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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg

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Speaker 1: Daybreak Asia Podcast. I'm Doug Krisner. So Wall Street took

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Speaker 1: a bit of a breather in the last session. Equities

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Speaker 1: drifted lower after a six day advance, and in the

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Speaker 1: bond market, longer term treasure yields were a bit higher

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Speaker 1: as US budget negotiations showed little sign of resolution. In

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Speaker 1: a moment, we'll be speaking with Brian Vendig. He is

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Speaker 1: the chief investment officer over at MJP Wealth Advisors. But

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Speaker 1: we start with the US China trade war and the

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Speaker 1: story on tariffs. Now in the US session, we heard

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Speaker 1: from the head of the Saint Louis fed Albertumusalom. He

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Speaker 1: said tariffs will likely weigh on growth and weaken the

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Speaker 1: labor market, even after the recent ninety day de escalation

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Speaker 1: between Washington and Beijing. Here is Musalam speaking earlier at

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Speaker 1: an event in Minneapolis.

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Speaker 2: Are higher have been more broadly applied and have prompted

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Speaker 2: stronger retaliation than I and many others had expected. Ongoing

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Speaker 2: negotiations with trading partners might dial back tariff significantly and durably,

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Speaker 2: as we have seen with the recent announcement of a

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Speaker 2: ninety day reduction in reciprocal tariffs with China.

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Speaker 1: That is the head of the Saint Louis fed Albertu

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Speaker 1: Musalom with a perspective on how tariffs are impacting the US.

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Speaker 1: So now let's take a look at how tariffs are

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Speaker 1: impacting China. I'm joined by Helen Ju, managing partner and

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Speaker 1: Chief investment Officer at NF Trinity. Helen is joining us

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Speaker 1: from our studios in Hong Kong. Good of you to

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Speaker 1: make time to chat with us before we get to

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Speaker 1: the Moody's downgrade on the US credit rating. Can we

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Speaker 1: start with the April activity data for China, the numbers

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Speaker 1: that we got on Monday. It seems somewhat surprising that

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Speaker 1: industrial output performed as well as it did. What do

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Speaker 1: you make of the activity data that we saw on

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Speaker 1: Monday for the mainland economy?

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Speaker 3: Look, I think there's going to be a lot of

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Speaker 3: noise in the activity data year today. So there's a

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Speaker 3: couple of factors to consider. One is that there was

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Speaker 3: clearly a lot of government support and stimulus in various

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Speaker 3: parts of the economy, harder for it to reach consumers

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Speaker 3: or to massively change consumer behavior and then your term.

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Speaker 3: But certainly in terms of manufacturing, infrastructure, investment, et cetera,

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Speaker 3: the government policies can have meaningful impacts short term. The

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Speaker 3: second thing I would mention is that because of the

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Speaker 3: trade war, there has been a lot of time shifting

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Speaker 3: of activity as well. So, for example, the exports were

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Speaker 3: very strong in the first quarter, probably because people wanted

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Speaker 3: to put in their orders and get the stuff shipped

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Speaker 3: prior to the trade war or prior to Liberation Day

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Speaker 3: coming in, and then later on I think it was

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Speaker 3: not necessarily clear whether you know, things were going to

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Speaker 3: be potentially extended as we did see in May. So

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Speaker 3: you know, I think there's a lot of like jerkiness

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Speaker 3: in terms of the activity because of these types of

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Speaker 3: one off events.

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Speaker 1: So the reading on retail sales was disappointing. Is it

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Speaker 1: still very much the case that anything related to consumer

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Speaker 1: sentiment begins and ends with the home market, the property market.

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Speaker 1: I saw the China's home prices down in the month

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Speaker 1: of April at a faster clip. Is that really the

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Speaker 1: eye of the storm still?

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Speaker 3: I would say that's one factor, but probably not the

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Speaker 3: only factor, but certainly it affects, you know, the wealth

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Speaker 3: effect in terms of high end discretionary spending, but retail

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Speaker 3: sales itself is not just all high end discretionary spending.

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Speaker 3: A lot of it could be specific sectors. You know,

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Speaker 3: for example, autos depending on what you know new models

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Speaker 3: were coming out that particular month, and you know in

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Speaker 3: the past, whether there were specific ev subsidy policies that

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Speaker 3: are less relevant today. There could also be impacts in

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Speaker 3: terms of other specifics, like you know, were their subsidies

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Speaker 3: relating to three C products coming from the government. You know,

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Speaker 3: those types of things I think do tend to have

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Speaker 3: an impact on the short term. But generally speaking, with

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Speaker 3: the backdrop of the trade war lurking in the month

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Speaker 3: of April, it's not a surprise that people would feel

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Speaker 3: less confident about spending, irrespective of what's happening in terms

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Speaker 3: of the property market.

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Speaker 1: So we're still in this period of a truce between

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Speaker 1: the US and China when it comes to the trade war.

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Speaker 1: What is going to be the ultimate outcome of this?

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Speaker 1: Do you think if you had to place a bet

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Speaker 1: on where we go on the other side of that

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Speaker 1: ninety day period, what does it look like.

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Speaker 3: I think it's highly unlikely that the tariffs that have

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Speaker 3: been bradscheted back are going to come back in, because

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Speaker 3: if you actually put those back in, then essentially there

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Speaker 3: won't be any trade between the US and China because

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Speaker 3: the tariffs will be so high. So I do think

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Speaker 3: that there is going to be some decent compromise in

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Speaker 3: terms of the overall headline. But as with China, similar

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Speaker 3: to the rest of the world, I think within the

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Speaker 3: ninety day period there will be specifics coming out not

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Speaker 3: only on a per country basis, but also exemptions and

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Speaker 3: adjustments to the teriff rates on a per sector basis.

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Speaker 3: That actually makes a lot more sense, right. The US

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Speaker 3: cares much more about what kind of products need to

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Speaker 3: come back to the US versus can continue to be

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Speaker 3: made overseas for economic or other supply chain reasons. So

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Speaker 3: I think there will be a lot more complex adjustments

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Speaker 3: the headline numbers for not only China but the rest

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Speaker 3: of the world over the coming weeks. But in the end,

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Speaker 3: China is still going to end up with a higher

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Speaker 3: headline tariff versus the rest of the world because the

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Speaker 3: US does want to incentimize the supply chain to migrate

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Speaker 3: out of China and into other markets where it feels

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Speaker 3: more friendly and more diversified.

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Speaker 1: So more of a decoupling here, And how bad could

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Speaker 1: this get? Do you think?

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Speaker 3: Well, I think the decoupling already started during the first

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Speaker 3: Trump administration of the first trade war, right, so it's

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Speaker 3: just going to continue, but it won't be a full

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Speaker 3: decoupling the way that people were assuming back in April,

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Speaker 3: when the reciprocal tariffs had gone out of control into

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Speaker 3: levels that were basically going to mean that there was

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Speaker 3: barely any activity on the trade front between the US

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Speaker 3: and China. So generally speaking, I think where the market

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Speaker 3: is pricing in is probably a pretty decently mild outcome already.

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Speaker 3: You can see that in both the Chinese equities as

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Speaker 3: well as US equities performance.

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Speaker 1: So how is this affecting your strategy these days? I mean,

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Speaker 1: what are you putting money to work in right now?

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Speaker 1: In Asia?

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Speaker 3: Generally, we've actually been looking at other markets outside of China.

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Speaker 3: So for example, you know, we've added to some of

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Speaker 3: our positions in Taiwan, Korea, and Japan as well as

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Speaker 3: Southeast Asia. In Taiwan, we had that massive move in

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Speaker 3: the NTD, which was unexpected and probably you know, not

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Speaker 3: as conspiracy much of a conspiracy as what people had

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Speaker 3: had feared. So some of the you know, tech supply

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Speaker 3: chain companies got hit aggressively on the back of that.

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Speaker 3: So we've been adding to that. Korea we've been positive

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Speaker 3: on for some time. The Korean Wan's been pressured by

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Speaker 3: the very strong US dollar last year, and that has

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Speaker 3: eased to some extent, and we actually think that the

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Speaker 3: value up efforts as well as the political situation are

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Speaker 3: both going to see some improvement off of relatively low base.

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Speaker 3: Japan was pressured by the fact that the yen kept

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Speaker 3: appreciating and you know, earlier this year because the dollar

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Speaker 3: was plummeting. Now I think the risk reward on the

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Speaker 3: currency front is a little bit more balanced and the

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Speaker 3: valuations are still fairly reasonable. In Southeast Asia, you know,

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Speaker 3: slam with a ton of very aggressive tariffs and people

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Speaker 3: are quite concerned. But I do think that like Mexico,

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Speaker 3: like some other places in Latin and Southeast Asia, those

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Speaker 3: tariffs will probably be brought down to very reasonable levels

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Speaker 3: going forward. And so as a result of that, we

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Speaker 3: think that you know, those are looking better. And then

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Speaker 3: obviously the weaker US dollar helps a lot as well.

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Speaker 1: To what extent is your strategy kind of concentrated in

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Speaker 1: the area of technology. You mentioned South Korea, I'm thinking

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Speaker 1: semiconductors Taiwan. There are other electronic components that are manufactured there.

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Speaker 1: Is it mostly centered around high tech?

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Speaker 3: Oh no, not necessarily. We're very versified investors across different

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Speaker 3: ASA classes, across different regions, across different sectors. So no,

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Speaker 3: it's definitely not purely tech. And you know, tech has

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Speaker 3: a pretty broad definition as well, everything from internet to software,

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Speaker 3: to hardware to semi et cetera. So we will pick

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Speaker 3: and choose between those different areas depending on where they

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Speaker 3: are in the cycle. We do think that the expectations

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Speaker 3: now for some of the AI plays is no longer low.

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Speaker 3: In the last couple of weeks, they've really popped quite

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Speaker 3: a bit. We do have a lot of those positions.

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Speaker 3: We're holding on to them, but we're not adding to

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Speaker 3: them at this point. But for example, some of the

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Speaker 3: smartphone and other hardware supply chain, I think the expectations

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Speaker 3: are very low at the moment, and you know, that

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Speaker 3: might be a good time to potentially, you know, add

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Speaker 3: to those positions. China Internet has rallied pretty dramatically since

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Speaker 3: the beginning of the year, and so you know, maybe

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Speaker 3: have to be a little bit more selective versus before.

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Speaker 3: And you know US software is more idiosyncratic than just

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Speaker 3: the beta trade, so various parts of tech are not

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Speaker 3: necessarily the same.

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Speaker 1: How are you feeling about US risk assets right now?

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Speaker 1: Do you have an appetite for US stocks?

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Speaker 3: Look, we added to US stocks and April on the selloff,

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Speaker 3: but now I think the risk reward is no longer

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Speaker 3: as obvious. This is basically because the market has pretty

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Speaker 3: much rebounded as if the trade war didn't really happen

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Speaker 3: to this extent and that there will be a pretty

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Speaker 3: decent resolution. Also, at some point the market was pricing

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Speaker 3: a much higher risk of recession. Now I think that

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Speaker 3: has been priced out to a certain extent, so the

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Speaker 3: room for further positive surprise on US equities is not

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Speaker 3: as great as before. But we do still think that

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Speaker 3: if we have a mild outcome in terms of the

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Speaker 3: trade negotiations, and Trump ends up being fairly reasonable and

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Speaker 3: people stop thinking that the US system is going to

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Speaker 3: be potentially breaking down quickly, then we actually see more

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Speaker 3: upside for treasury and fixing come versus equities in the

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Speaker 3: US at the moment will leave it.

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Speaker 1: There, Helen, It's always a pleasure. Thank you so much.

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Speaker 1: Helen Ju, managing partner, also the CIO at NF Trinity

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Speaker 1: from Hong Kong. Joining us here on the Daybreak Asia podcast.

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Speaker 1: Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.

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Speaker 1: So the FED seems likely to resist the notion of

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Speaker 1: rate cuts, at least in the near term, given some

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Speaker 1: of the mounting headwinds we've been talking about for the

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Speaker 1: American economy. The founder of Bridgewater Associates, Ray Daalio, says

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Speaker 1: the FED should not be cutting rates right now. Here

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Speaker 1: is Dalio in conversation with Bloomberg Shanali Bosik speaking at

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Speaker 1: the BNP Parabah Annual Global Electric Vehicle and Mobility Conference.

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Speaker 4: I think the markets, if they were to see a

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Speaker 4: too aggressive cut and monetary policy too inappropriate cut, that

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Speaker 4: it would actually be bad for the bottom market.

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Speaker 1: That is Bridgewater founder Dalio speaking to Bloomberg Shanali Bossik

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Speaker 1: in Hong Kong. For a closer look at the macro

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Speaker 1: let's bring in Brian Vendig. He is the chief investment

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Speaker 1: officer at MJP Wealth Advisors. Brian is on the line

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Speaker 1: from Westport Connecticut. Brian, thank you so much for making

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Speaker 1: time to chat. How do you understand the economic risk

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Speaker 1: right now? Given the story on tariffs. I know this

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Speaker 1: is a very dynamic situation working pretty much in the

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Speaker 1: middle of a ninety day cooling off period, let's call

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Speaker 1: it a pause, But I'm curious to get your take

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Speaker 1: on where you think things stand right now.

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Speaker 5: Yeah, thanks, Doug. I mean, I think in the short

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Speaker 5: term there has been damage to the economy, as we've

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Speaker 5: seen with business leaders on surveys talking about slowing hiring,

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Speaker 5: slowing investment in their businesses, and obviously the consumer pulling

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Speaker 5: back a little bit, even though retail sales numbers in

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Speaker 5: the past have come in healthy. I think the concern

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Speaker 5: is moving forward, moving forward price sensitivity there So I

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Speaker 5: think damage has been done in the short term to

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Speaker 5: the economy. However, depending on the jump ball, on the

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Speaker 5: speed of further trade negotiations and are we going to

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Speaker 5: get to some meaningful trade negotiations of some of our

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Speaker 5: larger partners over the next sixty days on the first pause,

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Speaker 5: and of course China later on in the summer, I

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Speaker 5: think that's really where that economic risk is going to

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Speaker 5: present itself, because if we have some resolution on trade

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Speaker 5: and some improving confidence coming back to the business community

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Speaker 5: and consumers, then I still think over the second half

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Speaker 5: of the year the economy still has a chance or

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Speaker 5: some growth. However, of course, if things go to the

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Speaker 5: contrary and these negotiations are extended, then I think those

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Speaker 5: A session ods can continue to stay elevated up.

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Speaker 1: I'm curious to get your take on price pressure, as

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Speaker 1: we heard earlier in the week from Jamie Diamond, the

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Speaker 1: head of JP Morgan, and he was saying, the chances

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Speaker 1: of elevated inflation, even stagflation, are greater than people think.

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Speaker 1: Do you think that pretty much a risk?

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Speaker 5: I think stagflation is a risk in the short term

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Speaker 5: in the sense that we're going to start to see

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Speaker 5: price increases start to flow through. However, going back to

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Speaker 5: my comment about trade, and also just looking at earnings

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Speaker 5: forecasts right now, I mean earnings forecasts have been taken down,

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Speaker 5: but for Q two we're still looking at year over

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Speaker 5: year profits of about five and a half percent something

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Speaker 5: very similar. Still on the outlooks for Q three and

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Speaker 5: some improvement in Q four, and I think once we

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Speaker 5: get to July earnings we'll get some confirmation there. I

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Speaker 5: think if there is stagflation, assuming trade negotiation, and those

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Speaker 5: earnings outlooks cold when we get to July, then I

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Speaker 5: think Jamie Diamond's comments might be short lived and there

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Speaker 5: will be some disruption in the short term, but not

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Speaker 5: necessarily over the longer term. I think also at the

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Speaker 5: same point in time, when we think about the disruptions

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Speaker 5: that have happened with supply chains, in the short term,

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Speaker 5: inventory levels need to be restocked in June. We've heard

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Speaker 5: from Walmart, for example, saying, you know, we'll do our

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Speaker 5: best to try to control margin, but we're going to

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Speaker 5: have to pass on some of these prices. I think

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Speaker 5: that's a concern that investors have over the next two

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Speaker 5: to three months.

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Speaker 1: Let's talk a little bit about the bond market. We

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Speaker 1: had a backup in yields today, ever so slightly. The

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Speaker 1: budget negotiations today showed very little in the way of resolution,

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Speaker 1: and we were told that the President expressed a little

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Speaker 1: bit of frustration today with demands to significantly boost a

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Speaker 1: cap on state and local tax deductions. If you look

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Speaker 1: at all the variables right now that are influencing the

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Speaker 1: bond market, where is the fiscal story right now? As

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Speaker 1: something that's carrying weight.

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Speaker 5: Yeah, Doug. I mean, I think with the uncertainty around

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Speaker 5: the level of government spending and how much the new

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Speaker 5: bill that's getting worked onne in Congress is going to

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Speaker 5: add two budget deficits going forward, I think the bond

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Speaker 5: market is telling us, you know, that uncertainty is leading

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Speaker 5: to an app it's a confidence in holding treasuries right now,

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Speaker 5: and you're seeing a little bit of selling pressure there

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Speaker 5: with yields going up, very similar to the reaction that

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Speaker 5: we saw on the treasury market, you know, back in

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Speaker 5: the beginning of April with the announcement of tariffs on

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Speaker 5: Liberation Deck. I also think there's a little bit of

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Speaker 5: flow through as well with elevated yields because of those

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Speaker 5: concerns about prices increasing coming from tariffs as well in

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Speaker 5: the short term. So I really think it's a double

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Speaker 5: edged sword. But when once we get some resolution later

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Speaker 5: on this summer, I think with the Reconciliation Bill, and

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Speaker 5: we get a better clear view on taxes and spending,

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Speaker 5: I think there's a ceiling on yields in the treasury

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Speaker 5: market where we'd really be surprised we see yields, you know,

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Speaker 5: shoot past you know, four point seven or four point

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Speaker 5: eight on the ten years, So definitely keeping a close

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Speaker 5: eye on it. But I think it's it's not surprising

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Speaker 5: in seeing that that slite increase based on today's news.

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Speaker 1: Before I get your view on how to put new

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Speaker 1: money to work in these markets, I want to address

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Speaker 1: geopolitical risk because we were getting indications from CNN that

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Speaker 1: US intelligence has suggested that Israel is planning to make

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Speaker 1: preparations to possibly strike Iranian nuclear facilities, and crude oil

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Speaker 1: right now is up by more than two percent in

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Speaker 1: the electronic session. How are you waiting geopolitics, whether it's

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Speaker 1: in the Mid East or whether we're talking about trying

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Speaker 1: to find an end to war in Ukraine. Well, when

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Speaker 1: you look.

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Speaker 5: Back historically when geopolitical events come up, you know they're

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Speaker 5: primarily short lived, and yes they create violatility and disruption

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Speaker 5: in the market. But if you still have a longer

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Speaker 5: term view, focusing on earnings, fundamentals and some of the

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Speaker 5: things we talked about, you know earlier, I think having

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Speaker 5: a broadly diversified portfolio in this in this environment is

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Speaker 5: still going to is going to help you weather through

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Speaker 5: the storm. So you know, I don't see gold, you know,

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Speaker 5: I see gold appreciating. When you go through these types

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Speaker 5: of geopolitical uncertainties, yields usually come in which favor more

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Speaker 5: conservative investments like bonds. And I think when you think

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Speaker 5: about equities, you know, just making making sure in this

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Speaker 5: environment was so much going on that you're not overpaying

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Speaker 5: for growth, uh, and making sure that your your balance

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Speaker 5: between value stocks, uh, mid cap stocks that really haven't

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Speaker 5: participated as much in the past in market rallies are

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Speaker 5: good ways to kind of hedge a little bit in

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Speaker 5: the short term against those geopolitical events.

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Speaker 1: How are you viewing markets offshore right now? Are there

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Speaker 1: opportunities that you're taking advantage of?

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Speaker 5: Oh, definitely, you know, we we added to international equities, uh,

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Speaker 5: you know, a couple of months ago, especially more on

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Speaker 5: the news of UH countries wanting to reinvest in themselves,

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Speaker 5: relooking at fiscal policies that are helping US support domestic

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Speaker 5: economic growth as the US is evaluating uh, you know,

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Speaker 5: trade and maybe taking a step back and decoupling from

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Speaker 5: some aspects of of of a global economy. And I

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Speaker 5: think valuations there on international equities are definitely a lot

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Speaker 5: more fair per se than you know than S and

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Speaker 5: P that's back up to you know, a four pe

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Speaker 5: with a twenty handle, while international equities are in the

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Speaker 5: low teams. So I think being selective in developed markets

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Speaker 5: right now makes a lot of sense. We like Europe,

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Speaker 5: we like Japan and specific parts of Latin South America.

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Speaker 5: But I think at the same point in time, there's

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Speaker 5: been a huge run international equities, Doug, so I wouldn't

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Speaker 5: be surprised if there's a little consolidation to find a

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Speaker 5: better edgy point moving forward.

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Speaker 1: All right, Brian, we'll leave it there. Thank you so

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Speaker 1: much for joining us. Brian Vendig there. He is the

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Speaker 1: chief investment Officer at MJP Wealth Advisors, joining from Westport, Connecticut.

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Speaker 1: Here on the Daybreak Asia Podcast. Thanks for listening to

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Speaker 1: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 1: we look at the story shaping markets, finance, and geopolitics

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Speaker 1: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 1: the Bloomberg Podcast Tube channel, or anywhere else you listen.

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Speaker 1: Join us again tomorrow for insight on the market moves

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Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Prisoner

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Speaker 1: and this is Bloomberg