WEBVTT - Global Bond Selloff 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.840 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:26.920 or watch us live on YouTube. 0:00:27.120 --> 0:00:30.680 Julian Emmanuel starts us strowing this morning single best paragraph 0:00:30.720 --> 0:00:34.960 I've seen on innovation, bullmarkets and draw down quote. 0:00:35.240 --> 0:00:39.159 Don't fear a bullmarket draw down. It's normal. It's not 0:00:39.240 --> 0:00:42.239 a correction. Even it's sort of like a video was 0:00:42.280 --> 0:00:45.519 down four days in a row. How do you respond 0:00:45.560 --> 0:00:45.839 to that? 0:00:45.960 --> 0:00:50.199 As an investor not as sophisticated as Julian Emmanuel. 0:00:49.920 --> 0:00:51.200 You have to think long term. 0:00:51.240 --> 0:00:54.160 And again you hit it a few moments ago, people 0:00:54.240 --> 0:00:57.320 up in the snack court getting teary eyed because they're 0:00:57.360 --> 0:00:58.440 sending their kids. 0:00:58.160 --> 0:00:58.880 Back to school. 0:00:59.280 --> 0:01:05.000 September never fails to disappoint the bulls. There's always always 0:01:05.000 --> 0:01:08.200 a time, and it started that way yesterday. And from 0:01:08.280 --> 0:01:11.280 our point of view, none of the elements that end 0:01:11.400 --> 0:01:15.400 bull markets are present. And so you know, even if 0:01:15.440 --> 0:01:18.640 you look back at all the great bubbles nineteen ninety nine, 0:01:18.680 --> 0:01:23.000 for instance, you had four discrete ten percent plus drawdowns 0:01:23.280 --> 0:01:25.920 in a nine month period where the Nasdaq rowse over 0:01:25.959 --> 0:01:26.880 one hundred percent. 0:01:27.560 --> 0:01:29.399 So what are we doing here? 0:01:29.520 --> 0:01:33.080 Are we sticking with the big tech names, Julian, or 0:01:33.080 --> 0:01:36.360 are we trying to find some value outside of what 0:01:36.560 --> 0:01:38.039 has worked so well for so long. 0:01:38.160 --> 0:01:43.360 So our view into twenty twenty six is that big 0:01:43.440 --> 0:01:46.920 tech will continue to lead. This is an AI driven 0:01:47.120 --> 0:01:53.280 bull market, Okay, but again Stomaching that volatility isn't necessarily 0:01:53.480 --> 0:01:57.080 for everyone. And frankly, what we're trying to do is 0:01:57.400 --> 0:02:00.440 sort of isolate the people that would prefer to have 0:02:00.480 --> 0:02:03.800 an element of hedging in the portfolio, because quite honestly, 0:02:04.320 --> 0:02:07.120 if you sort of transfer a little bit of risk, 0:02:07.680 --> 0:02:12.160 it enables you to buy the dip that's inevitable. So 0:02:12.240 --> 0:02:16.239 for us, that's low evaluation stocks and a little bit 0:02:17.080 --> 0:02:18.040 of a defensive tilt. 0:02:18.120 --> 0:02:21.639 Can you go into La Techdor downtown the steakhouse Daniel 0:02:21.600 --> 0:02:24.960 Blue Steakhouse in the place the place falls quiet when 0:02:25.040 --> 0:02:29.160 Juliana Manuart walks in because you write the single best 0:02:29.560 --> 0:02:34.760 earning summary every day of the earning season. Nobody's talking 0:02:34.800 --> 0:02:37.959 about quarter ending September thirty. How do you and Ed 0:02:38.040 --> 0:02:41.920 Hyman frame out revenue growth off nominal. 0:02:41.520 --> 0:02:46.239 GDP and the earning season it begins October fourteenth. 0:02:46.320 --> 0:02:50.079 Well, it's it isn't going to be as strong as 0:02:50.160 --> 0:02:52.520 these last couple because it's. 0:02:52.440 --> 0:02:55.000 Just not I just said that last time I got 0:02:55.000 --> 0:02:58.480 it wrong, and well no, no, actually actually the person 0:02:58.560 --> 0:03:02.959 that concox our surprise guys in disease actually got it right. 0:03:03.560 --> 0:03:08.200 Hats off to my colleague Stan Schipley for that. But frankly, 0:03:08.960 --> 0:03:13.959 what it says in general is there's more to all 0:03:14.000 --> 0:03:17.760 of this than just the bump from inflation. There is 0:03:18.360 --> 0:03:24.360 organic growth going on across business, and frankly you're seeing it, 0:03:24.520 --> 0:03:28.680 you know, really broad based, given the fact that what's 0:03:28.800 --> 0:03:32.400 different about this bull market as opposed to the Internet 0:03:32.400 --> 0:03:36.520 in the nineteen nineties is you're seeing the vast majority 0:03:36.640 --> 0:03:41.400 of stocks advancing together. Tech is outperforming, but you're seeing 0:03:41.440 --> 0:03:42.480 them advance together. 0:03:43.880 --> 0:03:45.760 What do you think we're going to get from this 0:03:45.880 --> 0:03:48.120 Federal Reserve? What does a market need from the Fed? 0:03:48.200 --> 0:03:52.240 Does a market need a big easing kind of play 0:03:52.240 --> 0:03:54.040 over the next twelve months or. 0:03:54.680 --> 0:04:03.160 Not the market expects seizing. Certainly, the political will seems 0:04:03.160 --> 0:04:07.920 to be pointing towards more easing rather than less. I 0:04:07.960 --> 0:04:10.720 would say that if you look at the last couple 0:04:10.800 --> 0:04:17.839 of years, provided that the direction of travel in terms 0:04:17.880 --> 0:04:22.120 of the economy is an expected trough in BROW in 0:04:22.200 --> 0:04:25.440 the fourth quarter, and then you get gradually higher growth. 0:04:25.880 --> 0:04:29.040 We don't necessarily need that degree of easing, but we 0:04:29.120 --> 0:04:33.440 certainly do require a cut in September. 0:04:33.480 --> 0:04:37.360 How do you respond to the idea that retail has 0:04:37.400 --> 0:04:41.240 a wall of money, they have pension money. Eric Belchuna says, 0:04:41.320 --> 0:04:45.280 it's all going into ETFs almost is an immovable force, 0:04:45.680 --> 0:04:48.159 like an aircraft carrier going through the water. 0:04:48.279 --> 0:04:50.720 How does that change guessing the market? 0:04:50.960 --> 0:04:55.240 Well, Jack Bogel had been talking about this for twenty 0:04:55.360 --> 0:05:01.440 thirty years previously, and what it actually does at the margin, 0:05:02.000 --> 0:05:06.640 because there's so much money going into ETFs, is that 0:05:06.800 --> 0:05:10.240 it gives you more of an opportunity to isolate the 0:05:10.279 --> 0:05:14.599 winners and the losers because there are mispricings at the 0:05:14.640 --> 0:05:18.440 individual stock level, and we've seen that throughout this bull market, 0:05:18.720 --> 0:05:22.640 because correlations among stocks are at some of the lowest 0:05:22.720 --> 0:05:24.520 levels they've been in a generation. 0:05:25.400 --> 0:05:28.560 When you go talk to your institutional investor clients joining 0:05:28.680 --> 0:05:30.560 around the world, what do they want to talk about? 0:05:30.640 --> 0:05:33.120 What's the question they really hit you with the most. 0:05:33.640 --> 0:05:40.680 It's certainly all surrounding AI. You know, yeah, surprise, surprise, 0:05:41.240 --> 0:05:45.680 and then the other surprise is valuations. Look, it's an 0:05:45.800 --> 0:05:51.360 uncomfortable time if you're sensitive to valuations, and generally we are, 0:05:51.720 --> 0:05:56.280 but this is an environment that all the fundamental underlying 0:05:56.839 --> 0:06:01.560 trends support, you know, persist didn't higher valuation. 0:06:01.720 --> 0:06:04.320 One final question, way Lee from Blackrock, So she's gonna 0:06:04.400 --> 0:06:06.080 leave if if you don't answer this? 0:06:06.120 --> 0:06:08.640 Where's Dheimen on the American economy? Right now? 0:06:10.320 --> 0:06:14.840 We're troughing, and I go back to April when the 0:06:15.000 --> 0:06:16.640 entire world thought we were going. 0:06:16.560 --> 0:06:17.799 To have her Asuay Wally didn't. 0:06:17.920 --> 0:06:21.640 She was long well evercore is I certainly did not, 0:06:22.960 --> 0:06:27.000 and we don't see it either. And we also see 0:06:27.279 --> 0:06:33.560 inflation peaking in the fourth quarter and gently falling over valuable. 0:06:33.600 --> 0:06:36.039 Julian Emmanuel, thank you so much for getting us as 0:06:36.080 --> 0:06:37.520 started to stay with us. 0:06:37.760 --> 0:06:41.000 More from Bloomberg Surveillance coming up after this. 0:06:48.240 --> 0:06:51.800 You're listening to the Bloomberg Surveillance podcast. Catch US Live 0:06:51.880 --> 0:06:55.039 weekday afternoons from seven to ten am Eastern Listen on 0:06:55.120 --> 0:06:58.760 Applecarplay and Android Auto with the Bloomberg Business app, or 0:06:58.920 --> 0:06:59.920 watch US Live on. 0:07:00.120 --> 0:07:04.320 To Juliana Manuel the Way, lead global chief investment strategist 0:07:04.600 --> 0:07:06.880 at Blackrock well Waitalie. We can do like a two 0:07:06.920 --> 0:07:10.360 hour conversation here, but let me just dovetail it over 0:07:10.960 --> 0:07:16.040 to the bond. As to me, it still reads idiosyncratic 0:07:17.000 --> 0:07:18.920 story by story. 0:07:18.840 --> 0:07:21.760 Versus a large global bond sell off. Do I have 0:07:21.880 --> 0:07:22.320 that right? 0:07:24.000 --> 0:07:30.040 There is a fundamental theme underpinning this bond yield reprising 0:07:30.640 --> 0:07:34.560 and this is to do with Tim Premier needing to 0:07:34.720 --> 0:07:40.480 reprise to reflect the deeper fiscal trajectory and the broadly 0:07:40.800 --> 0:07:46.880 still persistent inflationary pressure. Now there is a country specific 0:07:46.960 --> 0:07:51.680 flavor to the individual country bond market. But for the 0:07:51.720 --> 0:07:54.600 reasons that I just laid out, we have long held 0:07:54.760 --> 0:07:59.480 the view that long dated bond yields needs to reprice higher. 0:08:00.040 --> 0:08:01.280 They never reprise gradually. 0:08:01.360 --> 0:08:05.240 They always reprise suddenly, which is where we are right now. 0:08:05.440 --> 0:08:06.280 That's very suddenly. 0:08:06.360 --> 0:08:09.960 Really, what does it mean when out past ten years 0:08:10.040 --> 0:08:10.960 we reprice? 0:08:11.640 --> 0:08:14.360 What does it mean for the shorter term paper that 0:08:14.440 --> 0:08:16.400 most of our listeners and viewers are in. 0:08:17.960 --> 0:08:21.440 So, Thomas, you know, we have had the view of 0:08:22.360 --> 0:08:25.720 the curve needing to steepen. So in part there is 0:08:25.880 --> 0:08:28.480 a underweight to the long end of the curve, but 0:08:28.520 --> 0:08:33.000 there is also a preference, an implicit overweight to the 0:08:33.040 --> 0:08:35.920 front end of the curve, and so far this year 0:08:35.920 --> 0:08:39.960 we have seen significant steepening, but more relative to the 0:08:40.080 --> 0:08:42.320 very long end, so on poking about thirty year rather 0:08:42.440 --> 0:08:46.280 than ten years. But what has also happened is that 0:08:46.559 --> 0:08:50.720 the front end of the curve actually priced in more raycards, 0:08:51.200 --> 0:08:53.680 especially kind of going out to the end of next year. 0:08:53.760 --> 0:08:57.600 So that is further supporting this deepening view, meaning that 0:08:57.679 --> 0:09:00.439 they actually played out better than we expect. We were 0:09:00.480 --> 0:09:04.079 expecting to just collect coupon from the front end of 0:09:04.120 --> 0:09:07.320 the curve, and we're also getting capital appreciation because of 0:09:07.320 --> 0:09:12.160 the rape repricing rape path repricing, so that's done really 0:09:12.200 --> 0:09:14.960 well and almost almost too well. We still have the 0:09:15.040 --> 0:09:18.800 steepening view, but because of the very significant steepening that 0:09:18.840 --> 0:09:21.680 we have already seen relative especially kind of all the 0:09:21.679 --> 0:09:24.400 way out of thirty years, I think that view is 0:09:24.440 --> 0:09:26.720 a lower connection at this point. 0:09:27.040 --> 0:09:30.360 Wait, we saw early this year when there's all the 0:09:30.559 --> 0:09:34.520 concern about some of the tariff policies, a mi A 0:09:34.600 --> 0:09:38.120 shift and asset allocation. Outside of the US, the rest 0:09:38.160 --> 0:09:41.360 of the world, including European equities and so on. 0:09:42.559 --> 0:09:44.080 How do you see that these days? 0:09:44.120 --> 0:09:47.320 How do you think about geographic allocation of capital? 0:09:48.600 --> 0:09:52.840 I would say from a part of consideration alone, that 0:09:52.960 --> 0:10:00.520 does not immediately translate to international markets over the US 0:10:00.559 --> 0:10:05.000 market because it has global read across, and international market 0:10:05.040 --> 0:10:08.560 have also come under pressure because of tariff read through, 0:10:09.040 --> 0:10:11.640 and we think about kind of the dynamics of negotiations. 0:10:11.720 --> 0:10:16.640 It does not automatically mean that tariffs because it's mostly 0:10:16.679 --> 0:10:19.480 uncertainty coming from the US. It needs to be negative 0:10:19.480 --> 0:10:22.319 for US and more positive for international market. 0:10:22.480 --> 0:10:24.199 What's happened so far this year in. 0:10:24.200 --> 0:10:28.720 Terms of the our performance of international market, specifically Europe 0:10:28.960 --> 0:10:32.600 and may be parts of emergent market relative to the US, 0:10:32.640 --> 0:10:35.680 has everything to do with a weaker dollar now. A 0:10:35.720 --> 0:10:38.720 weaker dollar now close to ten percent down on the year, 0:10:38.920 --> 0:10:42.120 has everything to do with number one cash path has 0:10:42.240 --> 0:10:46.120 reprised the lower and number two term premier has reprised higher, 0:10:46.480 --> 0:10:49.319 and the combination of both of those things would lead 0:10:49.360 --> 0:10:52.319 to a weaker dollar, which we have had, and that 0:10:52.400 --> 0:10:57.120 has meant international markets are looking on a relative basis better. 0:10:57.320 --> 0:11:01.880 But the bigger fundamental picture remains when we look at earnings, 0:11:01.920 --> 0:11:07.280 it's still mostly US markets that are driving meaningful earnings growth, 0:11:07.400 --> 0:11:10.920 and within US is still around the ecosystem of technology 0:11:10.960 --> 0:11:15.920 AI tech plus international markets are really struggling to grow earnings. 0:11:16.120 --> 0:11:18.800 The emerging markets are doing better, but there's a translation effact. 0:11:19.120 --> 0:11:22.440 Well, in one final question, the United Kingdom is an 0:11:22.520 --> 0:11:26.200 ungodly mess. We're going to be governors Marcus Ashworth folks 0:11:26.200 --> 0:11:28.040 out with a brilliant essay today. 0:11:28.040 --> 0:11:29.839 We hope to get them on tomorrow. 0:11:30.240 --> 0:11:33.480 Walley, how does that work out? I mean with Liz Trust, 0:11:33.840 --> 0:11:37.000 it was a true crisis. Are we like a list 0:11:37.040 --> 0:11:40.240 trust moment? Or is this different with the Chancellor of 0:11:40.280 --> 0:11:40.959 the Exchequer? 0:11:42.480 --> 0:11:46.080 Well, UK seems specific, but the challenge that they face 0:11:46.760 --> 0:11:50.040 is not specific to the UK. UK is perhaps more 0:11:50.080 --> 0:11:55.520 emblematic and more pronounced. But the bigger picture is this 0:11:55.559 --> 0:11:59.520 is a tougher trade off environment facing the government and 0:11:59.600 --> 0:12:02.560 facing central banks. The government is facing a taugher trade 0:12:02.559 --> 0:12:06.400 off between fiscal discipline and also the need to spend 0:12:06.440 --> 0:12:09.240 more to boost growth, and a central bank is facing 0:12:09.280 --> 0:12:13.160 a tafa trade off between supporting growth and managing price 0:12:13.360 --> 0:12:16.920 stability and inflation. So in this world shaped by a 0:12:17.040 --> 0:12:21.120 supply constraint because of mega forces, We've talked a lot 0:12:21.160 --> 0:12:25.960 about them. Tafer tradeoff is really characterizing the UK in particular, 0:12:26.080 --> 0:12:29.160 but across the major economies. 0:12:29.520 --> 0:12:31.360 Too. Short of visit, Whaley would love to get you 0:12:31.360 --> 0:12:34.560 in the studio here when you can again. Wally is 0:12:34.600 --> 0:12:36.679 with Blackrock. Stay with us. 0:12:36.679 --> 0:12:39.920 More from Bloomberg Surveillance coming up after this. 0:12:47.160 --> 0:12:50.760 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:12:50.840 --> 0:12:54.000 weekday afternoons from seven to ten am Eastern Listen on 0:12:54.080 --> 0:12:57.720 Applecarplay and Android Otto with the Bloomberg Business app, or 0:12:57.880 --> 0:12:59.000 watch us live on. 0:12:58.920 --> 0:13:03.479 YouTube with us with City Group, head of Emerging Market Economics, 0:13:03.559 --> 0:13:08.320 Chief Asia Economists with a huge platform for the International Bank. 0:13:08.440 --> 0:13:11.559 You're at the University of Philippines. You're flying to Logan. 0:13:11.960 --> 0:13:14.880 Good morning, your first day at Harvard. What was it 0:13:15.000 --> 0:13:18.240 like your first day at Harvard in their PhD program? 0:13:18.320 --> 0:13:21.280 Well, this is back in the mid nineties. Completely intimidated. 0:13:21.440 --> 0:13:24.200 But hey, I'm a product of globalization. I mean, here's 0:13:24.200 --> 0:13:26.959 someone who came into Philippines, had nothing and it was 0:13:26.960 --> 0:13:27.760 a great experience. 0:13:28.400 --> 0:13:30.560 Who was your advisors at Harvard? 0:13:30.679 --> 0:13:33.640 So Martin, Marty Felsen, you're the privilege of Martin. 0:13:33.600 --> 0:13:37.679 Absolutely and David Cutler and you know other professor, fantastic professor. 0:13:37.960 --> 0:13:40.120 That's a good way to migrate to the fiscal debate. 0:13:40.200 --> 0:13:43.240 He got a little bit of that with Marty Feltsiegin folks, 0:13:43.240 --> 0:13:46.840 he was Professor Felsain was a huge supporter of what 0:13:46.880 --> 0:13:50.600 I've done for years. How messed up is it? Or 0:13:50.760 --> 0:13:54.560 is it idiosyncratic right now? Where the Philippines say we'll 0:13:54.559 --> 0:13:57.000 do well in Japan's killing over. 0:13:57.360 --> 0:13:59.840 No, it's really interesting the divergence we're seeing between emerging 0:13:59.880 --> 0:14:03.040 markets and developed economies. And I guess that's probably symptomatic 0:14:03.080 --> 0:14:05.080 of the fact that so many emerging market countries have 0:14:05.120 --> 0:14:06.839 gone through repeated bouts. 0:14:06.679 --> 0:14:07.840 Of crisis in the past. 0:14:07.880 --> 0:14:10.000 So in a way they've learned to kind of be 0:14:10.080 --> 0:14:14.000 They've been disciplined by the market to keep their fiscal indexes. 0:14:14.120 --> 0:14:16.040 Yes, but you look at us. You know, I'm an 0:14:16.080 --> 0:14:17.080 exorbitant privilege. 0:14:17.080 --> 0:14:18.760 So if you've gotten away with a lot of things, 0:14:18.880 --> 0:14:21.680 you know, it takes a lot politically, it becomes very 0:14:21.680 --> 0:14:24.560 difficult to actually self correct. So it is interesting to 0:14:24.560 --> 0:14:27.240 see some of these divergences happening. But of course, you know, 0:14:27.320 --> 0:14:28.880 we are still getting in. I mean, a lot of 0:14:28.880 --> 0:14:30.960 the sell off we're seeing in developed markets obviously seem 0:14:31.000 --> 0:14:33.760 to impact a lot more what's happening in DM markets 0:14:33.760 --> 0:14:37.120 for a lot of adiosyncratic reasons. And then we'll see 0:14:37.120 --> 0:14:40.760 to what extent parts of emerging markets can be relatively 0:14:40.800 --> 0:14:41.480 more insulated. 0:14:42.320 --> 0:14:44.720 You're based in Hong Kong. Yes, you're coming here to 0:14:44.760 --> 0:14:45.120 New York. 0:14:45.200 --> 0:14:48.680 You're meeting institutional investor clients. What's your message today that Asia? 0:14:48.960 --> 0:14:51.080 Look, I think the message is we are slowing down. 0:14:51.120 --> 0:14:52.960 I mean, we've had a lot of positive surprises in 0:14:53.000 --> 0:14:55.000 second quarter GDP growth, but I think there's really a 0:14:55.080 --> 0:14:57.200 risk going in the second half with the reversal of 0:14:57.240 --> 0:14:59.680 the export payback effects because a lot of these tariffs 0:15:00.240 --> 0:15:02.640 kick in belatedly, and then all this uncertainty is going 0:15:02.680 --> 0:15:05.040 to have an impact on capets, and capex is a 0:15:05.120 --> 0:15:08.360 very trade intensive activity. So overall, I mean, if Asia 0:15:08.400 --> 0:15:11.000 hasn't really had much inflation, I mean, even before all 0:15:11.040 --> 0:15:14.080 of this, we've had very benign core inflationary pressures, and 0:15:14.080 --> 0:15:16.560 so I really think there's not a lot of hurdles 0:15:16.560 --> 0:15:19.440 for central banks to continue to be relatively you know, 0:15:19.520 --> 0:15:22.640 dubbish and benign. And that's kind of the the macro 0:15:22.680 --> 0:15:25.520 theme is really more of a slowdown theme. But having 0:15:25.600 --> 0:15:28.120 said that, despite the slowdown, we can still have some 0:15:28.200 --> 0:15:31.240 kind of disconnect between macro fundamentals and financial markets. 0:15:31.280 --> 0:15:33.320 Look, what's happening to Chinese equities. 0:15:33.240 --> 0:15:33.480 So. 0:15:34.880 --> 0:15:37.720 How are the terrors playing out across Asia? 0:15:37.840 --> 0:15:38.560 Rit large? 0:15:38.840 --> 0:15:40.880 No, So it's really kind of interesting because at the 0:15:40.880 --> 0:15:43.160 start of the year, you know, Trump campaign sixty percent 0:15:43.200 --> 0:15:45.520 tariff on China and ten percent on everyone else, and 0:15:45.800 --> 0:15:47.320 there was a lot of hope that there will be 0:15:47.320 --> 0:15:49.680 a capex supply chain move to other parts of Asia, 0:15:49.760 --> 0:15:53.160 like Asion. But if anything, what's happened is China's net 0:15:53.160 --> 0:15:55.920 export engine has actually been stronger than expected, and the 0:15:56.000 --> 0:15:59.280 tiref differential is narrower than expected. And then when you 0:15:59.280 --> 0:16:02.000 factor in this shipment levee, it even complicates things. So 0:16:02.040 --> 0:16:05.440 in a way, this rebalancing is kind of not really happening. 0:16:05.680 --> 0:16:08.160 And so I think, you know, you know, I mean, 0:16:08.200 --> 0:16:10.440 obviously it's still a challenge. I do think we're not 0:16:10.520 --> 0:16:12.960 seeing it fully into data because of this front loading, 0:16:13.040 --> 0:16:15.600 but we are starting to see parts of Southeast Asia 0:16:15.720 --> 0:16:19.200 really see a slow down in exports, like Thailand, Malaysia, Singapore, 0:16:19.560 --> 0:16:22.520 and I think this kind of excess deflationary pressure, excess 0:16:22.520 --> 0:16:26.040 supply out of China impacting manufactured goods is a challenge, 0:16:26.200 --> 0:16:27.920 so overlay. 0:16:27.440 --> 0:16:28.840 A dollar call here. 0:16:29.000 --> 0:16:31.480 I don't want you to do effect strategy for City group, 0:16:32.000 --> 0:16:33.960 but to me, the heart of the matter is the 0:16:34.000 --> 0:16:38.560 release valve of the system, and a given structured trilemma 0:16:38.960 --> 0:16:40.360 is currency movement. 0:16:41.520 --> 0:16:46.440 How does the steam out of the pressure cooker in 0:16:46.560 --> 0:16:49.800 the dollar work out in the eighteen months forward? 0:16:50.160 --> 0:16:52.680 Okay, well, our view is that at least in the 0:16:52.760 --> 0:16:54.960 next you know, until by the end of the year, 0:16:55.040 --> 0:16:57.880 we are still expecting dollar weakness. And part of that 0:16:58.000 --> 0:16:59.640 is really on the view that we're expecting the FED 0:16:59.640 --> 0:17:02.160 to cut and we're you know, we're expecting to cut 0:17:02.160 --> 0:17:04.560 every meeting for the next five meetings. So as US 0:17:04.600 --> 0:17:06.639 economy is expected to slow down, I mean, we had 0:17:06.640 --> 0:17:09.719 this upburger vision in second quarter, but inevitably it's going 0:17:09.760 --> 0:17:11.560 to slow down. It's going to slow down faster than 0:17:11.640 --> 0:17:12.840 someone little pen pays. 0:17:12.840 --> 0:17:17.760 So strength, that's singing dollar strength, that's even yen strength. 0:17:17.800 --> 0:17:19.240 I mean, I don't want you to make a call 0:17:19.280 --> 0:17:21.399 in yen, but a one forty eight down to a 0:17:21.440 --> 0:17:23.800 one forty can they withstand now? 0:17:23.920 --> 0:17:27.560 Those strong currencies given the Trump terrafi. 0:17:27.480 --> 0:17:30.080 The case of Japan, I mean, the currency despite any movement, 0:17:30.080 --> 0:17:32.600 I mean, it's still relatively on a real effective exchange 0:17:32.640 --> 0:17:34.880 a quite cheap in Japan for the rest of Asia. 0:17:34.920 --> 0:17:36.480 I mean, this is why I kind of started off 0:17:36.480 --> 0:17:38.919 talking about central banks having more room to cut because 0:17:39.359 --> 0:17:41.320 if in the end, your economy is slowing down, and 0:17:41.359 --> 0:17:44.720 you know, dollars not really a hurdle. If anything, when 0:17:44.760 --> 0:17:46.840 you have an export slow down, rather than have the 0:17:47.000 --> 0:17:49.920 fts weaken as an automatic stabilizer, it's kind of going 0:17:49.960 --> 0:17:52.120 against you. It gives you a little bit more room 0:17:52.200 --> 0:17:55.199 to kind of ease monetary policy. The other interesting thing 0:17:55.240 --> 0:17:57.240 that's happening is kind of dollars cnah, you know, the 0:17:57.320 --> 0:17:59.960 dollars c and why fixings being relatively strong and stable. 0:18:00.560 --> 0:18:02.600 So again, I mean it's going to be interesting whether 0:18:02.800 --> 0:18:05.000 going into five fifteen to five year plan, if there's 0:18:05.040 --> 0:18:08.679 more messaging from China rebalancing to what extent does that 0:18:08.720 --> 0:18:11.280 get reflected with a greater acceptance of a bit of 0:18:11.280 --> 0:18:12.040 stronger redmen B. 0:18:12.520 --> 0:18:15.760 So, how does China view the US as an economic 0:18:16.000 --> 0:18:20.080 partner competitor? What's China thinking? 0:18:20.440 --> 0:18:23.400 I mean, obviously, I mean trust, Trust is something Once 0:18:23.440 --> 0:18:25.359 you lose that, it takes a lot of time. Look, 0:18:25.400 --> 0:18:27.160 I think China is going to be very very careful. 0:18:27.240 --> 0:18:29.600 They now realize the lesson that, Hey, you know, it 0:18:29.640 --> 0:18:32.720 pays to have economic leverage to have a choke point. 0:18:32.800 --> 0:18:35.399 So having that chokepoint of critical minerals really help them 0:18:35.440 --> 0:18:37.240 to de escalate the tariff, which is why I don't 0:18:37.240 --> 0:18:38.760 think they want to give up that choke point. It's 0:18:38.840 --> 0:18:41.639 very important to have leverage. And again, of course they 0:18:41.720 --> 0:18:43.760 still need to deal with China the US. It's still 0:18:43.800 --> 0:18:47.280 a very very important economic relationship. So I think they're 0:18:47.320 --> 0:18:49.120 going to want to, you know, obviously kind of stay 0:18:49.119 --> 0:18:51.879 engaged to a certain extent and have some positive overtures 0:18:51.880 --> 0:18:54.880 if there is a Sheet Trump summit by APEC in November. 0:18:55.280 --> 0:18:57.359 But I mean, China is still going to be diversifying 0:18:57.359 --> 0:18:58.320 its economic relationship. 0:18:58.320 --> 0:19:00.320 When you were at Harvard, did Ken Roga throw a 0:19:00.320 --> 0:19:01.240 piece of chalk at you? 0:19:01.800 --> 0:19:03.439 He wasn't at Harbor when I was there. 0:19:03.320 --> 0:19:06.240 He was lucky for you. Here's my book of the summer, 0:19:06.320 --> 0:19:08.760 Our dollariar problem, folks. I'll do all the books out, 0:19:09.040 --> 0:19:11.480 try to get it out today as we begin the 0:19:11.760 --> 0:19:16.360 autumnal season. Here our dollar your problems is wonderful compendium 0:19:16.400 --> 0:19:19.680 of fiscal financial crisis. Do you have in the back 0:19:19.720 --> 0:19:25.640 of your mind, given Trump tensions, France tensions, Italy, whatever, 0:19:26.040 --> 0:19:29.680 that where we could get to a point of volatility 0:19:29.720 --> 0:19:30.640 here them. 0:19:30.840 --> 0:19:31.720 I think it's really interesting. 0:19:31.800 --> 0:19:33.440 I mean, look, I think there are some debates about 0:19:33.440 --> 0:19:37.200 how much of dollar weakness is structural versus cyclical because 0:19:37.320 --> 0:19:39.359 US is going to slow down. Look, I think I 0:19:39.359 --> 0:19:42.560 don't want to over exaggerate the structural dedollarization story because 0:19:42.560 --> 0:19:44.560 the reality is there's not really be a lot of alternatives. 0:19:44.840 --> 0:19:46.800 But I do think something is happening in terms of 0:19:46.800 --> 0:19:49.560 markets wanting to have a higher term premium for a 0:19:49.600 --> 0:19:53.000 long data US treasuries because of fiscal risk, inflation risk, 0:19:53.160 --> 0:19:56.840 kind of mercantileist policy, wanting a weeker dollar, and any 0:19:56.960 --> 0:19:59.199 risk of economic coercion. So I think there is something 0:19:59.240 --> 0:20:02.680 there that's happening at the margin, but the dollar is 0:20:02.720 --> 0:20:03.560 the very dominant. 0:20:03.880 --> 0:20:06.720 I want to final question. We have a display back to. 0:20:06.680 --> 0:20:12.720 My ute of a Chinese military might in the last 0:20:12.720 --> 0:20:17.080 twenty four hours, North Korea, Russia, China all lined up 0:20:17.760 --> 0:20:20.440 lots of holding hands with the India and that what 0:20:20.480 --> 0:20:24.200 does it symbolize for your bank about the Pacific rim 0:20:24.520 --> 0:20:25.760 and over to South Asia. 0:20:25.840 --> 0:20:27.439 No, look, I think there is really a tug of 0:20:27.480 --> 0:20:29.679 war going on globally now about the kind of the 0:20:29.760 --> 0:20:31.879 levers of economic power. And I think, you know, there 0:20:31.960 --> 0:20:32.960 is a lot of changes. I mean, a lot of 0:20:32.960 --> 0:20:35.439 people are talking about changes in world order and to 0:20:35.480 --> 0:20:38.080 what extent are we moving towards multipolarity and this is 0:20:38.080 --> 0:20:40.199 going to be an orderly adjustment or not. And I 0:20:40.200 --> 0:20:42.520 think what we're seeing here is really a sign of 0:20:42.600 --> 0:20:44.720 kind of a posturing that's coming out of you know, 0:20:44.720 --> 0:20:46.800 obviously China and kind of showing them there. 0:20:47.200 --> 0:20:49.879 I need to get you in trouble with compliance, absolutely, 0:20:50.240 --> 0:20:52.160 I got to get you in trouble with your lawyers. 0:20:52.320 --> 0:20:54.800 Do you look at the Trump regime as one off 0:20:55.400 --> 0:20:58.399 which we will heal from or is this a seismic 0:20:58.520 --> 0:21:00.639 shift and global economics? 0:21:00.800 --> 0:21:03.439 Well, again, I am from you know, I'm hardly you 0:21:03.560 --> 0:21:06.240 probably know more about US politics than I do. So 0:21:06.359 --> 0:21:09.800 again I think hopefully this is part of an adjustment 0:21:09.800 --> 0:21:12.919 and pendulum swing, and they may be pivot a little bit. 0:21:13.000 --> 0:21:15.560 But look, I think he got elected twice. 0:21:15.240 --> 0:21:18.919 So it's hard to ignore the fact that there is 0:21:18.960 --> 0:21:21.800 something underpinning kind of this populist movement going on in 0:21:22.560 --> 0:21:23.160 the US. 0:21:23.160 --> 0:21:24.840 Why you're going to bring the m bar back at 0:21:24.840 --> 0:21:27.040 the Old Mandarin in Hong Kong. We'd like to see 0:21:27.080 --> 0:21:30.400 that they took it away. They had a brass plaquet 0:21:30.520 --> 0:21:33.480 in seats. Joanna, Thank you so much, Johanna and Shua 0:21:34.000 --> 0:21:37.520