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

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. So

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Speaker 2: President Trump's tariffs will remain in place, at least for now.

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Speaker 2: That's because a federal appeals court has stayed a ruling

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Speaker 2: one that was issued late yesterday by the Court of

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Speaker 2: International Trade and it found the tariffs to be illegal,

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Speaker 2: and the court said the President overstepped the use of

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Speaker 2: the International Economic Emergency Powers Act to justify them. So

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Speaker 2: in allowing these tariffs to remain, the Federal Appeals Court

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Speaker 2: said it needs time to consider challenges. For a closer

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Speaker 2: look at what's happening with the tariff story, I'm joined

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Speaker 2: now by Bloomberg Markets Live strategist Mary Nicola, who joins

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Speaker 2: us from Singapore. Good of you to make time to

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Speaker 2: chat with us, Mary, and there is so much to

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Speaker 2: talk about when it comes to tariffs. Can you begin

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Speaker 2: by giving me a sense of what this appeals court

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Speaker 2: decision has done and what it is set in motion.

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Speaker 1: Yeah, I think initially when actually when the ruling came out,

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Speaker 1: there was a great deal of specticism, and we wrote

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Speaker 1: that quite a bit on the blog because of the

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Speaker 1: fact that we knew there would be a lot of

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Speaker 1: tip for tat and back and forth between the Trump

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Speaker 1: administration and the courts because of how important they have

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Speaker 1: seen tariffs not only for trade policy, but also for

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Speaker 1: the impact and as tariff as a revenue generator as well.

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Speaker 1: And we heard similar comments from Scott Bessen, the Treasury

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Speaker 1: Secretary this for my morning essentially, and what I think

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Speaker 1: overall is it just adds to the policy uncertainty. So

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Speaker 1: a lot of what was fueling the Cell America trade

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Speaker 1: was because of policy uncertainty, and I think that just

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Speaker 1: doesn't go away, but just adds fuel to the fire

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Speaker 1: because if one thing we know for sure is that

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Speaker 1: it's likely to drag on, and even if it goes

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Speaker 1: to the Supreme Court, there's still the possible ability, as

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Speaker 1: we've seen from previous precedent by the Trump administration, that

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Speaker 1: it gets ignored.

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Speaker 2: It's very interesting because the data is now beginning to

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Speaker 2: reflect the price that the American economy is paying for

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Speaker 2: these tariffs. If you take a look at the GDP

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Speaker 2: revision today that we add for Q one negative two

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Speaker 2: tens of one percent overall, and you refer to the

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Speaker 2: fact that Scott Bess and the Treasury secretary was making

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Speaker 2: comments very recently. He told Fox News that a call

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Speaker 2: may be required between President Trump and Chinese President chi

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Speaker 2: Jinping in order to reach a trade deal, because, in

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Speaker 2: his characterization, these trade talks with China are a bit stalled.

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Speaker 2: Do you think Beijing is going to take advantage of

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Speaker 2: this situation at all?

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Speaker 1: We have to keep in mind how China is, and

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Speaker 1: it always plays the long game, so it's always going

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Speaker 1: to act, obviously, of course, in its own interests. And

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Speaker 1: I think what we're going to see out of China

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Speaker 1: is just especially when we saw the exceptionally punitive tariffs

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Speaker 1: that the US had put out on China, and then

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Speaker 1: a quick renake as well, so that combination and that

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Speaker 1: what they saw has also set a precedent and indicated

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Speaker 1: to other countries that they should do something very similar.

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Speaker 1: So I think in general, of course, for China, it's

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Speaker 1: always about what is best for China, not taking into

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Speaker 1: consideration really what's better for the United States, And of

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Speaker 1: course they're going to act in their own interests. So overall,

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Speaker 1: I think what we're going to still see from China

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Speaker 1: is just a long drawn out process similar to what

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Speaker 1: we saw from Trump one point zero and how we

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Speaker 1: saw an actual deal was in sign till twenty twenty,

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Speaker 1: when we started the rumblings of the trade war at

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Speaker 1: the very beginning of his administration in early twenty seventeen.

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Speaker 2: Let's not forget the fact that there are many trade

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Speaker 2: negotiations happening right now. We've got Japan, South Korea, Vietnam

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Speaker 2: among the countries in Asia that are at the negotiating

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Speaker 2: table right now trying to hammer out agreements. So I'd

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Speaker 2: like to change gears if we can right now and

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Speaker 2: talk a little about the inflation story in Japan. I'm

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Speaker 2: looking at a much stronger yen right now at around

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Speaker 2: one forty three eighty. We're up against the greenback by

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Speaker 2: around three tens of one percent. It seems like a

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Speaker 2: hot print on Tokyo CPI is driving a lot of

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Speaker 2: this price action. Is that the way you're seeing it?

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Speaker 1: Yeah, absolutely, I think there is. It was stronger. It

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Speaker 1: was an upside surprise on core inflation, and there was

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Speaker 1: an upside surprise on the what they describe as core core,

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Speaker 1: which is ex food and energy. So I think there is,

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Speaker 1: and that's what is keeping the market jittery, especially the

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Speaker 1: bond markets, where the BOJ is sitting on the sidelines

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Speaker 1: and has paused rate hikes because of external challenges and

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Speaker 1: the external headwinds. But inflation is rising and almost looking

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Speaker 1: that it's becoming unanchored. And then of course you have

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Speaker 1: the combination of data, so that stagflationary environment is bad

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Speaker 1: for bonds, but it's also going to be put a

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Speaker 1: lot of pressure on the BOJ to react.

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Speaker 2: Is that the only thing that has been putting upward

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Speaker 2: pressure on yields in Japan right now? Or is there

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Speaker 2: something else afoot?

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Speaker 1: I think there's a concern just generally about debt sustainability.

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Speaker 1: So you have rising yields, and that's also stemming from

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Speaker 1: what we've seen in the US. There's just a concern

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Speaker 1: of debt sustainability more globally so. But then also there's

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Speaker 1: less and as a result, there's less demand for longer

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Speaker 1: dated yields. So we had a forty year auction that

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Speaker 1: was really that wasn't very good. Earlier this week we've

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Speaker 1: got a ten year and a thirty year as well.

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Speaker 1: There's pressure on the Ministry of Finance to reduce issuance

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Speaker 1: given the lack of demand, because at the end of

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Speaker 1: the day, if the rise in yields, and then you're

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Speaker 1: seeing the global rise in yields is just going to

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Speaker 1: make this ballooning debt that Japan is sitting on just

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Speaker 1: more and more unsustainable.

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Speaker 2: Before I let you go, I want to get your

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Speaker 2: take on what happened today at the White House, President

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Speaker 2: Trump meeting with Fed share J. Powell, and basically Trump

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Speaker 2: pushed Powell to lower infrast rates. This is not really

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Speaker 2: a surprise. This is something the President has been wanting

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Speaker 2: Powell to do for some time right now, and apparently

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Speaker 2: Trump said to Powell that not cutting rates is putting

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Speaker 2: the US at a disadvantage to China and other countries.

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Speaker 2: And I'm reading between the lines here and really imagining

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Speaker 2: that what he's talking about is a weaker currency, that

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Speaker 2: that's really what he wants. Is that a fair statement?

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Speaker 3: Yeah?

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Speaker 1: I think so. And overall we've been getting a weaker

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Speaker 1: dollar largely because of this policy uncertainty, right whether it's

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Speaker 1: coming from the pressure on the FED to cut rates,

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Speaker 1: whether it's coming from tariffs, all of that is fueling

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Speaker 1: a weaker dollar. And then of course you're hearing more

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Speaker 1: and more murmurings about the currency being on the table,

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Speaker 1: especially when it comes to trade TALKSCUS trade early and

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Speaker 1: we were talking about talks coming in with Japan, Korea, Vietnam.

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Speaker 1: These are some of the countries where the US has

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Speaker 1: a huge deficit with and also the currencies remain relatively

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Speaker 1: undervalued when you look at it from a long term perspective.

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Speaker 1: So the trend for a weeker dollar is very clear

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Speaker 1: in terms of what the administration wants, and that's again

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Speaker 1: a way of reading it between the lines, and that's

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Speaker 1: how traders are interpreting it as well, because and we

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Speaker 1: saw that we will continue to see that, is that

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Speaker 1: the dollar takes the brunt of a lot of the

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Speaker 1: moves into a lot of the headlines coming through in

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Speaker 1: terms of just what's happening with the administration and the Fed,

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Speaker 1: as well as what's happening on trade policy.

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Speaker 2: We also heard today from Mary Daily. She is the

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Speaker 2: head of the San Francisco FED, and she dismissed President

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Speaker 2: Trump's pressure on the FED to lower interest rates. Daily

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Speaker 2: basically said, this is part of the job. The Fed's

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Speaker 2: going to do what's right to achieve its congressionally mandated goals.

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Speaker 2: And then when it came to the issue of monetary policy,

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Speaker 2: Daily said things are in a good place right now. So, Mary,

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Speaker 2: we know that the market is still expecting two rate

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Speaker 2: cuts before the end of the year. Do you think

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Speaker 2: that's about right?

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Speaker 3: Yeah.

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Speaker 1: I think we have to go back to what is

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Speaker 1: the dual mandate of the FED, and the FED is

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Speaker 1: not going to ignore its dual mandate even if it's

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Speaker 1: looking at uncertainty, the policy uncertainty. So you start seeing

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Speaker 1: cracks in the labor market, the FED is likely to react.

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Speaker 1: You see maybe softer inflation prints, they'll want it, They'll

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Speaker 1: think about it. In terms of saying that the impact

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Speaker 1: of tearuffs tariffs is likely to come through. But I

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Speaker 1: think really the key tipping point will come from the

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Speaker 1: labor market. And if you start seeing weaker be it,

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Speaker 1: weaker numbers on a monthly basis, that's really going to

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Speaker 1: get the FED to perk up and start thinking about

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Speaker 1: cutting rates and being a little bit more forgiving in

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Speaker 1: terms of using monetary policy and even forego some of

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Speaker 1: the expectations on inflation as a result of keeping the

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Speaker 1: labor market in a good place.

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Speaker 2: It's always great to talk to you, Mary, Thank you

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Speaker 2: so much. I hope you have a great weekend. Mary Nicola,

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Speaker 2: there Bloomberg m Live strategist joining from Singapore here on

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Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.

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Speaker 2: I'm Doug Chrisner. So the US equity market advanced in

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Speaker 2: the last session as it grappled with a number of forces.

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Speaker 2: We did have that solid guidance late in the day

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Speaker 2: on Wednesday from Nvidia, and today those shares were up

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Speaker 2: by more than three percent. However, the latest data on

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Speaker 2: the economy shows a slowdown, essentially the revised first quarter

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Speaker 2: GDP number contracting at a rate of two tenths of

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Speaker 2: one percent. Also, the legal uncertainty around the President's trade war,

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Speaker 2: and a few questions about monetary policy after the President

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Speaker 2: told Fetcher J. Powell he's making a mistake for not

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Speaker 2: cutting interest rates. For a closer look at some of

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Speaker 2: these issues and at overall US price action, I'm joined

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Speaker 2: by Scott Ladner. He is the chief investment officer at

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Speaker 2: Horizon Investments. Scott, thank you for taking the time. I'm

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Speaker 2: curious right out of the gate to get the most

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Speaker 2: important issue for you that has most of your focus

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Speaker 2: right now.

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Speaker 3: Hey, Doug, and thanks for having me on. Look. I mean,

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Speaker 3: I think it's actually a couple of things.

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Speaker 4: I mean, I think the more the more medium term

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Speaker 4: probably uh, you know, like more striking and interesting thing

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Speaker 4: is this continued divergence we get we're getting from between

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Speaker 4: you know, but this so called soft data, you know,

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Speaker 4: I think surveys isms things like that, and and hard data,

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Speaker 4: which is, you know, the GDP print this morning, notwithstanding,

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Speaker 4: you know, really really kind of focused more on labor markets,

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Speaker 4: which it takes to me pretty robust. And so we've

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Speaker 4: got this this dichotomy, and this is sort of the

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Speaker 4: spibrication between soft data and surveys where consumers and people

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Speaker 4: are just saying that they're really unhappy. They they're very

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Speaker 4: dour on the economy, very you know, the very dour

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Speaker 4: in inflation and all these things, and and hard data,

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Speaker 4: which is, you know, it just just remains to be robust,

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Speaker 4: and especially on the appointment side, which is you know,

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Speaker 4: by far the most important of those of those hard data.

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Speaker 4: I think we're getting a little bit of a clue,

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Speaker 4: you know, continuing clue as to why we're getting this, uh,

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Speaker 4: this this sort of bifurcation. And I think it has

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Speaker 4: to do with with some of the politicalization of how

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Speaker 4: people feel based on how they voted. You know, the

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Speaker 4: most striking example is just what what folks inflation expectations

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Speaker 4: look like. If you're a publican or you're a Democrat

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Speaker 4: post election, it's you know, if you were if you

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Speaker 4: vote for Trump, basically you think there's no inflation. If

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Speaker 4: you didn't vote for Trump and you're a Democrat, you

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Speaker 4: think that inflation is going to be running you know,

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Speaker 4: nine ten percent over the next year. That is that's

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Speaker 4: an incredible, incredible divergence and certainly just sort of guides

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Speaker 4: how people are feeling about the world. And I think

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Speaker 4: it really kind of brings in a question how much

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Speaker 4: weight we can put into those soft data, into those

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Speaker 4: surveys like the like the conference Forward in University of Michigan,

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Speaker 4: things like that, And it has been very misleading over

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Speaker 4: the last couple of years to follow that stuff. Is

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Speaker 4: that it is paid much better to listen and follow

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Speaker 4: the hard data in terms of like company earnings and

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Speaker 4: and and employment data. And I think that's going to

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Speaker 4: continue here at least for the foreseeable future.

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Speaker 2: So do you think most of that uncertainty or maybe

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Speaker 2: confusion is directly correlated to the tariff story?

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Speaker 3: That is definitely a big part of it.

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Speaker 4: Yeah, Doug, You know, look, I mean I don't think

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Speaker 4: anybody really loves the tariffs. I mean, you know, if

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Speaker 4: if that is one thing that folks had started to

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Speaker 4: agree on, at least in that first week after Liberation Day,

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Speaker 4: you saw Trump's poll numbers, even a something like Rasmussen

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Speaker 4: which is really sort of like Leans Leans Republican, you know,

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Speaker 4: really tanked and it hit US Nator right as, you know,

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Speaker 4: right right as as.

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Speaker 3: Trump basically reverse verse course and put the paws on everything.

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Speaker 4: And and so you know that that that tariff outlook

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Speaker 4: and sort of what it might do to short term inflation,

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Speaker 4: would it would definitely do to medium term growth, you know,

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Speaker 4: definitely definitely put a damper on how folks were feeling

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Speaker 4: about their job prospects.

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Speaker 3: Their their income prospects, and just how you know, just

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Speaker 3: the overall economy.

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Speaker 2: So I mentioned a moment ago, the meeting that to

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Speaker 2: place earlier today in the US between President Trump and

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Speaker 2: FED Chair J Powell. Apparently the President puts some pressure

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Speaker 2: on Powell to lower interest rates. We've been here before.

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Speaker 2: That wasn't really much of a surprise. Right now, the

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Speaker 2: market seems to be discounting to twenty five basis point

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Speaker 2: rate cuts before the end of the year. Do you

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Speaker 2: think that's about right?

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Speaker 3: Yeah? I do, Actually it's I mean, it shouldn't. It's not.

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Speaker 4: It's not surprised to any of your listeners that that

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Speaker 4: Trump would put pressure like that on Powell. He's been

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Speaker 4: very public and his criticism very public as to what

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Speaker 4: he wants Powell to do. But the data just don't

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Speaker 4: don't support what he's saying right now, at least in

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Speaker 4: the very short term.

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Speaker 3: You know, the Fed is is as confused as any

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Speaker 3: of us in.

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Speaker 4: Terms of like what the what these final economic policies

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Speaker 4: are going to look like, like what is it actually

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Speaker 4: going to happen? And until they get a little bit

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Speaker 4: of clarity, they're just in no rush because because you know,

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Speaker 4: inflation has come down, it's still a little bit sticky,

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Speaker 4: a little bit too high, but it's not scary right now,

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Speaker 4: and it's and it's trending still in the right general direction,

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Speaker 4: and the labor market, as I've said before, you know,

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Speaker 4: continue to hold up. So you know, time is on

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Speaker 4: the FED side right now. It won't probably always be

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Speaker 4: that way, but for now, until the until the Fed

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Speaker 4: gets a little bit of clarity, So like, what are

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Speaker 4: these policies really what are these policies really going to be,

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Speaker 4: what's actually going to get enacted?

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Speaker 3: It's really tough to move.

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Speaker 4: Ahead of you know what, what what the you know

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Speaker 4: what the economic impact would be.

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Speaker 2: So the bond market seems to have calmed down, at

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Speaker 2: least for the moment. But let's remember back a few

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Speaker 2: weeks ago when the House was debating this spending bill,

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Speaker 2: the bond vigilanties seemed to come out in force and

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Speaker 2: send yields much higher. And I'm wondering whether you expect

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Speaker 2: the same type of price action possibly as the Senate

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Speaker 2: takes up this spending bill, and maybe we see a

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Speaker 2: stronger effort at reducing the deficit.

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Speaker 4: You know, their hands are probably a little bit tied

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Speaker 4: on this, Doug. It's it's such a thin majority for

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Speaker 4: the Republicans in the House, and they really had to

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Speaker 4: twist a bunch of arms to get to even what

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Speaker 4: they got to, and and and so that, you know,

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Speaker 4: I don't think they're going to be able to do

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Speaker 4: a whole lot to this bill because I think they

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Speaker 4: I think they might end up losing the House.

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Speaker 3: And and here's here's the problem.

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Speaker 4: The risk for not doing this, the risk for not

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Speaker 4: for for not getting it done, is that taxes go

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Speaker 4: up massively, and that is something that the Republicans writ

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Speaker 4: large certainly don't.

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Speaker 3: Want to happen.

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Speaker 4: And so, you know, I think they'll end up finding

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Speaker 4: a way to take a bill that frankly, not a

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Speaker 4: whole lot of folks are super excited about on the

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Speaker 4: on the fiscal side. But the alternative is is, you know,

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Speaker 4: rather a disastrous on the tax side.

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Speaker 2: So I mentioned the solid guidance that we had late

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Speaker 2: in the day on Wednesday from Nvidia. How are you

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Speaker 2: viewing opportunities in the equity market right now? It seemed

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Speaker 2: like the Nvidia story helped to push much of the

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Speaker 2: market higher.

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Speaker 4: Yeah, look, I think that, you know, I still think

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Speaker 4: we are in the in the mid nineties in terms

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Speaker 4: of the right historical parallels.

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Speaker 3: AI is is going to is.

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Speaker 4: The big productivity boost globally, the first big one that

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Speaker 4: we're going to get. You know, you get BASICALLYET one

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Speaker 4: a generation if you're lucky. We're in the middle of

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Speaker 4: it right now. And so you know, any any move

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Speaker 4: for companies you know that look like they're spending more money,

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Speaker 4: doing more Capex trying to figure out how to actually

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Speaker 4: use AI in the in their business is you can

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Speaker 4: actually drive productivity and margins and and and the margin

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Speaker 4: story is really where this the rubber.

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Speaker 3: Is the road for the equity market.

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Speaker 4: You know, if you if you get an increase in

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Speaker 4: earnings that's sort of a linear impact on your stock

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Speaker 4: is a linear impact on earnings, you get increases on margins,

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Speaker 4: and that ends up being an exponential impact on on

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Speaker 4: on your earnings ability. And so you know that as

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Speaker 4: the market continues to sort of grapple with valuations and

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Speaker 4: everything that happening to do with all the uncertainty that's

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Speaker 4: that's been foisted upon us, you've got to kind of

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Speaker 4: like pull back a little bit and just realize this

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Speaker 4: technological change that we're going through in the productivity enhancement

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Speaker 4: capabilities of AI and particularly like agentic AI is just

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Speaker 4: too massive to to to ignore.

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Speaker 2: How are you viewing opportunities outside the US right now?

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Speaker 2: Are there any let's say, maybe in Europe, maybe in

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Speaker 2: Latin America, maybe in Asia.

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Speaker 4: Yeah, we actually like outside the US a lot right now.

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Speaker 4: It's and as much a dollar story as it is

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Speaker 4: anything else. You know, we we do think that the

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Speaker 4: dollar has started a probably a multi quarter, multi year

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Speaker 4: down trend. Nothing disastrous by any stretch of the imagination.

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Speaker 4: It's you know, we're not in that place by you know,

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Speaker 4: at all. But if you do get the dollar continuing

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Speaker 4: the week and you know, broadly against you know, gets

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Speaker 4: a bunch of different currencies, that's going to that's going

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Speaker 4: to be a boost towards international equity markets relative to

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Speaker 4: to US equity markets. And you know, we all know

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Speaker 4: what the valuation story is internationally. It's it is a

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Speaker 4: much better spot, a much cheaper spot than the US.

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Speaker 4: And and you've got a couple of catalysts that that

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Speaker 4: are out there in terms of you know, some potential

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Speaker 4: possible resolutions someday to the strust of the Ukraine War,

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Speaker 4: and and China frankly starting to pivot more towards capitalism,

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Speaker 4: uh than than they than they had over the last

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Speaker 4: five years. You haven't heard the words common prosperity come

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Speaker 4: out of President She's mouth for that to the last

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Speaker 4: couple of years as a signal to the market that

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Speaker 4: they really need to embrace private sector to to try

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Speaker 4: to win this AI race and this and this.

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Speaker 3: Technological race against against the rest of the world.

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Speaker 2: Scott, We'll leave it there. Thank you so much. Scott

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Speaker 2: Ladner there. He is the chief investment officer at Horizon Investments.

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Speaker 2: Joining here on the Daybreak Asia Podcast. Thanks for listening

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Speaker 2: to today's episode of the Bloomberg Daybreak Asia Edition podcast.

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Speaker 2: Each weekday, we look at the story shaping markets, finance,

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Speaker 2: and geopolitics in the Asia Pacific. You can find us

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Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 2: else you listen. Join us again tomorrow for insight on

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Speaker 2: the market moves from Hong Kong to Singapore and Australia.

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Speaker 2: I'm Doug Prisner, and this is Bloomberg