Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. Transportation
Speaker 2: stocks in Asia are slumping. That's after President Trump on
Speaker 2: veiled tariffs on foreign made autos. This is a key
Speaker 2: reason for the weakness that we had stateside in the
Speaker 2: US equity market. And in a moment, we'll be hearing
Speaker 2: from Robert Shine. He is the chief investment officer at
Speaker 2: Blankie Shine Wealth Management. But we begin in the Lion
Speaker 2: City and joining us now is friend of the program,
Speaker 2: Mary Nicolas. She is Bloomberg Markets Live strategist, joining us
Speaker 2: from our studios in Singapore. It's all about tariffs, isn't it.
Speaker 3: It is?
Speaker 2: And I'm looking at the stocks right now in Toyota
Speaker 2: down more than three percent, Hondai Motor off more than
Speaker 2: two and a half percent. I found it interesting that
Speaker 2: you wrote earlier on the Markets Live blog there's essentially
Speaker 2: no sign of leniency.
Speaker 1: Well, that's the thing, because essentially what we heard is
Speaker 1: especially from Hyundai. Hyundai has been praised by President Trump
Speaker 1: for building a factory and expanding investment in the US.
Speaker 1: Yet we haven't heard anything, and so you would think
Speaker 1: that when President Trump said that there's leniency, that the
Speaker 1: markets would get excited. However, it doesn't look like there's
Speaker 1: much in terms of give that we've seen, so for example,
Speaker 1: we haven't seen that. Sure, he's mentioned the idea of leniency,
Speaker 1: but what has happened as a result, Because we know
Speaker 1: that Japan and Korea would be one of the hardest hits,
Speaker 1: especially in this region, at least as a result of
Speaker 1: these auto tariffs.
Speaker 2: I'm wondering if anything could change next week when we
Speaker 2: get the reciprocal tariffs. Is that likely do you think?
Speaker 2: Or not so much?
Speaker 1: You know, I think the main thing is there's just
Speaker 1: going to be this huge sigh of relief in terms
Speaker 1: of some degree if there's a lot of tension being
Speaker 1: built up or that April second deadline, and I think
Speaker 1: there's going to be a little bit of relief of
Speaker 1: that there's something and we know what it is. Right
Speaker 1: in terms of implementation, that always tends to be a
Speaker 1: little bit more muddy, but at least we get some
Speaker 1: clarity in terms of what are the reciprocal tariffs and
Speaker 1: who's going to be the most affected.
Speaker 2: You know, President Trump has been described as being transactional,
Speaker 2: and I thought it was very interesting today that he
Speaker 2: said that he would consider lowering tariff rates in post
Speaker 2: on China to secure Beijing support for a sale of
Speaker 2: the US operations of TikTok to an American company. This
Speaker 2: seems to kind of plant the thin end of the
Speaker 2: wedge into the idea that this is all really a.
Speaker 1: Negotiation, absolutely, and I think that was very clear in
Speaker 1: the comments that he made about TikTok. So if the
Speaker 1: Chinese authorities show any sort of budge, they could see
Speaker 1: some signs of relief. But at the end of the day,
Speaker 1: I think there's alway. Is the factor of you know
Speaker 1: what if there's more and how far will it go?
Speaker 1: And I think that's the key issue that was going
Speaker 1: to come up in terms of like the the transactions
Speaker 1: over and over is how much leeway and how much
Speaker 1: given can go in these negotiations.
Speaker 2: Which brings us to the China story and the fact
Speaker 2: that Beijing might not have a lot of leverage against
Speaker 2: the US right now. One of the bright spots, though
Speaker 2: I think we can't agree mary, has been the high
Speaker 2: tech space in China, particularly after the kind of deep
Speaker 2: seek moment. What are we seeing right now in the
Speaker 2: behavior of Chinese equities.
Speaker 1: Absolutely, and I think one of the things is that
Speaker 1: everyone has gotten very excited about China equities and that's
Speaker 1: taken a while to really come through. And it's not
Speaker 1: it's more than just policy right now. It's about the
Speaker 1: tech and invation. It's about their ability to come through
Speaker 1: and to make these developments and significant developments despite what
Speaker 1: has some of the obstacles that have come their way.
Speaker 1: So there's still a lot of support for the tech
Speaker 1: industry and likely to continue. I think the problem is
Speaker 1: now is that a lot of it has been already
Speaker 1: baked in. Valuations aren't enough to keep this going. So
Speaker 1: what it will need is more improvement on a company outlooks,
Speaker 1: more innovation in terms of news about robotics and AI
Speaker 1: to really drive that rally and to keep it a
Speaker 1: lot more sustainable.
Speaker 2: But there are some dark clouds and I think we
Speaker 2: have to acknowledge them. In the US session, we had
Speaker 2: TD Cowen pointing out that Microsoft is abandoning some new
Speaker 2: data center projects in the US and Europe, so that
Speaker 2: may turn people away from putting new money to work
Speaker 2: in the SEMIS. And then, as you know, the chairman
Speaker 2: of Ali Baba jod Tsai was talking about a possible
Speaker 2: bubble in AI data center. So I think there's got
Speaker 2: to be a little bit of caution that pointed out
Speaker 2: here right, there's.
Speaker 1: General caution for US tech, but I think it's because
Speaker 1: the China story is quite new, especially with deep seek
Speaker 1: that only came up in the start of this year.
Speaker 1: But the tech, the US tech industry and innovation has
Speaker 1: been a story that has carried US stocks for quite
Speaker 1: some time. And of course now everyone's rethinking it because
Speaker 1: of valuations, because of the cracks and US exceptionalism, and
Speaker 1: because China is becoming a real competitor. So I think
Speaker 1: for now, especially with China, it really comes down to
Speaker 1: what are the improvements we see on company outlooks, and
Speaker 1: what do we see on the improvement especially coming through
Speaker 1: from the government and on policy implementation, to really drive
Speaker 1: that next leg higher in the rally.
Speaker 2: There's a bit of a concern I think that the
Speaker 2: FED may have to given the fact that these tariffs
Speaker 2: may be inflationary, that the FED may have to go
Speaker 2: on hold even if there is a little bit of
Speaker 2: economic weakness just because of the inflation concern. Is that
Speaker 2: a concern that you share or do you think the
Speaker 2: FED would opt to lower rates in the face of
Speaker 2: economic weakness.
Speaker 1: You know, it's interesting, it depends how the FED sees it.
Speaker 1: So J. Powell had mentioned that he sees tariffs as inflationary.
Speaker 1: It's a one off adjustment and then we won't see
Speaker 1: anything coming through afterwards. So it would suggest that yes,
Speaker 1: they'll see what happens and they'll take more of a
Speaker 1: wait and see approach. So I think two one to
Speaker 1: two cuts still make sense, especially with how tariffs are going.
Speaker 1: But in terms it's still we still have to remember
Speaker 1: that the Fed has a dual mandate. So if they
Speaker 1: see that the labor market is really weakening significantly, they'll
Speaker 1: see that that's going to have implications on inflation and
Speaker 1: we'll have to become a little bit more aggressive in
Speaker 1: terms of easing.
Speaker 2: What else are you really kind of talking about in
Speaker 2: your en live writing today? Is there anything that you
Speaker 2: want to tease out here?
Speaker 1: Yeah, Actually, there's been a lot of interesting idiosyncratics things
Speaker 1: coming up in Asia. So for example in Indonesia where
Speaker 1: we're seeing that a significant downside to the equity markets
Speaker 1: and largely coming through from growth concerns domestically and fiscal
Speaker 1: concerns as well. So and and we're seeing the implications
Speaker 1: on the currency as well. So the currency has been
Speaker 1: UH at the weakest that we've seen in a very
Speaker 1: long time, and we're seeing and that is becoming more
Speaker 1: of an issue because of the fact that you're seeing
Speaker 1: cracks and US exceptionalism. The Chinese recovery isn't a strong
Speaker 1: just yet, So the question is becomes more scrutinized into
Speaker 1: how em unfolds, and these idiosyncratic issues become even more
Speaker 1: concerning for places like Indonesia in terms of their ability
Speaker 1: to entice foreign investors to keep buying into their bond
Speaker 1: markets or their equity market. So I think one of
Speaker 1: the main things to watch, especially with all this uncertainty,
Speaker 1: especially around tariffs, is some of the idiosyncratic risks that
Speaker 1: we're seeing out of emerging markets and the broader implications
Speaker 1: given the weak global risk appetite.
Speaker 2: What are you looking at in the week ahead? Is
Speaker 2: there anything that you're paying especially close attention to?
Speaker 1: Labor market? Absolutely, I think that's going to be the
Speaker 1: pivotal point because everyone's been so focused on inflation, and
Speaker 1: of course the April second deadline. We can't escape tariffs.
Speaker 1: I think that's one thing we know so far in
Speaker 1: the first three months of this year. So the tariffs
Speaker 1: and I think the labor market is going to be
Speaker 1: especially important.
Speaker 2: Mary Nicola there, Bloomberg Markets Live Strategists joining us from
Speaker 2: Singapore here on the Daybreak Gasia podcast. Welcome back to
Speaker 2: the Daybreak Asia Podcast. I'm Doug Krisner. So the US
Speaker 2: equity market was in retre in the last session on
Speaker 2: some concern over the impact of the trade war. We
Speaker 2: had the S and P five hundred down a little
Speaker 2: more than one percent, and then after the bell, President
Speaker 2: Trump imposed tariffs on imported autos. This is a twenty
Speaker 2: five percent levy on all cars not made in the US.
Speaker 2: It's going to go into effect April. Second, let's take
Speaker 2: a closer look now at market action with our guest
Speaker 2: Robert Shine. He is the chief investment officer at Blankey
Speaker 2: Shine Wealth Management, on the line from Palm Desert, California.
Speaker 2: Thanks for taking the time to chat with us, Robert.
Speaker 3: I'd like to.
Speaker 2: Begin by getting your assessment on the impact of tariffs.
Speaker 2: Do we really know at this point whether it's going
Speaker 2: to be completely negative.
Speaker 4: That's the question that markets investors and everyone's trying to
Speaker 4: sift through. I think this short term volatility will have
Speaker 4: long term opportunity for investors that do take advantage of.
Speaker 4: What we're seeing is all of this uncertainty that's playing out,
Speaker 4: and you know, we've seen it the first term of
Speaker 4: President Trump when the US and China they imposed Phase one,
Speaker 4: then they went to Phase two, then they went to
Speaker 4: Phase three, and then Trump removed it, and then they
Speaker 4: finally got a deal.
Speaker 3: Done towards the end.
Speaker 4: But that was, you know, over a couple of year
Speaker 4: period of time, and markets actually ended up higher over
Speaker 4: that period of time. And if you look at the
Speaker 4: S and P, there were bouts of time where the
Speaker 4: S and P did test some lows, but not lower lows. So,
Speaker 4: you know, if we look at the first term during
Speaker 4: President Trump, there was a lot of volatility when he
Speaker 4: went for the tariffs, you know, and fair trade practices,
Speaker 4: but it turned out to be a positive.
Speaker 2: It's interesting. One member of the FED today was saying
Speaker 2: that it's not clear whether or not we're going to
Speaker 2: have an inflationary impact from these tariffs proving to be temporary.
Speaker 2: I'm referring here to the head of the Saint Louis FED,
Speaker 2: ALBERTU Mussalom. He said secondary effects could prompt the Fed
Speaker 2: hold rate steady for longer. Does he have a point there?
Speaker 2: Could there be an inflationary impact of the tariffs.
Speaker 4: He absolutely is of a point, and that is the
Speaker 4: biggest I would say concern of the overall market, which
Speaker 4: is putting. You know, we came into the year thinking
Speaker 4: we're going to get two to maybe three interest rate cuts,
Speaker 4: so some relief and some more sort of you know,
Speaker 4: wind in the sale to keep this rally going.
Speaker 3: Now, it's just.
Speaker 4: The opposite of saying, wait a minute, the tariffs impact
Speaker 4: on prices are an unknown, a question mark, So what
Speaker 4: does that actually mean. That means that the Federal Reserve
Speaker 4: obviously is keeping an eye on the labor market, which
Speaker 4: seems to be holding in there. So far, so good.
Speaker 4: But more importantly, it's the if they lower interest rates,
Speaker 4: they are going to invite inflation, adding more fuel to
Speaker 4: the fire. Is the overall concern, not only for the
Speaker 4: Federal Reserve but for investors as well. Markets are playing
Speaker 4: that out and it's only time will tell. Traditionally, tariffs
Speaker 4: should be a one time a fact where it's you know,
Speaker 4: sort of a speed bump. You pay your toll. But
Speaker 4: then again, I go back to what I said earlier.
Speaker 4: You know, tariffs are you know, could be imposed and
Speaker 4: then they could be taken away months even years later,
Speaker 4: depending upon how things are going.
Speaker 2: If you look at the tape today, the chip makers
Speaker 2: were the big losers, in Vidia and Gang. I'm looking
Speaker 2: at the Philadelphia Semiconductor index down about three point three
Speaker 2: percent today. We had analyst over at TD Cowen today
Speaker 2: saying that Microsoft is abandoning new data center projects not
Speaker 2: just in the US, but Europe as well, and that
Speaker 2: seemed to create this negative sentiment toward the chip stocks.
Speaker 2: Where are you right now in terms of the thesis
Speaker 2: on AI that the buildout is going to continue or
Speaker 2: maybe now we're reaching a point of capacity, starting to
Speaker 2: kind of reach a near term peak.
Speaker 4: If you saw the revenue generated by what Navidia has
Speaker 4: had committed from just the mag seven and I mean
Speaker 4: that's really the driver of what Navidia or even the
Speaker 4: semiconductors if.
Speaker 3: You will at home.
Speaker 4: You know, they pledged so much capital and so many,
Speaker 4: so many billions of dollars that was absolutely head scratching,
Speaker 4: you know, for Microsoft to take a moment and reassess
Speaker 4: how much they actually need, you know, to invest is
Speaker 4: not uncommon. That's that's actually prudent business move. But what
Speaker 4: I would say and submit for consideration, we are in
Speaker 4: the early innings of the AI race ARMS race, and
Speaker 4: so you're going to have the trickle down effect. And
Speaker 4: by the way, there are four hundred and ninety three
Speaker 4: other S and P five hundred companies they're going to
Speaker 4: have to start joining the race. So there's a lot
Speaker 4: of capacity and opportunity to be reinvesting in the semiconductors
Speaker 4: from just not only the S and P five hundred,
Speaker 4: but all the way down the you know, the value
Speaker 4: stack of all the companies that want to stay competitive
Speaker 4: for the future.
Speaker 2: What about the lower cause Chinese AI models that utilize
Speaker 2: a lot less computing power, is that a negative let's
Speaker 2: say for the buildout of some of these data centers.
Speaker 3: Yeah, we're going to see I mean every eighteen months
Speaker 3: everything doubles in terms of you know, memory, storage capacity
Speaker 3: and technology.
Speaker 4: That's not you know, for a chip that comes out
Speaker 4: today and you know there's more efficient way of doing
Speaker 4: it for tomorrow or like you just pointed out, a
Speaker 4: better way of using you know, getting more production with
Speaker 4: less is always going to be in the DNA of
Speaker 4: the capital structure of the economy, and that's the way
Speaker 4: we need it for more growth moving forward. But yeah,
Speaker 4: short term that it remains to be seen as it
Speaker 4: relates to how it plays out, it wouldn't shock me
Speaker 4: that more and more next you know, next month, next week,
Speaker 4: and even next year, we're going to get We're going
Speaker 4: to be able to do more with less. All across
Speaker 4: the technology spectrum.
Speaker 2: Let's talk a little bit about the macro in terms
Speaker 2: of ECO data. Today we learned that factory orders for
Speaker 2: business equipment unexpectedly declined in February, and at the same
Speaker 2: time today, an update to the Atlanta Fed's GDP now
Speaker 2: tracker still shows contraction in Q one by around one
Speaker 2: point eight percent. Are you worried about recession?
Speaker 3: Not so much.
Speaker 4: Recession right now, but I could see, you know, what
Speaker 4: we ideally, I think what we should have seen play out.
Speaker 4: I think markets would have liked this a little bit better,
Speaker 4: which is the sequence of what the Trump policy is
Speaker 4: playing is doing right now. They should have positioned and
Speaker 4: you know they know better than we do, but they
Speaker 4: should have positioned the big beautiful tax bill, the extension
Speaker 4: of twenty seventeen tax cuts as well as maybe a
Speaker 4: little bit more what they wanted to get because they
Speaker 4: have congressional support, you have momentum post election. Instead, they
Speaker 4: went for tariffs, and we understand why they're trying to
Speaker 4: offset all the ads that they want and make it
Speaker 4: sort of revenue neutral as much as possible both in
Speaker 4: the short and the long term and healthy wise fiscally.
Speaker 3: That's very responsible.
Speaker 4: But getting to point A to point B, that's putting
Speaker 4: businesses on pause, that's putting consumers on pause. That delay
Speaker 4: could cause or lead into a potential slow down in
Speaker 4: what we're seeing a consumer behavior, and that's playing out
Speaker 4: in the data.
Speaker 3: In the short term. That's okay. Long term, yeah, we.
Speaker 4: Could you know, basically lull ourselves into a recession because
Speaker 4: everyone's just sitting on their hands.
Speaker 3: Now, what gets us past that?
Speaker 4: We do need that bill of extension of We just
Speaker 4: need certainty, We need the tax cuts to continue. We
Speaker 4: need to see what else is going to happen with
Speaker 4: policy measures. Again, is there going to be business owner
Speaker 4: incentives inside that tax bill? Therefore you'll see capital goods
Speaker 4: in capital spending pick up again. So you know, we
Speaker 4: could touch you know, slow down but we could reaccelerate
Speaker 4: really quickly. We do have a strong economy. All we
Speaker 4: need is certainty in terms of policy. So I think
Speaker 4: Congress needs to get you know, to work. I know
Speaker 4: they have been working, but I think they need to
Speaker 4: get it done sooner than later, sooner than Memorial Day.
Speaker 3: I think that would be the key.
Speaker 2: I'm glad you mentioned the consumer there tomorrow will get
Speaker 2: the February numbers on retail sales. We know that some
Speaker 2: of the sentiment indicators, both from the Conference Board and
Speaker 2: the University of Michigan have been depressed. Would it surprise
Speaker 2: you if these numbers on retail sales were a big miss.
Speaker 4: It wouldn't surprise me. But again, I wouldn't bet against
Speaker 4: the US consumer. Again, we could see one month slow
Speaker 4: down and maybe a pause. If it's two or three months,
Speaker 4: that's a trend that's concerning. So but you know, given
Speaker 4: all the uncertainty, the trade talks, the nightly headlines, and
Speaker 4: given some geopolitical headlines that we've had to deal with
Speaker 4: over the last thirty forty five days, if it comes
Speaker 4: out to be a weaker number, that shouldn't be a
Speaker 4: major surprise. If we see multiple months in a row
Speaker 4: and that trend is negative. That's where we have the issue.
Speaker 2: So we've talked about a lot of things. How does
Speaker 2: this kind of coalesce in your mind in terms of
Speaker 2: coming up with an investment strategy.
Speaker 4: You know, the balance in diversification has won out. We
Speaker 4: always keep dry powder, but it's working for us, and
Speaker 4: you know, treasures are still paying us four percent. We
Speaker 4: expected that, so we added some dry powder again, allocated
Speaker 4: to some fixed income early on at the very beginning
Speaker 4: of the year, and now quite honestly, we're taking advantage
Speaker 4: of some great dislocation. Markets were over valued coming into
Speaker 4: the beginning year. So for markets to pull back by
Speaker 4: five or even ten percent, that's not unheard of. That's
Speaker 4: actually that that's a commonplace that should happen for a
Speaker 4: healthy market.
Speaker 3: But don't just sit there.
Speaker 4: Take advantage of some high quality companies, dividend compounders, companies
Speaker 4: that will be there not only in the next six
Speaker 4: to twelve months, but for the long term, because you're
Speaker 4: gonna you know, you're gonna this this opportunity. I think
Speaker 4: the headlines and the uncertainty are going to create a
Speaker 4: lot of opportunity moving forward for investors.
Speaker 2: So don't miss out, all right, Robert, we'll leave it there.
Speaker 2: Thank you so much. Robert Shine there. He is the
Speaker 2: chief investment Officer at Blankie Shine Wealth Management. Joining from
Speaker 2: Palm Desert, California, here on the Daybreak Asia Podcast. Thanks
Speaker 2: for listening to today's episode of the Bloomberg Daybreak Asia
Speaker 2: Edition podcast. Each weekday, we look at the story shaping markets, finance,
Speaker 2: and geopolitics in the Asia Pacific. You can find us
Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
Speaker 2: else you listen. Join us again tomorrow for insight on
Speaker 2: the market moves from Hong Kong to Singapore and Australia.
Speaker 2: I'm Doug Chrisner, and this is Bloomberg