1 00:00:02,440 --> 00:00:05,439 Speaker 1: Good morning, and welcome to the Bloomberg day Break Asia podcast. 2 00:00:05,600 --> 00:00:08,200 Speaker 1: I'm Doug Prisner. Here are the stories we're following today. 3 00:00:09,440 --> 00:00:12,159 Speaker 2: I'm Charlie Pellett. Doug Prisoner is off this week. It 4 00:00:12,280 --> 00:00:15,080 Speaker 2: was a mixed open for Asian markets this morning, as 5 00:00:15,160 --> 00:00:18,840 Speaker 2: the region work through mixed US tech earnings. For more, 6 00:00:18,920 --> 00:00:22,120 Speaker 2: we spoke with Adrian Zurker, co head of Global Asset 7 00:00:22,160 --> 00:00:25,480 Speaker 2: Allocation at the UBS Global Wealth Management. 8 00:00:26,280 --> 00:00:29,720 Speaker 3: You guys went overweight viewers equities across your portfolios. 9 00:00:30,480 --> 00:00:31,080 Speaker 4: Tell us why. 10 00:00:31,640 --> 00:00:34,280 Speaker 5: As you mentioned, actually the word looks very complex. We 11 00:00:34,360 --> 00:00:39,199 Speaker 5: have election data coming in, inflation rates are going up. 12 00:00:39,240 --> 00:00:41,720 Speaker 5: That doesn't really speak for high equity markets. But if 13 00:00:41,760 --> 00:00:44,239 Speaker 5: you take a step back, I think in general we 14 00:00:44,240 --> 00:00:47,320 Speaker 5: actually do see that the macroeconomic environment is are very solid. 15 00:00:47,400 --> 00:00:51,080 Speaker 5: So there was talk about soft landing or hard landing. 16 00:00:51,159 --> 00:00:53,880 Speaker 5: We think we actually be in no landing scenario where 17 00:00:53,960 --> 00:00:56,080 Speaker 5: growth day is actually quite supported. 18 00:00:56,600 --> 00:00:59,640 Speaker 4: Inflation is still coming off, maybe a bit slower than expected. 19 00:01:00,040 --> 00:01:02,880 Speaker 5: The labor market is still solid, so that really points 20 00:01:02,920 --> 00:01:05,640 Speaker 5: to solid earn's growth. We do expect double digits for 21 00:01:05,680 --> 00:01:08,679 Speaker 5: this year, still very high single digit for next year. 22 00:01:09,400 --> 00:01:11,080 Speaker 4: The market still looks attractive. 23 00:01:11,240 --> 00:01:13,760 Speaker 5: We actually do think there's so much cash on the 24 00:01:13,840 --> 00:01:16,640 Speaker 5: sideline that wants to go back to the market. They 25 00:01:16,680 --> 00:01:20,039 Speaker 5: have missed the rally in the equity market, and we 26 00:01:20,080 --> 00:01:23,280 Speaker 5: actually want to be positioned before the election because usually 27 00:01:23,560 --> 00:01:26,520 Speaker 5: election makes a lot of uncertainties, but once the under 28 00:01:26,560 --> 00:01:29,200 Speaker 5: inties is gone, it doesn't matter so much who actually 29 00:01:29,280 --> 00:01:29,959 Speaker 5: gets elected. 30 00:01:30,040 --> 00:01:30,600 Speaker 4: We actually do. 31 00:01:30,600 --> 00:01:33,520 Speaker 5: Think that the market had sort of relief rally as 32 00:01:33,560 --> 00:01:35,480 Speaker 5: well get to the end of the year, so a 33 00:01:35,560 --> 00:01:37,480 Speaker 5: lot of positive supporting factors. 34 00:01:37,560 --> 00:01:41,760 Speaker 6: There is that narrative though that if either candidate wins, 35 00:01:42,280 --> 00:01:44,920 Speaker 6: you're going to see fiscal deficits. Rates are probably going 36 00:01:44,920 --> 00:01:47,280 Speaker 6: to stay still elevated. At some point the Fed's going 37 00:01:47,360 --> 00:01:49,640 Speaker 6: to be a bit restricted and how much they're going 38 00:01:49,680 --> 00:01:52,200 Speaker 6: to cut. Does that impact your review on equities at all? 39 00:01:52,240 --> 00:01:52,480 Speaker 4: Though? 40 00:01:53,160 --> 00:01:55,240 Speaker 5: Well, two things on the election side, so we think 41 00:01:55,280 --> 00:01:56,600 Speaker 5: it's very split at the. 42 00:01:56,560 --> 00:01:58,200 Speaker 4: Moment fifty to fifty who could win. 43 00:01:58,560 --> 00:02:01,160 Speaker 5: But we have a quite strong view that if Kamala 44 00:02:01,160 --> 00:02:04,279 Speaker 5: Harris wins that it will be sort of a mixed 45 00:02:04,280 --> 00:02:07,760 Speaker 5: garment with a basically red Senate. If Trump wins, it 46 00:02:07,800 --> 00:02:09,639 Speaker 5: will be sort of a red sweep. So these are 47 00:02:09,760 --> 00:02:12,320 Speaker 5: our key scenarios and I think both of these scenarios 48 00:02:12,320 --> 00:02:15,760 Speaker 5: should be actually positive for equities. Yes, the FED might 49 00:02:15,800 --> 00:02:18,800 Speaker 5: have to consider how much they can cut. We still 50 00:02:18,800 --> 00:02:21,120 Speaker 5: have pencil in fifty basis points for the end of 51 00:02:21,400 --> 00:02:23,600 Speaker 5: this year and one hundred basis points for next year. 52 00:02:23,919 --> 00:02:26,919 Speaker 5: Maybe they will skip on one basis or one cut, 53 00:02:27,000 --> 00:02:30,120 Speaker 5: but it will be based on strong numbers. And therefore 54 00:02:30,400 --> 00:02:33,400 Speaker 5: I think the market looks through that. Eventually rates are 55 00:02:33,400 --> 00:02:35,440 Speaker 5: still heading lower. It's not that the FED will start 56 00:02:35,480 --> 00:02:37,720 Speaker 5: to talk about hiking interest rates. 57 00:02:37,880 --> 00:02:39,560 Speaker 3: Yeah, and as you point out right, a lot of 58 00:02:39,600 --> 00:02:43,600 Speaker 3: money still parked in money market assets. The one hundred 59 00:02:43,600 --> 00:02:46,800 Speaker 3: and fifty basis points of cutstore doesn't sound like a 60 00:02:46,840 --> 00:02:50,320 Speaker 3: no landing scenario. Why do we suspect the Fed styal 61 00:02:50,520 --> 00:02:52,680 Speaker 3: is able to cut rates in a no landing scenario? 62 00:02:52,760 --> 00:02:54,680 Speaker 3: I guess it's a question there. And why do equities 63 00:02:54,720 --> 00:02:58,880 Speaker 3: do well in the absence of perhaps he's more easy 64 00:02:58,919 --> 00:02:59,760 Speaker 3: coming out of the Fed. 65 00:03:00,120 --> 00:03:02,840 Speaker 5: Well, Sha, don't forget that the FED had to overtighten, 66 00:03:02,960 --> 00:03:06,320 Speaker 5: they lost control inflation, They overtight and we went above 67 00:03:06,360 --> 00:03:09,639 Speaker 5: five percent. Neutral rate is probably somewhere and three to 68 00:03:09,720 --> 00:03:11,360 Speaker 5: three and a half, and that's where they will have 69 00:03:11,440 --> 00:03:14,160 Speaker 5: to guide it to. So just to keep MONTI policy 70 00:03:14,639 --> 00:03:17,600 Speaker 5: stable and neutral and as it's not an easy mode 71 00:03:17,680 --> 00:03:20,760 Speaker 5: actually they are going into so they're basically readjusting to 72 00:03:20,840 --> 00:03:23,079 Speaker 5: the market environment. And I said at the end it 73 00:03:23,480 --> 00:03:28,200 Speaker 5: all points down to ernest growth. Corporates are not earning 74 00:03:28,240 --> 00:03:31,360 Speaker 5: real GDP growth. They actually are more in the nominal 75 00:03:31,840 --> 00:03:35,080 Speaker 5: GDP world, and nominal GDP growth is declining, but it 76 00:03:35,240 --> 00:03:36,840 Speaker 5: actually still remains. 77 00:03:36,560 --> 00:03:38,160 Speaker 4: Very ropust to what we have seen in the last 78 00:03:38,240 --> 00:03:40,400 Speaker 4: ten years. So there's a lot of aspects. We have 79 00:03:40,440 --> 00:03:42,280 Speaker 4: structural drivers as AI. 80 00:03:42,920 --> 00:03:44,920 Speaker 5: Yes, the market will look a bit more into the 81 00:03:44,920 --> 00:03:47,400 Speaker 5: earnings do they really deliver and we can see it's 82 00:03:47,440 --> 00:03:52,280 Speaker 5: actually also taking clear views. So if you are able 83 00:03:52,360 --> 00:03:55,880 Speaker 5: to beat, you get rewarded. If not, you actually get 84 00:03:55,920 --> 00:03:59,320 Speaker 5: also questioned. And basically market can trade lower, but it's 85 00:03:59,320 --> 00:04:02,400 Speaker 5: still a two trade. It's not that you're surprising and 86 00:04:02,480 --> 00:04:06,040 Speaker 5: nothing happens and you basically surprising negatively and the market 87 00:04:06,080 --> 00:04:08,320 Speaker 5: is selling off. And I think so it still shows 88 00:04:08,320 --> 00:04:09,119 Speaker 5: healthy environment. 89 00:04:09,840 --> 00:04:11,880 Speaker 6: It seems like you're leaning more towards the equity side 90 00:04:11,880 --> 00:04:13,680 Speaker 6: of things. What about when it comes to fixed income, 91 00:04:13,800 --> 00:04:16,280 Speaker 6: do you think this market is cheap enough now that 92 00:04:16,320 --> 00:04:18,920 Speaker 6: you can actually add some duration in your portfolio. 93 00:04:18,680 --> 00:04:20,880 Speaker 5: So we actually started to add a bit. We were 94 00:04:21,200 --> 00:04:24,840 Speaker 5: long the whole year. We actually cut basically our long 95 00:04:24,920 --> 00:04:29,039 Speaker 5: duration positions roughly two three weeks before the first cut, 96 00:04:29,560 --> 00:04:32,200 Speaker 5: and now we have seen rates backing up. We didn't 97 00:04:32,240 --> 00:04:35,359 Speaker 5: expect that in this extent, but it definitely looks very interesting. 98 00:04:35,680 --> 00:04:38,000 Speaker 5: You might want to wait for next week to see 99 00:04:38,040 --> 00:04:41,279 Speaker 5: what's happening after the election, but it definitely starts to 100 00:04:41,279 --> 00:04:43,039 Speaker 5: look like an interesting trade again. 101 00:04:43,320 --> 00:04:46,080 Speaker 3: Yeah, well that takes us into income strategies, right, So 102 00:04:46,240 --> 00:04:49,320 Speaker 3: what would be the preferred income strategies at this point 103 00:04:49,320 --> 00:04:50,680 Speaker 3: in time. Is it in the equity market, is it 104 00:04:50,720 --> 00:04:52,040 Speaker 3: in fixed income for example? 105 00:04:52,800 --> 00:04:55,320 Speaker 5: It's probably a mix. So we still like dividend stocks. 106 00:04:55,360 --> 00:04:57,559 Speaker 5: And I also have to say that we talked about 107 00:04:57,600 --> 00:05:00,800 Speaker 5: Magnificent seven. So last year these were the companies that 108 00:05:00,920 --> 00:05:03,159 Speaker 5: really had ernest growth. The rest of the four hundred 109 00:05:03,160 --> 00:05:05,440 Speaker 5: and ninety three and average didn't have any earnest growth. 110 00:05:05,680 --> 00:05:07,400 Speaker 4: It starts to be more balanced. 111 00:05:07,400 --> 00:05:09,640 Speaker 5: So we see that the four hundred ninety three stocks, 112 00:05:09,720 --> 00:05:13,279 Speaker 5: particularly the fourth quarter, will catch up a lot with 113 00:05:13,440 --> 00:05:16,320 Speaker 5: the Magnificent seven. Darn's growth is coming off, so we 114 00:05:16,360 --> 00:05:19,400 Speaker 5: think they will be broadening dividend stocks definitely look very interesting. 115 00:05:20,000 --> 00:05:22,640 Speaker 5: But I would definitely go into the fixed income market 116 00:05:22,640 --> 00:05:23,280 Speaker 5: as well. 117 00:05:23,440 --> 00:05:24,880 Speaker 4: Definitely more interesting than cash. 118 00:05:24,920 --> 00:05:28,440 Speaker 5: So we actually have maxed out our cash position to 119 00:05:28,520 --> 00:05:29,720 Speaker 5: the lowest level. 120 00:05:29,520 --> 00:05:30,560 Speaker 4: In our portfolios. 121 00:05:30,680 --> 00:05:35,000 Speaker 5: Okay, but within fixed income, really still focus on quality 122 00:05:35,200 --> 00:05:38,680 Speaker 5: evaluation in high yield is really unattractive and therefore be 123 00:05:38,839 --> 00:05:39,479 Speaker 5: cautious there. 124 00:05:39,520 --> 00:05:42,480 Speaker 3: How much does gold come up in your conversations? 125 00:05:42,560 --> 00:05:46,680 Speaker 4: Yeah? Lot? Does it come up? Okay, up a lot? 126 00:05:48,200 --> 00:05:50,960 Speaker 5: The question is I'm too late? Did I miss it? 127 00:05:52,080 --> 00:05:54,719 Speaker 5: We have it in our portfolio. We went in, we 128 00:05:54,960 --> 00:05:58,440 Speaker 5: cut our position by health probably also a bit too early, 129 00:05:58,480 --> 00:06:01,240 Speaker 5: but we still let it run after say, it's a 130 00:06:01,240 --> 00:06:04,159 Speaker 5: bit profy at this level. We still see upside fundamentally, 131 00:06:04,200 --> 00:06:08,240 Speaker 5: but it was going up in very short period, maybe 132 00:06:08,240 --> 00:06:11,200 Speaker 5: a bit too quick. There might be some profit taking 133 00:06:11,600 --> 00:06:16,120 Speaker 5: here and there, but I would say fundamentally they're still upside. 134 00:06:16,160 --> 00:06:18,800 Speaker 5: You have central banks that are trying to diversify their 135 00:06:18,839 --> 00:06:19,799 Speaker 5: ethics reserves. 136 00:06:20,839 --> 00:06:21,839 Speaker 4: You haven't seen very. 137 00:06:21,680 --> 00:06:24,600 Speaker 5: Strong ETF flows, which we actually do expect will come in. 138 00:06:25,760 --> 00:06:28,920 Speaker 5: We still expect the Fed to cut interest rates, and 139 00:06:29,000 --> 00:06:31,360 Speaker 5: we still have a weeked all of you, which should 140 00:06:31,360 --> 00:06:33,680 Speaker 5: be supported for stronger goal prices. 141 00:06:34,000 --> 00:06:35,960 Speaker 6: So what is the best election hedge then? 142 00:06:36,320 --> 00:06:36,760 Speaker 4: Is a goal? 143 00:06:36,920 --> 00:06:39,040 Speaker 6: Is it yen? Given how cheap it is these days? 144 00:06:39,560 --> 00:06:41,039 Speaker 6: What do you look at some something that you know? 145 00:06:41,120 --> 00:06:43,279 Speaker 6: I know you're saying you can see through the noise 146 00:06:43,880 --> 00:06:45,920 Speaker 6: and still in the US equities, But how are you 147 00:06:45,960 --> 00:06:47,640 Speaker 6: actually protecting your portfolio as well? 148 00:06:47,800 --> 00:06:48,560 Speaker 4: A very good point. 149 00:06:48,640 --> 00:06:51,919 Speaker 5: I mean, we try to build very robus portfolios. So 150 00:06:51,960 --> 00:06:55,480 Speaker 5: we have two key election hatches. One is actually despite 151 00:06:55,520 --> 00:06:58,599 Speaker 5: the overweight equities, we have a few narratives in it 152 00:06:58,680 --> 00:07:02,520 Speaker 5: that sort of flower out inside. The other key election 153 00:07:02,640 --> 00:07:05,599 Speaker 5: hatch we have is just short a CNY versus US dollar. 154 00:07:05,640 --> 00:07:09,559 Speaker 5: We actually do think the CNY could suffer further going 155 00:07:09,600 --> 00:07:14,040 Speaker 5: into particular Trump presidency, and therefore I think that's a 156 00:07:14,160 --> 00:07:17,960 Speaker 5: very interesting hetch because you get you're getting paid in 157 00:07:18,080 --> 00:07:21,760 Speaker 5: news dollar interest, you're basically paying CNY interests, so you 158 00:07:21,800 --> 00:07:23,600 Speaker 5: actually have a nice carry on top of that. 159 00:07:24,400 --> 00:07:25,360 Speaker 4: If it doesn't, I just. 160 00:07:25,360 --> 00:07:27,520 Speaker 3: Want to get your thoughts on is there still a 161 00:07:27,560 --> 00:07:30,520 Speaker 3: cyclical trade to be made here, a tactical trade to 162 00:07:30,560 --> 00:07:31,880 Speaker 3: be made in China? Do I need to wait for 163 00:07:31,880 --> 00:07:32,360 Speaker 3: the elections? 164 00:07:32,400 --> 00:07:33,680 Speaker 2: What's what's your overall view on that? 165 00:07:33,720 --> 00:07:37,440 Speaker 5: Before me unpacked, Probably still some tactical upside, but I 166 00:07:37,440 --> 00:07:40,520 Speaker 5: will probably wait for the election out common and we 167 00:07:40,520 --> 00:07:41,960 Speaker 5: also see a test that down. 168 00:07:41,800 --> 00:07:42,280 Speaker 4: A little bit. 169 00:07:42,440 --> 00:07:45,920 Speaker 5: Everybody wants to know who they will face going forward, 170 00:07:46,280 --> 00:07:49,559 Speaker 5: and then it could be actually a good still tactical trade. 171 00:07:49,560 --> 00:07:54,120 Speaker 3: At least you mentioned any potential tactical rally in China 172 00:07:54,200 --> 00:07:56,880 Speaker 3: might have to wait until the US elections are over. 173 00:07:57,320 --> 00:08:00,000 Speaker 3: Do you think that Chinese policy makers will also need 174 00:08:00,040 --> 00:08:02,840 Speaker 3: to wait who wins before they give us give us 175 00:08:02,840 --> 00:08:03,440 Speaker 3: the goods. 176 00:08:03,920 --> 00:08:04,960 Speaker 4: I think they want to wait. 177 00:08:05,200 --> 00:08:08,480 Speaker 5: I mean the package and the rumors we have heard 178 00:08:08,560 --> 00:08:11,200 Speaker 5: is probably in line what we also would expect, and 179 00:08:11,240 --> 00:08:15,440 Speaker 5: I'm pretty sure the dates that has been set was 180 00:08:15,520 --> 00:08:17,920 Speaker 5: related to the US election. They want to see how 181 00:08:18,000 --> 00:08:21,760 Speaker 5: markets react who they will face as a president. Then 182 00:08:21,760 --> 00:08:25,480 Speaker 5: they will announce basically stimulus package as well and probably 183 00:08:25,520 --> 00:08:29,280 Speaker 5: readjust that. And I said, that's probably where you have potential. 184 00:08:28,920 --> 00:08:31,880 Speaker 4: For a good sort of short term trade. If it's 185 00:08:31,920 --> 00:08:33,240 Speaker 4: structure enough, we will see. 186 00:08:33,280 --> 00:08:36,679 Speaker 5: I think the key issue in China currently is still 187 00:08:36,760 --> 00:08:39,600 Speaker 5: you can throw a lot at this economy, and as said. 188 00:08:39,440 --> 00:08:40,280 Speaker 4: Market is cheap. 189 00:08:40,960 --> 00:08:44,840 Speaker 5: People in opposition that's probably driving some flows, but it's 190 00:08:44,880 --> 00:08:46,680 Speaker 5: the real estate market and as long as you have 191 00:08:46,760 --> 00:08:51,040 Speaker 5: real estate prices going down, it's very hard to convince 192 00:08:51,080 --> 00:08:54,199 Speaker 5: the consumer and get is creating this positive feedback loop 193 00:08:54,200 --> 00:08:56,680 Speaker 5: before the consumer to get back and spend. And I 194 00:08:56,679 --> 00:08:59,959 Speaker 5: think that's if you look at the economy which is missed, 195 00:09:00,120 --> 00:09:03,000 Speaker 5: and I think that's the biggest part where I'm still 196 00:09:03,000 --> 00:09:06,000 Speaker 5: concerned about the structural challenges that China has. 197 00:09:06,120 --> 00:09:07,800 Speaker 6: So do you think it's still more going to be 198 00:09:07,880 --> 00:09:10,960 Speaker 6: domestically driven or do you think I look at you 199 00:09:10,960 --> 00:09:13,040 Speaker 6: know what terriff risks for example, is that going to 200 00:09:13,080 --> 00:09:15,240 Speaker 6: be a bigger overhang on this market. 201 00:09:16,040 --> 00:09:18,680 Speaker 5: Well, if Trump gets elected and he follows up on 202 00:09:18,760 --> 00:09:21,520 Speaker 5: his sixty percent tiis or whatever it is, that's definitely 203 00:09:21,559 --> 00:09:25,000 Speaker 5: a major challenge that will impact GDP growth, definitely also 204 00:09:25,040 --> 00:09:29,720 Speaker 5: impact the consumer spending. And so it's definitely much more 205 00:09:29,720 --> 00:09:32,400 Speaker 5: domestically focused, and I think that's what they also have 206 00:09:32,480 --> 00:09:34,360 Speaker 5: to do. The good thing is in China, it's a 207 00:09:34,440 --> 00:09:39,000 Speaker 5: very big economy, so they have the flexibility also to 208 00:09:39,160 --> 00:09:43,160 Speaker 5: engineer a domestic driven rebound. But as said, you have 209 00:09:43,240 --> 00:09:46,960 Speaker 5: to basically stimulate the property market, which structure is probably 210 00:09:46,960 --> 00:09:48,960 Speaker 5: not what you want to do to get sort of 211 00:09:48,960 --> 00:09:50,880 Speaker 5: this positive feedback loop for the consumer. 212 00:09:51,200 --> 00:09:54,120 Speaker 3: And you know, since if it is indeed the property 213 00:09:54,200 --> 00:09:57,559 Speaker 3: market that will be you know, the ultimate acid test 214 00:09:57,640 --> 00:10:01,280 Speaker 3: of you know, any potential bull market that might be 215 00:10:01,360 --> 00:10:04,440 Speaker 3: at least still a year away. How do you think 216 00:10:04,840 --> 00:10:07,840 Speaker 3: what is the appropriate exposure you think to Chinese equities 217 00:10:07,920 --> 00:10:09,680 Speaker 3: or Chinese assets at that that do you think people 218 00:10:09,720 --> 00:10:12,280 Speaker 3: should have? Well, we wait for that ship to eventually 219 00:10:12,320 --> 00:10:13,079 Speaker 3: turn hopefully. 220 00:10:13,240 --> 00:10:17,240 Speaker 5: So what we try to focus mainly really building solid 221 00:10:17,240 --> 00:10:21,600 Speaker 5: global portfolios, and unfortunately China is a relatively small part 222 00:10:21,640 --> 00:10:24,360 Speaker 5: out of that. We talk about maybe two percent exposure. 223 00:10:24,360 --> 00:10:26,400 Speaker 5: If you want to have a bit more Asian focus 224 00:10:26,480 --> 00:10:26,760 Speaker 5: for some. 225 00:10:26,800 --> 00:10:28,760 Speaker 4: Cent exposure, yeah, if you want to have a. 226 00:10:28,679 --> 00:10:31,199 Speaker 5: Bit more of an Asian focus for some of the clients, 227 00:10:31,240 --> 00:10:32,800 Speaker 5: I want to have a bit of a home buas 228 00:10:33,040 --> 00:10:36,240 Speaker 5: we still talk about six to seven percent exposure to China. 229 00:10:36,280 --> 00:10:37,000 Speaker 1: Wow, that's not a lot. 230 00:10:37,280 --> 00:10:40,800 Speaker 5: But also not forget I mean the compositions has changed, 231 00:10:40,840 --> 00:10:43,360 Speaker 5: so India actually caught up with China largely. 232 00:10:43,480 --> 00:10:45,160 Speaker 4: You have time on your Korea. 233 00:10:45,280 --> 00:10:47,600 Speaker 5: I think if you take India, Korea and Time and together, 234 00:10:47,800 --> 00:10:51,280 Speaker 5: it's almost forty five percent of the Asian extra pan market. 235 00:10:51,440 --> 00:10:55,720 Speaker 5: So you see, Asia overall is growing. There's actually positive 236 00:10:55,800 --> 00:10:58,680 Speaker 5: trends and so you have a much more balanced portfolio 237 00:10:58,679 --> 00:11:01,880 Speaker 5: if you invest into Asia, then just basically be overly 238 00:11:01,920 --> 00:11:02,800 Speaker 5: dependent on China. 239 00:11:03,400 --> 00:11:04,959 Speaker 6: I was going to get your take. I mean, what 240 00:11:05,120 --> 00:11:10,560 Speaker 6: is the playbook for this election? Can we do what 241 00:11:10,600 --> 00:11:13,000 Speaker 6: we did back in twenty sixteen when Trump won? I 242 00:11:13,000 --> 00:11:17,079 Speaker 6: mean at that time, inflation was way more controlled, rates 243 00:11:17,080 --> 00:11:20,320 Speaker 6: for much lower and there was this rally that went 244 00:11:20,360 --> 00:11:22,600 Speaker 6: on for about fifteen months after Trump won. I mean, 245 00:11:22,960 --> 00:11:25,640 Speaker 6: can we subscribe those same sort of narratives this time around, 246 00:11:25,640 --> 00:11:28,400 Speaker 6: because we've already seen aquen markets rally so much and 247 00:11:28,440 --> 00:11:29,680 Speaker 6: things are not cheap anymore. 248 00:11:30,640 --> 00:11:31,760 Speaker 4: That's a very good question. 249 00:11:32,440 --> 00:11:35,240 Speaker 5: I think the environment is very different than we are 250 00:11:35,320 --> 00:11:38,520 Speaker 5: much more advanced in the cycle. Well, the positive news 251 00:11:38,559 --> 00:11:41,920 Speaker 5: is the Fed is cutting industrates are coming off, there 252 00:11:41,960 --> 00:11:44,280 Speaker 5: will be more stimulus. I think the market at least 253 00:11:44,320 --> 00:11:47,600 Speaker 5: initially will play sort of the playbook of twenty sixteen. 254 00:11:48,400 --> 00:11:52,200 Speaker 5: But then once we actually go into next year and 255 00:11:52,240 --> 00:11:54,560 Speaker 5: we start to see policies coming through, then we will 256 00:11:54,600 --> 00:11:57,480 Speaker 5: have to see how solid the macroeconomic environment is, how 257 00:11:57,559 --> 00:12:01,400 Speaker 5: much the economy can digest if it's overspent, how much 258 00:12:01,440 --> 00:12:04,360 Speaker 5: it will influence inflation. So not forget in two and 259 00:12:04,480 --> 00:12:07,280 Speaker 5: sixteen there was no inflation. They wanted to create inflation. 260 00:12:07,880 --> 00:12:10,720 Speaker 5: Now we're sort of in a probably good environment and 261 00:12:10,760 --> 00:12:11,640 Speaker 5: it's coming off. 262 00:12:12,040 --> 00:12:14,000 Speaker 4: But if we're pushing too hard. 263 00:12:14,120 --> 00:12:16,680 Speaker 5: Inflation might go up and I won't be something negative 264 00:12:16,840 --> 00:12:19,920 Speaker 5: for the markets as well. So I think the market 265 00:12:19,960 --> 00:12:22,160 Speaker 5: will played until the end of the year, until the 266 00:12:22,200 --> 00:12:25,480 Speaker 5: inauguration the same way, but then afterwards might be a 267 00:12:25,559 --> 00:12:27,800 Speaker 5: bit more nuanced on that part. 268 00:12:29,080 --> 00:12:32,199 Speaker 3: Fancy, I guess if Harris takes it this time next week, 269 00:12:32,240 --> 00:12:33,960 Speaker 3: what do you think market reaction will be the first 270 00:12:33,960 --> 00:12:35,800 Speaker 3: forty eight hours? And if it's Trump, what do you 271 00:12:35,840 --> 00:12:36,920 Speaker 3: think market reaction will be. 272 00:12:37,280 --> 00:12:40,480 Speaker 5: It's not what we usually do, but I give you 273 00:12:40,880 --> 00:12:44,320 Speaker 5: my indication is that I still think market will be 274 00:12:44,360 --> 00:12:47,800 Speaker 5: positive because the Unswerta is a way we get more clarity, 275 00:12:48,200 --> 00:12:50,720 Speaker 5: and I said it will be probably a red Senate, 276 00:12:50,840 --> 00:12:53,520 Speaker 5: which also should dampen some of the policies that she 277 00:12:53,600 --> 00:12:54,440 Speaker 5: wants to implement. 278 00:12:54,840 --> 00:12:56,920 Speaker 6: Adre great to have you. Adrian's Rusher, their co head 279 00:12:56,920 --> 00:12:59,040 Speaker 6: of Global asset Allocation at UBS. 280 00:12:59,200 --> 00:13:00,080 Speaker 4: Global Wealth. 281 00:13:07,640 --> 00:13:10,640 Speaker 2: Gold trading at a record extending a surge that has 282 00:13:10,679 --> 00:13:13,720 Speaker 2: sent gold up over a third this year, joining US 283 00:13:13,720 --> 00:13:18,360 Speaker 2: now George Milling Stanley, chief gold strategist at State Street 284 00:13:18,400 --> 00:13:22,040 Speaker 2: Global Advisors. He is in our Hong Kong studio. So 285 00:13:22,280 --> 00:13:24,920 Speaker 2: with gold at a record, what is it that got 286 00:13:25,000 --> 00:13:25,360 Speaker 2: us here? 287 00:13:26,320 --> 00:13:28,120 Speaker 7: I think there are really three things that got us 288 00:13:28,200 --> 00:13:30,680 Speaker 7: up here. The first is that central banks have been 289 00:13:31,120 --> 00:13:34,439 Speaker 7: very significant buyers of gold, now primarily central banks in 290 00:13:34,520 --> 00:13:37,760 Speaker 7: the emerging markets, buying gold because they didn't have enough 291 00:13:37,800 --> 00:13:41,120 Speaker 7: in their official reserves. And that's been a process that's 292 00:13:41,160 --> 00:13:43,560 Speaker 7: been going on for fourteen straight years, not going to 293 00:13:43,559 --> 00:13:46,440 Speaker 7: go away anytime soon. The second thing, we've seen a 294 00:13:46,440 --> 00:13:50,400 Speaker 7: big revival in investment demand in China. I think Chinese 295 00:13:50,400 --> 00:13:53,600 Speaker 7: investors responding to problems in the stock market related to 296 00:13:53,679 --> 00:13:56,800 Speaker 7: real estate and turning to the traditional alternative, which has 297 00:13:56,840 --> 00:13:59,400 Speaker 7: been gold for a very long period of time. And 298 00:13:59,440 --> 00:14:02,120 Speaker 7: then for different reasons, we've seen a revival in Western 299 00:14:02,120 --> 00:14:07,000 Speaker 7: world investment, Western Europe and North America, concerned about macroeconomic 300 00:14:07,120 --> 00:14:10,760 Speaker 7: issues and also concerned about geopolitical issues. I think that 301 00:14:10,880 --> 00:14:13,360 Speaker 7: combination is what to driven gold up to a whole 302 00:14:13,400 --> 00:14:15,280 Speaker 7: succession of all time highs this year. 303 00:14:15,520 --> 00:14:20,680 Speaker 2: Well, does the current price of gold then justify current valuations? 304 00:14:22,280 --> 00:14:24,640 Speaker 7: I think it does. I mean, you know, if you 305 00:14:24,640 --> 00:14:28,000 Speaker 7: think about it the kind of macroeconomic scenario that we're in, 306 00:14:28,280 --> 00:14:32,600 Speaker 7: with inflation still being sticky, especially on the Fed's preferred measure, 307 00:14:33,760 --> 00:14:36,280 Speaker 7: and with the Fed having started to cut interest rates 308 00:14:36,280 --> 00:14:39,600 Speaker 7: and clearly embarking on a sustained period of rate cutting 309 00:14:39,640 --> 00:14:42,760 Speaker 7: that's going to run through next year if everybody is 310 00:14:42,800 --> 00:14:45,600 Speaker 7: to believe it to be believed that I think is 311 00:14:45,720 --> 00:14:49,200 Speaker 7: likely to lead to dollar weakness and then consequently gold strength. 312 00:14:49,560 --> 00:14:53,360 Speaker 7: And then the geopolitical background, a conflict in Europe with 313 00:14:53,400 --> 00:14:55,760 Speaker 7: the potential to turn nuclear at the push of a button, 314 00:14:56,320 --> 00:14:59,080 Speaker 7: and the Middle Eastern conflict having now spread way beyond 315 00:14:59,160 --> 00:15:02,400 Speaker 7: Israel's borders where it was confined at the beginning, and 316 00:15:02,440 --> 00:15:05,960 Speaker 7: now including open warfare with Iran and Lebanon, and the 317 00:15:06,000 --> 00:15:08,840 Speaker 7: potential for that to get even worse. I think all 318 00:15:08,880 --> 00:15:12,000 Speaker 7: of those things together historically have been very helpful for gold, 319 00:15:12,680 --> 00:15:15,400 Speaker 7: and right now they're continuing to be very, very supportive, 320 00:15:15,400 --> 00:15:17,440 Speaker 7: which is why we keep hitting this succession of all 321 00:15:17,480 --> 00:15:18,120 Speaker 7: time highs. 322 00:15:18,360 --> 00:15:20,680 Speaker 2: Well, let me throw in one more piece of uncertainty, 323 00:15:20,720 --> 00:15:24,120 Speaker 2: and that is the American presidential election. Potentially what might 324 00:15:24,160 --> 00:15:25,480 Speaker 2: that mean for the price of gold. 325 00:15:26,640 --> 00:15:30,640 Speaker 7: I'm guessing that whoever becomes the president We're going to 326 00:15:30,640 --> 00:15:36,040 Speaker 7: see continued spending, whether it's spending on domestic programs from 327 00:15:36,080 --> 00:15:39,360 Speaker 7: the Democrats, or whether it's spending to finance, whether it's 328 00:15:39,480 --> 00:15:42,680 Speaker 7: it's tax cuts. We're going to see bigger deficits whoever 329 00:15:42,680 --> 00:15:45,120 Speaker 7: becomes the president, and that I think is going to 330 00:15:45,200 --> 00:15:48,960 Speaker 7: lead to further dollar depreciation and quite possibly a renewal 331 00:15:48,960 --> 00:15:51,440 Speaker 7: of inflation, which could be really very very damaging. 332 00:15:51,480 --> 00:15:55,520 Speaker 2: At this point, is there a perhaps more bullish or 333 00:15:55,680 --> 00:15:58,120 Speaker 2: bearish case depending on the outcome of the election. 334 00:15:59,600 --> 00:16:02,800 Speaker 7: I think that as long as we avoid the dreaded trifecta, 335 00:16:02,880 --> 00:16:06,000 Speaker 7: as long as we avoid one party getting the presidency, 336 00:16:06,320 --> 00:16:09,240 Speaker 7: the House, and the Senate, which I think has always 337 00:16:09,320 --> 00:16:12,520 Speaker 7: led to extremism in the past. I think that as 338 00:16:12,520 --> 00:16:14,960 Speaker 7: long as we get the checks and balances that the 339 00:16:15,040 --> 00:16:18,760 Speaker 7: US system is designed to incorporate, then I don't think 340 00:16:18,800 --> 00:16:21,160 Speaker 7: that there is anything likely to be bearish for gold 341 00:16:21,240 --> 00:16:23,720 Speaker 7: in there at all. My sense is that, you know, 342 00:16:23,800 --> 00:16:28,280 Speaker 7: with likely increased spending, likely increased deficits, I've been hearing 343 00:16:28,320 --> 00:16:31,800 Speaker 7: for twenty years that our deficit is unsustainable and we 344 00:16:31,880 --> 00:16:34,560 Speaker 7: keep sustaining it somehow or other. I think that all 345 00:16:34,600 --> 00:16:37,680 Speaker 7: of those things are going to lead to dollar depreciation, 346 00:16:38,080 --> 00:16:41,120 Speaker 7: and that should lead in turn to a stronger goal price. 347 00:16:41,640 --> 00:16:45,280 Speaker 2: What happens if we don't quickly know the election outcome, 348 00:16:45,320 --> 00:16:47,480 Speaker 2: how might that play into the price of gold. 349 00:16:48,160 --> 00:16:49,680 Speaker 7: I think all that would do, and I think is 350 00:16:49,680 --> 00:16:51,800 Speaker 7: a very real possibility of that, given the way some 351 00:16:51,880 --> 00:16:54,560 Speaker 7: of the candidates are talking, I think that all that 352 00:16:54,600 --> 00:16:57,200 Speaker 7: would do is simply add to the general feeling of 353 00:16:57,280 --> 00:17:01,440 Speaker 7: geopolitical uncertainty, the uncertainty about the conflict in Ukraine and 354 00:17:01,520 --> 00:17:03,680 Speaker 7: the conflict in the Middle East. And if we have, 355 00:17:04,440 --> 00:17:07,520 Speaker 7: let's hope it's not an armed conflict in the United States. 356 00:17:07,640 --> 00:17:10,520 Speaker 7: But if we have a contentious election, which I think 357 00:17:10,600 --> 00:17:13,240 Speaker 7: is a very likely outcome, I think that's simply going 358 00:17:13,280 --> 00:17:16,000 Speaker 7: to be even further positive for gold. I don't see 359 00:17:16,040 --> 00:17:18,280 Speaker 7: any negatives out there right now. It's hard to see 360 00:17:18,359 --> 00:17:20,560 Speaker 7: where the headwinds might be coming from from the gold 361 00:17:20,560 --> 00:17:21,120 Speaker 7: point of view. 362 00:17:21,280 --> 00:17:23,560 Speaker 2: Well, certainly, we've got a lot ahead on the calendar. 363 00:17:23,560 --> 00:17:27,080 Speaker 2: In addition to the presidential election, there's also a Federal 364 00:17:27,200 --> 00:17:30,800 Speaker 2: Reserve meeting. What assumptions are you and your colleagues making 365 00:17:30,840 --> 00:17:34,200 Speaker 2: about the Federal Reserve and the pace of further rate cuts. 366 00:17:35,080 --> 00:17:38,720 Speaker 7: I think that you know Jerome Powell has said explicitly 367 00:17:38,840 --> 00:17:41,719 Speaker 7: and many many times that he plans to be driven 368 00:17:41,760 --> 00:17:44,520 Speaker 7: by the data, and that he's also trying not to 369 00:17:44,560 --> 00:17:48,320 Speaker 7: be to put too much emphasis on any one month's 370 00:17:48,480 --> 00:17:52,080 Speaker 7: particular set of economic statistics, because these are always open 371 00:17:52,119 --> 00:17:56,760 Speaker 7: to revision. But if everything stays pretty much the same 372 00:17:56,800 --> 00:17:59,120 Speaker 7: as we are right now, and he doesn't get any 373 00:17:59,160 --> 00:18:02,399 Speaker 7: major surprises in the data, then it looks like the 374 00:18:02,440 --> 00:18:05,720 Speaker 7: market consensus is right. The market consensus has now settled 375 00:18:05,720 --> 00:18:09,000 Speaker 7: on two more twenty five basis point rate cuts, one 376 00:18:09,040 --> 00:18:11,760 Speaker 7: at the November meeting, one at the December meeting, and 377 00:18:11,800 --> 00:18:16,080 Speaker 7: then a sustained succession of small twenty five basis point 378 00:18:16,200 --> 00:18:19,439 Speaker 7: rate cuts through the whole of twenty twenty five to 379 00:18:19,520 --> 00:18:22,399 Speaker 7: bring FED funds rate down to somewhere around about the 380 00:18:22,440 --> 00:18:25,760 Speaker 7: three percent level, probably a little bit higher than the 381 00:18:25,960 --> 00:18:29,119 Speaker 7: sustainable normal rate, the neutral rate, if you like, as 382 00:18:29,160 --> 00:18:32,120 Speaker 7: some of the economists want to call it, but your 383 00:18:32,160 --> 00:18:34,800 Speaker 7: own power is indicated. If the data keep coming in 384 00:18:34,840 --> 00:18:38,080 Speaker 7: the way that they are. Strong economy, some signs of 385 00:18:38,119 --> 00:18:40,320 Speaker 7: a little wobble here and there in the labor market, 386 00:18:40,920 --> 00:18:44,760 Speaker 7: but nothing really dramatic, then that will be the lightly outcome. 387 00:18:44,880 --> 00:18:45,520 Speaker 4: Two more rate. 388 00:18:45,480 --> 00:18:47,920 Speaker 7: Cuts this year, and then a succession of rate cuts 389 00:18:48,000 --> 00:18:50,879 Speaker 7: next year, and then somewhere toward the end of twenty 390 00:18:50,920 --> 00:18:54,040 Speaker 7: twenty five, the Fed will will take a little pause 391 00:18:54,760 --> 00:18:58,200 Speaker 7: and have another macro view, if you like, the view 392 00:18:58,200 --> 00:19:01,199 Speaker 7: from thirty five thousand feet, to see exactly where the 393 00:19:01,560 --> 00:19:05,080 Speaker 7: general economy is and where all the other indicators that 394 00:19:05,119 --> 00:19:08,200 Speaker 7: they're looking at, especially the labor market. But Jerome Power 395 00:19:08,240 --> 00:19:10,600 Speaker 7: has made it very clear that he still wants to 396 00:19:10,640 --> 00:19:14,560 Speaker 7: see an extended period of below trend growth, and he 397 00:19:14,640 --> 00:19:17,720 Speaker 7: has seen nothing like that, and certainly in the last 398 00:19:17,720 --> 00:19:20,920 Speaker 7: twelve months, and there are no real signs of anything 399 00:19:21,040 --> 00:19:24,360 Speaker 7: like an extended period of below trend growth. That's what 400 00:19:24,400 --> 00:19:27,280 Speaker 7: he wants to see, So he's not going to rush 401 00:19:27,400 --> 00:19:29,040 Speaker 7: cutting interest rates at all. 402 00:19:29,040 --> 00:19:31,639 Speaker 2: What's the view at State Street Global about where gold 403 00:19:31,680 --> 00:19:34,400 Speaker 2: heads not only next year, but first of all by 404 00:19:34,400 --> 00:19:36,680 Speaker 2: the end of this year and then into twenty twenty five. 405 00:19:37,600 --> 00:19:40,640 Speaker 7: Look, I think that you know, it's difficult. As I said, 406 00:19:40,640 --> 00:19:43,200 Speaker 7: it's difficult to see any major headwinds at the moment, 407 00:19:43,480 --> 00:19:45,760 Speaker 7: and there are a number of tailwinds. The fact that 408 00:19:45,800 --> 00:19:49,800 Speaker 7: inflation is still sticky that I think is usually helpful 409 00:19:49,800 --> 00:19:53,280 Speaker 7: for gold. The fact that even in spite of inflation 410 00:19:53,440 --> 00:19:56,639 Speaker 7: being sticky. The FED has decided that it is definitely 411 00:19:56,680 --> 00:19:58,639 Speaker 7: time and possibly even they were a little late to 412 00:19:58,680 --> 00:20:01,159 Speaker 7: the party, but it's definitely time for them to start 413 00:20:01,160 --> 00:20:05,320 Speaker 7: cutting rates and embark on a sustained rate cutting a 414 00:20:05,440 --> 00:20:08,400 Speaker 7: series of measures. I think that that is all very 415 00:20:08,480 --> 00:20:11,720 Speaker 7: very positive. It has to be, and I see no 416 00:20:12,240 --> 00:20:16,119 Speaker 7: real signs of any improvement in the geopolitics. Attempts to 417 00:20:16,119 --> 00:20:18,720 Speaker 7: start peace stocks in either of the two armed conflicts 418 00:20:18,760 --> 00:20:21,320 Speaker 7: that we have around the world seem to be doomed 419 00:20:21,320 --> 00:20:23,400 Speaker 7: to failure. At the moment. Nobody seems to be making 420 00:20:23,480 --> 00:20:26,000 Speaker 7: much in the way of progress, and I think that 421 00:20:26,040 --> 00:20:30,720 Speaker 7: means we are going to have continued geopolitical uncertainty, continued 422 00:20:30,800 --> 00:20:34,600 Speaker 7: economic uncertainty, and gold tends to thrive in the past. 423 00:20:34,640 --> 00:20:38,040 Speaker 7: It's always thrived in an uncertain environment. 424 00:20:38,520 --> 00:20:41,320 Speaker 2: Quick question about demand. You are talking to us from 425 00:20:41,400 --> 00:20:44,640 Speaker 2: Hong Kong. China and India are the world's two top 426 00:20:44,720 --> 00:20:49,159 Speaker 2: gold consumers. Is the demand story for the precious metal 427 00:20:49,280 --> 00:20:50,800 Speaker 2: the same in both countries? 428 00:20:51,480 --> 00:20:53,760 Speaker 7: No, I think there are very very different dynamics in 429 00:20:53,800 --> 00:20:58,120 Speaker 7: each country. We have seen We've seen pretty good jewelry 430 00:20:58,160 --> 00:21:03,119 Speaker 7: demand in China, but nothing outstanding. We've seen stellar investment demand, 431 00:21:03,160 --> 00:21:06,040 Speaker 7: I think because the Chinese investor is frightened of his 432 00:21:06,160 --> 00:21:09,959 Speaker 7: stock market right now. India is a very very different story. 433 00:21:10,000 --> 00:21:14,600 Speaker 7: What we have in India is that demographics population growth 434 00:21:14,640 --> 00:21:18,080 Speaker 7: is definitely on gold side, with strong population growth there 435 00:21:18,320 --> 00:21:24,040 Speaker 7: unlike China, and the economic factors are also on gold side. 436 00:21:24,600 --> 00:21:28,240 Speaker 7: The Indian economy has been growing. The IMF seems to 437 00:21:28,280 --> 00:21:31,399 Speaker 7: believe from the most recent report, I think that India 438 00:21:31,480 --> 00:21:34,440 Speaker 7: was really the one country that got top marks there. 439 00:21:34,880 --> 00:21:38,920 Speaker 7: They're expecting seven percent economic growth this year and probably 440 00:21:38,960 --> 00:21:42,080 Speaker 7: better than that next year. They're expecting the Indian economy 441 00:21:42,080 --> 00:21:45,480 Speaker 7: to overtake the Chinese economy in size because the Chinese 442 00:21:45,520 --> 00:21:48,720 Speaker 7: economy has turned into some decline with the growing of 443 00:21:48,760 --> 00:21:52,680 Speaker 7: the population. Very much different dynamic from what's happening in India. 444 00:21:53,720 --> 00:21:56,680 Speaker 7: And of course, you know, we are now well into 445 00:21:56,720 --> 00:22:00,480 Speaker 7: the Indian wedding season, which we'll run through until next 446 00:22:00,520 --> 00:22:02,960 Speaker 7: May or June, depending on where in India one lives, 447 00:22:03,280 --> 00:22:05,640 Speaker 7: and that has always been very good for an uptick 448 00:22:05,680 --> 00:22:09,240 Speaker 7: in gold jewelry demand there. But investment demand is also 449 00:22:09,320 --> 00:22:11,960 Speaker 7: running strong in both countries, and I think it's very 450 00:22:11,960 --> 00:22:15,240 Speaker 7: important to look at both of those dynamics. And finally, 451 00:22:16,119 --> 00:22:18,919 Speaker 7: as China and India go, so go the rest of 452 00:22:18,960 --> 00:22:21,800 Speaker 7: the emerging markets. You know, it's important not to ignore 453 00:22:21,880 --> 00:22:24,080 Speaker 7: the Thaie Lands and the Koreas, and the Indonesias and 454 00:22:24,119 --> 00:22:27,200 Speaker 7: the Vietnams, all of which are very very large consumers 455 00:22:27,200 --> 00:22:31,040 Speaker 7: of gold for both jewelry and investment. And I think that, 456 00:22:31,640 --> 00:22:33,760 Speaker 7: you know, things look pretty rosy out there right now. 457 00:22:34,240 --> 00:22:36,399 Speaker 7: George milling Stanley, we thank you very much. He is 458 00:22:36,520 --> 00:22:39,800 Speaker 7: Chief Global Strategist at State Street Global Advisors. 459 00:22:42,640 --> 00:22:45,199 Speaker 1: This is Bloomberg day Break Asia. You're morning brief on 460 00:22:45,240 --> 00:22:48,440 Speaker 1: the stories making news from Hong Kong to Singapore and 461 00:22:48,520 --> 00:22:51,760 Speaker 1: Wall Street. 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