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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.

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Speaker 2: So the stock market has now recovered its losses for

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Speaker 2: the year. Today we had the S and P picking

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Speaker 2: up around seven tens of one percent, a move led

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Speaker 2: higher by semiconductor stocks. And at the same time, the

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Speaker 2: cooling tensions in the US China trade war has kind

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Speaker 2: of brightened the outlook. In a moment, we'll hear from

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Speaker 2: former US Ambassador to China, Nick Burns. He says the

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Speaker 2: US China trade war has effectively become a trade embargo.

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Speaker 2: Burns spoke with Bloomberg's David Gura and will bring you

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Speaker 2: part of their conversation. But we begin today with markets

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Speaker 2: and the reading on US retail inflation for April it

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Speaker 2: was cooler than expected. Course, CPI increased at a rate

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Speaker 2: of two tenths of one percent from March. And we

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Speaker 2: got reaction from David Kelly, he is the chief global

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Speaker 2: strategist at Jpmore An Asset Management, on what the CPI

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Speaker 2: print means for the FED.

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Speaker 3: I think we will get at least one cut this year.

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Speaker 3: By the end of the year. I think the Fed

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Speaker 3: realizes they they can edge rates down a little bit,

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Speaker 3: but I don't expect a cut in June. I don't

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Speaker 3: expect a cut in July, to be honest. I think

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Speaker 3: they'll want to see much more of a you know,

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Speaker 3: a more much more certainty rat what the terriff picture

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Speaker 3: really is and how much stimulus is in this in

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Speaker 3: this bill before they collemplate any for any cut.

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Speaker 4: So I think we're going to have to wait some

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Speaker 4: time for the first rate cut.

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Speaker 2: That is JP Morgan's David Kelly for another view on

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Speaker 2: what we're seeing in the price action. I'm joined now

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Speaker 2: by Todd Walsh. Todd is the CEO also the chief

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Speaker 2: technical analyst at Alpha Cubed Investments. He joins us from Irvine, California. Todd,

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Speaker 2: it's always a pleasure to benefit from your perspective. Thank

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Speaker 2: you so much for joining us. Let's put the CPI

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Speaker 2: print aside for a moment. Talk to me about the

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Speaker 2: tension or what appears to be less tension now in

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Speaker 2: the US China trade war, and how that is brightening

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Speaker 2: the outlook. Are you a believer have we turned a

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Speaker 2: corner here?

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Speaker 4: Well?

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Speaker 5: I think I'm a believer in more volatility Doug, and

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Speaker 5: thanks for having me on. Technically, it's extremely important that

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Speaker 5: we have crossed over and above the two hundred day

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Speaker 5: moving average as of yesterday and extended that today. As

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Speaker 5: you know, Paul Tudor Jones famously says nothing good happens

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Speaker 5: under the two hundred day, and we certainly had our

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Speaker 5: share of white knuckling over the last month and a half.

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Speaker 5: I think the biggest concern that we've had since the

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Speaker 5: election is the investors tendency to take any narrative or

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Speaker 5: the prevailing narrative and projected out into infinity. So we

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Speaker 5: had the election happen, we had a business friendly president,

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Speaker 5: the market rockets up through February pretty much moves straight up,

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Speaker 5: and then it shifts to the administration. Maybe's going to

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Speaker 5: tank the economy. We have a twenty percent drop, and

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Speaker 5: now we've had some movement in the trade talks from

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Speaker 5: saber rattling to negotiations. Now peace, prosperity, and hope have

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Speaker 5: broken out. But I think we need to be careful

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Speaker 5: about this tendency to project too far into the future.

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Speaker 5: I think volatility is with us for a while and

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Speaker 5: we've just got to get used to that normal state.

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Speaker 5: For twenty twenty five. I think we're going to have

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Speaker 5: more volatility ahead, but let's enjoy the break for now

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Speaker 5: and this run that we're in the middle of and

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Speaker 5: hope it extends quite a way.

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Speaker 2: So I'm curious to get your take on market leadership.

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Speaker 2: Today we had the Semis out in front news that

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Speaker 2: Nvidia and AMD will be supplying chips to a Saudia

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Speaker 2: Arabian firm for a massive data center project. Do you

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Speaker 2: put a lot of stock in where the leadership seems

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Speaker 2: to be coming from in the short term, No, Doug,

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Speaker 2: because it represents sort of the bipolar nature of investor

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Speaker 2: activity this year, in what we're calling a sawtooth market.

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Speaker 4: It's important to look at what's been happening.

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Speaker 5: These these major moves in one direction or another, and

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Speaker 5: not run from one side of the ferry to the

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Speaker 5: other and disrupt our long term investment plan. Our thesis

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Speaker 5: has been that after AI and the AI innovation names

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Speaker 5: had such tremendous returns in twenty twenty three and twenty

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Speaker 5: twenty four, it would be very normal to have a

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Speaker 5: consolidating year outsize volatility.

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Speaker 4: That's exactly what we're seeing.

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Speaker 5: We just went from market leadership, going from the defensive names,

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Speaker 5: the utilities things like that immediately whip sawing back over

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Speaker 5: to the innovation AI and some of the chip names.

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Speaker 5: We need to stay the course, and our plan this

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Speaker 5: year has been to expect a consolidating year, which means

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Speaker 5: more volatility, and use that volatility to add to the

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Speaker 5: strong AI, the strong chip names, which we think will

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Speaker 5: continue to be in a secular bull market to us

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Speaker 5: since AI has national security implications and it's not fully

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Speaker 5: built out. We expect that trend to continue, but it's

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Speaker 5: going to be volatile after two big years. Think of

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Speaker 5: the Internet ecosystem in nineteen ninety five or nineteen ninety six,

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Speaker 5: wasn't quite ready for prime time, a lot of volatility,

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Speaker 5: but still had a long ways to go.

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Speaker 4: We think that's a good analogy.

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Speaker 2: So we talked a moment ago about the cool reading

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Speaker 2: that we had on consumer prices, which I guess you

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Speaker 2: could say is supportive of FED rate cuts. We don't

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Speaker 2: know when that first move may happen. Right now, I

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Speaker 2: think the swaps market is indicating it's fully priced in

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Speaker 2: a twenty five basis point cut for September. What kind

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Speaker 2: of message are you getting these days? From the bond

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Speaker 2: market today, yields were very little changed in New York.

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Speaker 5: I'm glad you brought that up, Doug, because the tenuere

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Speaker 5: has been moving up above resistance technically and is suggesting

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Speaker 5: they want to go a little bit higher. But one

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Speaker 5: thing I want to caution investors about is think the

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Speaker 5: environment which within which the FED would be comfortable cutting rates.

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Speaker 5: It's probably not a market at all time highs. It's

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Speaker 5: probably not a ten year bond moving up. It's a

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Speaker 5: market where there's some volatility, some concerns, and some issues

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Speaker 5: that are causing the market to be just more volatile.

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Speaker 5: So you know, these FED fun futures event all over

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Speaker 5: the map this year and now we're back at two.

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Speaker 5: But we think that's going to continue to evolve as

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Speaker 5: the next you know, hand ringing crisis comes out in

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Speaker 5: the market. It's important to remember we're twenty three times

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Speaker 5: earnings on the S and P five hundred. Again, the

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Speaker 5: market's not cheap, and the more expensive it gets, the

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Speaker 5: more vulnerable it is to this kind of volatility that

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Speaker 5: we've already seen this year.

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Speaker 2: It's interesting that you make that point because I was

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Speaker 2: looking at a measure of earnings revisions from City Group today,

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Speaker 2: it's turned positive for the first time in six months. Generally,

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Speaker 2: this implies that analyst estimates could be headed higher soon,

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Speaker 2: But you don't think that that is likely. Is that

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Speaker 2: what I'm hearing that you think there is really some

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Speaker 2: downside risk to the earning story going forward.

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Speaker 5: Well, we've already seen earnings for twenty twenty five on

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Speaker 5: the S and P five hundred come in from two

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Speaker 5: hundred and seventy three dollars to two hundred and sixty five,

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Speaker 5: So that's a fifteen percent gain going down to a

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Speaker 5: seven and a half percent estimate estimated earnings gain for

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Speaker 5: twenty twenty five.

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Speaker 4: We need to see those.

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Speaker 5: Estimates coming up if we're going to have a robust market.

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Speaker 5: So I'm on the same page as you. I wouldn't

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Speaker 5: be surprised to see those start drifting up. But we've

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Speaker 5: got such extreme emotional activity going on in the markets.

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Speaker 5: We've just gone through a pretty traumatic market event. We

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Speaker 5: seem to have a v bottom in place. A lot

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Speaker 5: of people were looking for that w re test bottom

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Speaker 5: like we got nineteen ninety seven and nineteen ninety eight,

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Speaker 5: or we could have had no bottom. A lot of

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Speaker 5: people thinking we were going a lot lower, and we're

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Speaker 5: one hundred percent convinced we were going to have a recession.

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Speaker 5: The jury's still out on that, of course, but I

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Speaker 5: think we're going to get mixed data as we continue.

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Speaker 4: To go through the year.

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Speaker 5: The tariff turbulence might have caused a little bit more

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Speaker 5: disruption than you know people are expecting right now. We

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Speaker 5: might start seeing some of that in the hard data

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Speaker 5: as we get into the months of head and those

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Speaker 5: situations are not resolved and completely worked out as of

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Speaker 5: this moment, it's still a picture that's in flux.

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Speaker 2: Do you pay attention in your work to the movement

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Speaker 2: in the dollar today? We had some dollar weakness yesterday,

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Speaker 2: a big rally talk about volatility. I think you look

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Speaker 2: no further than the currency space to see that, But

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Speaker 2: do you look at where the dollar is headed to

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Speaker 2: try to kind of predict overall market movement to.

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Speaker 5: A degree, The dollar has been declining quite a bit

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Speaker 5: this year, but I think we've reached a point where

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Speaker 5: we should see dollar strength. We've been seeing that over

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Speaker 5: the last week or so, and it's our projection that

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Speaker 5: that's going to continue. What we don't want to see

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Speaker 5: is excessive dollar strength or excessive dollar weakness, and so

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Speaker 5: that's kind of the little lens through which we look

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Speaker 5: at it, and right now that we do see it

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Speaker 5: firming up, not a big factor in terms of what

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Speaker 5: we're seeing in terms of the domestic market action. We've

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Speaker 5: got a pretty strong move here. We've resolved that two

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Speaker 5: hundred day and I wouldn't be surprised to see a

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Speaker 5: little animal spirits kick in over the next couple of

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Speaker 5: weeks before we get to the next volatility spate.

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Speaker 2: Does that necessarily cause you to take a look at

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Speaker 2: some of the haven trades, whether we're talking about gold

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Speaker 2: or even the Japanese en.

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Speaker 5: No, we're focusing on the dividend value trade here at

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Speaker 5: Alpha cubed Investments. We've got of fed that arguably is

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Speaker 5: inclined to lower rates to some degree or another, and

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Speaker 5: that should put the wind at the.

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Speaker 4: Back of that trade.

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Speaker 5: You know, that dividend value trade on the S and

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Speaker 5: P five hundred, if you track it and index it

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Speaker 5: to November twenty twenty three, has almost kept pace, believe

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Speaker 5: it or not, with the white hot Nasdaq one hundred,

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Speaker 5: just on a price basis. So we call that having

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Speaker 5: your cake and eating it too. So we like that

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Speaker 5: trade for twenty twenty five as well.

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Speaker 2: Todd will leave it there. It's always a pleasure. Thank

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Speaker 2: you so much for making time to check with us.

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Speaker 2: Todd Walsh there. He is the CEO also the chief

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Speaker 2: technical Analyst at AL for Cubed Investments. Joining from Irvine, California.

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Speaker 2: Here on the Daybreak Asia podcast. Welcome back to the

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Speaker 2: Daybreak Asia Podcast. I'm Doug Chrisner. So we know the

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Speaker 2: US and China will temporarily lower tariffs on each other's products,

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Speaker 2: and the two countries have allotted three months to work

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Speaker 2: toward a broader trade agreement. Well, today we got reaction

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Speaker 2: to these developments from former US Ambassador to China, Nick Burns.

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Speaker 2: He said the US China trade war has effectively become

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Speaker 2: a trade embargo, driven by extreme tariffs and deepening strategic rivalry.

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Speaker 2: Burns also said the world's two largest economies must strike

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Speaker 2: a deal within ninety days to prevent long term economic decoupling.

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Speaker 2: Burns spoke with Bloomberg's David Gura. Here is part of

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Speaker 2: their conversation.

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Speaker 6: I want to start with the meetings that took place

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Speaker 6: over the weekend in Geneva, and I'm curious sort of

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Speaker 6: how you look at the way they unfolded and the

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Speaker 6: outcome of them, do you see it as a positive

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Speaker 6: step the agreement that has come to.

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Speaker 7: Well, first of all, I start from a first principle,

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Speaker 7: and that is that China has been the largest and

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Speaker 7: most important disruptor in the global trade system for about

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Speaker 7: three decades right now. There's a reason why the United

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Speaker 7: States and many other countries around the world have placed

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Speaker 7: tarifts on China. China's manufactured exports in particular, is because

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Speaker 7: China's been dumping them around the world below the cost

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Speaker 7: of production, and it's been a killer for jobs both

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Speaker 7: in the United States historically in the last several decades,

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Speaker 7: but also around the world. You have a situation now

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Speaker 7: where Turkey and India and Brazil and Colombia and Mexico

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Speaker 7: and Canada, and the United States and the European Union

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Speaker 7: have all put tariffs on China. So I have a

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Speaker 7: degree of sympathy for the situation that President Trump and

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Speaker 7: his team inherited, which was a situation that we left

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Speaker 7: when I left in mid January as Ambassador to China

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Speaker 7: President Iden a year ago. I made twenty twenty four

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Speaker 7: place one hundred percent tariffs on Chinese evs, fifty percent

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Speaker 7: on semiconductors, twenty five percent on lithium batteries.

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Speaker 1: So the root of this.

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Speaker 7: Problem is China and Chinese trade policy.

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Speaker 1: The Chinese are trying to act now.

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Speaker 7: You sought in the statements over the weekend from Vice

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Speaker 7: Premier Hurly Funk is that they're the innocent party, that

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Speaker 7: they're the victim of this trade war by President Trump

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Speaker 7: what in fact, and that they're the responsible party, when

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Speaker 7: in fact the reality is quite different. I think it's

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Speaker 7: important to set the stage. Having said that these are

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Speaker 7: going to be very, very difficult negotiations over the next

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Speaker 7: ninety days. I think in the end, self interest and

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Speaker 7: logic will prevail. Both sides need and agreement. It was

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Speaker 7: encouraging to hear Treasury Secretary Scott Besson say that they

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Speaker 7: had agreed in principle they don't want to couple these

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Speaker 7: two economies. Last year, we had a six hundred and

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Speaker 7: forty two billion dollars two way trade relationship in goods

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Speaker 7: and services with China. China is our third largest trade partner.

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Speaker 7: About a million American jobs depend on trade with China.

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Speaker 7: Upwards of twenty million manufacturing jobs in China depend on

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Speaker 7: trade with the United States, So neither country can afford

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Speaker 7: to sunder the economic ties and the millions of interactions

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Speaker 7: that our private sector has had with the Chinese economy

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Speaker 7: over the last forty years. And I think in the

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Speaker 7: end there will be a trade agreement, but getting there,

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Speaker 7: I think is going to be extraordinarily difficult.

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Speaker 6: During your tenure, you were trying to if I may,

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Speaker 6: rehabilitate a relationship that had worsened during the first Trump administration,

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Speaker 6: develop conduits for communication, re establish economic and security ties.

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Speaker 6: When you left that post, could you've envision this turning

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Speaker 6: out the way that it has in terms of how

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Speaker 6: the rhetoric has been ratcheted up the tariffs have been

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Speaker 6: put in place. Is it the worst case that you

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Speaker 6: envisioned or worse yet?

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Speaker 7: Still, I certainly did not anticipate one hundred and forty

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Speaker 7: five percent American tariffs on China or one hundred and

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Speaker 7: twenty five percent Chinese tariffs on American goods, and the

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Speaker 7: trade war that has resulted effectively led to a trade

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Speaker 7: embargo as of the past week, when no ships were

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Speaker 7: sailing with goods back and forth, when manufacturers couldn't export

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Speaker 7: to each other's countries, and you see the significant shortage

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Speaker 7: of goods that traditionally are important to both economies. So

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Speaker 7: I didn't expect that to happen at all. And that's

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Speaker 7: the most important thing happening in the global economy right now,

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Speaker 7: which is another reason I think that eventually both sides

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Speaker 7: have to agree to a deal to calm global markets.

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Speaker 7: We're the two largest global economies, so we have a

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Speaker 7: profound impact on the health of global economy. But we

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Speaker 7: also need the global economy to be functioning in a

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Speaker 7: rational and stable way. There's so much at stake. I

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Speaker 7: didn't see that happening. I think few people saw that happening.

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Speaker 7: You remember Canada, Trump pledged sixty percent tariffs on Chinese goods,

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Speaker 7: and people thought that would be a revolution.

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Speaker 1: Will one hundred and.

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Speaker 7: Forty five was a revolution of a different magnitude. And

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Speaker 7: I think, you know, we're not anywhere close to being

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Speaker 7: out of the woods. If the levels now are set

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Speaker 7: at thirty percent tariff on the American side imposed on

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Speaker 7: China and ten percent by China imposed on the United States,

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Speaker 7: those are historically high levels and a lot of trade

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Speaker 7: will not be able to take place. It just simply

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Speaker 7: won't be economical for people to be importing manufacturers at

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Speaker 7: that level. So this is an urgent crisis. I assume

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Speaker 7: this is going to be one of the highest priorities

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Speaker 7: of the Trump administration and of the Chinese government. But

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Speaker 7: I hope that cooler heads will prevail, and I do

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Speaker 7: think for the long term here health of the US

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Speaker 7: China relationship.

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Speaker 1: Trade is a major part of it.

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Speaker 7: And a decoupling of a two global economies, of the

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Speaker 7: two economy, let me say that again. Sure, a decoupling

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Speaker 7: of the US and Chinese economies would have profoundly negative

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Speaker 7: consequences for both. So getting right, it's going to be

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Speaker 7: very important. Trade negotiations normally take a year or two

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Speaker 7: or three. To try to compress this level of complexity

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Speaker 7: in the ninety days is going to be a real negotiating.

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Speaker 1: Challenge, but it has to be done.

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Speaker 6: You know, well, the difficulty of establishing dialogue between these

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Speaker 6: two countries. The Treasure Secretary talks a lot about a

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Speaker 6: consultative mechanism, he's called it the Geneva mechanism going forward

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Speaker 6: here and establishing kind of regular communication. What's the going

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Speaker 6: to take to make sure that happens? We don't yet

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Speaker 6: know when they're next going to talk or they're next

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Speaker 6: going to meet.

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Speaker 7: I think self interest is going to dictate a fast

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Speaker 7: paced of these negotiations over the next ninety days. Both

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Speaker 7: sides have committed to this consultative process, and it has

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Speaker 7: to happen at a very high level.

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Speaker 1: In China.

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Speaker 7: The decision maker below President Xi Jinping is Vice Premier

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Speaker 7: Huli fun, the head of the Chinese delegation who met

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Speaker 7: Secretary of Vessent. Secretary Vessent has a I think a

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Speaker 7: good reputation globally, and he's the lot person to lead,

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Speaker 7: along with jameson Greer, the US trade representative from the

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Speaker 7: American side. So the right people are going to be involved,

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Speaker 7: but it's going to have to be at a really

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Speaker 7: quick pace, and it's going to have to be done

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Speaker 7: with a lot of alacrity and a lot of determination

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Speaker 7: to get to the to get to the finish line.

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Speaker 6: A minute ago, you spoke about how China is portraying

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Speaker 6: not just the talks, but the way that this trade

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Speaker 6: war is unfolding, and I'm.

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Speaker 1: Very curious sort of.

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Speaker 6: How effective you think that is. Do they walk away

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Speaker 6: from this feeling like they have the upper hand. Do

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Speaker 6: you think the world views them as having the upper

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Speaker 6: hand in these these negotiations.

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Speaker 7: Well, the Chinese are the Chinese press, the nationalist press,

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Speaker 7: and to an extent, the government of China have been

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Speaker 7: have been saying that they held out, that they stood strong,

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Speaker 7: and that they faced up to the American tariff threats

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Speaker 7: and they did not blink. And they've been trumpeting that

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Speaker 7: line in the Global South. President she just hosted most

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Speaker 7: of the major leaders from South America at a major

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Speaker 7: summit he's been making. He made a trip in Southeast

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Speaker 7: Asia to the Asian country. So they clearly are signaling

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Speaker 7: to the United States, you're not going to bully us.

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Speaker 1: We have other options.

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Speaker 7: You've seen a big increase in Chinese manufactured exports to

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Speaker 7: their neighbors in the Southeast Asian Organization ASIAN, and so

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Speaker 7: they're very definitely standing up has become a national nationalist issue.

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Speaker 1: When Vice President JD.

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Speaker 7: Vance referred to the Chinese as peasants, an unfortunate term

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Speaker 7: under any circumstances, but that really lit a fire in

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Speaker 7: Chinese social media, which is a force in Chinese society. So, yes,

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Speaker 7: the government of China is trying to portray itself as

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Speaker 7: the steady, solid country that stood up to the United States.

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Speaker 7: I think that China needs a deal too. There's a

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Speaker 7: reason why the Chinese met with Secretary of Vessant. The

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Speaker 7: economy is slowing down. If they grew by five percent

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Speaker 7: and twenty two four, well, most economists would say they

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Speaker 7: probably grew by less. They're facing lower GDP growth for

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Speaker 7: the next five to ten years. They have a property

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Speaker 7: crisis that continues to linger. They have a consumption problem.

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Speaker 7: The Chinese people are not consuming in a rational way,

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Speaker 7: sitting on their money because of the uncertainty of the

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Speaker 7: investment environment in China itself. They have strength in the

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Speaker 7: Chinese economy, enormous strengths, but they also have these weaknesses.

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Speaker 7: China could not afford a sustained trade war with the

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Speaker 7: United States. That's why they are at the table, and

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Speaker 7: that's why they've agreed to a deal in ninety days.

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Speaker 2: That is former US Ambassador to China Nick Burns in

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Speaker 2: conversation with Bloomberg's David Gura, and you can hear the

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Speaker 2: entire conversation on the Bloomberg Talks podcast feed. It's available

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Speaker 2: wherever you get your podcast. Thanks for listening to today's

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Speaker 2: episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 2: we look at the story shaping markets, finance, and geopolitics

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Speaker 2: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 2: Join us again tomorrow for insight on the market moves

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Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Prisoner

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Speaker 2: and this is Bloomberg