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Speaker 2: and of course lower energy prices is going to flow through,

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Speaker 2: so we don't see the build up of inflationary pressure.

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Speaker 2: But we still haven't reached the peak, which will probably

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Speaker 2: sort of come out at about four percent and then

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Speaker 2: ease as we get towards the year end at around

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Speaker 2: three percent. With that in mind, our view on the

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Speaker 2: US economy is for below trend growth at about one

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Speaker 2: point three percent as we get through to the year end,

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Speaker 2: the sort of J curve type shape for twenty twenty five.

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Speaker 2: In context of that, earnings are holding up well. We

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Speaker 2: think credit is probably still the spreads are still too tight.

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Speaker 2: But given those views on inflation, we see an opportunity

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Speaker 2: at the long end of the curve to tactically overweight

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Speaker 2: duration exposure to rates and wait for the curve to

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Speaker 2: adjust and come back down.

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Speaker 1: Mark will leave it there. Thank you so much for

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Speaker 1: visiting with us. Mark comment. There is the chief investment

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Speaker 1: officer at AIA Group joining from Hong Kong here on

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Speaker 1: the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast.

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Speaker 1: I'm Doug Chrisner. So today the equity market did show

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Speaker 1: some signs of fatigue after an epic rebound over the

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Speaker 1: last month since those intra day lows in April, the

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Speaker 1: S and P is up a whopping twenty two percent. Interestingly,

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Speaker 1: today the CNN Business Fear Greed Index approached extreme greed

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Speaker 1: and we had the S and P rising just one

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Speaker 1: tenth of one percent today. Joining me now is John Creekmuir.

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Speaker 1: He is the chief investment officer at Kreekmuir Wealth Advisors.

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Speaker 1: John's on the line from Morton, Illinois. John, thank you

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Speaker 1: so much for making time to chat with us. How

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Speaker 1: would you characterize where we are right now in this

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Speaker 1: cycle in the equity market.

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Speaker 4: Let's say we're at a very interesting time to say

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Speaker 4: the least. And you know, we came off last year

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Speaker 4: where the Ape Schiller hit the second highest recorded level

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Speaker 4: as far as in the history of the market. The

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Speaker 4: highest one is actually in December of nineteen ninety nine.

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Speaker 4: The market was overvalued, was looking for a reason to sell,

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Speaker 4: and quite honestly, the first one hundred days the Trump

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Speaker 4: administration face was fast and furious. And when we had

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Speaker 4: Liberation Day, that's so called Day of Liberation on April

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Speaker 4: the second, that was the event that created immense uncertainty,

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Speaker 4: and we actually hit a twenty percent decrease, and as

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Speaker 4: you just mentioned, we had bounced off of that. We've

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Speaker 4: made back a large portion from the sell off from

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Speaker 4: the high on February eighteenth. Now we are at a

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Speaker 4: point in time where all of a sudden the bounce

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Speaker 4: back has happened. There seems to be a bit of

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Speaker 4: a certainty. However, we believe that they buys have gotten

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Speaker 4: ahead of the cells and we're really looking to see

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Speaker 4: are we going to stay above this resistance level which

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Speaker 4: was fifty eight thirty three and close above it. If so,

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Speaker 4: we have room to go higher. However, we're still navigating

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Speaker 4: the uncertainty of what the actual effect of these tariffs

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Speaker 4: are going to be over on the economy.

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Speaker 1: So when you look at certain areas of the market

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Speaker 1: these days, where are you putting your focus? Where is

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Speaker 1: the opportunity?

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Speaker 4: You know, right now, we are really looking for companies

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Speaker 4: that have a strong wide mode so they have a

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Speaker 4: competitive advantage. We do see some opportunities as far as

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Speaker 4: the oil and glass exploration, but really as far as

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Speaker 4: the pipelines, we love n Bridge here and again strong Moat.

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Speaker 4: The demand for their product is going to be there.

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Speaker 4: We're also looking for opportunities and select technology areas. We

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Speaker 4: do still like companies such as Snowflake. We just initiated

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Speaker 4: a new position in Snowflake as far as the company,

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Speaker 4: and so there's tremendous opportunities. But again, value is the

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Speaker 4: key right now and when uncertainty, value is the key.

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Speaker 1: So these days, if you look at the swaps market

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Speaker 1: pricing for FED rate cuts right now, only about fifty

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Speaker 1: basis points between now and the end of the year,

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Speaker 1: and perhaps we don't get the first rate cut until September.

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Speaker 1: Where do you see the FED in your thinking and

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Speaker 1: the extent to which rate cuts will push the market higher,

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Speaker 1: if at all.

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Speaker 4: You know? So with rain cuts, we really have to

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Speaker 4: look to say what is going to be driving that.

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Speaker 4: The FED has really been focused as far as on

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Speaker 4: inflation as the number one metrics they're looking at. We

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Speaker 4: get a really nice surprise as far as inflation numbers

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Speaker 4: that came out earlier this week, and we'll have to

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Speaker 4: wait and see how numbers later on this week play

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Speaker 4: into it. However, even with the most numbers that we've

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Speaker 4: seen here recently, really it's about seeing how do things

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Speaker 4: play out throughout the rest of the summer. We do

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Speaker 4: forecast at least a one quarter percent decrease as far

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Speaker 4: as in rates sometime towards the end of the third

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Speaker 4: quarter in the September meeting, and potentially another decrease they're

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Speaker 4: early on in the fourth quarter, possibly in October or November. However,

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Speaker 4: a fifty basis point decrease is probably the most we're

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Speaker 4: going to see this year. We do believe the market

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Speaker 4: is already starting to price in at least a twenty five,

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Speaker 4: if not fifty basis point decrease later on this year.

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Speaker 4: So some of the most recent runoff actually is not

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Speaker 4: just from some of the issues being resolved as far

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Speaker 4: as in the tariff arguments and tariff wars that we're seeing,

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Speaker 4: but also a little bit of advanced thinking that we

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Speaker 4: are going to see a decrease in rate cuts. So

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Speaker 4: the market is getting a little bit ahead of itself

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Speaker 4: in anticipation of the rate cuts that could provide a

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Speaker 4: little bit more instability if the economic numbers do not

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Speaker 4: play out for the rest of the summer.

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Speaker 1: We've talked a little bit about the market overall. You're

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Speaker 1: talking about some of the technical indicators we've brought the

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Speaker 1: fed into the story, and I'm curious as to whether

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Speaker 1: or not you're seeing opportunities offshore right now if at all.

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Speaker 4: Yeah, we are, and so we were actually early investors

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Speaker 4: early on in the cycle and end of January as

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Speaker 4: far as reallocating dollars over into Europe specifically, we really

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Speaker 4: liked Germany at that period of time. We made some

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Speaker 4: early plays as far as in the early part of

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Speaker 4: February as far as in defense contractors, specifically in Germany.

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Speaker 4: We believe what the current administrations be a larger level

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Speaker 4: of demand that different countries of the role prepare for

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Speaker 4: their own def and so because of that, we know

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Speaker 4: that countries are finding dollars to allocate toward defense spending

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Speaker 4: and they're favoring companies within their own country. That run

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Speaker 4: is actually started to slow down. We do is look

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Speaker 4: for company countries that are not going to be greatly

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Speaker 4: impacted as far as with the current trade dispute that

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Speaker 4: we're in. And so even if we look at internationally,

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Speaker 4: we like developed countries. We're looking for companies again and

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Speaker 4: that have a strong balance sheet. And the third leg

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Speaker 4: as far as the decision making is for companies that

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Speaker 4: are specifically there are more domestic as far as in

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Speaker 4: their overall sales, or if not domestic, their trading partners

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Speaker 4: are more friendly as far as to the current environment.

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Speaker 1: John, before I let you go, I'm wondering whether or

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Speaker 1: not there is a conviction trade that you have right

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Speaker 1: now that may be a little counterintuitive.

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Speaker 3: Yeah, there is.

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Speaker 4: So, you know, we really believe that the huge sell

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Speaker 4: off we saw as far as in the large name

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Speaker 4: technology sector was tremendously overblown. And so whenever we see

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Speaker 4: drastic reactions and drastic movements as far as with any

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Speaker 4: individual name hitting sector hitty country specific index, typically those

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Speaker 4: are large emotional moves in which the people are viewing

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Speaker 4: a possible consequence in the most extreme manner. And so

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Speaker 4: we believe there are some phenomenal names now they were

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Speaker 4: extremely attractively priced three and four weeks ago, and yet

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Speaker 4: they are still competitively priced at current levels. And so

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Speaker 4: we're looking not this at the mag seven, but we're

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Speaker 4: looking at industries really as far as any artificial intelligence

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Speaker 4: and advanced computing in the storage space that became oversold

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Speaker 4: relative to whatever their competitive advantages. We were actually adding

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Speaker 4: into some big names three weeks ago at some phenomenal prices,

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Speaker 4: specifically the semiconductor space. Super Micro had a phenomenal day

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Speaker 4: of strong earnings. We're seeing earnings still intact. We're starting

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Speaker 4: to see trade agreements actually benefiting some of these larger names.

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Speaker 4: We still love some of the old homegrown names that

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Speaker 4: we're seeing tremendous values such as Microsofts and really beating

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Speaker 4: up tremendous value in those type of companies.

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Speaker 1: John will leave you there. Thank you so much for

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Speaker 1: joining us. John Creekmuir there. He is the chief investment

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Speaker 1: Officer at Creekmeir Wealth Advisors, joining from Morton, Illinois. Here

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Speaker 1: on the Daybreak Asia podcast. Thanks for listening to today's

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Speaker 1: episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 1: we look at the story shaping markets, finance, and geopolitics

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Speaker 1: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 1: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 1: Join us again tomorrow for insight on the market moves

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Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Chrisner,

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Speaker 1: and this is Bloomberg