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

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Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner. So,

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Speaker 2: South Korea has elected a new president, while here in

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Speaker 2: the US the labor market is holding up in the

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Speaker 2: face of trade war. And in a moment, we'll take

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Speaker 2: a look at today's market action in the States with

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Speaker 2: Brad Bernstein. He is portfolio manager at UBS Private Wealth Management.

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Speaker 2: But we begin this morning in Seoul and the voice

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Speaker 2: of newly elected President Lee J Mung, speaking through a translator,

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Speaker 2: ton Chiga, I won't get them with it.

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Speaker 3: While politicians may clash over interest and drawing lines between factions,

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Speaker 3: the people are not bound to follow those divisions. People

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Speaker 3: are the messer of this nation, and politicians are workers

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Speaker 3: who are responsible for people's lives. Political crawls may not

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Speaker 3: be avoidable, but the people don't have to be divided

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Speaker 3: and hate each other.

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Speaker 2: That is President elect Lee J Mung declaring victory in

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Speaker 2: Tuesday's national election. Now this is seen as a turning

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Speaker 2: point for South Korea after former President yunsuk yuol's botched

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Speaker 2: attempt to impose martial law six months ago and a

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Speaker 2: subsequent constitutional crises. So against the backdrop of the election.

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Speaker 2: We got the latest reading this morning on Korean consumer inflation.

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Speaker 2: Prices cooled in May, supporting the case for the Bank

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Speaker 2: of Korea to continue easing policy settings. Consumer prices in

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Speaker 2: South Korea rose at an annual rate of one point

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Speaker 2: nine percent. That compares with a two point one percent

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Speaker 2: clip in April. Now, the Bank of Korea is seeking

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Speaker 2: to support an economy increasingly under threat from Donald Trump's

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Speaker 2: tariff campaign. For a closer look, we heard from Rachel

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Speaker 2: Minyung Lee. She is senior fellow at the Stimpson Center's

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Speaker 2: Korea Program. Rachel spoke earlier with Bloomberg, Cherry On and

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Speaker 2: Paul Allen.

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Speaker 4: Rachel, thanks so much for joining us. Certainly wasting no time.

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Speaker 4: The new president's been sworn and already he's got a

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Speaker 4: number of competing demands on both the domestic and international agenda.

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Speaker 4: What's the first priority for President Lee?

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Speaker 5: I think, well, he's got a number of priorities. On

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Speaker 5: the domestic front. Lee has promised to grow the economy.

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Speaker 5: I think he will focus on various economic issues. He

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Speaker 5: has promised a number of domestic political reforms, so I

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Speaker 5: think he will focus on those as well. On the

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Speaker 5: foreign policy agenda. Of course, there are a number of

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Speaker 5: pending issues between South Korea and the US, such as

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Speaker 5: tariffs and defense cost sharing.

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Speaker 4: Well, it was a tight victory, tied to the most

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Speaker 4: forecast but decisive nonetheless, but it was interesting that the

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Speaker 4: two opposition candidates seem to split the conservative vote. Can

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Speaker 4: you talk to us a little bit about the challenges

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Speaker 4: that President Lee is going to have when it comes

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Speaker 4: to uniting a country that was so divided over the

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Speaker 4: past few months.

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Speaker 5: Lee has certainly promised to promote national unity into a

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Speaker 5: very challenging situation because he is based with a very

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Speaker 5: divided nation politically. If you look at the map, the

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Speaker 5: electoral map, on one side, you have everything is blue, right,

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Speaker 5: all provinces so the Democratic Party, and then the other

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Speaker 5: side of the map is completely red, so people who

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Speaker 5: voted for the People Power Party, which is the conservative

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Speaker 5: party that lost this election. So it really will be

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Speaker 5: a big challenge for the new president to bring the

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Speaker 5: country together.

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Speaker 1: Yeah, especially when it comes to his support among men

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Speaker 1: in their twenties. It seems that the younger male voters

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Speaker 1: in South Korea twenties and thirties there even more conservative

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Speaker 1: vertive than male in their seventies. What does his demographics

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Speaker 1: sort of society or look into South Korea tell you

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Speaker 1: about some of the future policies that we could expect

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Speaker 1: from the new administration.

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Speaker 5: So I think all this again speaks to the divided

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Speaker 5: nation that that I just mentioned. As you mentioned males

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Speaker 5: in their early twenties or in their twenties, mostly many

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Speaker 5: of them voted for other reform parties LEGIONSUK and they

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Speaker 5: tend to be conservative. On the other hand, do you

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Speaker 5: have many of the women South Korean women in their

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Speaker 5: twenties who voted for Hmail who is now just been

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Speaker 5: sworn as sworn in as president. I think that again

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Speaker 5: this speaks to the divided nation, and President Lee will

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Speaker 5: face that challenge of divide, of bridging that gap between

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Speaker 5: genders and generations, and you know, female gender equality issue

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Speaker 5: is something that he has promised that he would tackle

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Speaker 5: as a priority.

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Speaker 1: Yeah, he's very popular among young women here in South Korea.

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Speaker 1: Let's talk a little bit about foreign policy, because of

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Speaker 1: course that will also be very different from what we

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Speaker 1: saw from the Unisyol administration. What do you expect to

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Speaker 1: be the key changes.

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Speaker 5: I think the key change will be that President Ly

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Speaker 5: will probably aim to seek more equidistance policy between the

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Speaker 5: US and China. Certainly, the Unit administration made it pretty

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Speaker 5: clear that it was aligning with the US, and it

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Speaker 5: worked very hard to align many of its policies with

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Speaker 5: the US. President E Jmong on the campaign trail, has

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Speaker 5: said that he wanted to mentize with China and with

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Speaker 5: North Korea as well. So I think what we'll see

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Speaker 5: is more of an equidistance policy. Now, I don't know

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Speaker 5: how well that would be taken by the Trump administration

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Speaker 5: because I think that there will be pressure from Washington

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Speaker 5: for Seoul to take take sides to make its position

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Speaker 5: more clear. Also, relations with Japan will probably it probably

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Speaker 5: not be as strong as as as that relationship was

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Speaker 5: in Unsungnard's time. The Unit administration worked very hard to

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Speaker 5: mentize with with Japan. Uh I think that the new

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Speaker 5: administration in South Korea will try to strike a strike

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Speaker 5: a more of a balanced approach toward Japan.

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Speaker 1: Has cautioned about striking a deal with the US too quickly.

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Speaker 1: What are we expecting on how he'll approach those trade

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Speaker 1: negotiations with President Trump.

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Speaker 5: I think it'll be interesting to see how he responds

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Speaker 5: to the various pressures that we can expect from the

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Speaker 5: Trump Trump administration. So far, the President Trump has not

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Speaker 5: said much about South Korea, mostly because South Korea did

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Speaker 5: not have a president. It had acting presidents over the

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Speaker 5: last six months. Now that an election has taken place,

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Speaker 5: I think we will see these negotiations moving more quickly.

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Speaker 5: But I think it's more I think it's a little

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Speaker 5: difficult to expect at this point or trying to to

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Speaker 5: to to figure out exactly how quickly the or how

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Speaker 5: well the new administration of South Koreole will reply will

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Speaker 5: respond to Washington's demands.

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Speaker 4: One of the promises that candidate Ly made was to

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Speaker 4: make some changes to corporate governance, break the grip of

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Speaker 4: the family run conglomerates, the chabowls in South Korea. What

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Speaker 4: are his chances of success then and now that he

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Speaker 4: has an opportunity to try and enact that agenda.

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Speaker 5: Certainly he comes in with a great amount of power.

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Speaker 5: He has won nearly fifty percent or about fifty percent

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Speaker 5: of the votes, and we have the highest turnout in

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Speaker 5: recent in the last twenty eight years, so that speaks

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Speaker 5: for something. And also the National Assembly is under control

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Speaker 5: by his party, which is a democratic Party, So I

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Speaker 5: think he will again. He has talked a lot about

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Speaker 5: reforms political and economic, and I think he will act

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Speaker 5: with Lee to act on those promises.

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Speaker 4: Just finally, what now for former President Union his supporters,

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Speaker 4: because of course the former president is still facing charges.

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Speaker 5: I think this election outcome was the biggest disappointment for

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Speaker 5: the PPP supporters, including Yun supporters and you, and still

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Speaker 5: is a faces that criminal charge of insurrection. And again

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Speaker 5: I think this goes back to our earlier point about

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Speaker 5: a earlier point about a very very divided nation. Again,

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Speaker 5: the opposition parties candidate Kimmunsu still managed to border forty

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Speaker 5: two percent. Now, still he didn't win, but you know,

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Speaker 5: that was a huge improvement over twenty seventeen when the

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Speaker 5: Conservative Party's candidate Hunjimpo at the time only got twenty

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Speaker 5: four percent of the vote. So so that's that's something

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Speaker 5: that the new Lee administration will have to.

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Speaker 6: Reckon with.

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Speaker 1: Racial minon Lee. Good to have you with us, senior

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Speaker 1: fellow the Simpsons Center's Career Program.

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Speaker 2: Welcome back to the Daybreak Asia podcast. I'm dek Krisner.

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Speaker 2: In the States. On Tuesday, the equity market advanced on

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Speaker 2: signs the American labor market is holding up despite risk

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Speaker 2: stemming from the trade war. The government reported an unexpected

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Speaker 2: increase in the number of job openings. Importantly, we'll get

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Speaker 2: Friday's data on employment for the month of May. We'll

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Speaker 2: talk more about that momentarily as we bring into the conversation.

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Speaker 2: Brad Bernstein. He is managing director at UBS Private Wealth Management.

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Speaker 2: Brad is on the line from Philadelphia. It's good of

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Speaker 2: you to make time to chat with me. I mentioned

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Speaker 2: the JOLT data. This seems to support the Fed's assertion

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Speaker 2: that the labor market is really in a good place

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Speaker 2: right now, and maybe it would justify the Fed's maintaining

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Speaker 2: kind of a wait and see approach. Do you think

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Speaker 2: they have it right?

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Speaker 7: What we continue to see is the hard data continues

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Speaker 7: to be resilient. You know, we're related to the economy,

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Speaker 7: related to GDP. You know projections now for the second

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Speaker 7: quarter out of the Atlanta Fed of potentially four point

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Speaker 7: six percent GDP up from three point eight for this quarter.

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Speaker 7: Whether it's the PCE that we got on Friday, that

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Speaker 7: was evidence that inflation over the last twelve months grew

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Speaker 7: at the slowest rate in four years, which, by the way,

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Speaker 7: markets are now pricing in two cuts this year instead

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Speaker 7: of one. I do think it's been fantastic that the

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Speaker 7: economy has been holding up, but I believe the Fed

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Speaker 7: is waiting for clarity on tariff policy. If it wasn't

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Speaker 7: for the tariff, you know, uncertainty, I think the Fed

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Speaker 7: would actually be able to start cutting this month, but

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Speaker 7: we think they'll start cutting in September.

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Speaker 2: I don't know how much weight you would put in

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Speaker 2: anything coming out of the OECD, but today the research

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Speaker 2: group published a report. It indicated that the combative trade

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Speaker 2: policies have essentially tipped the world into an economic downturn.

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Speaker 2: Now for the US, the oe c D is expecting

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Speaker 2: GDP this year to decelerate sharply to a rate of

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Speaker 2: around one point six percent. I'm curious as to whether

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Speaker 2: or not you become a little concerned when you hear

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Speaker 2: that fact.

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Speaker 6: Yes and no.

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Speaker 7: What we've seen if you take a look at what

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Speaker 7: Wall Street is saying about where we'll be at the

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Speaker 7: end of the year with the market, these numbers continue

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Speaker 7: to go up and down with all the announcements of trade.

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Speaker 7: So what the OCD is saying is that if you

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Speaker 7: know where we are right Now, with Paris continue to

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Speaker 7: stay the course and they don't get better and decline,

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Speaker 7: then yeah, of course the.

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Speaker 6: Growth is going to slow.

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Speaker 7: So you're either on the camp that Paris are going

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Speaker 7: to stay high or or you're you're you know, you

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Speaker 7: think that the administration wants to continue to move in

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Speaker 7: the reduction of the lower number on tiis, which in

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Speaker 7: that case, you know, votes better for the economy in

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Speaker 7: the market. So it just really depends on what side

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Speaker 7: of the fence you are with where the administration is

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Speaker 7: going to end up.

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Speaker 2: I want to get your sense of US fiscal policy

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Speaker 2: right now. I've been talking a lot about that big

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Speaker 2: beautiful bill. It's in the Senate up for debate, and

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Speaker 2: today Elon Musk was publicly criticizing the legislation, calling it

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Speaker 2: a budget busting abomination. Now, yes, it is forecast to

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Speaker 2: add around two and a half trillion to the federal

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Speaker 2: deficit over a decade. Do you expect this to sail

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Speaker 2: through the Senate or is there going to be a

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Speaker 2: lot of horse trading here?

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Speaker 7: Well, it appears as of the moment they don't have

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Speaker 7: the Republican support to prove as it is.

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Speaker 6: It will have to be moderated.

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Speaker 7: If you listen to Ran Paul this morning, who was

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Speaker 7: on TV talking about it, and the President responded in

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Speaker 7: his unique way, and whether you look at you listen

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Speaker 7: to what Elon Musk said, or you listen to what

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Speaker 7: Senator Johnson said. They don't have the Republican support, so

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Speaker 7: they're going to have to amend this bill to be

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Speaker 7: more friendly to the deficit in order to pass. So

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Speaker 7: it'll be interesting to see what comes about over the

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Speaker 7: next few days, a few weeks.

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Speaker 2: Would you expect the bond vigilantes to emerge to kind

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Speaker 2: of push back on anything that may be super aggressive

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Speaker 2: in adding to the deficit.

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Speaker 7: It depends, you know, once again, it depends on where

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Speaker 7: this packs extension of cuts ends up. You know, if

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Speaker 7: as is, I think yields can move higher or steep in.

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Speaker 7: If the Fed starts cutting later this year, and if

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Speaker 7: they redo it to a degree and they don't add

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Speaker 7: as much debt, yields can come down. So it'll be

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Speaker 7: interesting to see what comes out of the you know,

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Speaker 7: the Senate and the reaction by the bond market based

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Speaker 7: on how much debt it adds to our how much

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Speaker 7: extra debt it ads to the.

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Speaker 2: Deficit, mention the fact that we do get the monthly

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Speaker 2: employment report from May on Friday. I think an hour

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Speaker 2: survey economist predict growth and job of around one hundred

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Speaker 2: and thirty thousand. The unemployment rate is expected to hold

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Speaker 2: steady at around four point two percent. How does that

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Speaker 2: square with the research team at UBS.

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Speaker 6: I think that's right about in line.

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Speaker 7: But at the end of the day, you know, in

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Speaker 7: order to get the FED cuts, I believe we need

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Speaker 7: the trade war to continue to move in the direction

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Speaker 7: that it's been moving. We need, you know, hopefully on Friday,

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Speaker 7: there'll be some positive.

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Speaker 6: Developments with China.

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Speaker 7: Hopefully in the very near future there'll be positive developments

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Speaker 7: with the EU, and worst case scenarios continue to be

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Speaker 7: removed and better case scenarios can considered continue to be

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Speaker 7: priced in, and depending on those outcomes over the next

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Speaker 7: week or two, I think markets have a great chance

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Speaker 7: of moving higher into the end of the year based

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Speaker 7: on the fact of how how well the hard data

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Speaker 7: is held up, how well.

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Speaker 6: Earnings have held up.

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Speaker 7: We continue to see companies guide higher as we did

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Speaker 7: tonight in the technology space, and we think AI growth

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Speaker 7: will power earnings growth in the next couple of years.

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Speaker 2: So, Brad, I'm curious, is AI the area where you're

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Speaker 2: still finding opportunity or are there other corners of the

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Speaker 2: market that you are attracted to right now?

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Speaker 7: Well, I think AI got You know, the technology sector

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Speaker 7: was the worst place to be in the April sell off,

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Speaker 7: and it's been the best place to be since the

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Speaker 7: April bottom. Interestingly, and you know everyone's talking about international.

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Speaker 7: International had its day in the first quarter, but if

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Speaker 7: you look at the lows of April to today, the

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Speaker 7: US markets have actually outperformed the world and led by

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Speaker 7: technology dramatically. So if that trade continues, I think from

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Speaker 7: these levels into the end of the year, US market's

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Speaker 7: outperformed led by tech.

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Speaker 2: If I ask you to diversify a portfolio away from

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Speaker 2: tech so that you weren't so heavily concentrated on technology,

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Speaker 2: what would be the first industry group that you would

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Speaker 2: want to include in that?

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Speaker 7: So we want to be diversified in large cap, MidCap,

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Speaker 7: small cap, in multiple sectors, and yes, have some exposure international,

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Speaker 7: but overweight large cap US equities. You know, and what

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Speaker 7: we've been seeing is is that in the industrial and

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Speaker 7: power company in the industrial sector and power companies that

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Speaker 7: sell the data centers reiterated their solid outlook, and obviously

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Speaker 7: that bodes well for AI. So there's a lot of

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Speaker 7: ways to see the growth and and what's amazing about

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Speaker 7: AI is that you don't have to own just technology

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Speaker 7: to benefit from it.

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Speaker 6: It's really impacting almost almost every sector.

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Speaker 2: How are you viewing the bond market these days?

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Speaker 7: I think if you are conservative, you get paid to

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Speaker 7: be short. You know you can, you can, you could

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Speaker 7: stay it under two year. US treasuries have no risk,

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Speaker 7: have no interest rate risk, have no credit risk, and

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Speaker 7: get paid in the low fours.

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Speaker 6: So that that's a great place to hie out.

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Speaker 7: But you know, depending on the outcome of the trade

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Speaker 7: war or if you want to call it that that

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Speaker 7: we're in right now, and the and the outcome of

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Speaker 7: the tax extension and what they do and how they

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Speaker 7: impact that bonds. You know, interest rates on bonds right

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Speaker 7: now yield on bombs of the highest they've been in

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Speaker 7: eighteen years. So we've been really adding a lot of money,

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Speaker 7: specifically in tax freeze. You know, in the intermediate space.

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Speaker 7: I think, you know, getting clipping four to four and

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Speaker 7: a half yield right now, tax free is a great

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Speaker 7: place to be.

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Speaker 2: Brad We'll leave it there. Brad Bernstein is Managing director

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Speaker 2: at UBS Private Wealth Management. On the line from Philadelphia

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Speaker 2: here on the Daybreak Asia podcast. Thanks for listening to

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

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

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

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

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

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

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Speaker 2: and this is Bloomberg