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Speaker 1: This is Bloomberg day Break Asia for this Thursday, June

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Speaker 1: fifteenth in Hong Kong, Wednesday June fourteenth in New York

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Speaker 1: and coming up today.

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Speaker 2: The Fed votes to keep interest rates steady but projects

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Speaker 2: more rate hikes this year.

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Speaker 1: Chair Jay Powell says inflation risks remain and rate cuts

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Speaker 1: are probably a couple of years away.

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Speaker 2: And the PBOC looks set to ease policy again as

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Speaker 2: signs of economic deterioration mount in China.

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Speaker 3: B Lincoln, headed to Beijing this weekend, spoke today with

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Speaker 3: China's Foreign Minister Anthem Glory to Hong Kong no longer

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Speaker 3: searchable on iTunes. Canada severs relations with Asia Infrastructure Investment Bank.

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Speaker 3: I'm at Baxter with Global News.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Asia, the business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App,

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Speaker 4: and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm Doug Krisner and I'm Brian Kurtiz. Here

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Speaker 1: are the stories we're following today. Fed officials voted to

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Speaker 1: pause today and keep interest rates steady, following fifteen months

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Speaker 1: of rate hikes. The FOMC left the benchmark federal funds

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Speaker 1: rate in a target range of five to five and

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Speaker 1: a quarter percent. Vetcher J. Palll said that this month's

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Speaker 1: pause is a continuation of the moderating pace of policy measures.

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Speaker 1: Here's pal speaking at the post meeting news conference.

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Speaker 5: I think it allows the economy a little more time

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Speaker 5: to adapt as we as we make our decisions going forward,

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Speaker 5: and we'll get to see that we don't know the

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Speaker 5: full extent of the consequences of the banking turmoil that

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Speaker 5: we've seen. It would be early to see those, but

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Speaker 5: we don't know what the extent is. We'll have some

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Speaker 5: more time to see that unfolding. It's just the idea

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Speaker 5: that we're trying to get this right. This is if

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Speaker 5: you think of the two things as separate variables, then

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Speaker 5: I think that the skip, I shouldn't call it a skip.

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Speaker 5: The decision makes sense.

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Speaker 1: Pal said that nearly all FED officials expect it will

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Speaker 1: be appropriate to high grade somewhat further this year. He

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Speaker 1: declined to say whether another rate height could come as

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Speaker 1: soon as July, but he emphasized that it would be

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Speaker 1: a quote live meeting. The FED chief also suggested rate

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Speaker 1: cuts are probably a couple of years out once inflation

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Speaker 1: comes down significantly meantime.

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Speaker 2: Devil Line Capitals Jeff Gunlock was saying today he doesn't

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Speaker 2: believe the FED will continue to raise rates anytime soon.

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Speaker 2: He went on to say the Fed's decision was definitely

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Speaker 2: hawkish in rhetoric, but not hawkish in action. And mister

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Speaker 2: Gunlock is arguing the American economy isn't as strong as

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Speaker 2: many believe. Here he is speaking with CNBC.

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Speaker 6: There are so many indicators that are deeply in recessionary territory.

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Speaker 6: And people talk about the strength of the labor market,

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Speaker 6: and there spend many months of beats on that, but

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Speaker 6: the most recent labor market report, which was touted as

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Speaker 6: being very strong, was not strong. There was a growth

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Speaker 6: in jobs, but there was a significant decrease in average

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Speaker 6: hours work.

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Speaker 2: That is double Line Capital's Jeff Gunlock there. He went

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Speaker 2: on to say that he believes the FED is in

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Speaker 2: an okay place right now, but he thinks the Fed

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Speaker 2: may have overtightened a little already.

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Speaker 1: Bran in some other New city group is warning that

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Speaker 1: job cuts will cause a big jump inexpenses this quarter.

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Speaker 1: Bloomberg's Tom Buzzby has the.

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Speaker 7: Story City Groups Chief financial officer Mark Mason said that

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Speaker 7: severance costs that are tied to the bank's recent job

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Speaker 7: cuts will cause expenses to climb by as much as

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Speaker 7: four hundred million dollars in the current quarter. That's compared

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Speaker 7: to the first quarter of the year. Most of the

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Speaker 7: sixteen hundred cuts the bank has already made. We're in cities,

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Speaker 7: investment banking, and trading divisions, but it's not over. The

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Speaker 7: firm has set aside severance costs for uppards of five

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Speaker 7: thousand employees when the ongoing layoffs are all over now.

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Speaker 7: Mason also warned that trading revenue is down twenty percent

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Speaker 7: so far this quarter. Revenue from its investment banking unit

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Speaker 7: down by twenty five percent. Tom buzzby Bloomberg Daybreak Asia.

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Speaker 2: We go to China next, where the economics slow down

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Speaker 2: is expected to have been starker in the month of May.

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Speaker 2: Bloomberg's Joan Wong tells us well, the activity data out

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Speaker 2: later today may be a little bleak.

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Speaker 8: Retail sales, industrial output, and fixed asset investment all probably

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Speaker 8: slowed in May. Base effects at obscurage weakness in April

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Speaker 8: will fade, revealing a faltering recovery. Economists survey say industrial

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Speaker 8: production likely rows three and a half percent compared to

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Speaker 8: five point six percent in April. Data for the Labor

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Speaker 8: Day holiday also suggests lower spending per capita on travel

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Speaker 8: compared with pre COVID levels. That's another sign of weak

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Speaker 8: confidence by consumers. Added all up, it appears more stimulus

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Speaker 8: is coming. Consensus is the one year mL OF rate

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Speaker 8: will be cut ten basis points to two point six

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Speaker 8: five percent. In Hong Kong, joined Wog Bloomberg Day Brigaisia.

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Speaker 1: Meantime, China is said to have held urgent meetings to

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Speaker 1: discuss the nation's slowing economy. Bloomberg's Bonny Ao has that

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Speaker 1: from Hong Kong.

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Speaker 9: Bloomberg is reporting at least six consultations have been held

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Speaker 9: with key business leader in recent weeks. So also say

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Speaker 9: officials are seeking advice on how to stimulate the economy.

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Speaker 9: Participants have called on the government to take urgent action.

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Speaker 9: They've asked for a more market oriented approach to growth.

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Speaker 9: Several business leaders also said they've been approached by regulators

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Speaker 9: to gotsh their biggest challenges on getting something done. We

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Speaker 9: reported earlier that the State Council could be discussing options

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Speaker 9: as soon as tomorrow, and as mentioned earlier, the PBOC

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Speaker 9: is expected to cut a key interest rate later today

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Speaker 9: in Hong Kong. I'm Bonnie out Bloomberg Daybreak Asia.

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Speaker 1: I'm Brian Curtis along with Doug Christner. So Doug on

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Speaker 1: the Fed. The initial reaction appears to be watch what

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Speaker 1: I do, not what I say. The pause was kind

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Speaker 1: of ho hum. The rhetoric though, was hawkish, most definitely.

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Speaker 2: And when you look at the summary of economic projections

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Speaker 2: in that forecast for another fifty basis points in tightening,

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Speaker 2: when you look at the dot plot, that seems to

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Speaker 2: be a little aggressive. If you look at what theis

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Speaker 2: market is saying right now, maybe FED funds at five

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Speaker 2: point three percent in September, and that would suggest just

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Speaker 2: one more rate increase, not too that the dot plot

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Speaker 2: seem to be implying.

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Speaker 1: Yeah, it was pretty interesting the reaction to it. You

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Speaker 1: mentioned that small caps were down. We saw a little

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Speaker 1: bit of downward push in the equal weighted S and

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Speaker 1: P but then looking at the numbers, reasonably solid there.

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Speaker 1: But we played those comments from Jeff Gunlock. He thinks

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Speaker 1: the FED is just really too much. Looking in the

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Speaker 1: rear view mirror and that forward looking indicators are negative. However,

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Speaker 1: if you look at the Bloomberg Economics Surprises Index, it's

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Speaker 1: actually I mean it's down a little, but after a

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Speaker 1: very big move up. And then adding if you're looking

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Speaker 1: at Wales, Ken Griffin was also saying that he's increasing

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Speaker 1: his focus on credit trading. He thinks that the potential

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Speaker 1: for recession is much higher now.

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Speaker 2: Well, you're talking about Jeff Gunlock. He went on to

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Speaker 2: be a little skeptical of the rally that we have

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Speaker 2: seen in the S and P. Five hundred, and he

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Speaker 2: went on to say that the recent bull run that

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Speaker 2: we have seen is really about a handful of companies

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Speaker 2: that are or have been benefiting from this hype over

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Speaker 2: artificial intelligence. And I say that today because web Bush

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Speaker 2: had a call that the tech sector really is in

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Speaker 2: the early stages of an AI revolution. We had a

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Speaker 2: lot of strength and Nvidia up five and a half

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Speaker 2: percent today. Yesterday that stock reached a trillion dollar market cap,

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Speaker 2: and the Philadelphia Semiconductor Index was up one and a

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Speaker 2: half percent today.

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Speaker 1: So it really depends on whether or not you look

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Speaker 1: at that product of artificial intelligence as so dominating and

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Speaker 1: so important for the economy that you know, you're piling

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Speaker 1: into all these stocks that are exposed to it, or

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Speaker 1: whether or not you think it's kind of a fad

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Speaker 1: and it's some kind of you know, not really big

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Speaker 1: enough to make a huge change in things. Gun Logie's

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Speaker 1: a bond guy, so it tends to be a little

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Speaker 1: more pessimistic in his approach to things. Lots of other

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Speaker 1: people think that, you know, AI will stimulate the entire

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Speaker 1: economy because everybody will be using it. So it really

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Speaker 1: sets up as an interesting day for discussions. We also

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Speaker 1: have China, We've got a lot of data coming out

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Speaker 1: later today, and we'll also have the MLF today, so

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Speaker 1: shapes up as a very big session. It's time now

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Speaker 1: for Global News. US Secretary of State Anthony Blincoln will

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Speaker 1: be visiting Beijing this weekend. At Baxter has Global News

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Speaker 1: from the nine to sixty news room in San Francisco.

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Speaker 3: D Yeah, you know, Brian, the lead up to this

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Speaker 3: has been long and hard, and as today, as part

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Speaker 3: of that lead up, he had a phone call with

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Speaker 3: China's Foreign Minister Chang Gong and got an earfull China's statement,

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Speaker 3: saying that Chen told him that the US needs to

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Speaker 3: stop meddling in its affairs and harming its security. He

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Speaker 3: told Blincoln that the US needs to respect China's core issues,

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Speaker 3: such as those relating to Taiwan. White House spokes when

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Speaker 3: Korean and Jean Pierre says, it is a very important step.

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Speaker 10: One to establish communication channels to help manage competition so

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Speaker 10: it does not veer into conflict, which is something that

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Speaker 10: we have said. Keeping those lines of communication open to

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Speaker 10: stand up and speak for American values, that's something that

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Speaker 10: the President leads with.

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Speaker 3: Yeah now as well as joint products and Blinkoln's statements,

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Speaker 3: saying it was a good call. He was happy that

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Speaker 3: lines of communication have been opened up, saying he's looking

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Speaker 3: forward to the trip. The anthem Glory to Hong Kong

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Speaker 3: is no longer searchable on iTunes of this after dominating

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Speaker 3: the top ten spots earlier this month, it surged in

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Speaker 3: popularity after the Justice Department announced plans to seek an

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Speaker 3: injunction to ban the song. Pennsylvania has announced a new

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Speaker 3: plan to backfill the crash site on I ninety five

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Speaker 3: and open up six lanes for traffic and supply routes

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Speaker 3: as quickly as possible. Congressman Brendan Boyle represents that district

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Speaker 3: and on Bloomberg's Balance of Power, says, people are working

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Speaker 3: very constructively on this.

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Speaker 5: We all understand that this isn't about partisanship, It's not

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Speaker 5: about ideology or your level of government.

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Speaker 2: We just need to fix the damn road and we

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Speaker 2: need to get it reconstructed.

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Speaker 7: Period.

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Speaker 3: Yeah, nobody has set a timeline, but the hope is

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Speaker 3: to get traffic up and running within a month or

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Speaker 3: five weeks. And Prime Minister Justin Trudeau's government has severed

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Speaker 3: Canada's involvement with the Asian Infrastructure Investment Bank while it

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Speaker 3: investigates the claims of substantial interference from the Chinese government.

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Speaker 3: The allegations come from AIIB. It comes at a time

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Speaker 3: when Trudeau's government is under some criticism regarding recent elections.

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Speaker 3: House Republicans are ratcheting up their heat on Homeland Security

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Speaker 3: Secretary Alejandro Majorcas. The Homeland Security Chair Mark Green says,

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Speaker 3: so far the evidence of Myerica's lack of effectiveness is

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Speaker 3: very clear. But he says they have not talked impeachment yet.

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Speaker 3: We haven't even gotten to that word that process. Our

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Speaker 3: goal here is we're starting with what you have here

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Speaker 3: and we're going to get more information. Yeah, the committee

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Speaker 3: already has a fifty five page report detailing complaints on

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Speaker 3: their concerns in US and India. Likely to agree to

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Speaker 3: jointly manufacture fighter engines in India. This should come as

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Speaker 3: Prime Minister and Arndrom Motive Visions visits Washington next week.

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Speaker 3: This comes as a closer tie in cooperation between the

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Speaker 3: two in the face of China's growing assertiveness. Source to

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Speaker 3: say the deal is close to the finish line global

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Speaker 3: news power by more than twenty seven hundred journalist and

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Speaker 3: analysts in over one hundred and twenty countries. In San Francisco,

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Speaker 3: I'm at Baxter and this is Bloomberg.

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Speaker 1: I'm Brian Curtis in Hong Kong along with Rishad's salot,

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Speaker 1: and our guest is Sandy Breger, chief client officer at Aspirant,

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Speaker 1: taking a look at market. So, Sandy, you were correct

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Speaker 1: that we got a sort of hawkish pause here from

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Speaker 1: the FED. I've been portraying it in one way. What

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Speaker 1: I watch, what I do, not what I say. Does

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Speaker 1: that mean if you think about that, that the FED

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Speaker 1: is not guaranteed to break something right?

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Speaker 11: I don't think there's any guarantees in this environment. I

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Speaker 11: think we're in a situation where the Fed is signaled

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Speaker 11: that there's a lot more work for them to do.

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Speaker 11: Inflation is much stickier than the market would like, growth

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Speaker 11: is stronger than expected, and they're going slow. So what

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Speaker 11: we've been telling clients is to hang on. They've been

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Speaker 11: paying attention to the rally and the S and P

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Speaker 11: five hundred and wondering if they should participate more in

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Speaker 11: that party. We're more cautious. We're advising our clients who

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Speaker 11: are corporate executives, family business owners, and entrepreneurs to be

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Speaker 11: well diversified in their portfolios. We think that it's really

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Speaker 11: important in this environment to protect against risk and also

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Speaker 11: be positioned to take advantage of opportunities when they present themselves.

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Speaker 12: Sandy, I think one of the questions being really answered

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Speaker 12: not just for the FED, but it depends on that

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Speaker 12: your target, But in the case of the Fed Federal Reserve,

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Speaker 12: whether they are happy that maybe ultimately inflation is above

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Speaker 12: and remains above that two percent.

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Speaker 11: Target Rossada, we're not seeing that. We think they are

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Speaker 11: concerned at about that inflation number. You know, we certainly are,

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Speaker 11: especially where bond rates are where the market is. We

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Speaker 11: think the economy, especially here in the United States, is

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Speaker 11: beginning to slow down. We have concerns about what's ahead.

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Speaker 11: We've been looking at what's happening with consumers. You know,

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Speaker 11: they've largely been drawing down savings that they had. There's

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Speaker 11: been an increase in the cost of debt. Debt's much tighter.

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Speaker 11: We're looking also what's happening in the lending markets and

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Speaker 11: particularly around real estate. You know, there's so many properties

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Speaker 11: in different cities where borrowers are just giving the properties

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Speaker 11: back to the lenders, and so.

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Speaker 1: We think that things are sticky.

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Speaker 11: We need to pay attention to this.

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Speaker 1: Yeah, that's why I kind of asked about whether or

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Speaker 1: not the FED might break something, because there is a

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Speaker 1: camp out there. The things that the FED is so

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Speaker 1: interested in storing its reputation and still so committed to

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Speaker 1: two percent, which is just a kind of arbitrary level

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Speaker 1: for inflation, that they are going to keep going until

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Speaker 1: they get inflation down to two percent, and that requires

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Speaker 1: a lot more work. So it seems like you're, you know,

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Speaker 1: you're sticking with the line that, look, we have to

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Speaker 1: stay in markets, but we are nervous.

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Speaker 11: We are we are and so when we look at

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Speaker 11: our portfolios, Brian, we're very diversified. We have about thirty

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Speaker 11: percent of our portfolios and fixed income, and we're feeling

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Speaker 11: much more positive about bonds as we near what we

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Speaker 11: think is the end of the interest rate cycle. It

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Speaker 11: might not be the very end yet based on today's news,

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Speaker 11: but we're near, we're closely to the end. In the beginning,

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Speaker 11: we have about twenty percent in liquid alternatives that we

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Speaker 11: think is really important, especially if inflation stays high and

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Speaker 11: the economy slows down more. And then on the equity side,

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Speaker 11: we're both defensive, sticking toward quality stocks, you know, companies

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Speaker 11: with really strong balance sheets, little or no debt, companies

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Speaker 11: that sell goods and services during good economic times and

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Speaker 11: poor economic times. And then also being opportunistic in terms

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Speaker 11: of tilting toward value stocks and also stocks outside of

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Speaker 11: the United States we have.

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Speaker 1: Yeah, I'm surprised to see that. If you're if you're

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Speaker 1: a little cautious you like em stocks. That seems that

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Speaker 1: seems out there a little bit on the risk profile.

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Speaker 11: Yeah, it's I think we're we're driving out a highway.

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Speaker 9: We're in this.

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Speaker 11: Closer to the slower lay, but we still have our

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Speaker 11: foot on the pedal, and in terms of emerging markets,

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Speaker 11: we see opportunities there as we look out over the

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Speaker 11: next seven years. So we're not trying to place bets

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Speaker 11: on what will happen in the next few months, but

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Speaker 11: we have a longer term view and as we see it,

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Speaker 11: the emerging market countries have had different policy implementations. They

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Speaker 11: did more earlier on to get a hold of inflation.

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Speaker 11: Valuations are much more attractive, and also with the dollar

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Speaker 11: weakening a bit, that helps too. So we are pretty

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Speaker 11: bullish on emerging markets. And it's a big, you know,

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Speaker 11: relatively big portion of our equity allocation which is underweight.

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Speaker 11: It's benchmark Zach, Yeah.

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Speaker 12: Sandy, you know m dining back has fed a little

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Speaker 12: bit and it's more to Also what Brown is asking

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Speaker 12: just now too, and it's Charles Evans. Of course, you

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Speaker 12: retired from the Chicago Fed in January. Now, he says,

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Speaker 12: the debate all boils down to one question, and he

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Speaker 12: said this to the FT, I believe so, what kind

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Speaker 12: of policy mistake are you most comfortable making now? Do

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Speaker 12: you think they are making one? And if so, how

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Speaker 12: do you profit from it?

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Speaker 11: I don't think we're in a point where we would

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Speaker 11: call a mistake or not. We think the Fed you know,

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Speaker 11: has been has been raising interest rates at a really

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Speaker 11: high pace. It's nice to see them backing off a

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Speaker 11: little bit now just to see how the economy is doing.

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Speaker 11: It does take anywhere from twenty one to twenty seven

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Speaker 11: months for interest rate increases to make their way through

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Speaker 11: the economy. So I think, you know, we're just paying

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Speaker 11: attention to, well, how is the economy responding and what

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Speaker 11: are the risks? And as I mentioned, we do see

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Speaker 11: some risks out there. So we want to make sure

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Speaker 11: that we're paying attention to what's going on and that

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Speaker 11: we're helping our clients feel good about how they're organizing

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Speaker 11: the entirety of their personal financial affairs so that they

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Speaker 11: can weather any storms that might be ahead and also

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Speaker 11: take advantage of good times if they last a while longer.

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Speaker 1: Okay, In what you would do, you mentioned value stocks

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Speaker 1: and you mentioned emerging markets. So what sort of alternative

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Speaker 1: investments interests you the most?

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Speaker 11: Yeah, you know, just traditional hedging. Brian managers that are

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Speaker 11: hedging interest rates. They're heading different portions of the stock

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Speaker 11: market and really looking to make money on trades. I

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Speaker 11: the differential between trades based on what's happening in the

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Speaker 11: markets on a day to day basis. We think that

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Speaker 11: there's some benefit there, and certainly on the global macroside

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Speaker 11: as well, So that's an area that we think belongs

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Speaker 11: in the portfolio. The twenty percent allocations we're keeping are

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Speaker 11: on the high end of what we would expect to

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Speaker 11: have at any given time, so we won't be adding more.

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Speaker 11: It's just a matter of when will we feel comfortable

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Speaker 11: moving out of there and into more bonds in stocks

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Speaker 11: as time plays out.

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Speaker 12: Well exactly, and talking of bonds duration wise, and indeed

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Speaker 12: the same time, you know, it seems like a no

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Speaker 12: brainer right now to be in fixed in CAME and

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Speaker 12: solver and fixed.

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Speaker 11: In Came even, Yes, a lot of great opportunities there.

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Speaker 11: I'd say that clients that we work with have been

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Speaker 11: much more comfortable in cash because of the high relative

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Speaker 11: rates that they're getting on money market funds, but we

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Speaker 11: have been moving more into bonds. We think that as

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Speaker 11: the Fed continues doing what it's doing, bonds not only

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Speaker 11: will help damp in the volatility of the overall portfolios,

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Speaker 11: but they should provide some returns and certainly when we

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Speaker 11: get into the point. Looks like maybe next year when

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Speaker 11: the FED might pivot and start decreasing rates, that would

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Speaker 11: help bonds quite a bit.

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Speaker 1: All right, Sandy, great session. Thank you. Sandy Breger, Chief

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