Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
Speaker 1: Daybreak Asia Podcast. I'm Doug Krisner. So Wall Street took
Speaker 1: a bit of a breather in the last session. Equities
Speaker 1: drifted lower after a six day advance, and in the
Speaker 1: bond market, longer term treasure yields were a bit higher
Speaker 1: as US budget negotiations showed little sign of resolution. In
Speaker 1: a moment, we'll be speaking with Brian Vendig. He is
Speaker 1: the chief investment officer over at MJP Wealth Advisors. But
Speaker 1: we start with the US China trade war and the
Speaker 1: story on tariffs. Now in the US session, we heard
Speaker 1: from the head of the Saint Louis fed Albertumusalom. He
Speaker 1: said tariffs will likely weigh on growth and weaken the
Speaker 1: labor market, even after the recent ninety day de escalation
Speaker 1: between Washington and Beijing. Here is Musalam speaking earlier at
Speaker 1: an event in Minneapolis.
Speaker 2: Are higher have been more broadly applied and have prompted
Speaker 2: stronger retaliation than I and many others had expected. Ongoing
Speaker 2: negotiations with trading partners might dial back tariff significantly and durably,
Speaker 2: as we have seen with the recent announcement of a
Speaker 2: ninety day reduction in reciprocal tariffs with China.
Speaker 1: That is the head of the Saint Louis fed Albertu
Speaker 1: Musalom with a perspective on how tariffs are impacting the US.
Speaker 1: So now let's take a look at how tariffs are
Speaker 1: impacting China. I'm joined by Helen Ju, managing partner and
Speaker 1: Chief investment Officer at NF Trinity. Helen is joining us
Speaker 1: from our studios in Hong Kong. Good of you to
Speaker 1: make time to chat with us before we get to
Speaker 1: the Moody's downgrade on the US credit rating. Can we
Speaker 1: start with the April activity data for China, the numbers
Speaker 1: that we got on Monday. It seems somewhat surprising that
Speaker 1: industrial output performed as well as it did. What do
Speaker 1: you make of the activity data that we saw on
Speaker 1: Monday for the mainland economy?
Speaker 3: Look, I think there's going to be a lot of
Speaker 3: noise in the activity data year today. So there's a
Speaker 3: couple of factors to consider. One is that there was
Speaker 3: clearly a lot of government support and stimulus in various
Speaker 3: parts of the economy, harder for it to reach consumers
Speaker 3: or to massively change consumer behavior and then your term.
Speaker 3: But certainly in terms of manufacturing, infrastructure, investment, et cetera,
Speaker 3: the government policies can have meaningful impacts short term. The
Speaker 3: second thing I would mention is that because of the
Speaker 3: trade war, there has been a lot of time shifting
Speaker 3: of activity as well. So, for example, the exports were
Speaker 3: very strong in the first quarter, probably because people wanted
Speaker 3: to put in their orders and get the stuff shipped
Speaker 3: prior to the trade war or prior to Liberation Day
Speaker 3: coming in, and then later on I think it was
Speaker 3: not necessarily clear whether you know, things were going to
Speaker 3: be potentially extended as we did see in May. So
Speaker 3: you know, I think there's a lot of like jerkiness
Speaker 3: in terms of the activity because of these types of
Speaker 3: one off events.
Speaker 1: So the reading on retail sales was disappointing. Is it
Speaker 1: still very much the case that anything related to consumer
Speaker 1: sentiment begins and ends with the home market, the property market.
Speaker 1: I saw the China's home prices down in the month
Speaker 1: of April at a faster clip. Is that really the
Speaker 1: eye of the storm still?
Speaker 3: I would say that's one factor, but probably not the
Speaker 3: only factor, but certainly it affects, you know, the wealth
Speaker 3: effect in terms of high end discretionary spending, but retail
Speaker 3: sales itself is not just all high end discretionary spending.
Speaker 3: A lot of it could be specific sectors. You know,
Speaker 3: for example, autos depending on what you know new models
Speaker 3: were coming out that particular month, and you know in
Speaker 3: the past, whether there were specific ev subsidy policies that
Speaker 3: are less relevant today. There could also be impacts in
Speaker 3: terms of other specifics, like you know, were their subsidies
Speaker 3: relating to three C products coming from the government. You know,
Speaker 3: those types of things I think do tend to have
Speaker 3: an impact on the short term. But generally speaking, with
Speaker 3: the backdrop of the trade war lurking in the month
Speaker 3: of April, it's not a surprise that people would feel
Speaker 3: less confident about spending, irrespective of what's happening in terms
Speaker 3: of the property market.
Speaker 1: So we're still in this period of a truce between
Speaker 1: the US and China when it comes to the trade war.
Speaker 1: What is going to be the ultimate outcome of this?
Speaker 1: Do you think if you had to place a bet
Speaker 1: on where we go on the other side of that
Speaker 1: ninety day period, what does it look like.
Speaker 3: I think it's highly unlikely that the tariffs that have
Speaker 3: been bradscheted back are going to come back in, because
Speaker 3: if you actually put those back in, then essentially there
Speaker 3: won't be any trade between the US and China because
Speaker 3: the tariffs will be so high. So I do think
Speaker 3: that there is going to be some decent compromise in
Speaker 3: terms of the overall headline. But as with China, similar
Speaker 3: to the rest of the world, I think within the
Speaker 3: ninety day period there will be specifics coming out not
Speaker 3: only on a per country basis, but also exemptions and
Speaker 3: adjustments to the teriff rates on a per sector basis.
Speaker 3: That actually makes a lot more sense, right. The US
Speaker 3: cares much more about what kind of products need to
Speaker 3: come back to the US versus can continue to be
Speaker 3: made overseas for economic or other supply chain reasons. So
Speaker 3: I think there will be a lot more complex adjustments
Speaker 3: the headline numbers for not only China but the rest
Speaker 3: of the world over the coming weeks. But in the end,
Speaker 3: China is still going to end up with a higher
Speaker 3: headline tariff versus the rest of the world because the
Speaker 3: US does want to incentimize the supply chain to migrate
Speaker 3: out of China and into other markets where it feels
Speaker 3: more friendly and more diversified.
Speaker 1: So more of a decoupling here, And how bad could
Speaker 1: this get? Do you think?
Speaker 3: Well, I think the decoupling already started during the first
Speaker 3: Trump administration of the first trade war, right, so it's
Speaker 3: just going to continue, but it won't be a full
Speaker 3: decoupling the way that people were assuming back in April,
Speaker 3: when the reciprocal tariffs had gone out of control into
Speaker 3: levels that were basically going to mean that there was
Speaker 3: barely any activity on the trade front between the US
Speaker 3: and China. So generally speaking, I think where the market
Speaker 3: is pricing in is probably a pretty decently mild outcome already.
Speaker 3: You can see that in both the Chinese equities as
Speaker 3: well as US equities performance.
Speaker 1: So how is this affecting your strategy these days? I mean,
Speaker 1: what are you putting money to work in right now?
Speaker 1: In Asia?
Speaker 3: Generally, we've actually been looking at other markets outside of China.
Speaker 3: So for example, you know, we've added to some of
Speaker 3: our positions in Taiwan, Korea, and Japan as well as
Speaker 3: Southeast Asia. In Taiwan, we had that massive move in
Speaker 3: the NTD, which was unexpected and probably you know, not
Speaker 3: as conspiracy much of a conspiracy as what people had
Speaker 3: had feared. So some of the you know, tech supply
Speaker 3: chain companies got hit aggressively on the back of that.
Speaker 3: So we've been adding to that. Korea we've been positive
Speaker 3: on for some time. The Korean Wan's been pressured by
Speaker 3: the very strong US dollar last year, and that has
Speaker 3: eased to some extent, and we actually think that the
Speaker 3: value up efforts as well as the political situation are
Speaker 3: both going to see some improvement off of relatively low base.
Speaker 3: Japan was pressured by the fact that the yen kept
Speaker 3: appreciating and you know, earlier this year because the dollar
Speaker 3: was plummeting. Now I think the risk reward on the
Speaker 3: currency front is a little bit more balanced and the
Speaker 3: valuations are still fairly reasonable. In Southeast Asia, you know,
Speaker 3: slam with a ton of very aggressive tariffs and people
Speaker 3: are quite concerned. But I do think that like Mexico,
Speaker 3: like some other places in Latin and Southeast Asia, those
Speaker 3: tariffs will probably be brought down to very reasonable levels
Speaker 3: going forward. And so as a result of that, we
Speaker 3: think that you know, those are looking better. And then
Speaker 3: obviously the weaker US dollar helps a lot as well.
Speaker 1: To what extent is your strategy kind of concentrated in
Speaker 1: the area of technology. You mentioned South Korea, I'm thinking
Speaker 1: semiconductors Taiwan. There are other electronic components that are manufactured there.
Speaker 1: Is it mostly centered around high tech?
Speaker 3: Oh no, not necessarily. We're very versified investors across different
Speaker 3: ASA classes, across different regions, across different sectors. So no,
Speaker 3: it's definitely not purely tech. And you know, tech has
Speaker 3: a pretty broad definition as well, everything from internet to software,
Speaker 3: to hardware to semi et cetera. So we will pick
Speaker 3: and choose between those different areas depending on where they
Speaker 3: are in the cycle. We do think that the expectations
Speaker 3: now for some of the AI plays is no longer low.
Speaker 3: In the last couple of weeks, they've really popped quite
Speaker 3: a bit. We do have a lot of those positions.
Speaker 3: We're holding on to them, but we're not adding to
Speaker 3: them at this point. But for example, some of the
Speaker 3: smartphone and other hardware supply chain, I think the expectations
Speaker 3: are very low at the moment, and you know, that
Speaker 3: might be a good time to potentially, you know, add
Speaker 3: to those positions. China Internet has rallied pretty dramatically since
Speaker 3: the beginning of the year, and so you know, maybe
Speaker 3: have to be a little bit more selective versus before.
Speaker 3: And you know US software is more idiosyncratic than just
Speaker 3: the beta trade, so various parts of tech are not
Speaker 3: necessarily the same.
Speaker 1: How are you feeling about US risk assets right now?
Speaker 1: Do you have an appetite for US stocks?
Speaker 3: Look, we added to US stocks and April on the selloff,
Speaker 3: but now I think the risk reward is no longer
Speaker 3: as obvious. This is basically because the market has pretty
Speaker 3: much rebounded as if the trade war didn't really happen
Speaker 3: to this extent and that there will be a pretty
Speaker 3: decent resolution. Also, at some point the market was pricing
Speaker 3: a much higher risk of recession. Now I think that
Speaker 3: has been priced out to a certain extent, so the
Speaker 3: room for further positive surprise on US equities is not
Speaker 3: as great as before. But we do still think that
Speaker 3: if we have a mild outcome in terms of the
Speaker 3: trade negotiations, and Trump ends up being fairly reasonable and
Speaker 3: people stop thinking that the US system is going to
Speaker 3: be potentially breaking down quickly, then we actually see more
Speaker 3: upside for treasury and fixing come versus equities in the
Speaker 3: US at the moment will leave it.
Speaker 1: There, Helen, It's always a pleasure. Thank you so much.
Speaker 1: Helen Ju, managing partner, also the CIO at NF Trinity
Speaker 1: from Hong Kong. Joining us here on the Daybreak Asia podcast.
Speaker 1: Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.
Speaker 1: So the FED seems likely to resist the notion of
Speaker 1: rate cuts, at least in the near term, given some
Speaker 1: of the mounting headwinds we've been talking about for the
Speaker 1: American economy. The founder of Bridgewater Associates, Ray Daalio, says
Speaker 1: the FED should not be cutting rates right now. Here
Speaker 1: is Dalio in conversation with Bloomberg Shanali Bosik speaking at
Speaker 1: the BNP Parabah Annual Global Electric Vehicle and Mobility Conference.
Speaker 4: I think the markets, if they were to see a
Speaker 4: too aggressive cut and monetary policy too inappropriate cut, that
Speaker 4: it would actually be bad for the bottom market.
Speaker 1: That is Bridgewater founder Dalio speaking to Bloomberg Shanali Bossik
Speaker 1: in Hong Kong. For a closer look at the macro
Speaker 1: let's bring in Brian Vendig. He is the chief investment
Speaker 1: officer at MJP Wealth Advisors. Brian is on the line
Speaker 1: from Westport Connecticut. Brian, thank you so much for making
Speaker 1: time to chat. How do you understand the economic risk
Speaker 1: right now? Given the story on tariffs. I know this
Speaker 1: is a very dynamic situation working pretty much in the
Speaker 1: middle of a ninety day cooling off period, let's call
Speaker 1: it a pause, But I'm curious to get your take
Speaker 1: on where you think things stand right now.
Speaker 5: Yeah, thanks, Doug. I mean, I think in the short
Speaker 5: term there has been damage to the economy, as we've
Speaker 5: seen with business leaders on surveys talking about slowing hiring,
Speaker 5: slowing investment in their businesses, and obviously the consumer pulling
Speaker 5: back a little bit, even though retail sales numbers in
Speaker 5: the past have come in healthy. I think the concern
Speaker 5: is moving forward, moving forward price sensitivity there So I
Speaker 5: think damage has been done in the short term to
Speaker 5: the economy. However, depending on the jump ball, on the
Speaker 5: speed of further trade negotiations and are we going to
Speaker 5: get to some meaningful trade negotiations of some of our
Speaker 5: larger partners over the next sixty days on the first pause,
Speaker 5: and of course China later on in the summer, I
Speaker 5: think that's really where that economic risk is going to
Speaker 5: present itself, because if we have some resolution on trade
Speaker 5: and some improving confidence coming back to the business community
Speaker 5: and consumers, then I still think over the second half
Speaker 5: of the year the economy still has a chance or
Speaker 5: some growth. However, of course, if things go to the
Speaker 5: contrary and these negotiations are extended, then I think those
Speaker 5: A session ods can continue to stay elevated up.
Speaker 1: I'm curious to get your take on price pressure, as
Speaker 1: we heard earlier in the week from Jamie Diamond, the
Speaker 1: head of JP Morgan, and he was saying, the chances
Speaker 1: of elevated inflation, even stagflation, are greater than people think.
Speaker 1: Do you think that pretty much a risk?
Speaker 5: I think stagflation is a risk in the short term
Speaker 5: in the sense that we're going to start to see
Speaker 5: price increases start to flow through. However, going back to
Speaker 5: my comment about trade, and also just looking at earnings
Speaker 5: forecasts right now, I mean earnings forecasts have been taken down,
Speaker 5: but for Q two we're still looking at year over
Speaker 5: year profits of about five and a half percent something
Speaker 5: very similar. Still on the outlooks for Q three and
Speaker 5: some improvement in Q four, and I think once we
Speaker 5: get to July earnings we'll get some confirmation there. I
Speaker 5: think if there is stagflation, assuming trade negotiation, and those
Speaker 5: earnings outlooks cold when we get to July, then I
Speaker 5: think Jamie Diamond's comments might be short lived and there
Speaker 5: will be some disruption in the short term, but not
Speaker 5: necessarily over the longer term. I think also at the
Speaker 5: same point in time, when we think about the disruptions
Speaker 5: that have happened with supply chains, in the short term,
Speaker 5: inventory levels need to be restocked in June. We've heard
Speaker 5: from Walmart, for example, saying, you know, we'll do our
Speaker 5: best to try to control margin, but we're going to
Speaker 5: have to pass on some of these prices. I think
Speaker 5: that's a concern that investors have over the next two
Speaker 5: to three months.
Speaker 1: Let's talk a little bit about the bond market. We
Speaker 1: had a backup in yields today, ever so slightly. The
Speaker 1: budget negotiations today showed very little in the way of resolution,
Speaker 1: and we were told that the President expressed a little
Speaker 1: bit of frustration today with demands to significantly boost a
Speaker 1: cap on state and local tax deductions. If you look
Speaker 1: at all the variables right now that are influencing the
Speaker 1: bond market, where is the fiscal story right now? As
Speaker 1: something that's carrying weight.
Speaker 5: Yeah, Doug. I mean, I think with the uncertainty around
Speaker 5: the level of government spending and how much the new
Speaker 5: bill that's getting worked onne in Congress is going to
Speaker 5: add two budget deficits going forward, I think the bond
Speaker 5: market is telling us, you know, that uncertainty is leading
Speaker 5: to an app it's a confidence in holding treasuries right now,
Speaker 5: and you're seeing a little bit of selling pressure there
Speaker 5: with yields going up, very similar to the reaction that
Speaker 5: we saw on the treasury market, you know, back in
Speaker 5: the beginning of April with the announcement of tariffs on
Speaker 5: Liberation Deck. I also think there's a little bit of
Speaker 5: flow through as well with elevated yields because of those
Speaker 5: concerns about prices increasing coming from tariffs as well in
Speaker 5: the short term. So I really think it's a double
Speaker 5: edged sword. But when once we get some resolution later
Speaker 5: on this summer, I think with the Reconciliation Bill, and
Speaker 5: we get a better clear view on taxes and spending,
Speaker 5: I think there's a ceiling on yields in the treasury
Speaker 5: market where we'd really be surprised we see yields, you know,
Speaker 5: shoot past you know, four point seven or four point
Speaker 5: eight on the ten years, So definitely keeping a close
Speaker 5: eye on it. But I think it's it's not surprising
Speaker 5: in seeing that that slite increase based on today's news.
Speaker 1: Before I get your view on how to put new
Speaker 1: money to work in these markets, I want to address
Speaker 1: geopolitical risk because we were getting indications from CNN that
Speaker 1: US intelligence has suggested that Israel is planning to make
Speaker 1: preparations to possibly strike Iranian nuclear facilities, and crude oil
Speaker 1: right now is up by more than two percent in
Speaker 1: the electronic session. How are you waiting geopolitics, whether it's
Speaker 1: in the Mid East or whether we're talking about trying
Speaker 1: to find an end to war in Ukraine. Well, when
Speaker 1: you look.
Speaker 5: Back historically when geopolitical events come up, you know they're
Speaker 5: primarily short lived, and yes they create violatility and disruption
Speaker 5: in the market. But if you still have a longer
Speaker 5: term view, focusing on earnings, fundamentals and some of the
Speaker 5: things we talked about, you know earlier, I think having
Speaker 5: a broadly diversified portfolio in this in this environment is
Speaker 5: still going to is going to help you weather through
Speaker 5: the storm. So you know, I don't see gold, you know,
Speaker 5: I see gold appreciating. When you go through these types
Speaker 5: of geopolitical uncertainties, yields usually come in which favor more
Speaker 5: conservative investments like bonds. And I think when you think
Speaker 5: about equities, you know, just making making sure in this
Speaker 5: environment was so much going on that you're not overpaying
Speaker 5: for growth, uh, and making sure that your your balance
Speaker 5: between value stocks, uh, mid cap stocks that really haven't
Speaker 5: participated as much in the past in market rallies are
Speaker 5: good ways to kind of hedge a little bit in
Speaker 5: the short term against those geopolitical events.
Speaker 1: How are you viewing markets offshore right now? Are there
Speaker 1: opportunities that you're taking advantage of?
Speaker 5: Oh, definitely, you know, we we added to international equities, uh,
Speaker 5: you know, a couple of months ago, especially more on
Speaker 5: the news of UH countries wanting to reinvest in themselves,
Speaker 5: relooking at fiscal policies that are helping US support domestic
Speaker 5: economic growth as the US is evaluating uh, you know,
Speaker 5: trade and maybe taking a step back and decoupling from
Speaker 5: some aspects of of of a global economy. And I
Speaker 5: think valuations there on international equities are definitely a lot
Speaker 5: more fair per se than you know than S and
Speaker 5: P that's back up to you know, a four pe
Speaker 5: with a twenty handle, while international equities are in the
Speaker 5: low teams. So I think being selective in developed markets
Speaker 5: right now makes a lot of sense. We like Europe,
Speaker 5: we like Japan and specific parts of Latin South America.
Speaker 5: But I think at the same point in time, there's
Speaker 5: been a huge run international equities, Doug, so I wouldn't
Speaker 5: be surprised if there's a little consolidation to find a
Speaker 5: better edgy point moving forward.
Speaker 1: All right, Brian, we'll leave it there. Thank you so
Speaker 1: much for joining us. Brian Vendig there. He is the
Speaker 1: chief investment Officer at MJP Wealth Advisors, joining from Westport, Connecticut.
Speaker 1: Here on the Daybreak Asia Podcast. Thanks for listening to
Speaker 1: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,
Speaker 1: we look at the story shaping markets, finance, and geopolitics
Speaker 1: in the Asia Pacific. You can find us on Apple, Spotify,
Speaker 1: the Bloomberg Podcast Tube channel, or anywhere else you listen.
Speaker 1: Join us again tomorrow for insight on the market moves
Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Prisoner
Speaker 1: and this is Bloomberg