1 00:00:02,480 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:09,640 --> 00:00:12,840 Speaker 2: This is the Bloomberg Daybreak Aisia podcast. I'm Doug Krisner. 3 00:00:12,920 --> 00:00:15,400 Speaker 2: You can join Brian Curtis and myself for the stories, 4 00:00:15,440 --> 00:00:18,520 Speaker 2: making news and moving markets in the Apec region. You 5 00:00:18,600 --> 00:00:21,439 Speaker 2: can subscribe to the show anywhere you get your podcast 6 00:00:21,520 --> 00:00:24,919 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 7 00:00:24,920 --> 00:00:26,120 Speaker 2: Bloomberg Business App. 8 00:00:26,880 --> 00:00:31,880 Speaker 3: Seema Shat, Chief Global Strategist, Principal Asset Management, Sema, thank 9 00:00:31,920 --> 00:00:36,360 Speaker 3: you for joining us. So Powell was essentially a lot 10 00:00:36,400 --> 00:00:40,080 Speaker 3: more positive on the economy than Messrs Dudley, who we 11 00:00:40,120 --> 00:00:43,960 Speaker 3: heard from el Arian Shepherds and Goodlock and many others. 12 00:00:44,600 --> 00:00:47,920 Speaker 3: For him, there's no real urgency to cut. I think 13 00:00:47,960 --> 00:00:50,040 Speaker 3: many people would agree with that. Is well, will they 14 00:00:50,080 --> 00:00:50,800 Speaker 3: be proved right? 15 00:00:51,960 --> 00:00:54,120 Speaker 4: Thanks for having me on this morning. Well, look, I 16 00:00:54,160 --> 00:00:57,800 Speaker 4: think that they are. I think Powell is correct to 17 00:00:58,000 --> 00:01:02,240 Speaker 4: retain that air of optionality. We've already seen their fingers 18 00:01:02,280 --> 00:01:04,959 Speaker 4: be bent several times with regards to the inflation story, 19 00:01:05,600 --> 00:01:09,080 Speaker 4: so they do need to maintain that hawkishness to ensure 20 00:01:09,080 --> 00:01:11,399 Speaker 4: that they have full confidence and that it's the right decision. 21 00:01:11,840 --> 00:01:14,240 Speaker 4: I think for us, we can see that there is 22 00:01:14,240 --> 00:01:16,560 Speaker 4: an economic slowdown taking place in the US, but we're 23 00:01:16,600 --> 00:01:19,840 Speaker 4: fairly sanguine about how that plays out. We do need 24 00:01:19,880 --> 00:01:21,800 Speaker 4: to keep an eye on the labor market most importantly, 25 00:01:22,319 --> 00:01:24,600 Speaker 4: but I think at this stage it is right for 26 00:01:24,680 --> 00:01:27,440 Speaker 4: them probably to not be as negative as maybe you're 27 00:01:27,440 --> 00:01:29,959 Speaker 4: hearing from a number of other compentators. 28 00:01:29,480 --> 00:01:31,200 Speaker 2: When you look at the way that markets have been 29 00:01:31,240 --> 00:01:34,160 Speaker 2: reacting lately in anticipation of a pivot from the FED, 30 00:01:34,240 --> 00:01:38,160 Speaker 2: whether it's in some people were saying possibly this month. 31 00:01:38,200 --> 00:01:40,680 Speaker 2: I think Bill Dudley was in that camp. Let's say 32 00:01:40,720 --> 00:01:43,640 Speaker 2: that September is the first cut that we get. Do 33 00:01:43,680 --> 00:01:47,200 Speaker 2: you think the FED is concerned about the relaxation of 34 00:01:47,720 --> 00:01:51,480 Speaker 2: financial conditions? The easing and financial conditions that the FED 35 00:01:51,520 --> 00:01:53,200 Speaker 2: has seen lately, is that worrisome? 36 00:01:54,320 --> 00:01:56,960 Speaker 4: I think that is absolutely key actually for Power and 37 00:01:57,000 --> 00:01:59,240 Speaker 4: for the rest of the FED. What we've seen in 38 00:01:59,240 --> 00:02:01,920 Speaker 4: the past a lost October when Powell took a slightly 39 00:02:01,960 --> 00:02:04,640 Speaker 4: dubbish pivot, is that you did see financial conditions ease. 40 00:02:05,040 --> 00:02:07,120 Speaker 4: You could see that the way that the market responded 41 00:02:07,160 --> 00:02:08,919 Speaker 4: to it, and I think I would say that that's 42 00:02:08,919 --> 00:02:10,560 Speaker 4: actually one of the reasons why you did see that 43 00:02:10,600 --> 00:02:12,920 Speaker 4: inflation surge at the beginning of the year, so I 44 00:02:12,919 --> 00:02:14,880 Speaker 4: think they have to be very cognizant of that, and 45 00:02:15,000 --> 00:02:18,320 Speaker 4: even once they do start to cut rates, probably in September, 46 00:02:19,280 --> 00:02:21,120 Speaker 4: they will keep a very very close eye on how 47 00:02:21,240 --> 00:02:24,440 Speaker 4: the market is evolving post that moment to ensure that 48 00:02:24,440 --> 00:02:26,480 Speaker 4: they're not losing the inflation fight as soon as they 49 00:02:26,520 --> 00:02:27,360 Speaker 4: start to cut rates. 50 00:02:28,320 --> 00:02:31,760 Speaker 3: So, as Dog mentioned, there was vigorous debate about actually 51 00:02:31,800 --> 00:02:35,120 Speaker 3: moving at the July meeting, but the vote was unanimous 52 00:02:35,639 --> 00:02:38,920 Speaker 3: to do what they did. Powell is a very good 53 00:02:38,960 --> 00:02:43,480 Speaker 3: consensus builder. But is that a little bit too much 54 00:02:43,520 --> 00:02:44,480 Speaker 3: group think for some. 55 00:02:46,600 --> 00:02:50,240 Speaker 4: Well, we know from the various comments coming out from 56 00:02:50,800 --> 00:02:54,559 Speaker 4: the Fed speakers that there is a difference across the spectrum. 57 00:02:54,720 --> 00:02:56,600 Speaker 4: So you do have some which is slightly more hawkish, 58 00:02:56,639 --> 00:03:00,280 Speaker 4: but you have actually seen the tilt moved towards slowly 59 00:03:00,360 --> 00:03:03,680 Speaker 4: more dubvish commentary from even some of the most hawkish 60 00:03:03,800 --> 00:03:07,080 Speaker 4: of FED speakers of late chance are that it probably 61 00:03:07,160 --> 00:03:08,639 Speaker 4: was a fair amount of intense debate. 62 00:03:10,440 --> 00:03:12,520 Speaker 3: But we know that, as you said, have it reflected, 63 00:03:12,560 --> 00:03:15,480 Speaker 3: you know, in a couple of descents, And why does 64 00:03:15,560 --> 00:03:17,880 Speaker 3: everybody have to be behind it? It just seems a 65 00:03:17,960 --> 00:03:20,000 Speaker 3: little worrisome to some. 66 00:03:20,960 --> 00:03:22,639 Speaker 4: I don't think it's orri as I think that it's 67 00:03:22,840 --> 00:03:25,520 Speaker 4: very clear that this is Powell's FED. When it is 68 00:03:25,560 --> 00:03:27,400 Speaker 4: no longer Powell as a chairman, we could see a 69 00:03:27,400 --> 00:03:30,720 Speaker 4: slight difference where we do hear the chairman talk more 70 00:03:30,720 --> 00:03:33,239 Speaker 4: about descents. It is very different to the Bank of 71 00:03:33,280 --> 00:03:35,160 Speaker 4: England or the ECB, for example. But I think at 72 00:03:35,200 --> 00:03:40,160 Speaker 4: this stage it's important for Powell to portray an image 73 00:03:40,360 --> 00:03:42,960 Speaker 4: of complete consensus as they talk about FED decisions. 74 00:03:43,000 --> 00:03:45,160 Speaker 2: So Sima, where does this leave you in terms of 75 00:03:45,200 --> 00:03:47,119 Speaker 2: putting money to work in markets right now? 76 00:03:48,320 --> 00:03:50,800 Speaker 4: So we continue to be fairly risk on as we 77 00:03:50,800 --> 00:03:52,840 Speaker 4: look across to the rest of the year. We do believe, 78 00:03:52,840 --> 00:03:55,480 Speaker 4: as I said, although the US economic economy is slow 79 00:03:55,520 --> 00:03:58,040 Speaker 4: and we think it's fairly robust, we're not looking at recession. 80 00:03:58,400 --> 00:04:00,240 Speaker 4: And then if you combine that with great cuts, that 81 00:04:00,320 --> 00:04:02,200 Speaker 4: is a soft landing and it should continue to be 82 00:04:02,200 --> 00:04:05,800 Speaker 4: positive for ECHTIS. The other areas that we are looking 83 00:04:05,800 --> 00:04:08,440 Speaker 4: across is around the world, because valuations across the US 84 00:04:08,520 --> 00:04:11,880 Speaker 4: are still quite expensive, so we do see opportunities across 85 00:04:11,880 --> 00:04:15,240 Speaker 4: places like Japan, India, parts of Latin America, areas that 86 00:04:15,320 --> 00:04:19,359 Speaker 4: can still do well even a post US selection with 87 00:04:19,560 --> 00:04:22,599 Speaker 4: the various tariffs that could be coming in so Seemen. 88 00:04:22,839 --> 00:04:25,880 Speaker 3: As you say, the Fed has actually been more right 89 00:04:26,200 --> 00:04:31,160 Speaker 3: so far this year than the critics. So that's one thing. 90 00:04:31,200 --> 00:04:33,960 Speaker 3: But what about the Bank of Japan? Do you like 91 00:04:34,000 --> 00:04:36,280 Speaker 3: what they did yesterday and do you like how they've 92 00:04:36,320 --> 00:04:41,040 Speaker 3: been assessing the conditions in the Japanese economy. 93 00:04:42,200 --> 00:04:44,480 Speaker 4: So I think the Bank of Japan absolutely needed to 94 00:04:44,560 --> 00:04:48,920 Speaker 4: move when they did. I think the weakness in the 95 00:04:49,040 --> 00:04:51,760 Speaker 4: yen was really starting to become somewhat worrisome, so they 96 00:04:51,800 --> 00:04:53,360 Speaker 4: had they not moved, and there would have been a 97 00:04:53,400 --> 00:04:56,880 Speaker 4: significant market reaction to this. From here on, though, I 98 00:04:56,880 --> 00:04:58,960 Speaker 4: think it's important the Bank of Japan continues on that 99 00:04:59,040 --> 00:05:02,880 Speaker 4: path of tightening policy, of course, with some caution. They 100 00:05:02,920 --> 00:05:06,000 Speaker 4: do need to ensure that wage growth is being sustained, 101 00:05:06,360 --> 00:05:08,280 Speaker 4: and then they're still on that slightly positive path that 102 00:05:08,320 --> 00:05:10,599 Speaker 4: they've been on for the past couple of months. It 103 00:05:10,640 --> 00:05:12,760 Speaker 4: will be interesting to see how the yen respond in 104 00:05:12,800 --> 00:05:15,920 Speaker 4: the next week or two after this immediate knee jec 105 00:05:15,960 --> 00:05:17,000 Speaker 4: reaction starts to fade. 106 00:05:17,120 --> 00:05:19,080 Speaker 2: Sima, Before we let you go, can we get your 107 00:05:19,080 --> 00:05:22,240 Speaker 2: thoughts on China. I know you've been talking with colleagues 108 00:05:22,240 --> 00:05:24,800 Speaker 2: and clients in the region. What are they saying about 109 00:05:24,839 --> 00:05:26,360 Speaker 2: the recovery in China right now? 110 00:05:28,120 --> 00:05:29,840 Speaker 4: I think the good thing is that investors a little 111 00:05:29,839 --> 00:05:32,560 Speaker 4: bit more realistic about what to expect for China than 112 00:05:32,560 --> 00:05:35,360 Speaker 4: they were maybe six to nine months ago. So their 113 00:05:35,400 --> 00:05:41,440 Speaker 4: expectation is that the recovery stays fairly lackluster, that policy 114 00:05:41,440 --> 00:05:45,840 Speaker 4: stimulus is going to be quite modest, and that expectation 115 00:05:46,640 --> 00:05:49,400 Speaker 4: is somewhat more realistic, and it does hopefully provide the 116 00:05:49,480 --> 00:05:53,920 Speaker 4: fundamentals for a continued positive market reaction. 117 00:05:55,080 --> 00:05:57,400 Speaker 3: One of our stories starts off by saying President she 118 00:05:57,600 --> 00:06:01,119 Speaker 3: is facing pressure to address the growth profile in China 119 00:06:01,200 --> 00:06:03,720 Speaker 3: because it's one of the biggest threats to global economic growth. 120 00:06:03,760 --> 00:06:04,240 Speaker 3: Do you agree? 121 00:06:06,240 --> 00:06:07,880 Speaker 4: You know, as of course it's one of the largest 122 00:06:07,880 --> 00:06:10,279 Speaker 4: economists in the world. It really doesn't matter what is 123 00:06:10,320 --> 00:06:13,720 Speaker 4: happening in China at this stay. So we're not expecting 124 00:06:13,720 --> 00:06:16,520 Speaker 4: a further deceleration and growth. This is something which we 125 00:06:16,560 --> 00:06:19,000 Speaker 4: think is going to be fairly constant and positive. And 126 00:06:19,040 --> 00:06:20,680 Speaker 4: then that there's a positive story right there. 127 00:06:21,200 --> 00:06:25,280 Speaker 3: Yeah, okay, thank you. Seema Shah, chief Global Strategist, Principal 128 00:06:25,279 --> 00:06:35,240 Speaker 3: Asset Management from our Singapore studios this time joining us 129 00:06:35,360 --> 00:06:38,279 Speaker 3: is Kurt Wagner Bloomberg Tech Reporter to take a closer 130 00:06:38,320 --> 00:06:42,719 Speaker 3: look at Meta's earnings. So the CEO, Mark Zuckerberg, Kurt 131 00:06:42,760 --> 00:06:46,159 Speaker 3: said that we CEOs are talking about this because AI 132 00:06:46,279 --> 00:06:49,680 Speaker 3: is exciting and it's going to change so many things 133 00:06:49,720 --> 00:06:53,240 Speaker 3: about how we do business metaphor instance, using AI to 134 00:06:53,560 --> 00:06:58,160 Speaker 3: improve the way that ads find interested users. So tell 135 00:06:58,200 --> 00:07:01,039 Speaker 3: us about how that played into the kind of positive reaction. 136 00:07:02,600 --> 00:07:05,160 Speaker 5: Yeah, I mean, there's kind of two stories right now 137 00:07:05,200 --> 00:07:07,960 Speaker 5: with Meta. There's the immediate term, right, which is how 138 00:07:07,960 --> 00:07:11,920 Speaker 5: they're using AI to help their algorithms recommend content to people, 139 00:07:12,120 --> 00:07:16,120 Speaker 5: recommend ads to people, and essentially make that existing business 140 00:07:16,160 --> 00:07:18,920 Speaker 5: more efficient. And then there's the long term play, right 141 00:07:18,960 --> 00:07:23,880 Speaker 5: which is building large language models for chatbots, building AI 142 00:07:24,080 --> 00:07:28,000 Speaker 5: powered sunglasses or the metaverse that we've heard Mark Zuckerberg 143 00:07:28,000 --> 00:07:30,560 Speaker 5: talk about. And so right now they're kind of doing 144 00:07:30,600 --> 00:07:34,080 Speaker 5: this balancing act of trying to continually report earnings, continually 145 00:07:34,160 --> 00:07:37,440 Speaker 5: keep investors happy with that short term stuff while spending 146 00:07:37,560 --> 00:07:39,960 Speaker 5: very aggressively on the long term. And every quarter that 147 00:07:40,360 --> 00:07:42,920 Speaker 5: they exceed expectations, they kind of buy themselves a little 148 00:07:42,960 --> 00:07:45,280 Speaker 5: bit more time for those long term visions, which is 149 00:07:45,280 --> 00:07:46,040 Speaker 5: what happened today. 150 00:07:46,120 --> 00:07:48,280 Speaker 2: Yeah, it's a very interesting point because there is that 151 00:07:48,440 --> 00:07:51,480 Speaker 2: overall cap x, but a portion of that is delivering 152 00:07:51,560 --> 00:07:54,840 Speaker 2: on the return on investment in the AD space. What 153 00:07:55,000 --> 00:07:58,880 Speaker 2: is less clear is whether mister Zuckerberg's bet on the 154 00:07:58,920 --> 00:08:01,720 Speaker 2: metaverse is going to off. What should we be looking 155 00:08:01,800 --> 00:08:05,760 Speaker 2: for next beyond kind of the search and what do 156 00:08:05,760 --> 00:08:08,440 Speaker 2: I call it search? But ad related placement as it 157 00:08:08,480 --> 00:08:12,280 Speaker 2: relates to AI for the people that use Facebook, Instagram, 158 00:08:12,320 --> 00:08:15,160 Speaker 2: and WhatsApp. What should we be looking at next? 159 00:08:16,440 --> 00:08:18,560 Speaker 5: Well, the two things that he kind of hammered home 160 00:08:18,640 --> 00:08:21,120 Speaker 5: on the on the call today and again he said 161 00:08:21,160 --> 00:08:22,760 Speaker 5: they're far off, but I think there may be the 162 00:08:22,920 --> 00:08:27,160 Speaker 5: closest are these you know, chatbots that we've talked about, 163 00:08:27,200 --> 00:08:29,880 Speaker 5: these AI assistants. So the idea that you know, you'd 164 00:08:29,920 --> 00:08:32,400 Speaker 5: interact with a business and perhaps they would outsource their 165 00:08:32,400 --> 00:08:35,960 Speaker 5: customer service now to a smart assistant powered by some 166 00:08:36,040 --> 00:08:39,760 Speaker 5: of metas technology. That's maybe one business avenue for them, 167 00:08:39,960 --> 00:08:41,880 Speaker 5: and the other is these smart glasses, right, And it 168 00:08:41,920 --> 00:08:44,880 Speaker 5: sounds kind of crazy, but he said, he said repeatedly, 169 00:08:44,960 --> 00:08:47,760 Speaker 5: they can't even keep up with demand selling these ray bands. 170 00:08:47,760 --> 00:08:50,280 Speaker 5: And it's this idea that you would have glasses that 171 00:08:50,320 --> 00:08:53,040 Speaker 5: look and feel like regular sunglasses, but they can take 172 00:08:53,080 --> 00:08:55,800 Speaker 5: pictures and videos, and more than that, you can talk 173 00:08:55,840 --> 00:08:58,800 Speaker 5: to them, right, They could read you your email or 174 00:08:58,960 --> 00:09:00,920 Speaker 5: read you your text message. You could kind of use 175 00:09:00,960 --> 00:09:03,480 Speaker 5: them as a voice assistant in that way. I still 176 00:09:03,480 --> 00:09:06,359 Speaker 5: think we're, you know, several years away from that being mainstream, 177 00:09:06,720 --> 00:09:08,360 Speaker 5: but it does feel like those are the two things 178 00:09:08,400 --> 00:09:12,120 Speaker 5: he's kind of harping on as being perhaps the closest 179 00:09:12,440 --> 00:09:14,439 Speaker 5: closer than the metaverse. For sure. 180 00:09:15,080 --> 00:09:17,600 Speaker 3: Yeah, investors love to hear that there's so much demand 181 00:09:17,640 --> 00:09:20,360 Speaker 3: we can't meet it. That kind of bodes well, right future. 182 00:09:21,080 --> 00:09:22,680 Speaker 3: But I think Doug and I are sort of dancing 183 00:09:22,720 --> 00:09:25,880 Speaker 3: around the same kind of essential point, which is, you know, 184 00:09:26,160 --> 00:09:29,280 Speaker 3: Meta was slammed for it spending on the metaverse, and 185 00:09:29,320 --> 00:09:32,720 Speaker 3: it's being rewarded for its spending on AI. What's really 186 00:09:32,840 --> 00:09:34,760 Speaker 3: changed to create those conditions? 187 00:09:36,080 --> 00:09:38,679 Speaker 5: Well, I think the metaverse, which, again for those who 188 00:09:38,679 --> 00:09:40,480 Speaker 5: aren't familiar, is this idea that you know you're going 189 00:09:40,559 --> 00:09:43,280 Speaker 5: to put on more of like a VR headset and 190 00:09:43,360 --> 00:09:46,760 Speaker 5: live and operate in this virtual world. Right, I think 191 00:09:46,800 --> 00:09:50,920 Speaker 5: that has just not had the adoption that anyone, you know, 192 00:09:51,040 --> 00:09:53,520 Speaker 5: certainly Mark Zuckerberg, maybe would have hoped this early on, 193 00:09:53,960 --> 00:09:57,560 Speaker 5: it feels very much, you know, a decade out, whereas 194 00:09:57,679 --> 00:09:59,880 Speaker 5: the AI stuff, in addition to the ads we talked 195 00:09:59,880 --> 00:10:02,920 Speaker 5: to about in the glasses and the smart assistance, it 196 00:10:03,000 --> 00:10:05,640 Speaker 5: just feels more urgent, more timely, right. And I think 197 00:10:06,040 --> 00:10:08,959 Speaker 5: that there's this feeling that, even though AI plays a 198 00:10:09,040 --> 00:10:12,120 Speaker 5: role in both of these paths, that you know, all 199 00:10:12,120 --> 00:10:13,800 Speaker 5: the other stuff you're talking about at the beginning of 200 00:10:13,880 --> 00:10:17,120 Speaker 5: this conversation is just much more urgent and accessible to 201 00:10:17,200 --> 00:10:19,680 Speaker 5: people than the metaverse stuff. And so I think that's 202 00:10:19,720 --> 00:10:22,360 Speaker 5: why they're sort of leaning into AI and leaning away 203 00:10:22,400 --> 00:10:24,240 Speaker 5: from Metaverse because right now it's an easier thing to 204 00:10:24,240 --> 00:10:24,720 Speaker 5: talk about. 205 00:10:24,840 --> 00:10:27,400 Speaker 2: You're very familiar with the criticism that has been launched 206 00:10:27,400 --> 00:10:30,880 Speaker 2: against this company for contributing to a lot of misinformation 207 00:10:31,480 --> 00:10:33,959 Speaker 2: and the lack of oversight when it comes to content. 208 00:10:34,320 --> 00:10:37,800 Speaker 2: Is there a way can you imagine Kurt artificial intelligence 209 00:10:37,840 --> 00:10:42,040 Speaker 2: being employed by a company like meta to monitor content 210 00:10:42,200 --> 00:10:45,360 Speaker 2: and to make those adjustments accordingly. 211 00:10:45,520 --> 00:10:48,960 Speaker 5: Great, Well, it's already happening at scale. I mean, you 212 00:10:49,000 --> 00:10:51,439 Speaker 5: think about how many people. I think they have three 213 00:10:51,600 --> 00:10:55,760 Speaker 5: point two billion users across all of their apps on 214 00:10:55,800 --> 00:10:59,040 Speaker 5: a monthly basis, right, now, and so they're already using 215 00:10:59,080 --> 00:11:01,320 Speaker 5: AI for a lot of things. They're using it to 216 00:11:01,440 --> 00:11:05,319 Speaker 5: take down certainly things that are easily detectable child pornography, 217 00:11:05,400 --> 00:11:08,640 Speaker 5: for example, terrorism propaganda, things that they can build a 218 00:11:08,720 --> 00:11:11,800 Speaker 5: database and say to the AI, go find things that 219 00:11:11,840 --> 00:11:14,440 Speaker 5: look like this and remove it. It gets harder, of course, 220 00:11:14,440 --> 00:11:17,240 Speaker 5: when you talk about misinformation or speech related things, right 221 00:11:17,280 --> 00:11:21,760 Speaker 5: because these are rarely very black and white. But because 222 00:11:21,800 --> 00:11:23,440 Speaker 5: of the scale they operate on, a lot of this 223 00:11:23,480 --> 00:11:26,480 Speaker 5: stuff is first flagged by AI and then it's reviewed 224 00:11:26,480 --> 00:11:29,760 Speaker 5: by human afterwards. So as the AI gets better and better, 225 00:11:30,080 --> 00:11:33,000 Speaker 5: you could see the human element of this maybe starting 226 00:11:33,000 --> 00:11:35,240 Speaker 5: to fade away. I don't think it'll ever go away entirely, 227 00:11:35,679 --> 00:11:38,120 Speaker 5: but that's the goal. When you're at a scale that 228 00:11:38,160 --> 00:11:40,480 Speaker 5: they operate at, you have to do things automatically. You 229 00:11:40,480 --> 00:11:41,480 Speaker 5: can't rely on humans. 230 00:11:43,040 --> 00:11:46,520 Speaker 3: Is Meta going to control the consumer AI experience where 231 00:11:46,559 --> 00:11:49,200 Speaker 3: Microsoft has the enterprise. 232 00:11:50,280 --> 00:11:52,640 Speaker 5: Well, that's the goal, right, I mean, that's part of 233 00:11:52,679 --> 00:11:55,280 Speaker 5: why Mark Zuckerberg is making a lot of their AI 234 00:11:55,360 --> 00:11:58,719 Speaker 5: technology open source. It sounds sort of counterintuitive, like why 235 00:11:58,760 --> 00:12:01,240 Speaker 5: would you spend billions and tens of billions of dollars 236 00:12:01,280 --> 00:12:03,360 Speaker 5: billing this and then sort of give the blueprints away 237 00:12:03,400 --> 00:12:05,880 Speaker 5: to other people. But his argument is that it will 238 00:12:05,880 --> 00:12:08,839 Speaker 5: make this ubiquitous around the industry and hopefully everyone will 239 00:12:08,880 --> 00:12:10,160 Speaker 5: be using metas technology. 240 00:12:10,760 --> 00:12:13,040 Speaker 3: Yeah sounds good, Kurt. Thank you very much for being 241 00:12:13,040 --> 00:12:16,080 Speaker 3: with us here on the program. Kurt Wagnerrol Bloomberg Tank reporter. 242 00:12:22,360 --> 00:12:25,840 Speaker 3: Joining us now on the program is Raissa Rasid, Global 243 00:12:25,880 --> 00:12:29,720 Speaker 3: market strategist JPM thanks very much for joining us. So 244 00:12:29,720 --> 00:12:33,120 Speaker 3: we've talked a lot about the Fed standing pat tilting 245 00:12:33,240 --> 00:12:37,840 Speaker 3: toward a possible cut in September, and that the statement 246 00:12:37,920 --> 00:12:40,720 Speaker 3: was a little more hawkish than Powell himself. He tended 247 00:12:40,760 --> 00:12:43,040 Speaker 3: to be a little more on the wish side. What 248 00:12:43,160 --> 00:12:46,199 Speaker 3: I found the most interesting, because some people are worried 249 00:12:46,200 --> 00:12:48,640 Speaker 3: about a drop off in growth, is that Powell himself 250 00:12:48,720 --> 00:12:51,960 Speaker 3: is super positive on the economy. He said, there's nothing 251 00:12:52,040 --> 00:12:55,480 Speaker 3: there that indicates a lot of weakness. The fact that 252 00:12:55,520 --> 00:12:58,080 Speaker 3: the economy is weakening is one thing, but it's not 253 00:12:58,200 --> 00:13:00,640 Speaker 3: turning weak to be right. 254 00:13:02,720 --> 00:13:04,680 Speaker 1: Good morning, and thank you for having me. I think 255 00:13:04,720 --> 00:13:06,920 Speaker 1: you know you said it earlier that the most notable 256 00:13:06,960 --> 00:13:10,080 Speaker 1: part of the statement and the press conference is the 257 00:13:10,080 --> 00:13:13,360 Speaker 1: fact that you know they are focusing on maximum employment 258 00:13:13,440 --> 00:13:16,240 Speaker 1: and the price stability mandate because we call you know, 259 00:13:16,280 --> 00:13:18,480 Speaker 1: the FAT does have a dual mandate, and this is 260 00:13:18,520 --> 00:13:21,040 Speaker 1: a shift from you know, what we've seen early on inflation. 261 00:13:21,679 --> 00:13:23,959 Speaker 1: I think, you know, what we're seeing about the FAT 262 00:13:24,120 --> 00:13:27,520 Speaker 1: is the prevention of doing a policy mistake. So even 263 00:13:27,520 --> 00:13:31,040 Speaker 1: though we are seeing some you know, moderation and growth, 264 00:13:31,360 --> 00:13:34,120 Speaker 1: what you're seeing from the labor market, for example, with 265 00:13:34,280 --> 00:13:37,800 Speaker 1: the labor data that's come out overnight with the ADP 266 00:13:38,720 --> 00:13:42,920 Speaker 1: as well as Employment cost Index that show still relatively 267 00:13:43,320 --> 00:13:47,040 Speaker 1: robust labor market, albeit it is cooling at a you know, 268 00:13:47,160 --> 00:13:49,920 Speaker 1: gradual manner. So I think, you know, in terms of 269 00:13:50,000 --> 00:13:52,840 Speaker 1: the central banks movement going forward, it will be still 270 00:13:53,040 --> 00:13:54,240 Speaker 1: a patient central bank. 271 00:13:54,480 --> 00:13:57,600 Speaker 2: So is the equity market in the US right to rally? 272 00:13:57,800 --> 00:14:00,320 Speaker 2: Is it correct to rally? Because I mean, if there 273 00:14:00,360 --> 00:14:05,520 Speaker 2: is some question about potential slowing earnings, may may feel 274 00:14:05,559 --> 00:14:06,719 Speaker 2: the effect of that. 275 00:14:08,440 --> 00:14:10,960 Speaker 1: Now that's good question. And you know, I think what 276 00:14:11,040 --> 00:14:13,400 Speaker 1: the you know, Chairman Power had said that they would 277 00:14:13,440 --> 00:14:16,880 Speaker 1: be considering the totality of the data, and you know, 278 00:14:17,120 --> 00:14:20,440 Speaker 1: we think that investors should also be you know, concerned 279 00:14:20,440 --> 00:14:23,800 Speaker 1: about that as well, and the risk and investors should 280 00:14:23,800 --> 00:14:26,280 Speaker 1: be very mindful of the potential risks which are really 281 00:14:26,320 --> 00:14:30,000 Speaker 1: at times underestimated. You know, we're talking about the possibility 282 00:14:30,040 --> 00:14:33,360 Speaker 1: of a shoper growth acceleration and the impact of geopolitical 283 00:14:33,480 --> 00:14:36,800 Speaker 1: uncertainties that you know you've spoken about early earlier in 284 00:14:37,080 --> 00:14:39,120 Speaker 1: the segment as well. So you know, we think that 285 00:14:39,120 --> 00:14:41,880 Speaker 1: the focus should really remain on quality when it comes 286 00:14:41,920 --> 00:14:45,760 Speaker 1: to risk assets such as the US equities. And you know, 287 00:14:46,280 --> 00:14:48,760 Speaker 1: given that you've really said that the fact is likely 288 00:14:48,840 --> 00:14:52,040 Speaker 1: to move in a very measured manner, investors should also 289 00:14:52,120 --> 00:14:55,680 Speaker 1: remain quite balanced between both the US and global equities. 290 00:14:55,680 --> 00:14:58,400 Speaker 1: And we do see plenty of reasons to remain constructive, 291 00:14:58,400 --> 00:15:01,040 Speaker 1: for example on Asian markets as well. 292 00:15:01,880 --> 00:15:03,840 Speaker 3: Right, So, we had a big rally at the open 293 00:15:03,840 --> 00:15:06,440 Speaker 3: on the S and P five hundred took the benchmark 294 00:15:06,480 --> 00:15:09,160 Speaker 3: up to fifty five thirty and that was way before 295 00:15:09,320 --> 00:15:12,400 Speaker 3: the Fed put his statement out or Powell spoke, and 296 00:15:12,440 --> 00:15:14,840 Speaker 3: we actually finished the day you know, at fifty five 297 00:15:14,920 --> 00:15:17,280 Speaker 3: twenty two, so lower than that. So it wasn't like 298 00:15:17,320 --> 00:15:20,320 Speaker 3: the Fed juiced up this rally. Our earning is more 299 00:15:20,320 --> 00:15:23,160 Speaker 3: important right now than you know, these maneuverings at the 300 00:15:23,200 --> 00:15:23,800 Speaker 3: Central Bank. 301 00:15:25,440 --> 00:15:27,600 Speaker 1: Yeah, so I mean, more broadly, what we're seeing from 302 00:15:27,680 --> 00:15:30,640 Speaker 1: this earning season is that we are seeing that technology 303 00:15:30,680 --> 00:15:33,760 Speaker 1: lease again. Most of the earning growth that's really coming 304 00:15:33,800 --> 00:15:37,280 Speaker 1: through is coming from increased sales as aggressive AI related 305 00:15:37,480 --> 00:15:41,600 Speaker 1: CAPEC spending is still really dominating mugin expansion there. I 306 00:15:41,640 --> 00:15:43,880 Speaker 1: think the message that we really tell investments right now 307 00:15:43,920 --> 00:15:46,920 Speaker 1: is that we'll likely see a more inclusive equity rally. 308 00:15:47,240 --> 00:15:49,960 Speaker 1: We've earning growth expected to be supported by you know, 309 00:15:50,040 --> 00:15:52,080 Speaker 1: the rest of the index as well. I mean, we 310 00:15:52,120 --> 00:15:54,920 Speaker 1: could see some correction of volatility like what we've seen 311 00:15:55,200 --> 00:15:58,000 Speaker 1: in the last two weeks as well, but the fundamentals 312 00:15:58,000 --> 00:16:00,840 Speaker 1: that are really underscoring the teams that we believe in, 313 00:16:00,920 --> 00:16:03,920 Speaker 1: such as AI, will remain in the median term as well. 314 00:16:04,480 --> 00:16:07,080 Speaker 2: We were talking about this sell off a moment ago 315 00:16:07,120 --> 00:16:09,240 Speaker 2: in the Japanese equity market at the end has been 316 00:16:09,240 --> 00:16:12,240 Speaker 2: on a tremendous rally in about the last twenty four hours. 317 00:16:12,360 --> 00:16:15,120 Speaker 2: Are you constructive on Japan on the equity side? 318 00:16:16,600 --> 00:16:19,560 Speaker 1: So on Japan, it's you know, what we're thinking about 319 00:16:19,720 --> 00:16:22,560 Speaker 1: is that we're given all the eage negotiations that really 320 00:16:22,560 --> 00:16:25,240 Speaker 1: have come through, we are seeing that, you know the 321 00:16:26,040 --> 00:16:29,480 Speaker 1: dependency of the wage and cost pass through into inflation 322 00:16:29,560 --> 00:16:32,840 Speaker 1: would likely keep the Bank of Japan on alert. You know, 323 00:16:32,920 --> 00:16:36,320 Speaker 1: the Bank of Japan itself is a very gradually central bank. 324 00:16:36,840 --> 00:16:39,520 Speaker 1: So the impact on equities right now, though we see 325 00:16:39,680 --> 00:16:44,240 Speaker 1: is pretty minimal. But you know, given the whole idea 326 00:16:44,440 --> 00:16:46,840 Speaker 1: that we could see some slow down on the global 327 00:16:46,840 --> 00:16:50,480 Speaker 1: growth backdrop, which could really affect excellental demand, we still 328 00:16:50,480 --> 00:16:53,640 Speaker 1: think that, you know, staying into equities are more services 329 00:16:53,720 --> 00:16:56,880 Speaker 1: or rented, more domestic demand or rented would be the 330 00:16:56,920 --> 00:16:57,400 Speaker 1: way to go. 331 00:16:59,200 --> 00:17:01,800 Speaker 3: We we mentioned as well that we had some huge 332 00:17:01,840 --> 00:17:04,600 Speaker 3: buying in some of these AI related stocks that sold 333 00:17:04,600 --> 00:17:06,840 Speaker 3: down a lot twenty percent. There's so many of them, 334 00:17:07,080 --> 00:17:10,280 Speaker 3: and not just in video but many many companies that 335 00:17:10,359 --> 00:17:13,480 Speaker 3: sold down twenty percent. You know, if I could relate 336 00:17:13,480 --> 00:17:16,160 Speaker 3: that to Japan, you see like a thousand points sell 337 00:17:16,200 --> 00:17:20,640 Speaker 3: off today. You know, there's a lot of funny things 338 00:17:20,640 --> 00:17:24,800 Speaker 3: that happen in financial markets and eventually sometimes we get 339 00:17:24,800 --> 00:17:28,679 Speaker 3: a reversion to the mean. Are you looking for dislocations 340 00:17:28,760 --> 00:17:30,000 Speaker 3: like that as an opportunity? 341 00:17:31,720 --> 00:17:35,159 Speaker 1: Yeah, I think that's true, not only in Japan market 342 00:17:35,200 --> 00:17:37,400 Speaker 1: as well, but really everywhere else. So once you start 343 00:17:37,400 --> 00:17:40,080 Speaker 1: seeing the relocation, we do think that it is time 344 00:17:40,160 --> 00:17:45,240 Speaker 1: to buy on dips. For example, but I think fundamentally Japan, 345 00:17:45,359 --> 00:17:47,600 Speaker 1: as you know, the economic structure right now is going 346 00:17:47,640 --> 00:17:51,280 Speaker 1: to be very much more domestic demand driven just because 347 00:17:51,400 --> 00:17:54,280 Speaker 1: of what's going on in terms of the wages as 348 00:17:54,280 --> 00:17:57,159 Speaker 1: mentioned earlier. So that's where our focus lies when it 349 00:17:57,160 --> 00:17:58,280 Speaker 1: comes to Japanese equities. 350 00:17:58,320 --> 00:17:59,720 Speaker 2: I don't know if you had a chance to look 351 00:17:59,720 --> 00:18:02,400 Speaker 2: at your monitor today when looking at crude oil, big 352 00:18:02,480 --> 00:18:04,520 Speaker 2: spike in New York trading. We had the New York 353 00:18:04,560 --> 00:18:08,879 Speaker 2: Times reporting that Iran Supreme leaders ordered a retaliatory strike 354 00:18:08,920 --> 00:18:12,920 Speaker 2: on Israel for the killing of that Hamas leader in Tehran. 355 00:18:13,840 --> 00:18:16,199 Speaker 2: When you guys got together for the morning call at 356 00:18:16,280 --> 00:18:20,160 Speaker 2: JP Morgan, were they talking geopolitical risk A great deal. 357 00:18:21,800 --> 00:18:24,000 Speaker 1: Yeah, I think that's really something that it's always you know, 358 00:18:24,040 --> 00:18:25,959 Speaker 1: on our RIDA as well. So the way that we 359 00:18:26,000 --> 00:18:28,480 Speaker 1: look at geopolitical risk, not only you know, when it 360 00:18:28,480 --> 00:18:31,320 Speaker 1: comes to commodities market, but other markets as well, is 361 00:18:31,359 --> 00:18:34,080 Speaker 1: really the impact on you know, the financial markets from 362 00:18:34,160 --> 00:18:37,440 Speaker 1: geopolitical risks and how much that would really impact on 363 00:18:37,520 --> 00:18:42,560 Speaker 1: economic activity. So I think beyond what we're seeing earlier 364 00:18:42,680 --> 00:18:46,080 Speaker 1: with regards to that geopolitical region as well, we're also 365 00:18:46,119 --> 00:18:49,639 Speaker 1: seeing other risks right that could affect commodity market, you know, 366 00:18:49,680 --> 00:18:52,359 Speaker 1: from renewed terrorists, et cetera, which is why you know, 367 00:18:52,440 --> 00:18:57,000 Speaker 1: we really push for diversification towards markets that would really 368 00:18:57,040 --> 00:19:00,159 Speaker 1: be a little bit more insulated and less vulnerable in 369 00:19:00,160 --> 00:19:02,200 Speaker 1: the line of action. 370 00:19:03,600 --> 00:19:06,320 Speaker 3: All right, thanks so much Rys for joining us, just 371 00:19:06,359 --> 00:19:08,720 Speaker 3: having to look here at some of these markets and 372 00:19:08,920 --> 00:19:11,080 Speaker 3: how the internals are playing out. But will say goodbye 373 00:19:11,119 --> 00:19:15,480 Speaker 3: to you first. Riser Rasied, Global market strategist JPM with 374 00:19:15,560 --> 00:19:18,719 Speaker 3: us from the Lions City in Singapore. 375 00:19:21,480 --> 00:19:24,439 Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you 376 00:19:24,480 --> 00:19:27,600 Speaker 2: the stories making news and moving markets in the Asia Pacific. 377 00:19:28,119 --> 00:19:31,240 Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more 378 00:19:31,280 --> 00:19:34,879 Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to 379 00:19:34,920 --> 00:19:38,680 Speaker 2: the podcast on Apple, Spotify or anywhere else you listen 380 00:19:38,800 --> 00:19:41,879 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 381 00:19:41,920 --> 00:19:43,000 Speaker 2: Bloomberg Business app.